author: Lehman,'J.

text:
    The People of the State of New York ex rel. Buffalo and Fort Erie Public Bridge Authority, Respondent, against Jacob L. Davis et al., as Assessors of the City of Buffalo, Appellants.
    Argued January 17, 1938;
    decided March 8, 1938.

      Francis E. Cornish, Corporation Counsel (Frank G. Raichle, Carlos C. Alden and Herbert A. Hickman of counsel), for appellants.
    The respondent is not such a State instrumentality that its property is exempt from taxation. (Genet v. City of Brooklyn, 99 N. Y. 296; People ex rel. Andrews v. Cameron, 140 App. Div. 76; 200 N. Y. 585; Economic Power & Const. Co. v. City of Buffalo, 195 N. Y. 286.) Chapter 824 of the Laws of 1933 is a private and local bill as the terms are used in constitutional provisions relating thereto. (N. Y. Const. art. 3, § 18; St. John v. Andrews Inst., 191 N. Y. 254; Economic Power & Constr. Co. v. City of Buffalo, 195 N. Y. 286; Bush Terminal Co. v. City of New York, 152 Misc. Rep. 144; People ex rel. Devery v. Coler, 173 N. Y. 103; Ferguson v. Ross, 126 N. Y. 459; People v. O’Brien, 38 N. Y. 193; Robertson v. Zimmermann, 268 N. Y. 52; Matter of Mayor of New York [Elm St.], 246 N. Y. 72; Adler v. Deegan, 251 N. Y. 467.) The act creating the respondent violates subdivision 13 of section 18 of article 3 of the State Constitution. (Johnson Home v. Village of Seneca Falls, 37 App. Div. 147; Village of Watkins Glen v. Hager, 140 Misc. Rep. 816; 234 App. Div. 904; Matter of Board of Education of Jamestown v. Baker, 241 App. Div. 574; 266 N. Y. 636; Robertson v. Zimmermann, 268 N. Y. 52.) In the mode of its passage, chapter 824 of the Laws of 1933, passed at an extraordinary session, the Legislature violated the constitutional command that no subject may be, acted upon thereat unless recommended by the Governor for consideration. (People v. Devlin, 33 N. Y. 269; People v. Petrea, 92 N. Y. 128; People ex rel. Durham Realty Corp. v. LaFetra, 195 App. Div. 280.)

      John W. Van Allen, Selby G. Smith and Louis L. Babcock for respondent.
    Chapter 824 of the Laws of 1933 was passed at an extraordinary session of the Legislature in accordance with the provisions of section 4 of article 4 of the State Constitution. (People ex rel. Henderson v. Supervisors, 147 N. Y. 1; People v. Gillson, 109 N. Y. 389; Matter of N. Y. E. R. R. Co., 70 N. Y. 327; Matter of McAneny v. Board of Estimate, 232 N. Y. 377; Sinking Fund Cases, 99 U. S. 700; Borden’s Farm Products Co. v. Baldwin, 293 UJ. S. 194; People v. Devlin, 33 N. Y. 269; Field v. Clark, 143 U. S. 649; People ex rel. Purdy v. Commissioners of Highways, 54 N. Y. 276; Helm v. Day, 134 N. Y. Supp. 770; Browne v. City of New York, 241 N. Y. 96.) The Bridge Authority, as a municipal corporate instrumentality of the State of New York, possesses the immunities of the State of New York, which it represents, including immunity from taxes and assessments upon its property within the State. (Gaynor v. Marohn, 268 N. Y. 417; New York ex rel. Rogers v. Graves, 299 U. S. 401; Brush v. Commissioner, 300 U. S. 352; Commissioner v. Harlan, 80 Fed. Rep. [2d] 660) Butler v. Perry, 240 U. S. 328; Atkin v. Kansas, 191 U. S. 207; United States v. Kings Co., 281 Fed. Rep. 686; Jamestown & Newport Ferry Co. v. Commissioner, 41 Fed. Rep. [2d] 920; Continental Baking Co. v. Helvering, 75 Fed. Rep. 243; Kansas City Bridge Co. v. Alabama State Bridge Corp., 59 Fed. Rep.. [2d] 48; 287 U. S. 644; Patchogue Land Corp. v. State Park Commission, 243 N. Y. 15; Clallam County v. United States, 263 U. S. 341; People ex rel. Mayor v. Assessors of Brooklyn, 111 N. Y. 505; Matter of Hamilton, 148 N. Y. 310; Mountain Bridge Co. v. Diamond, 222 App. Div. 756; Bush Terminal Co. v. City of New York, 152 Misc. Rep. 144.) Chapter 824 of the Laws of 1933 does not violate section 18 of article 3 of the State Constitution. (Flint v. Stone Tracy Co., 220 U. S. 107; Brush v. Commissioner, 300 U. S. 352; Commissioner v. Ten Eyck, 76 Fed. Rep. [2d] 515; Robertson v. Zimmermann, 268 N. Y. 52; City of Louisville v. Babb, 75 Fed. Rep. [2d] 162; Bush Terminal Co. v. City of New York, 152 Misc. Rep. 144; People ex rel. Bronx Parkway Comm. v. Common Council, 106 Misc. Rep. 579; 190 App. Div. 957; 229 N. Y. 1; Sun Printing & Pub. Assn. v. Mayor, 152 N. Y. 272.)

      John J. Bennett, Jr., Attorney-Ceneral (Henry Epstein of counsel), for State of New York.
   Lehman,'J.

The Legislature created the relator as a body corporate and politic, constituting a public benefit corporation.” (Laws of 1933, ch. 824.) Pursuant to authority conferred upon it by the statute, the relator acquired from the Buffalo and Fort Erie Public Bridge Company a bridge across the Niagara river, which forms part of the boundary of the State of New York and of the Dominion of Canada. For that purpose the relator issued bonds. The statute declares that the properties of the Buffalo and Fort Erie Public Bridge Authority shall be exempt from all taxes and assessments by the state or any municipality or municipal subdivision thereof and the bonds shall be exempt from taxation except for transfer, estate and inheritance taxes ” (§ 23).

The assessors of the city of Buffalo have disregarded the fiat of the Legislature and have, placed the real property of the relator, in the city of Buffalo, upon the assessment rolls of the city for the purpose of taxation. Their determination has been annulled in certiorari proceedings by the Supreme Court. The assessors are required by law to place upon the assessment rolls all real property which is not exempt by law from taxation. The power of the Legislature to grant exemption from taxation is subject to restrictions contained in the Constitutian of the State. Where power is withheld from the Legislature, a statute purporting to grant an exemption is of no effect. The assessors are still bound to assess the property for taxation. The question which must be determined upon this appeal is whether the Legislature acting within the scope of its powers has exempted the property of the relator.

The statute which created the relator as a body corporate and politic and which in express terms grants exemption from taxation to the property of the relator was passed at an extraordinary session of the Legislature. The Constitution of the State provides that at extraordinary sessions no subject shall be acted upon, except such as the Governor may recommend for consideration.” (Art. IV, § 4.) It appears that on August 17, 1933, the Governor sent a message to the Legislature, then in extraordinary session, recommending to its consideration legislation creating a Buffalo and Port Erie Public Bridge Authority which shall be a body corporate and politic of the State,” and on August 21st the Governor sent another message certifying to the necessity of the immediate passage of Senate Bill (Int. No. 29, Pr. No. 30), entitled, “ An Act creating Buffalo and Port Erie Public Bridge Authority, providing for its appointment and defining its jurisdiction, powers and duties; authorizing it to issue and sell or exchange its bonds and authorizing their use for certain purposes; authorizing it to acquire all the assets and property of the Buffalo and Port Erie Public Bridge Company; authorizing it to maintain and operate such property and assets and to charge tolls for the use thereof and to acquire other assets; authorizing -it to exercise authority, powers and duties not inconsistent herewith, granted by the Dominion of Canada, and generally to define its purposes and to provide for the exercise of its powers, as amended.” The bill was passed after these messages were received, and the presiding officers of both houses of the Legislature have appended to the bill the certificate required by section 40 of the Legislative Law (Cons. Laws, ch. 32); but an examination of the legislative journals shows that prior thereto the bill had been passed by the Legislature, sent to the Governor and returned by him for amendment at the request of the Legislature, and that after the receipt of the messages from the Governor no new bill was introduced; the bill previously passed was amended in minor details and then passed again. It is said that since the Legislature had no power to pass the bill in its original form without a message from the Governor, the amendment of the bill thereafter and its passage in amended form was insufficient compliance with the mandate of the Constitution.

We do not pause to consider whether we may go back of the certificates appended to the bill and may examine the legislative journals to determine whether, after receipt of the Governor’s message, the Legislature took every step required by its rules and practice in enacting legislation. (Cf. Browne v. City of New York, 241 N. Y. 96, 114.) We hold that the mandate of the Constitution requires no more than was done in this case, as disclosed by these journals. The Constitution withholds from the Legislature, at an extraordinary session, power to act upon a subject not recommended by the Governor for consideration. The Legislature acts upon a subject ” embodied in a bill when it passes the bill. The introduction of the bill, its printing, its reading and reference to a committee and the debates upon it, constitute only the procedure required by the rules to bring up the bill for action. The Constitution is not concerned with those matters, and when, in anticipation of a message from the Governor, the Legislature is prepared to take action upon a subject, the Constitution does not require the Legislature to retrace each step after the message is received.

A question, perhaps more serious, remains. The Legislature shall not pass a private or local bill in any of the following cases: * * * Granting to any person, association, firm or corporation, an exemption from taxation on real or personal property.” (N. Y. Const. art. III, § 18.) Does the statute violate this provision of the Constitution? The statute which is challenged recites that “ the board shall constitute the municipal corporate instrumentality of the state of New York, for the purpose of carrying out the provisions of this act.” Though the Legislature has power to create corporate bodies and endow them with powers and functions, yet whether a body corporate is in truth a public benefit corporation ” and a municipal corporate instrumentality ” depends upon its nature and functions, not upon the tag which the Legislature may choose to attach to it. The basic problem presented upon this appeal is whether the relator is a governmental agency of the State carrying out a matter of State concern for the benefit of the people of the State. If the relator is such an agency, then the bill is not private or local. (Robertson v. Zimmermann, 268 N. Y. 52.) Indeed, the relator would then not be a “ corporation ” as that term is ordinarily understood and as it is used in article III, section 18, of the Constitution.

The Legislature may, of course, determine by general laws what property shall be taxed and what property shall be exempt. It has decreed that property of this state other than its wild or forest lands in the forest preserve ” and also property of a municipal corporation of the state held for a public use ” shall be exempt from taxation. (Tax Law [Cons. Laws, ch. 60], § 4, subds. 2 and 3.) The relator maintains that even without the special statute its property would be exempt under the provisions of the Tax Law. No member of the corporate body which holds title to the real property assessed has any beneficial interest in the property. Six members of the Board are appointed by the Governor of the State and three members in manner determined by the Dominion of Canada, and they hold title for the benefit of the public. The owners of the bonds issued by the relator are, however, holders of a first lien upon the bridge structure and its approaches. We are not called upon to determine whether the property so held and subject to such a lien is, in full sense, property of the State and exempt from taxation under the Tax Law, for, in any event, we find that the statute granting a special exemption is valid.

The bridge is connected with the highway system of the State and of the Dominion of Canada. It serves the people of both. The State and the Dominion of Canada acting together would have power to acquire and maintain the bridge, and, if they chose, to exact tolls for its use. Instead of providing for acquisition of the bridge through the pledge of the credit of the State and for its maintenance by State officers and employees paid out of the treasury of the State, the State has chosen to enter into a compact with the Dominion of Canada for the creation of a new body corporate and politic with a board appointed by the State, responsible to the State and acting for the State. We have held that similar bodies corporate crea ted to act for the State in carrying out a public purpose are State agencies. (Gaynor v. Marohn, 268 N. Y. 417, and cases there cited.) We find that the corporate body here created is such an agency of the State. Indeed, in the opinion by Crane, Ch. J., in the cited case, the statute now challenged is included in a list of statutes which have created municipal corporations or districts to carry out a governmental power. We cannot doubt that the grant of exemption from taxation may appropriately be included in a statute creating such an agency without violation of any mandate of the Constitution. None of the other objections to the validity of the statute urged by the appellant require extended consideration.

The order should be affirmed, without costs.

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

Order affirmed.


source: Caselaw Access Project

author: Lehman, J.

license: Public Domain

text:
    John O’Keefe et al., Respondents, v. Local 463 of the United Association of Plumbers and Gas Fitters of the United States and Canada et al., Appellants.
    Argued January 11, 1938;
    decided March 8, 1938.

      J. G. Fink, Ernest Frederick Eidlitz and Harry N. French for appellants.
    The action of the executive board and that of the union was in pursuance of the action of the joint arbitration board, whose decision was within its jurisdiction and was binding upon the plaintiffs. This decision was not a penalty. It merely prescribed á course of procedure to adjust a controversy. (Mandell v. Moses, 239 N. Y. 555; Mandell v. Cole, 244 N. Y. 221; Cross Mountain Coal Co. v. Ault, 157 Tenn. 461; Whiting Milk Co. v. Grondin, 282 Mass. 41; Nederlandsch Amer. S. M. v. Stevedores’ & L. B. Society, 265 Fed. Rep. 397; Yazoo & M. V. R. Co. v. Webb, 64 Fed. Rep. [2d] 902; Maisel v. Sigman, 123 Misc. Rep. 714; Polin v. Kaplan, 257 N. Y. 277; Matter of Pratt v. Rudisule, 249 App. Div. 305.) The action of the union was in good faith and in the best interests of the members of the union as a whole and necessary for its welfare and within the expressed and implied purposes of the union and was, therefore, within and authorized by its constitution. The complaint should have been dismissed without regard to the power of the arbitration board. (Helvering v. Davis, 81 L. Ed. 804; Polin v. Kaplan, 257 N. Y. 277; Matter of Haebler v. New York Produce Exchange, 149 N. Y. 414; Brownfield v. Simon, 94 Misc. Rep. 720; 174 App. Div. 872; 225 N. Y. 643; Shaup v. Grand International Brother
      hood, 223 Ala. 202; Simpson v. Engineers, 83 W. Va. 355; Edgar v. Halpin, 185 N. Y. Supp. 307; M’Culloch v. Maryland, 4 Wheat. 316; Nebbia v. New York, 291 U. S. 502; Wabash R. R. Co. v. Hannahan, 121 Fed. Rep. 563; Bossert v. Dhuy, 221 N. Y. 342; Willcutt & Sons Co. v. Driscoll, 220 Mass. 110; Ryan v. Hayes, 243 Mass. 168.)

      Charles S. Scholnicoff for respondents.
    The action of the defendants in ordering the plaintiffs to leave their positions was arbitrary, unwarranted and without authority under the union’s constitution, by-laws and rules of order. (Polin v. Kaplan, 257 N. Y. 277; Blek v. Wilson, 237 App. Div. 712; 262 N. Y. 253; Shouten v. Alpine, 77 Misc. Rep. 19; Connell v. Stalker, 21 Misc. Rep. 609.)
   Lehman, J.

The plaintiffs are, and have been for many years, members in good standing of the defendant labor union. They are employed by the Byrne Company, a corporation engaged in business in the city of New York as a master plumber and a member of the Association of Master Plumbers of the City of New York, Manhattan Branch, Inc. The defendant union and the Master Plumbers Association have a working agreement which fixes, in detail, hours of labor, rate of wages and working conditions. In November, 1934, charges were preferred that the Byrne Company, Inc., was paying one Louis De Lustra, a plumber’s helper, less than the wages fixed in the working agreement. The charges were heard by the Joint Arbitration Board, established in accordance with the working agreement to hear such charges. It sustained the charges and adopted a resolution to the effect that all plumbers and helpers be furnished to the Byrne Company, Inc., by Local 463, the defendant union, for a period of three years. Thereupon the executive board of the local union recommended that all plumbers and helpers working for the Byrne Company be removed from the shop for one year.” That recommendation was approved by Local Union 463 at a regular meeting. The result of these proceedings is that, though no charges have been preferred against the plaintiffs, they have lost, at least temporarily, jobs which they have held for long periods.

Claiming that the action of the labor union was arbitrary, unreasonable and without authority under its constitution and by-laws, the plaintiffs have, in this action, sought and obtained a judgment restraining the defendants from prohibiting the plaintiffs’ former employer, the Byrne Company, Inc., from rehiring the plaintiffs to their former positions as plumbers,” and awarding to the plaintiffs damages for loss of wages while they were unemployed. To determine whether the action of the defendant union was arbitrary and unreasonable, we must examine the facts established at the trial and found by the court; to determine whether the action of the union was authorized, we must analyze the constitution and by-laws and construe them in the light of the facts established and found.

The court has found that in 1931, when many plumbers, members of the union, were unemployed, some members of the Master Plumbers Association and other employers in the building industry started the practice “ of paying to their employees, including members of Local 463, less wages than are provided to be paid by working agreements, which practice has been called in the building trades and elsewhere ‘ paying cheap money.’ ” The court also found that the effect of paying ‘ cheap money ’ is injurious to those employers, members of the Master Plumbers Association who live up to the working agreement and pay the agreed scale, in that they are not able to compete for jobs with the employer who bases his estimate on paying ‘ cheap money.’ That the effect of paying 1 cheap money ’ is injurious to the members of Local 463 who live up to the working agreement in that they are not able to compete for jobs with those members of Local 463 who are willing to violate the agreement and work for less than the agreed wage.”

The constitution and by-laws of the defendant union define the relations of the union and its members; the powers of the union officers and committees and the rights of the members. The preamble of the constitution of its parent body, the international union, provides among other things that: The objects of this Association are to protect its members from unjust and injurious competition and secure unity of action among all workers of the trades throughout the United States and Canada * * *. Recognizing the right of the employer or capitalist to control his capital, we also claim and will exercise, the right to control our labor, and be consulted in determining the price paid for it * * *. For the successful accomplishments of the ends decreed by the Association, for the instruction, information and guidance of its members and for the due regulation of the business connected therewith, this code of laws is hereby formed.” The constitution of Local Union No. 463, the defendant union, sets forth among its objects: “ Section 2. To protect our members from unjust and injurious competition and to secure unity of action for their mutual protection and support. Section 3. To assist our members in obtaining employment and retaining same for a just, fair and equitable remuneration. Section 4. To establish and maintain a minimum standard of daily wages. Section 7. To elevate by legal and proper means, the moral, intellectual and social conditions of our members and to promote and foster, just and equitable action in all dealings with each other, and our employers.”

It is plain that collective bargaining to achieve these objects is one of the purposes of the defendant union. The working agreement is intended to bind members of the Master Plumbers Association collectively and members of the defendant union collectively. The validity of that agreement is not challenged. It not only fixes hours of labor, rates of wages and conditions of employment, but it provides machinery for the hearing of charges, the adjustment of grievances and the settlement of disputes. For that purpose it establishes a Joint Arbitration Board, to which all grievances and disputes must be referred. Committees of five members each, appointed by the parties to the working agreement, are to form the Joint Arbitration Board, with full power to act for the Association of Master Plumbers and Local No. 463. The decision of the Joint Arbitration Board is to be “ final and binding ” on all parties to the agreement.

The working agreement provides also that “ all parts of the Constitution and By-Laws of either Association in conflict with this Agreement are by mutual consent repealed, and this Agreement governs in all matters stipulated.” We need not consider whether the agreement could, of its own force, repeal any part of a constitution or by-laws. No provision in the constitution or by-laws of the union has been pointed out to us' which is in conflict with the agreement and there are provisions which recognize the existence of the agreement and are intended to implement it. Thus the constitution of the union provides, among other things, that its executive board shall perform all the duties of the Arbitration Board as follows: It shall be the duty of the Executive Board to attend all meetings of the Joint Arbitration Board, report all infractions of the agreement to the Local Union of said Board for action thereon, and have general supervision of the local union in that body.”

The decision of the Joint Arbitration Board sustaining the charges against the Byrne Company, Inc., is final, and the plaintiffs do not deny its binding force. Under the terms of the working agreement the Joint Arbitration Board had no power to impose a penalty upon the guilty employer, for the working agreement provides that “ in case parties tried by the Joint Arbitration Board shall be declared guilty, the respective Association of which he is a member shall determine the penalty.” The evidence shows that penalties imposed upon employers who paid “ cheap monies ” were ineffective. In spite of penalties imposed the practice continued. The union urged that the way to end the practice was to give the union the right to remove all plumbers and place all new men in a shop where the employer had been found guilty. After that suggestion had been accepted in one or two cases by the representatives of the Master Plumbers Association the practice ceased.

Even though the resolution of the Joint Arbitration Board that “ all plumbers and helpers be furnished to the Byrne Company, Inc., by Local 463 for a period of three years ” may have been for the best interests of the members both of the union and of the Master Plumbers Association, yet there may be some doubt as to whether the two organizations had delegated to the Joint Arbitration Board the power to make such a decision. The result of the resolution" is to deprive the Byrne Company, Inc., of freedom to chose its own employees because it has been found guilty of abuse of that freedom. In that aspect, the result is analogous to a penalty, and the Master Plumbers Association had reserved the right to fix the penalty whenever one of its members might be found guilty of charges preferred against him. On the other hand, the practice by employers of paying less than the agreed rate of wages constituted a continuing grievance. It was injuring the members of both organizations and both organizations were interested in ending the practice. A refusal by the union to permit its members to work for the delinquent employer might end the practice but might lead to conflict with the Master Plumbers Association. The resolution of the Joint Arbitration Board is a device calculated to end the practice and settle the grievance. In that aspect it is not a penalty, and, it may be argued, falls within the powers delegated to the Joint Arbitration Board.

We need not, however, decide upon this appeal whether, in adopting the resolution, the Joint Arbitration Board exceeded the powers delegated to it, for, even assuming that the Joint Board did exceed its powers, the union might, if it chose, ratify its action. The plaintiffs complain of the action taken by the labor union, of which they are members, to give force and effect to the resolution of the Joint Arbitration Board. They cannot complain of the resolution itself. Their grievance is not that all plumbers and helpers be furnished to the Byrne Company by Local 463 for a period of three years, but that all plumbers and helpers working for the Byrne Company be removed from the shop for one year.”

The resolution so providing was, as we have already pointed out, recommended by the executive board of the union and approved by the union at a regular meeting. The court has found that this action of the union was “ taken solely for the purpose of trying to stamp out the vicious practice of paying ‘ cheap money.’ ” The court also found that this action was “ taken in good faith and without malice * * * and was for the best interests of the members of Local 463 as a whole and necessary for the welfare of the union.” (Italics are new.)

The plaintiffs have committed no wrong and no charges have been preferred against them. The action of the union in removing them for one year from the shop where they have been long employed has caused great damage and hardship to them without any fault on their part. That damage has not been imposed as a penalty for wrongdoing nor with any malice towards them, but solely to promote the welfare of the union and achieve the objects for which the union was formed. The findings establish that the action of the union was not only reasonably calculated to advance the objects of the union but was, indeed, necessary for its welfare. The question presented upon the appeal is whether under its constitution and by-laws the union has power and right to take action reasonably calculated to advance its objects, even though such action involves interference with the employment of a member who has committed no wrong and against whom no charges have been preferred.

This court has frequently sustained the right of labor unions to interfere by lawful means between an employer and his employees who are not members of the union where the purpose of such interference is solely to advance the interest of the members of the union. We have not been oblivious of the consequent hardship imposed, at times, upon individual employers or employees, but for hardship to the individual resulting from action reasonably calculated to achieve a lawful end by lawful means the courts can give no redress. The plaintiffs, in joining the union, agreed to its objects and submitted themselves to its powers. Its declared objects included the establishment and maintenance of a minimum standard of wages, the improvement of the social condition of its members and the promotion of just and equitable action in all dealings. All these objects were threatened by the practice of certain employers and members of the union. The union has adopted a measure which, the court has found, was necessary for its welfare. That measure was approved by the members of the union at a regular meeting. The constitution and the by-laws of the local union and its parent body were devised for the successful accomplishments of the ends desired by the Association ” (the international); and in the constitution and by-laws of the local authority may be found for the action taken by the local. The right of the association to take such action is certainly not weakened by the fact that it was recommended by the Joint Arbitration Board, established by the working agreement with the Master Plumbers Association, and is calculated to benefit employers as well as members of the union. Except as otherwise provided in the constitution and by-laws a member of a union has no more right than a non-member to complain of hardship caused to him by a union acting lawfully.

The constitution and by-laws of the union carefully protect its members from deprivation of membership rights or other form of punishment where there has been no trial properly conducted upon charges properly presented. These provisions have no application here. The plaintiffs have not been charged with any wrong and have not suffered any deprivation of membership rights. The right to retain a job is not a membership right. The welfare of the union required that the union should exercise control of employment in a shop where there had been a violation of the working agreement and in the exercise of that control without malice to the plaintiffs others have been employed in place of the plaintiffs. Of that the plaintiffs cannot complain. The objects sought by a union and the “ unity of action ” to achieve them cannot be attained without some harm to the individual. The tests of whether the law affords redress for such harm are the legality, good faith and freedom from malice of the union. The findings of the court establish that here the action of the union meets these tests.

The plaintiffs have violated no provision of the constitution or by-laws by appeal to the courts. The provisions relied upon by the defendant union in that respect have no application here. Indeed, by seeking an authoritative determination of the rights and powers of the union they have probably rendered a service to the union.

The judgments should be reversed and the complaint dismissed, without costs.

Crane, Ch. J., Loughran and Finch, JJ., concur; O’Brien and Bjppey, JJ., dissent; Hubbs, J., taking no part.

Judgments reversed, etc.


author: Hubbs, J. Lehman, J. O’Brien, J.

text:
    In the Matter of the Estate of Ellen W. Duryea, Deceased. State Tax Commission, Appellant and Respondent. Robert H. Heighe, Respondent and Appellant. James C. Webster et al., as Executors of Lisa W. Sandford, Deceased, Respondents.

      Argued October 4, 1937;
    decided March 8, 1938.

      Harry T. O’Brien, Jr., and Mortimer M. Kassell for State Tax Commission, appellant and respondent.
    The transfers to Lisa W. Heighe of one-half of each of the two trust funds created by the decedent, over which' Lisa W. Sandford was given power of appointment, are taxable in the estate of the decedent. (Matter of Chauncey, 102 Misc. Rep. 378; 187 App. Div. 952; Matter of Bartow, 30 Misc. Rep. 27; Matter of Irvin, 137 Misc. Rep. 666; Matter of Lansing, 182 N. Y. 238; Matter of Duff, 114 Misc. Rep. 309; Matter of Slosson, 216 N. Y. 79; Matter of Taylor, 209 App. Div. 299; 239 N. Y. 582; Matter of Ripley, 192 N. Y. 536; Matter of Hoffman, 161 App. Div. 836; 212 N. Y. 604; Matter of Haggerty, 128 App. Div. 479; Matter of Haight, 152 App. Div. 228; Matter of Backhouse, 110 App. Div. 737; 185 N. Y. 544; Matter of Morgan, 164 App. Div. 854; 215 N. Y. 703; Matter of Lewis, 60 Misc. Rep. 643; 129 App. Div. 905; 194 N. Y. 550; Matter of Canda, 114 Misc. Rep. 161; 197 App. Div. 597; Matter of Tuckerman, 130 Misc. Rep. 806; Matter of Vanderbilt, 163 Misc. Rep. 667; Helvering v. Grinnell, 294 U. S. 153; Matter of Cooksey, 182 N. Y. 92; Matter of King, 217 N. Y. 358.) No election by Lisa W. Heighe is necessary for her to take the property under consideration from the decedent herein. (Matter of Chauncey, 102 Misc. Rep. 378; 187 App. Div. 952; Matter of Schell, 134 Misc. Rep. 242; Matter of Irvin, 137 Misc. Rep. 666; Matter of Backhouse, 110 App. Div. 737; 185 N. Y. 544; Matter of Morgan, 164 App. Div. 854; 215 N. Y. 703; Matter of Haight, 152 App. Div. 228; Matter of Tuckerman, 130 Misc. Rep. 806.)

      Clifton P. Williamson and Lasater Terrell for Robert H. Heighe, respondent and appellant.
    The clause of the will which provides for the payment of transfer, inheritance and estate taxes out of the residuary estate of testatrix has reference only to those taxes validly assessed against testatrix’s own estate. (Matter of Hoffman, 201 N. Y. 247.) The transfers to both Lisa W. Heighe and Baronig Baron of the property comprising trusts were effected by the exercise by Lisa W. Sandford of the powers of appointment given to her by the will of testatrix herein, and such transfers are not Subject to transfer tax in the estate of testatrix herein. In order to receive the property appointed to her, Lisa W. Heighe must of necessity take under the exercise of the powers of appointment by Lisa W. Sandford, since otherwise she would receive only one-quarter instead of one-half of each of the two trust funds. (Matter of Lansing, 182 N. Y. 238; Helvering v. Grinnell, 70 Fed. Rep. [2d] 705; 294 U. S. 153; Matter of Slosson, 216 N. Y. 79; Matter of Ripley, 192 N. Y. 536; Matter of Morgan, 164 App. Div. 854; 215 N. Y. 703; Matter of Backhouse, 110 App. Div. 737; 185 N. Y. 544; Matter of Chapman, 133 App. Div. 337; Matter of Schell, 134 Misc. Rep. 242.)

      James C. Webster for respondents.
    Testatrix designated her residuary estate as the fund from which to pay all transfer, inheritance and estate taxes, which includes the taxes on the transfer of the corpus of the two trusts over which Lisa W. Sandford was given the power of appointment, and testatrix had an absolute right to do so. (Farmers Loan & Trust Co. v. Winthrop, 238 N. Y. 488; Matter of Ham, 123 Misc. Rep. 889; Matter of Harbeck, 161 N. Y. 211; Farmers Loan & Trust Co. v. Mortimer, 219 N. Y. 290; Matter of Stewart, 131 N. Y. 274; Matter of Smith, 85 Misc. Rep. 636.) The tax on the half of the securities in the trusts turned over to Lisa W. Heighe by the trustees named in Ellen W. Duryea’s will is payable by Robert H. Heighe, even if the court should hold that he is not liable for the taxes on the whole of the two trusts. (Matter of Brenner, 149 Misc. Rep. 412; Helvering v. Grinnell, 294 U. S. 153; Matter of Slosson, 216 N. Y. 79; Matter of Ripley, 192 N. Y. 536; Matter of Lansing, 182 N. Y. 238; Matter of Taylor, 121 Misc. Rep. 7; 209 App. Div. 299; 239 N. Y. 582; Matter of Chauncey, 102 Misc. Rep. 387; 187 App. Div. 952; Matter of Backhouse, 110 App. Div. 738; 185 N. Y. 544; Matter of Chapman, 133 App. Div. 337; Matter of Schell, 134 Misc. Rep. 242.)
   Hubbs, J.

Ellen W. Duryea, testatrix, died December 23, 1927. On June 2, 1923, she had established a $200,000 inter vivas trust, the income payable to her sister, Lisa W. Sandford, for life, reserving to herself power of appointment over the corpus of the trust. She left a will dated February 16, 1927, and two codicils. By the third clause of her will she gave to her sister, Lisa W. Sandford, the corpus of the inter vivas trust, and by the fourth paragraph of the third clause she gave to her said sister an additional sum of $200,000. By the ninth paragraph she provided as follows: “I direct that all transfer inheritance and estate taxes be paid out of my residuary estate, and that all the foregoing gifts, legacies and devises shall be free from and without deduction of any such taxes thereon.” By the tenth paragraph of the will she gave her residuary estate to her nephew, the appellant, Robert H. Heighe, a son of her sister, Lisa W. Sandford. By the second codicil, dated December 14, 1927, first clause, she revoked the bequest of the trust fund to her sister, Lisa W. Sandford, and provided as follows: “ * * * in lieu of said gift, I hereby give to my dear sister the power to appoint by will the disposition of the corpus of said trust fund, * * * and should she fail to exercise such power of appointment, I hereby give and bequeath the remainder of said trust fund from and after her death to her children to whom I now give and bequeath the same subject to such exercise of said power.” By the same codicil, second paragraph, she revoked the bequest to her sister of $200,000 and gave the same to her executors and trustees in trust, the income to be paid to her said sister during her lifetime and upon the death of her sister gave and bequeathed said sum so held in trust to such person or persons and in such proportions and amounts as my sister may by will designate and appoint, and failing such appointment, to her heirs at law.”

The children ” and “ heirs at law ” of Lisa W. Sand-ford who would have taken under the will of Ellen W. Duryea in default of the exercise of these powers of appointment of which Lisa W. Sandford was donee were the appellant, Robert H. Heighe, and his sister, Lisa W. Heighe. Lisa W. Sandford died on February 7, 1934, leaving a will and codicil in which she exercised the power of appointment as to both trusts and gave one-half to her daughter, Lisa W. Heighe, and the other half to the respondent, Baronig Baron, an adopted son, thus entirely excluding from participation in the trust funds the appelant, Robert H. Heighe, who would otherwise have taken a one-half interest therein under the second codicil of the will of Ellen W. Duryea.

The appellant, Robert H. Heighe, petitioned the Surrogate to have excluded from the taxable estate of Ellen W. Duryea the two trust funds in question and to have stricken from the order assessing the tax the provisions for a tax thereon payable out of the residuary estate of Ellen W. Duryea, deceased. The Surrogate held the tax upon both trust funds not payable out of the estate of Ellen W. Duryea, deceased. The Appellate Division reached a contrary conclusion, modified the order and directed that the tax on both trust funds be paid from the estate of the donor.

Subdivision 4 of section 220 of the Tax Law (Cons. Laws, ch. 60), as amended in 1926 (L. 1926, ch. 357), states that whenever any person shall exercise a power of appointment, the appointment shall be deemed a taxable transfer “ in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power.”

Subsequent to the death of the said Ellen W. Duryea, article 10 of the Tax Law, of which section 220 was a part, was repealed as to the estates of persons dying subsequent to September 1, 1930, and article 10-C substituted therefor, but Ellen W. Duryea having died before article 10-C took effect, section 220, subdivision 4, remained in full force and éffect as to her estate under the specific provisions of section 249-mm of article 10-C. Of course, had the donee of the power, Lisa W. Sand-ford, died without exercising the power, the principal of both trust funds would have passed under the will of Ellen W. Duryea, the donor of the power, and would have been taxable as a part of the estate of Ellen W. Duryea. Lisa W. Sandford having exercised the power, the gift would be taxable as a transfer from her as donee under article 10-C unless, by some controlling principle of law or effective testamentary provision in the will of the donor of the power, that article is rendered inapplicable.

Not every exercise of a power has been held taxable to the estate of the donee, as where the appointment is identical in amount and to persons who would have taken in default of exercise of the power (Matter of Lansing, 182 N. Y. 238; Matter of Backhouse, 110 App. Div. 737; affd., 185 N. Y. 544; Helvering v. Grinnell, 294 U. S. 153) or where a beneficiary receives less than he would have taken in default of the exercise. (Matter of Slosson, 216 N. Y. 79.)

Likewise, a testator may by clearly expressed intention, charge his estate with the payment of transfer estate or succession taxes on gifts or devises made by him. (Decedent Estate Law [Cons. Laws, ch. 13], § 124, Matter of Gihon, 169 N. Y. 443; Isham v. N. Y. Association for the Poor, 177 N. Y. 218.)

The questions here are whether the testatrix did clearly express an intention to charge her estate with a tax on the interest of each of the appointees, Lisa W. Heighe and Baronig Baron, in the trust funds, and if not, whether the transfer in each instance is one properly held taxable to the estate of the donee under established principles of law.

It is clear that it was the intent of the testatrix to direct payment of all gifts, legacies and devises provided for under her will free from and without deduction on account of taxes properly assessed on account of such gifts, legacies and devises, and that the taxes thereon should be paid out of her residuary estate. It must be assumed, since she affirmed that part of her original will in the codicil by which she gave the powers of appointment, that it was her intention that the taxes assessed on gifts made by her under those powers should likewise be payable out of her residuary estate. The question is whether it is either necessary or proper to assume it to have been her intention to make payable out of her residuary estate taxes which pursuant to statute would otherwise be assessed in the estate of the donee of a power granted in her will. We believe not. To so assume would necessitate basing the tax on a law totally different from the law applicable when the will was drawn or during the lifetime of the grantor of the power. Under the order of the Appellate Division, the tax assessable has been held to be against the estate of the donee under article 10-C enacted after the death of the donor, but it is made payable out of the estate of the donor, to which is applicable the provisions of the prior law. No such result could have been contemplated by the donor or is to be inferred as her intent from the language used.

We must, therefore, seek authority to uphold a finding that the tax assessed on account of transfers to the appointees or either of them is payable from the estate of the donor of the powers in decisions which have for their basis something other than an expressed intention of a testator.

Eliminating the question of intent as expressed by the testatrix, nothing remains upon which to reach a conclusion that the tax on the share passing to Baronig Baron may be held to be payable from the estate of the donor of the power. He is a stranger who under no circumstances would take under the will of testatrix except by virtue of an exercise of the power of appointment. The property transferred to him must be included in the gross estate of the donee under section 249-r of article 10-C of the Tax Law, since the estate of the donee is subject to the provisions of the new estate tax law and the tax is to be based on the provisions of that law. That an appointment to a stranger or an appointment through which the appointee takes benefits greater than would have accrued in the absence of an appointment is taxable in the estate of the donee of the power where the power is absolute is well established by authority. (Matter of Cooksey, 182 N. Y. 92; Matter of Delano, 176 N. Y. 486.)

With respect to the share appointed to Lisa W. Heighe a more difficult question is presented. It is well established that where an appointee takes the same share that would have passed to that person under the will of the donor of the power, even in the absence of an expressed intent in the will of the donor, the share is to be taxed as passing under the will of the donor and in such case no tax can be imposed in the estate of the donee of the power, and if there was no tax applicable to the estate of the donor there would be no tax upon the property transferred to the appointee. (Matter of Slosson, supra.)

The question is whether Lisa W. Heighe, under the peculiar facts of this case, did take the share she would have taken under the will of Ellen W. Duryea. It is contended on the part of the appellants that she took more under the power of appointment than she would have taken by an election to take under the will of Ellen W. Duryea. Conceding the validity and effectiveness of the appointment of half of each of the funds to Baronig Baron, it is said that if she renounced her appointment only half of the two funds would remain to be distributed under the Duryea will and the one-half would be required to be divided between Lisa W. Heighe and the appellant, Robert H. Heighe. As has been suggested by the learned Surrogate in his opinion in this case, the true rule to be applied can be reached only by an entire disregard of any intention to elect or of what has been termed an election and may be stated to be that where a person named under the exercise of the power takes the same or less than he would have taken under the original will, if the power of appointment had not been exercised, his interest is taxable in the estate of the donor and not in the estate of the donee. While it is true that no case has been called to our attention where a similar state of facts to those presented in this case existed, except Matter of Chauncey (102 Misc. Rep. 378), several cases in the lower courts are to be noted where a result contrary to that reached would have been necessitated had not the court recognized the rule to be as above stated. (See Matter of Taylor, 121 Misc. Rep. 7; affd., 209 App. Div. 299; affd., 239 N. Y. 582, upon other points; Matter of Canda, 114 Misc. Rep. 161; revd. on other grounds, 197 App. Div. 497; Matter of Tuckerman, 130 Misc. Rep. 806; Matter of Vanderbilt, 163 Misc. Rep. 667.)

The rule as stated is not in conflict with the decisions in Matter of Slosson (supra), Matter of Lansing (supra) and Matter of Ripley (192 N. Y. 536), in each of which cases shares appointed to persons who would have taken under the will of the donor in the absence of an appointment, amounts equal to or less than were given under the will of the donee, were held not taxable in the estate of the donee.

The question is not what Lisa W. Heighe would take if she renounced her rights to take by the appointment made and elected to take under the will of the donor of the power, but rather what she would have taken had the power not been exercised to any extent. In that case she would have taken one-half under the will of the donor. The donee of the power might have said, “ I give to Lisa W. Heighe the share which she would have taken under the will of Ellen W. Duryea and to Baronig Baron the share which Robert H. Heighe would have taken.” That would have been a good appointment, would have precluded Robert H. Heighe from taldng a share in the trust estate under the Duryea will and would have given to Lisa W. Heighe exactly what she would have taken under the Duryea will had no appointment been made. While the donee of the power did not mention the fact that such was the disposition she was making of the fund, it is entirely clear that such was the intent and effect of the appointment made. It must, therefore, be held that Lisa W. Heighe takes no more under the appointment than she would have taken had no appointment been made and the principle set forth in the cases above cited is applicable, namely, that she is deemed to take under the will of the donor rather than under the appointment made by the donee. Even without an expressed intent in the will of the donor of the power as to the fund to be used in paying taxes upon property passing under her will, such taxes would be assessable in her estate. The tax on the share passing to Lisa W. Heighe constitutes property taxable in the estate of the donor, and since it is so taxed, the tax is to be paid out of the residuary estate. However, the tax is to be computed under article 10 and not under article 10-C as it would be required to be computed under the order of the Appellate Division. Article 10-C is in no wise applicable to the estate of Ellen W. Duryea or to any property passing under her will. It is not to be presumed from the language used by the testatrix that she intended to subject property passing under her will to a tax of an entirely different nature from the tax which would by law be applicable to her estate and transfers therein. The language used does not require the conclusion that she intended that her residuary estate should be subject to a tax applicable to the estate of the donee of the power, especially where the power was not exercised in such a manner as to make it taxable by law in the estate of the donee. The reasonable interpretation of clause 9 is that she intended only that the tax upon transfers made by her and taxable in her estate should be paid out of her residuary estate. The result of our conclusion is that the share in the trust funds passing to Baronig Baron pursuant to the power of appointment is not taxable in the estate of Ellen W. Duryea and that the share of the trust funds appointed to Lisa W. Heighe is transferred to her under the will of Ellen W. Duryea and subject to taxation under article 10 of the Tax Law which tax when assessed shall be paid from the residuary estate of Ellen W. Duryea.

The order of the Appellate Division should be modified in accordance with this opinion and as so modified affirmed, without costs.

Lehman, J.

(dissenting in part). I dissent from so much of the opinion and decision as hold that the share of the trust funds appointed to Lisa W. Heighe is transferred to her under the will of Ellen W. Duryea and subject to tax payable from the residuary estate of Ellen W. Duryea.

O’Brien, J.

(dissenting). The question here, as I conceive it, is not the statutory liability of the ultimate beneficiaries of Mrs. Duryea to pay taxes but rather the intention of the testatrix to assume such liability out of the property originating from her own estate.

The codicil executed December 14, 1927, modified the third and fourth paragraphs of the will in the following respects:

“First. I hereby revoke the third paragraph of the third subdivision of my will whereby I gave to my. dear sister, Lisa Winchester Sandford, all my right, title and interest in and to a trust fund established for her benefit under a deed of trust executed by me to Guaranty Trust Company of New York, dated June 2, 1923, and in lieu of said gift, I hereby give to my dear sister the power to appoint by will the disposition of the corpus of said trust fund, which right was reserved to me by said trust deed upon her death, and should she fail to exercise such power of appointment, I hereby give and bequeath the remainder of said trust fund from and after her death to her children to whom I now give and bequeath the same subject to such exercise of said power.

Second. I hereby revoke the fourth paragraph of the third subdivision of my will whereby I gave to my dear sister a legacy of $200,000, and in lieu thereof I now give and bequeath said sum to the Executors and Trustees named in my will in trust to hold, invest and re-invest the same for and during the term of the natural life of my said sister, and to collect the income and profits thereof and to pay over to her the net income therefrom in quarterly instalments, or more often if conveniently may be; and from and after my sister’s death I give and bequeath said sum so held in trust to such person or persons and in such proportions and amounts as my sister may by will designate and appoint, and failing such appointment, to her heirs at law.”

After the execution of this codicil, the ninth paragraph of the will as originally drafted remained unchanged. It reads:

“Ninth. I direct that all transfer inheritance and estate taxes be paid out of my residuary estate, and that all the foregoing gifts, legacies and devises shall be free from and without deduction of any such taxes thereon.”

After the execution of the codicil, the beneficiaries of the power of appointment under the third and fourth paragraphs of the will, although then unindentified, were to become the recipients of the foregoing gifts, legacies and devises ” within the meaning of the ninth paragraph and, therefore, such gifts, legacies and devises were, under the language of the ninth paragraph, to be “ free from and without deduction of any such taxes thereon.” Difficulty will be encountered in attempting to express more clearly an intention that every individual, except the residuary legatee, deriving a benefit from the estate of the testatrix, whether directly from herself or mediately through power of appointment by another named in the will, should receive that benefit wholly unburdened by any liability to a deduction of any kind of tax whether such tax should result from a statute then in effect or from a law to be later enacted.

Crane, Ch. J.; Loughran, Finch and Rippey, JJ., concur with Hubbs, J.; Lehman, J., dissents in part in memorandum; O’Brien, J., dissents in opinion.

Ordered accordingly.


author: O’Brien, J.

text:
    In the Matter of the Estate of Lisa W. Sandford, Deceased. State Tax Commission, Appellant. James C. Webster et al., as Executors of Lisa W. Sandford, Deceased, Respondents.

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

      Mortimer M. Kassell and Harry T. O’Brien, Jr., for appellant.
    A State can validly tax the transfer by the exercise of a power of appointment when the property passing under such exercise has a tax situs therein at the time of the exercise. (Frick v. Pennsylvania, 268 U. S. 473; Chanler v. Kelsey, 205 U. S. 466; Matter of Delano, 176 N. Y. 486; Matter of Fearing, 138 App. Div. 881; 200 N. Y. 340; Matter of Kissel, 65 Misc. Rep. 443; 142 App. Div. 934; Matter of Brett, 123 Misc. Rep. 507; 206 App. Div. 746; Matter of Palmer, 214 App. Div. 705; Matter of Putnam, 127 Misc. Rep. 799; 220 App. Div. 34; Matter of Canda, 197 App. Div. 597; Matter of Thomas, 39 Misc. Rep. 136; Wachovia Bank & Tr. Co. v. Doughton, 272 U. S. 567; Clark v. Treasurer & Receiver General, 218 Mass. 292; Matter of Bowditch, 189 Cal. 377.) The securities in the fund passing under the exercise of the power of appointment by the decedent herein had a tax situs in this State at the time of the exercise, and the value of such securities is includible in her gross estate. (Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204; Baldwin v. Missouri, 281 U. S. 586; Beidler v. South Carolina Tax Comm., 282 U. S. 1; First Nat. Bank v. Maine, 284 U. S. 312; Safe Deposit & Trust Co. v. Virginia, 280 U. S. 83; Matter of Brown, 274 N. Y. 10; Brooke v. Norfolk, 277 U. S. 27; Matter of Lord, 111 App. Div. 152; 186 N. Y. 549; Mayor v. Gibbs, 166 Md. 364; 293 U. S. 559; Johnston v. State, 8 N. E. Rep. [2d] 590; Virginia v. Appalachian Elec. Power Co., 159 Va. 462; 288 U. S. 613.) The value of the securities remaining in the 1929 trust at the date of the decedent’s death is includible in her gross estate. (Porter v. Commissioner of Internal Revenue, 288 U. S. 436; Commissioner of Internal Revenue v. Chase Nat. Bank, 82 Fed. Rep. [2d] 157; Commissioner of Internal Revenue v. Erickson, 74 Fed. Rep. [2d] 327; 294 U. S. 730; Hoblitzelle v. United States, 3 Fed. Supp. 331; Reinecke v. Smith, 289 U. S. 172; Helvering v. City Bank Farmers Trust Co., 296 U. S. 85.)

      James C. Webster for respondents.
    The property in the Winchester trust, passing under decedent’s exercise of a power of appointment, is not taxable. (Matter of Harbeck, 161 N. Y. 211; Matter of Rogers, 249 App. Div. 238; Matter of Burch, 160 Misc. Rep. 342; Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204; Blodgett v. Silberman, 277 U. S. 1; First Nat. Bank v. Maine, 284 U. S. 312; Baldwin v. Missouri, 281 U. S. 586.) The value of the property remaining at decedent’s death in the inter vivas trust created by decedent on December 31, 1929, was properly excluded from the gross estate. (Matter of Barstow, 230 App. Div. 371; Coolidge v. Long, 282 U. S. 582; Nichols v. Coolidge, 274 U. S. 531; May v. Heiner, 281 U. S. 238; Burnet v. Northern Trust Co., 283 U. S. 782; Morsman v. Burnett, 283 U. S. 783; McCormick v. Burnett, 283 U. S. 784.)
   O’Brien, J.

The testatrix, Lisa W. Sandford, who died February 7, 1934, was the daughter of Thomas B. Winchester, a resident of Massachusetts, whose will was probated in that Commonwealth in March, 1904. By his will Mr. Winchester established a trust in favor of this testatrix, among others, with power of. appointment by her in her will of the beneficiary of the principal. By the seventh paragraph of Mrs. Sandford’s will, executed June 30,1932, and the codicil, executed. September 1, 1933, she exercised this power in favor of ten individuals and one charitable institution.

The first issue presented by appellant, State Tax Commission, is whether the value of the securities in the Winchester trust should be included in the gross estate of Lisa W. Sandford and whether the transfer, by the exercise of her power of appointment, is taxable in this State. The record discloses the fact that the original trustees of the testamentary Winchester trust were both residents of Massachusetts, and that after the death of one of them the- other continued to act as sole surviving trustee until his death in January, 1933. During all that time the securities, comprising the corpus of the trust, were held by the trustees in Massachusetts. After the death of the surviving trustee the Probate Court of Suffolk county, Massachusetts, in April, 1933, appointed, as substitute trustees, two residents of New York, who are still acting. For twenty-nine years, until shortly after the appointment of the New York residents as trustees, all the securities comprising the trust were held in Massachusetts, but since April or May, 1933, the greater part have been held in New York. This testatrix died in February, 1934. The Winchester trust was created by a Massachusetts resident, the trustees are subject to the control of the Probate Court of that State, and all the securities constituting the corpus had an actual situs there except for one year prior to the death of the donee of the power and at present have at least a constructive situs there. The trustees’ obligation is to account to the Massachusetts court. The actual presence in this State of the certificates or instruments evidencing the intangible property did not afford a basis for taxation. Neither did the removal of the residence of the trustee into this State afford a basis for the imposition of a tax. The transfer of the securities in the trust by the exercise of this power of appointment is not taxable in this State. (Wachovia Bank & Trust Co. v. Doughton, 272 U. S. 567.)

The second issue presented by appellant, State Tax Commission, is whether the value of the securities remaining in the 1929 inter vivas trust at the date of the death of testatrix should be included in her gross estate. Under date of December 31, 1929, testatrix and Guaranty Trust Company executed a trust agreement whereby she transferred certain designated property to the trustee. It provides that upon her death the trustee should pay over to her adopted son, Baronig Baron, the principal of the trust fund with accrued interest. It also provides: “ 4. The Trustee may make such payments out of the principal as the Grantor may request from time to time, provided, however, that the aggregate of such withdrawals shall not at any time exceed fifty per cent (50%) of the total of the original amount of securities and properties placed in trust by her plus any additional amounts thereafter added to the principal of the trust fund. 5. The Trustee may also make such payments out of the principal as the Grantor may request for illness and emergency and any other unusual expenses.” On July 12, 1932, the grantor exercised her right to withdraw fifty per cent of the securities, and on that date a new trust indenture was executed by her and Baronig Baron, as trustee. By this new trust agreement reference is made to the indenture of December 31,1929, and Baronig Baron is named as trustee as well as remainderman. The value of the securities in the new trust created July 12, 1932, was approximately $32,000. It recites the desire of the testatrix to withdraw from the trust fund then held by the Guaranty Trust Company as trustee fifty (50%) per cent of the entire said trust fund * * * for the purpose of continuing the said trust fund as to the said fifty (50%) per cent under the substituted trusteeship of Baronig Baron * * * amending the said instrument [the indenture of December 31, 1929] as to substitute Baronig Baron the trustee as to the said fifty (50%) per cent thereof.”

The appraiser included in decedent’s gross estate the sum of $72,317.02, the value of the securities in the trust of December 31, 1929. Of this amount, $40,499.22 is the value of the securities remaining in the original trust on the day of decedent’s death, and $31,817.80, the value of the securities in the hands of the trustee named on July 12, 1932. The order of the Surrogate excluded from the gross estate the value of the securities in the original trust of December 31, 1929, at decedent’s death, but included the value of the securities in the trust created July 12, 1932.

The question is whether the $40,499.22, the value of the property remaining at decedent’s death in the trust of December 31, 1929, was properly excluded from the gross estate. The Surrogate and the Appellate Division have held that the securities that remained at the time of decedent’s death in the original trust of December 31, 1929, are not includible in the gross estate. The theory of the respondent executors is that when, on July 12,1932, the testatrix transferred fifty per cent of the securities from the trusteeship of the Guaranty Trust Company to Baronig Baron, she had no power to revoke as to the balance and had no rights in respect to the remaining fifty per cent except to receive the income. The appellant Tax Commission argues that the additional power vested by paragraph 5 in the trustee at the grantor’s request to make other payments out of the principal constitutes an absolute power to recall, that the grantor could withdraw the entire corpus, in addition to the fifty per cent, and use it for illness, emergency and other unusual expenses. Respondents answer this argument by reference to certain recitations in the new trust indenture of July 12, 1932, which, as they argue, indicates a clear intent by the grantor that no more than fifty per cent of the corpus of the original trust could ever be withdrawn. These are the recitations in the agreement of July 12, 1932, in respect to the agreement of December 31, 1929, upon which respondents rely: Whereas, the said Lisa Winchester Sandford had the power under the said trust agreement to withdraw up to fifty (50%) per cent of the original amount of securities and properties placed in trust; and Whereas, it is the desire of the said Lisa Winchester Sandford to withdraw out of the aforementioned trust fund now held by Guaranty Trust Company of New York as trustee fifty (50%) per cent of the entire said trust fund, according to the market valuation of the securities contained therein as of July 7, 1932, for the purpose of continuing the said trust as to the said fifty (50%) per cent under the substituted trusteeship of Baronig Baron for the better management and simpler access by the grantor, party of the first part, to the said portion of the said fund, not taking away from the said fund or from the said trust any of the provisions created in the said trust indenture of the 31 st day of December, 1929.” The powers granted to the trustee, Baronig Baron, under the new agreement in reference to the fund set up under this agreement of July 12, 1932, are far more extensive than the powers vested in the trustee, Guaranty Trust Company, under the original trust agreement of December 31, 1929. Under the new agreement the trustee, by paragraph 9, could withdraw the entire corpus and was not required to render any accounting. There is no evidence that more than fifty per cent of the original trust fund of December 31, 1929, was ever withdrawn or that any effort was made or that there was ever any inclination to do so. If any ambiguity arises by reason of an apparent conflict between paragraph 4 and paragraph 5 of the agreement of December 31, 1929, the practical construction given to that instrument by the parties during the years 1930 and 1931 up to July 12, 1932, would be quite persuasive in ascertaining intent. The trust of December 31, 1929, may, therefore, be interpreted as irrevocable up to fifty per cent of the corpus. The Surrogate and the Appellate Division are correct when they hold that the provisions of section 249-r (subd. 3) of the Tax Law, as added by chapter 710 of the Laws of 1930 and amended by chapter 62 of the Laws of 1931, are not retroactive as to a trust created prior to its enactment. (Nichols v. Coolidge, 274 U. S. 531; May v. Heiner, 281 U. S. 238; Coolidge v. Long, 282 U. S. 582.)

The order appealed from should be modified in accordance with the prevailing opinion in Matter of Duryea (277 N. Y. 310), decided herewith, by striking from said order the following provision: It is hereby unanimously ordered and adjudged that the order so appealed from be and the same hereby is modified by providing that any and all estate taxes assessed and payable (1) on the value of the principal of the inter vivas trust created by Ellen W. Duryea, deceased, on June 2, 1923, with income therefrom for fife to decedent herein, and over the corpus of which trust the said Ellen W. Duryea gave this decedent a power of appointment by will, and any and all estate taxes assessed and payable (2) on the value of the principal of the trust created under the will of said Ellen W. Duryea, deceased, with income therefrom to decedent herein for life, and over the corpus of which trust the said Ellen W. Duryea gave this decedent a power of appointment by will, shall be paid by Robert H. Heighe, residuary legatee of said Ellen W. Duryea, and shall not be. paid by the Executors of the decedent herein, nor by the appointees of said trusts, said Robert H. Heighe to pay such proportion of the estate taxes herein as the amount of the value at the date of this decedent’s death of the principal of said two trusts, namely, the sum of Three hundred Fifty-four thousand, one hundred fifteen and 33/100 Dollars ($354,115.33), bears to the total gross taxable estate herein,” and, as so modified, affirmed, with costs.

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

Ordered accordingly.


author: Per Curiam.

text:
    In the Matter of Edward McKague, Appellant, against Howard E. Pearsall, as Clerk of the Village of Freeport, Respondent. Henry Von Elm et al., Respondents.
    Argued March 14, 1938;
    decided March 14, 1938.

      Israel J. Beck and Edward Marks for appellant.
    Failure to append at the bottom of each separate sheet of the nominating petition the authentication prescribed in sections 135 and 137 of the Election Law (Cons. Laws, ch. 17) invalidates each such separate sheet, and a petition filed in this form is not sufficient compliance with the Election Law to entitle the nominees therein to have their names placed on the official ballot. (Matter of Kollock v. Russell, 162 Misc. Rep. 299; 250 App. Div. 774; Matter of Wood v. Board of Elections, 247 App. Div. 322; Matter of Lerner v. Cohen, 240 App. Div. 805; 262 N. Y. 450; Matter of Dorsey v. Cohen, 245 App. Div. 849; 268 N. Y. 620.)

      G. Bur chard Smith for Henry Von Elm et al., respondents.
    The designating petition is valid. (Matter of Simpson v. Cohen, 299 N. Y. Supp. 124.)

      Samuel M. Levy for Howard E. Pearsall, as clerk of the village of Freeport, respondent.
   Per Curiam.

We are of the opinion that section 137 of the Election Law (Cons. Laws, ch. 17), read in connection with section 135, requires that when a nominating petition is authenticated by the affidavit of the witness before whom it was subscribed, such affidavit must be appended at the bottom of each sheet of the petition containing signatures of the electors.

The orders should be reversed and the motion granted, without costs.

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

Orders reversed, etc.


author: Loughban, J.

text:
    Robert L. Redfield et al., as Trustees under the Will of Montgomery B. Cowperthwait, Deceased, et al., Appellants, v. Walter Critchley et al., as Executors of Herbert M. Cowperthwait, Deceased, et al., Appellants, and Louise C. Lawrence, Respondent.
    Argued January 25, 1938;
    decided March 15, 1938.

      Philip W. Lowry for appellants.
    The court had no power to grant the motion to vacate after the expiration of five years since the filing of the 1928 judgment. (Gysin v. Gysin, 263 N. Y. 509; 264 N. Y. 595; Delaplaine v. Hitchcock, 6 Hill, 14.) Defendant-respondent was not entitled to be relieved from the 1928 judgment even under section 108 of the Civil Practice Act. (Delaplaine v. Hitchcock, 6 Hill, 14; Furman v. Furman, 153 N. Y. 309; Malicky v. Rosenberg, 152 Misc. Rep. 197; Schlimmer v. N. Y., Ontario & Western R. R. Co., 212 App. Div. 782.)

      John L. Wells for respondent.
    The motion to open the default was made under section 108 of the Civil Practice Act, and under that section the Appellate Division had power to vacate the default judgment. (Furman v. Furman, 153 N. Y. 309; Ladd v. Stevenson, 112 N. Y. 325; Donnelly v. McArdle, 14 App. Div. 217; Matter of Cartier v. Spooner, 118 App. Div. 342.) The one-year limitation did not begin to rim until respondent was served with a copy of the judgment and no such sendee was ever made. (Civ. Prac. Act, § 108.)
   Loughban, J.

Montgomery B. Cowperthwait died in 1915. He left a will which was admitted to probate by the Surrogate’s Court of Westchester county. By the provisions thereof his daughter, Louise Cowperthwait Lawrence, was to receive during her life $2,500 a year as income from a trust thereby established.

Over a period between 1915 and 1928 the trustees made remittance for such income to Mrs. Lawrence by twenty-six checks for the aggregate sum of $32,125. She retained those checks without depositing any of them for collection. The trustees wrote to her about her failure to do so. She answered none of their queries. During this period there was no accounting of the administration of the trust.

In that state of affairs the trustees, in June, 1928, brought this action against Mrs. Lawrence and the trust remaindermen. The complaint prayed a declaration of the effect of the foregoing facts upon the respective rights and legal relations of all parties in interest.

At that time Mrs. Lawrence resided in the State of New Jersey. The summons and complaint in this action were there delivered to her personally pursuant to an order for service by publication. When she defaulted in appearing, final judgment was rendered against her on November 12, 1928. It was thereby declared that she had renounced all the benefits provided for her by the will of her father, with the result that the trust for her life set up by that instrument had terminated by operation of law. The accounts of the trustees were thereby judicially settled and they were directed to distribute the balance of trust principal and of accumulated income then in their hands to the persons entitled to the gifts in remainder. Distribution was made accordingly. No copy of this judgment or notice of entry thereof was ever served upon Mrs. Lawrence.

In May, 1934, she moved to vacate this judgment of November 12, 1928. The motion was denied by the Special Term and granted by the Appellate Division. Mrs. Lawrence then served an answer and, after trial of the issues, the court found that she “ never intended to waive or renounce her rights to receive said $2,500 per annum under her father’s will and never intended that the accumulated interest should be paid to any one other than herself.” There is evidence sufficient to support that finding. The judgment entered thereon in substance has restored the several parties in interest to the positions respectively occupied by them prior to commencement of this action.

This determination having been affirmed at the Appellate Division, the parties other than Mrs. Lawrence now appeal therefrom to this court, specifying in their notice of appeal their intention to bring up for review the intermediate order of the Appellate Division which had vacated the judgment of November 12, 1928. Whether there was power to vacate that judgment is the single question left for decision.

Section 528 of the Civil Practice Act provides: A motion to set aside a final judgment, for error in fact not arising upon the trial, shall not be heard, except as herein specified, after the expiration of two years since the filing of the judgment-roll.” The exceptions specified in section 528 have no relevancy to this case. Mrs. Lawrence, as we have noticed, did not move to vacate the judgment of November 12, 1928, until more than five years after entry thereof against her. The ground of her motion for that relief was that she had been advised that as she was a resident of New Jersey, the service upon her of the summons and complaint in this action had no effect or validity.” We assume with the appellants that this unwarranted conclusion was an error in fact. The error did not arise upon a trial. Consequently, if section 528 is here applicable, the present judgment in favor of Mrs. Lawrence must be reversed and the judgment entered against her on November 12, 1928, must be reinstated.

Section 108 of the Civil Practice Act provides: “ The court, in its discretion, and upon such terms as justice requires, at any time within one year after notice thereof, may reheve a party from a judgment, order or other proceeding, baleen against him through his mistake, inadvertence, surprise or excusable neglect.” The Appellate Division has held that section 108 authorized its order granting the motion of Mrs. Lawrence to vacate the judgment of November 12, 1928.

Sections 108 and 528 are to be read together so that both shall have due and conjoint effect (Matter of Kaplan v. Peyser, 273 N. Y. 147). Section 108 is captioned, Relief against default judgments and orders.” Section 528 fixes the time for a motion to set aside a final judgment, for error in fact not arising upon the trial.” We think that when the context of either section is matched with the context of the other no necessary conflict results. Section 528 is addressed to judgments after trial and not to inquests on default, to which section 108 is made applicable in terms.

The judgment of November 12, 1928, was directed upon a referee’s report. He made this finding: “ That the complaint in this action which contains an allegation that the said Louise Cowperthwait Lawrence had failed to accept the benefits provided for her in said Will of Montgomery B. Cowperthwait and had failed to cash the said checks was served personally upon the said Louise Cowperthwait Lawrence and she did not appear or answer herein.”

We agree with the Appellate Division that the judgment of November 12, 1928, was (as to Mrs. Lawrence) a default judgment within the scope and meaning of section 108.

Our decision in Gysin v. Gysin (263 N. Y. 509) is not authority to the contrary. In that case the action was one for divorce, and, although the wife failed to appear, the judgment there granted in favor of the husband was not a default judgment in any fair sense. (See Civ. Prac. Act, § 1150.) “ No judgment annulling a marriage contract, or granting a divorce, or for a separation, shall be made of course by the default of the defendant, or in consequence of any neglect to appear at the hearing of the cause, or by consent ” (Rules Civ. Prac., rule 283). A default is in legal effect the equivalent of a demurrer (Foster v. Smith, 10 Wend. 377). Such a constructive admission will not do for the purposes of judgment in a matrimonial action. Though the defendant spouse be absent, the hearing that must none the less be had therein is in essence a trial (Rules Civ. Prac., rule 282). The judgment in the Gysin case was thus a judgment after trial within the scope and meaning of section 528.

A further inquiry as to the construction of section 108 remains to be made. The Appellate Division was of opinion that the word notice ” as used in that section means service of a copy of a default judgment with written notice of the entry thereof (243 App. Div. 70). On that interpretation the court had power in its discretion to vacate the judgment entered against Mrs. Lawrence on November 12, 1928, in as much as she never received any formal notice thereof.

Appellants point out that the notice prescribed by section 108 is not declared to be actual notice and that Mrs, Lawrence (since she was duly served with process) had constructive notice of the resulting judgment of November 12, 1928. They argue that to read section 108 as requiring more than constructive notice would be unjustly to impose upon a judgment party the difficulty and expense of locating a defaulting party, who may avoid service of notice of a judgment against him. This prospect, we think, is quite shadowy. Section 108 confers upon the court jurisdiction to reheve against a default judgment “ in its discretion, and upon such terms as justice requires.” The court can exercise this discretion against a defaulting party who has avoided or made difficult the notice to which the statute entitles him.

We see no reason why the notice imported by section 108 should not be taken to be the usual notice of a judgment, that is to say, service of a copy thereof with written notice of entry, as the Appellate Division has held.

It is no more than just to add that nothing in this record suggests to us that the trustees were here actuated by anything other than a disposition to administer properly the trust committed to then care.

The judgment appealed from should be affirmed, without costs. The motion to dismiss the appeal should be denied, without costs.

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

Judgment affirmed, etc.


text:
    The People of the State of New York, Respondent, v. Milton Speiser, Appellant.
    Reargued March 15, 1938;
    decided March 18, 1938.

      George Gordon Battle, Samuel Hassen, I. Maurice Wormser and Irving Mariash for defendant-appellant.
    Although the direct jurisdiction of the Court of Appeals is limited in this case to questions of law, nevertheless, the court has power and it is its duty to examine the whole record so far as it may be necessary to do justice within the jurisdiction of the court. (Matter of Kaufmann, 245 N. Y. 423.)

      Thomas E. Dewey, District Attorney {Felix C. Benvenga and William P. Rogers of counsel), for respondent.
    The Court of Appeals is without power to reduce the sentence imposed. (Shepherd v. People, 25 N. Y. 406; Matter of Lange, 85 U. S. 163; People v. Bork, 96 N. Y. 188; Messner v. People, 45 N. Y. 1; People v. Phillips, 42 N. Y. 200; Ratzky v. People, 29 N. Y. 124; People v. Bissert, 71 App. Div. 118; 172 N. Y. 643; People v. McGonegal, 136 N. Y. 62; People v. Williams, 58 Hun, 278; People v. Naimark, 154 App. Div. 760; People v. Miles, 173 App. Div. 179; People v. Gitlow, 234 N. Y. 132; People v. Johnson, 252 N. Y. 387; Matter of Goodman, 199 N. Y. 143; Wallace v. United States, 243 Fed. Rep. 300; Gilley v. State, 22 Ala. App. 171.)
   O’Brien, J.

The judgment of conviction of defendant for conspiracy having been affirmed by this court, he has applied to us for reduction of sentence. The only question presented on this motion concerns the power of the Court of Appeals under section 543 of the Code of Criminal Procedure. This is the language of the statute:

1. Upon hearing the appeal the appellate court may, in cases where an erroneous judgment has been entered upon a lawful verdict, or finding of fact, correct the judgment to conform to the verdict or finding; in all other cases they must either reverse or affirm the judgment appealed from or reduce the sentence imposed to a sentence not lighter than the minimum penalty provided by law for the offense of which the defendant or defendants have been convicted and in cases of reversal, may, if necessary or proper, order a new trial.”

Under this statute, the Appellate Division has complete jurisdiction to reduce the sentence imposed upon this defendant. In examining the power of this court, however, section 543 must be read in connection with sections 7 and 8 of article YI of the Constitution. Pursuant to section 7, except where the judgment is of death or where, in civil actions, the Appellate Division, on reversing or modifying, makes new findings, our jurisdiction is limited to the review of questions of law. The provisions of section 8 which confer upon any appellate court ” the power to modify a judgment must necessarily exclude power by this court to modify on questions of fact or discretion except in the two instances provided for in section 7. In reviewing a judgment of conviction for a misdemeanor or for a felony other than a capital offense, we can no more review the appropriateness of a discretionary sentence than the weight of evidence or other elements which do not include questions of law.

The facts set forth in the moving affidavit on this motion may merit serious consideration by such an appellate court as possesses power to act in accordance with the provisions of section 543 of the Code of Criminal Procedure, but we are bound to decide that the Court of Appeals is not such a court. Therefore, we must deny this motion to reduce the sentence of defendant but we do so solely for lack of power.

Upon reargument, the judgment as to defendant Speiser should be affirmed.

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

Judgment affirmed.


text:
    In the Matter of Wallach’s, Inc., Appellant, against John P. Boland et al., as Members of the New York State Labor Relations Board, Respondents.
    Argued March 7, 1938;
    decided March 18, 1938.

      Herbert Ferster, David Drechsler, Theodore W. Adler and Mortimer Horowitz for appellant.
    The orders of the Board are final orders by which petitioner is aggrieved, and they are presently judicially reviewable. (Matter of Leland, 219 N. Y. 387; People ex rel. Bankers Trust Co. v. Graves, 245 App. Div. 166; 270 N. Y. 316; Matter of Talmage, 160 N. Y. 512; Matter of Simmons [Catskill Aqueduct], 206 N. Y. 577; Matter of Scheidecker v. Department of State, 242 App. Div. 119; People ex rel. Steward v. Board of Railroad Comm., 160 N. Y. 202; People ex rel. New York Edison Co. v. Wilcox, 207 N. Y. 86; People ex rel. N. Y. C. & H. R. R. R. Co. v. Public Service Comm., 195 N. Y. 157.)

      Burton A. Zorn and Eugene Cotton for respondents.
    The Board’s certification and direction of election are not subject to review at this time. (Myers v. Bethlehem Shipbuilding Corp., 303 U. S. 41; Newport News Shipbuilding & Drydock Co. v. Schauffler, 303 U. S. 54; Virginian Railway Co. v. System Federation, 300 U. S. 515; Associated Press v. Herrick, 13 Fed. Supp. 897; United States v. Los Angeles & Salt Lake R. R. Co., 273 U. S. 299.)
   Per Curiam.

A certification under section 705 of the New York State Labor Relations Act (Labor Law [Cons. Laws, ch. 31]) is an interlocutory determination which can be reviewed only in connection with the review of a final order, made under section 706 and necessarily affected by the interlocutory determination.

The order should be affirmed, without costs.

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

Order affirmed.