text:
    New York City Tunnel Authority, Appellant, v. Consolidated Edison Company of New York, Inc., et al., Respondents, et al., Defendants.
    Argued May 23, 1946;
    decided July 23, 1946.

      John J. Bennett, Corporation Counsel (Henry Epstein, Charles C. Weinstein and Andrew Bellanea of counsel), for appellant.
    I. Defendants are under a common-law duty to adapt their structures at their own expense to the requirements of the public improvement undertaken by plaintiff. The obligation to rearrange utility structures in connection with public improvements is an essential incident of every street franchise. (Transit Comm. v. Long Island R. R. Co., 253 N. Y. 345; Matter of Deering, 93 N. Y. 361; New Orleans Gas Co. v. Drainage Comm., 197 U. S. 453; Bell Telephone Co. v. Penn. P. U. C., 129 Pa. Super. 529; N. J. Bell Tel. Co. v. Delaware River Joint Comm., 125 N. J. L. 235; Delaware River Joint Commission Case, 342 Pa. 119; Phila. Electric Co. v. Commonwealth, 311 Pa. 542.) II. Defendants are not entitled to undisturbed permanent enjoyment of specific room in or under public streets. (New Orleans Gas Co. v. Drainage Comm., 197 U. S. 453; Transit Comm. v. Long Island R. R. Co., 253 N. Y. 345; N. Y. InterUrban W. Co. v. City of Mount Vernon, 185 App. Div. 305; Gas Light & Coke Co. v. Columbus, 50 Ohio St. 65; Union Light, Heat & Power Co. v. L. & N. R. Co., 257 Ky. 761; Butchers' Union Co. v. Crescent City Co., 111 U. S. 746; National Water-Works Co. v. City of Kansas, 28 F. 921; Anderson v. Fuller,
      51 Fla. 380; Scranton Gas Co. v. Scranton City, 214 Pa. 586.) IDE. The tunnel approaches are a part of the public highway. (Matter of Deering, 93 N. Y. 361.) IV. The form of financing selected for the tunnel does not deprive the project of its “ governmental ” nature. Plaintiff is a State agency. (Robertson v. Zimmermann, 268 N. Y. 52; People ex rel. Bridge Authority v. Davis, 277 N. Y. 292; Bush Terminal Co. v. City of New York, 282 N. Y. 306; Delaware River Comm. v. Colburn, 310 U. S. 419; Commissioner of Internal Revenue v. Estate of Shamberg, 144 F. 2d 998, 323 U. S. 792; Commissioner of Internal Revenue v. Estate of White, 144 F. 2d 1019, 323 U. S. 792; Kansas City Bridge Co. v. Alabama State Bridge Corp., 59 F. 2d 48, 287 U. S. 644.) V. The case does not call for determination whether there is room in the law of street franchises for the theory of so-called “ proprietary ” government activities. (City of New York v. New York Telephone Co., 278 N. Y. 9.) VI. The power to collect tolls does not diminish the privileged character of plaintiff’s activities. (People ex rel. Bridge Authority v. Davis, 277 N. Y. 292; Commissioner of Internal Revenue v. Estate of Chamberg, 144 F. 2d 998, 323 U. S. 792; Kansas City Bridge Co. v. Alabama State Bridge Corp., 59 F. 2d 48, 287 U. S. 644; Robia Holding Corp. v. Walker, 257 N. Y. 431; Huse v. Glover, 119 U. S. 543.) VH. The statute leaves the burden of the relocation expense with the utility companies. (Westchester El. R. R. Co. v. W. Co. P. Comm., 255 N. Y. 297; Tilton v. State of New York, 259 App. Div. 507, 285 N. Y. 601; Matter of Town of Cheektowaga Grade Grossings, 259 App. Div. 141, 283 N. Y. 687; Western New York Water Co. v. Brandt, 259 App. Div. 11, 283 N. Y. 686; Town of Oyster Bay v. Moses, 248 App. Div. 598, 273 N. Y. 631; C. B. & Q. Ry. v. Drainage Comm’rs., 200 U. S. 561; New Orleans Gas Co. v. Drainage Comm., 197 U. S. 453.)

      Leander I. Shelley and Daniel B. Goldberg for The Port of New York Authority, amicus curbs.

    I. The construction of the Queens Midtown Tunnel is a governmental function. (Brush v. Commissioner, 300 U. S. 352; Atkin v. Kansas, 191 U. S. 207; Interstate Bridge Authority v. Ham’s Estate, 92 N. H. 277; Robia Holding Corp. v. Walker, 136 Misc. 358, 230 App. Div. 666, 257 N. Y. 431; Commissioner of Internal Revenue v. Estate of White, 144 F. 2d 1019, 323 U. S. 792; Commis

      sioner of Internal Revenue v. Estate of Shamberg, 144 F. 2d 998, 323 U. S. 792; Dysart v. City of St. Louis, 321 Mo. 514; Butler v. Perry, 240 U. S. 328; Rex v. Inhabitants of the County of Nottingham, 2 Levinz 112; Rex v. Inhabitants of the City of Norwich, 1 Strange 179; Robia Holding Corp. v. Walker, 257 N. Y. 431.) II. The collection of tolls does not diminish the governmental character of the construction of the Queens Midtown Tunnel. (Brush v. Commissioner, 300 U. S. 352; Kansas City Bridge Co. v. Alabama State Bridge Corp., 59 F. 2d 48, 287 U. S. 644; Commissioner of Internal Revenue v. Estate of Shamberg, 144 F. 2d 998, 323 U. S. 792.) III. The construction of the tunnel is no less a governmental function because it was performed by an authority. (Robertson v. Zimmermann, 268 N. Y. 52; People ex rel. Bridge Authority v. Davis, 277 N. Y. 292; Atkin v. Kansas, 191 U. S. 207; Gaynor v. Marohn, 268 N. Y. 417; Wells v. Housing Authority of Wilmington, 213 N. C. 744; Bachmann v. New York City Tunnel Authority, 47 N. Y. S. 2d 767, 263 App. Div. 945, 288 N. Y. 707, 317 U. S. 675; Kansas City Bridge Co. v. Alabama State Bridge Corp., 59 F. 2d 48, 287 U. S. 644; Commissioner of Internal Revenue v. Harlan, 80 F. 2d 660; Tranter v. Allegheny Comity Authority, 316 Pa. 65; Miller v. The Port of New York Authority, 18 N. J. Misc. 601; LeBeau Piping Corp. v. City of New York, 170 Misc. 644.)

      Horace R. Lamb, Thomas H. Beardsley, Carl M. Abromeit, Irving W'. Young, Earle M. Simonson and Ralph W. Brown for respondents.
    I. The provisions of the Tunnel Authority Act (L. 1936, ch. 1) clearly show that the Legislature intended that the expense of protecting and relocating the respondents’ public utility structures should be borne by plaintiff as a part of the total cost' of the tunnel project. The act contains adequate authorization and direction to pay such expenses either as the cost of the acquisition of respondents’ properties by purchase or condemnation or as damages to real estate necessary for the tunnel project. (Gaynor v. Marohn, 268 N. Y. 417; Robertson v. Zimmermann, 268 N. Y. 52; City of Detroit v. Detroit & Canada Tunnel Co., 92 F. 2d 833; Trenton v. New Jersey, 262 U. S. 182; Pettengill v. City of Yonkers, 116 N. Y. 558; Sun Publishing Assn. v. Mayor, 152 N. Y. 257; Matter of Rapid Transit R. R. Comm., 197 N. Y. 81; Litchfield Const.

      Co. v. City of New York, 244 N. Y. 251; Public Service Comm. v. City of New York, 268 App. Div. 121, 294 N. Y. 951; Transit Comm. v. Long Island R. R. Co., 253 N. Y. 345; City of New York v. New York Telephone Co., 278 N. Y. 9; Los Angeles v. Los Angeles Gas Corp., 251 U. S. 32.) II. The Tunnel Authority Act expressly authorizes plaintiff to “take”, i.e., acquire, respondents’ utility structures by purchase or condemnation and to pay respondents the reasonable value thereof. (Matter of City of New York [Newport Ave.], 218 N. Y. 274; N. Y. Electric Lines v. Empire City Subway, 235 U. S. 179; People v. O’Brien, 111 N. Y. 1; Ghee v. Northern Union Gas Co., 158 N; Y. 510; Rochester & L. O. W. Co. v. City of Rochester, 176 N. Y. 36; Levy v. McClellan, 196 N. Y. 178; Trustees of Southampton v. Jessup, 162 N. Y. 122; People ex rel. City of New York v. N. Y. R. Co., 217 N. Y. 310; U. S. v. General Motors Corp., 323 U. S. 373; Oswego & Syracuse R. R. Co. v. State, 226 N. Y. 351.) III. The act also authorizes plaintiff to pay claims for damages to real estate, required for the tunnel project. (Lawrence Constr. Corp. v. State of New York, 293 N. Y. 634; Transit Comm. v. Long Island R. R. Co., 253 N. Y. 345; Public Service Comm, v. City of New York, 268 App. Div. 121, 294 N. Y. 951; People ex rel. City of Olean v. W. N. Y. & P. T. Co., 214 N. Y. 526.) IV. The sovereign police power of the State to regulate respondents’ public utility structures has not been delegated to plaintiff. (Matter of Rapid Transit R. R. Comm., 197 N. Y. 81; Sun Publishing Assn. v. Mayor, 152 N. Y. 257; Sammons v. City of Gloversville, 175 N. Y. 346; Augustine v. Town of Brant, 249 N. Y. 198; Ohio v. Helvering, 292 U. S. 360; Helvering v. Powers, 293 U. S. 214; People ex rel. City of New York v. N. Y. R. Co., 217 N. Y. 310.) V. The so-called rule of common-law duty upon which plaintiff relies has no application.
   Fuld, J.

Plaintiff, New York. City Tunnel Authority, a public benefit corporation, was created for the purpose of constructing the Queens Midtown Tunnel (L. 1936, ch. 1; Public Authorities Law, art. 3, tit. 6). In the construction of the approaches to the tunnel it was necessary to relocate certain public utility facilities maintained by defendants in public streets within the area of the approaches. This work was made necessary because the grades of certain streets were changed and the street lines of others altered. Above and below the surface of these streets, defendants under their franchise rights maintained various pipes, cables, ducts, conduits, steam mains and other public utility structures. Plaintiff notified defendants to take the necessary steps at their expense to maintain, protect, restore, and, if necessary, to relocate their facilities affected by the construction of the tunnel. Defendants refused to comply unless reimbursed for their expense. The work of reconstruction and relocation was performed by plaintiff’s contractors and in some instances by defendants who received payment from the contractors. It was agreed that these arrangements should not prejudice the legal rights of the parties with respect to the ultimate liability for the expense.

The amount expended by plaintiff for this work aggregated $536,200, of which $535,500 is applicable to the facilities of the respondents and $700 is applicable to the facilities of the other two defendants, and plaintiff brought this action to recover these amounts with interest.

In Special Term, plaintiff moved for summary judgment and respondents made cross motions to dismiss the complaint. All motions were denied by Mr. Justice Collins in view of the serious, doubtful legal and factual issues raised ”. The Appellate Division, First Department, upon appeal by respondents, unanimously reversed upon questions of law and dismissed the complaint, and, upon appeal by plaintiff, affirmed the order of Special Term denying the motion for summary judgment.

Plaintiff’s appeal from the judgment dismissing the complaint as to respondents also brings up for review, under section 580 of the Civil.Practice Act, the order affirming the Special Term order which denied plaintiff’s motion for summary judgment.

The Appellate Division, reasoning that plaintiff was exercising a proprietary and not a governmental function in the construction and operation of the tunnel, ruled that the relocation of defendants’ facilities was necessarily a part of the cost to be borne by the authority. With that determination we disagree.

Plaintiff, a board consisting of three members, appointed by the mayor and serving without compensation, was designated as “ a body corporate and politic constituting a public benefit corporation ” (Public Authorities Law, § 627), and authorized to construct, maintain and operate various vehicular tunnels in the city of-New York (§ 629, subd. 9; § 626, subd. 8). It was given the power to sue and be sued; to acquire, hold and dispose of personal property for its corporate purposes; to acquire, in the name of the city, by purchase or condemnation, real property, including that of public utility corporations, necessary or convenient for its corporate purposes; to make by-laws for the management and regulation of its affairs; to use with the consent of the city the employees and facilities of the city, paying the latter its agreed proportion of the cost or compensation; to make contracts; to accept grants or loans from Federal agencies; to fix and collect tolls, rentals and other charges; to borrow money and issue bonds; and “ to do all things necessary or convenient to carry out the powers expressly given ” (§ 629, subd. 17).

The authority’s construction contracts are made by public letting in the manner provided in the New York City Charter for city contracts (§ 635). The city comptroller handles the money of the authority (§ 636). The act also contains a commitment by the State to the bondholders to the effect that it will not authorize a competitive project (§ 638). Its property and activities are tax exempt (§ 641) and its bonds are subject only to transfer and estate taxes (§ 641, subd. (2) and § 641-a). Its existence continues until all its bonds and liabilities are discharged and at that time all its rights and properties pass to the city of New York (§ 627).

Pursuant to the authorization contained in the law, plaintiff prepared plans for the - Queens Midtown Tunnel which were approved by the city’s board of estimate and apportionment. The tunnel was laid out under the East River from East 40th Street, Manhattan, to Fifth Street, Queens, and within the lines of First Avenue from East 40th Street to East 37th Street, Manhattan, and Borden Avenue from Fifth Street to Vernon Boulevard, Queens. The facilities in question were located in certain of these streets. No part of them was under the East River.

Since its completion, plaintiff has operated the tunnel and charged a toll for its use.

The fundamental common-law right applicable to franchises in streets ” is that a utility company must relocate its facilities in the public streets when changes are required by public necessity. (Transit Comm. v. Long Island R. R. Co. [Bell Ave. case], 258 N. Y. 345, 353.) The rule finds succinct statement in that case (253 N. Y., at p. 351): “ Although authorized to lay its pipes in the public streets, the company takes the risk of their location and is bound to make such changes as the public convenience and security require, at its own cost and charge. (Chicago, Burlington & Quincy R. R. Co. v. Chicago, 166 U. S. 226; New Orleans Gas Light Co. v. Drainage Commission, 197 U. S. 453; Chicago, Burlington & Quincy R. R. Co. v. Drainage Commrs., 200 U. S. 561; Lake Shore & Michigan Southern R. Co. v. Clough, 242 U. S. 375; Chicago, Milwaukee & St. Paul Ry. Co. v. City of Minneapolis, 232 U. S. 430; National Water Works Co. v. City of Kansas, 28 Fed. Rep. 921; Matter of Petition of Deering, 93 N. Y. 361; Chace Trucking Co. v. Richmond Light & R. R. Co., 225 N. Y. 435.) All these cases are to the point, that these public service corporations maintain their rights in the streets, subject to reasonable regulation and control, and are bound to relocate their structures at their own expense whenever the public health, safety or convenience requires the change to be made. ’ ’

If this rule is not to apply here, the distinction must lie in the nature of the project, the character of the authority, or the intent of the Legislature as shown by the enabling statute.

So far as the project is concerned, it is plainly a public highway improvement since a highway can be carried across a body of water only by bridge or tunnel. The rule cited is peculiarly applicable to street changes required for improved use for the streets themselves. (Matter of Petition of Deering, 93 N. Y. 361.) The project is, therefore, one which would have required respondents to relocate at their own expense, had it been undertaken directly by either the State or the city. Nor do the respondents contend otherwise. As to its character— the statute provides that the authority shall bd “ a body corporate and politic ” (§ 627), a description adequate for the city itself. Beyond that, the Legislature has declared (§ 641, subd. [1]): “ It is hereby found, determined and declared that the creation of the authority and the carrying out of its corporate purposes is in all respects for the benefit of the people of the state of New York, for the improvement of their health and welfare, and for the increase of their commerce and prosperity, and is a public purpose, and the authority shall be regarded as performing an essential governmental function in the exercise of the powers conferred upon it by this title * * * and it has further announced (§ 641-a): “ * * • the project is an essential part of the public highway system and the authority will be performing an essential governmental function in the exercise of the powers conferred by this title * * These provisions make clear that the authority is more than a private corporation; indeed, as has already been judicially observed, it is an agent of the State. (Bachmann v. New York City Tunnel Authority, 47 N. Y. S. 2d 767, 769, affd. 263 App. Div. 945, appeal dismissed, 288 N. Y. 707 [1942], certiorari denied, 317 U. S. 675.)

Nor does the circumstance that tolls are charged in order to finance the improvement change either the character of that improvement or the character of the authority. We may take judicial notice of the fact that, when this authority was created, many municipalities of the State were struggling to finance public improvements which could not be undertaken upon their own direct credit, either because of constitutional debt limitations or because of the disinclination or inability to burden further the traditional taxpayer. The imposition of a toll or charge for the use of the new improvement does not make the operation a business enterprise carried on for profit, as the Appellate Division suggested. Eather, it creates a new class of taxpayers thought to be more justly charged with the cost of the new improvement. The Legislature’s choice of the incidence of this taxation should not, and does not, change applicable principles. Imposing no new burdens on respondents, it was certainly not intended to relieve them of obligations to which they were subject by well-established rules. (Cf. Robertson v. Zimmermann [Buffalo Sewer Authority case], 268 N. Y. 52; Brush v. Commissioner, 300 U. S. 352.)

The Legislature might, of course, have required the authority to pay the expenses of the character here involved — or to reimburse those who laid them out — and respondents contend that the statute so provides. This argument is two-pronged. Respondents argue, first, that the Legislature failed to delegate to the authority expressly its own police power and that in the absence of such a delegation the authority was not intended to be vested with it; and, second, that the power of condemnation given to plaintiff (§ 629) with respect to “ easements ”, “ structures ”, franchises ” — as well as the power to pay for damages to real estate — carries a fair intendment that the authority was to pay for the charges here in question. It seems to us that neither contention has merit.

The enabling act, it is true, does not contain any delegation of police power in haec verba, but such language is at best rare; it is not contained in any of the statutes governing similar projects, to which our attention has been called. The legislation does, however, contain the language — to which we have already referred — clothing this authority with the attributes of delegated sovereignty as a State agency. Such language would be fully adequate for the purpose even apart from the well-settled rule of construction — announced in the Bell Avenue case — that the power is to be implied unless expressly negatived (253 N. Y., at pp. 354-355).

The conclusion here reached is in accord with decisions in other jurisdictions. (New Jersey Bell Tel. Co. v. Delaware River Joint Comm., 125 N. J. L. 235; Delaware River Joint Commission case, 342 Pa. 119; Phila. Electric Co. v. Commonwealth, 311 Pa. 542; Bell Telephone Co. v. Penn. P. U. C., 139 Pa. Sup. Ct. 529.)

The judgment and order should be reversed and plaintiff’s motion for summary judgment granted, with costs in all courts.

Loughran, Oh. J., Lewis, Conway, Desmond and Thaohbr, JJ., concur; Dye, J., taking no part.

Judgment accordingly.


source: Caselaw Access Project

author: PxjiiD, J.

license: Public Domain

text:
    Marion Johnson, Appellant and Respondent, v. Herbert Johnson, Respondent and Appellant.
    Argued June 3, 1946;
    decided July 23, 1946.

      Gilbert J. Fortgang and Milton Solomon for plaintiff, appellant and respondent.
    I. The defendant did not sustain his burden of proof that plaintiff’s alleged prior marriage was valid and in effect at the time defendant married her. (Fisher v. Fisher, 250 N. Y. 313; Matter of Dugro, 261 App. Div. 236, 287 N. Y. 595; Hansen v. Hansen, 255 App. Div. 1016.) II. The alleged marriage between plaintiff and another was void and a nullity. (McCullen v. McCullen, 162 App. Div. 599; Earle v. Earle, 141 App. Div. 611; Berry v. Berry, 130 App. Div. 53; di Lorenzo v. di Lorenzo, 174 N. Y. 467; Davis v. Davis, 119 Conn. 194.) III. Defendant should be held estopped both to plead the invalidity of his marriage to the plaintiff, and to obtain affirmative relief on his counterclaim for an annulment. (Stokes v. Stokes, 198 N. Y. 301; Johannessen v. Johannessen, 70 Misc. 361; Heller v. Heller, 172 Misc. 875, 259 App. Div. 852, 285 N. Y. 572.) IV. In any event, that part of the order of the Appellate Division, affirming the award to plaintiff wife of alimony and support of the infant child of the parties, should be affirmed. (Civ. Prac. Act, § 1140-a.)

      Michael B. Lieberman for defendant, respondent and appellant.
    I. The law and the evidence sustain the Appellate Division’s finding that plaintiff’s marriage to another was a valid and subsisting marriage at the time she married the defendant. (Cervone v. Cervone, 155 Misc. 543; Matter of Hinman, 147 App. Div. 452; Stokes v. Stokes, 198 N. Y. 301; Waddey v. Waddey, 290 N. Y. 251; Erkenbrach v. Erkenbrach, 96 N. Y. 456; Shonfeld v. Shonfeld, 260 N. Y. 477; Fearon v. Treanor, 272 N. Y. 268.) II. Section 1140-a of the Civil Practice Act must be read in the light of the familiar law that recovery may not be had by a person whose criminal act is the basis of his asserted cause; there is nothing in the language of the statute to indicate that the Legislature intended to interfere with the rule that one may not profit from his own wrongdoing. (Riggs v. Palmer, 115 N. Y. 506; Morgan v. Hedstrom, 164 N. Y. 224; Watts v. Malatesta, 262 N. Y. 80; Edison El. Illuminating Co. v. Frick Co., 221 N. Y. 1; Holy Trinity Church v. United States, 143 U. S. 457.)
   PxjiiD, J.

The Appellate Division, modifying the judgment of the trial court, has dismissed plaintiff wife’s complaint for a separation, granted defendant husband judgment on his counterclaim for annulment, and affirmed an award of $100 a week for the support of plaintiff and the child of the parties,.

The weight of the evidence clearly establishes that plaintiff’s prior marriage was still in existence, her first husband still living at the time of her marriage to defendant. Accordingly, the separation was properly denied, the annulment properly granted.

There remains one question upon which this court has not previously passed — is the wife in such a situation as the present entitled to permanent alimony under section 1140-a ot the Civil Practice Act. Provision for support of the minor child of the pa 'ties is not here in issue, as defendant expressly requests such provision to be made; indeed, under section 1140 of the Act, the court ‘ must give such direction' [therefor] * * * as justice requires.”

Section 1140-a oí the Civil Practice Act provides: “Maintenance and support of wife in action for annulment of marriage or to declare the nullity of a void marriage. When an action is brought to annul a marriage or to declare the nullity of a void marriage, the court may give such direction for support of the wife by the husband as justice requires. Such direction may be made in the final judgment in such action, or by one or more orders from time to time before final judgment. Upon the application of either the husband or the wife, upon notice to be given as the court shall direct, the court may annul or modify such direction, or in case no such direction shall have been madé, in a judgment hereafter given, may amend it bv inserting such direction. This section shall apply to any action brought by either the husband or the wife or by any other person in the lifetime of both parties to the marriage.”

Upon its face, the statute clearly applies to the case at bar. Defendant, however, relying upon the language of the report of the Law Revision Commission (1940 Report of N. Y. Law Revision Commission, p. 237 [Legis. Doc. 1940]), contends that the Legislature intended the statute to apply only against a bigamist husband. This contention strikes us as both unsound and unreasonable.

True enough, the prime evil which the commission sought to remedy was the unhappy plight of the innocent wife married to a bigamist husband; under the law as it then existed, she could terminate this undesirable and illegal relationship only at the cost of relinquishing all claim to support, while the offending husband could, at his pleasure, avail himself of the invalidity of a marriage — void because of his own misdeed — and slough off the financial responsibilities which he had voluntarily assumed. Nevertheless, the commission obviously did not desire to restrict the application of the statute to that situation alone, for the very language employed — When an action is brought to annul a marriage or to declare the nullity of a void marriage ”■ — demonstrates unequivocally an intent to embrace all the situations in which the Domestic Relations Law (§§ 5, 6, 7) declares a marriage to be void or voidable. Necessarily, then, the statute covers invalidity for a host of reasons besides bigamy — for instance, nonage, fraud, incapacity, insanity, incest.

Moreover, the statute is not, by its terms, limited to cases where the wife is the innocent party; such a limitation would certainly be most unreasonable and unjust, for example, in the case where the marriage is voided because of the wife’s insanity. (Cf. Bancroft v. Bancroft, 288 N. Y. 323.) To escape such a result, the draftsmen and the Legislature eschewed the rigidity of a mandatory “ direction for support ” subject to an ironclad limitation. Instead, they left it to the court’s own discretion in all cases, granting the court power to give such direction * * * as justice requires.”

Phrased in general fashion, the provision is sufficiently broad to cover such a case as the present, and direction for support of the wife on the record before us cannot be said to have been an abuse of discretion.

The judgment should be affirmed, without costs.

Loughran, Ch. J., Lewis, Conway, Desmond and Thacher, JJ., concur; Dye, J., taking no part.

Judgment affirmed. •


author: Fuld, J.

text:
    Sialkot Importing Corp., Appellant, v. Norman Berlin et al., Respondents, et al., Defendants.
    Argued June 6, 1946;
    decided July 23, 1946.

      Harry Geffner and Charles J. Herson for appellant.
    I. The gravamen of the first cause of action is one in equity, based upon constructive fraud, for an accounting to recover the wrongful profits made by the defendants in excess of the actual loss, sustained by the plaintiff corporation. There is no adequate remedy at law for said action. (Kalmanash v. Smith, 291 N. Y. 142.) II. The second cause of action is one in equity, to impress a constructive trust upon the specific property of the plaintiff diverted- and retained by these defendants. It is not an action in waste. The Statute of Limitations is ten years. (Turner v. American Metal Co., 268 App. Div. 239; Harriss v.
      Tams, 258 N. Y. 229.) III. Defendants’ first affirmative defense of the three-year Statute of Limitations is insufficient in law upon its face. The ten-year Statute of Limitátions applies. The motion to strike it out should have been granted. (Hearn 45 St. Corp. v. Jano, 283 N. Y. 139; Potter v. Walker, 276 N. Y. 15.) IY. Defendants’ second affirmative defense of the six-year Statute of Limitations is insufficient in law . upon its face. (Turner v. American Metal Co., 268 App. Div. 239; Harriss v. Tams. 258 N. Y. 229.)

      Maurice Reliman for respondents.
    I. The gravamen of the first and second causes of action is the recovery of damages for waste and they were therefore correctly held to be barred by the three-year Statute of Limitations. (Kalmanash v. Smith, 291 N. Y. 142; Dunlop’s Sons, Inc., v. Spurr, 285 N. Y. 333; Potter v. Walker, 276 N. Y. 15; Hornstein v. Podwitz, 254 N. Y. 443; Broadway Photoplay Co. v. World Film Corp., 225 N. Y. 104; Wakeman v. Wheeler & Wilson Mfg. Co., 101 N. Y. 205; Gerdes v. Reynolds, 281 N. Y. 180; Brass v. Rathbone, 153 N. Y. 435; McHenry v. Jewett, 90 N. Y. 58; Kienle v. Gretsch Realty Co., 133 App. Div. 391; Brick v. Cohn-Hall-Marx Co., 276 N. Y. 259.) II. Special Term properly held that even if the second cause of action were considered equitable in nature, it would be barred by the six-year Statute of Limitations provided in subdivision 8 of section 48 of the .Civil Practice Act. (Harriss v. Tams, 258 N. Y. 229; Clark v. Title Guarantee & Trust Co., 259 App. Div. 136, 284 N. Y. 619.)
   Fuld, J.

This is an action by a corporation against former officers and directors for dereliction of duty. The complaint — viewed in a light most favorable to plaintiff — charges that defendants, in or about March, 1938, while directors, “ secured ” the cancellation of a contract which the corporation had with a firm in India for the exclusive sale and distribution of the latter’s products; that, after establishing a rival business, they acquired ” that exclusive sales and distribution arrangement for themselves; and that they secured ” plaintiff’s customers and outlets and purloined ” its files and other assets for use in their own business. By their wrongdoing, it was further asserted, the corporation was virtually put out of business while their newly created enterprise brought them profits “ far in excess of the actual loss sustained by plaintiff.”

The complaint sets forth two causes of action. The "first seeks an accounting of defendants ’ profits ‘ beyond the amount of losses caused to plaintiff by their wrong ”; the second, to impress a constructive trust on plaintiff’s assets in defendants’ hands. The suit was commenced in April, 1942; the second cause of action was added by amendment in December, 1944.

The answer pleads the three-year Statute of Limitations and, as an alternative defense to the second cause of action, the six-year statute. Plaintiff’s motion to strike out those affirmative defenses was denied and defendants’ cross motion for judgment on the pleadings in their favor was granted at Special Term. That court ruled that the three-year statute prescribed by section 49, subdivision 7, of the Civil Practice Act applied to the first cause of action and that the six-year statute, provided for by section 48, subdivision 8, applied to the second. The Appellate Division unanimously affirmed. With the conclusions reached, we disagree.

The acts complained of occurred in 1938. At that time, the ten-year Statute of Limitations (Civ. Prac. Act, § 53) was applicable to an accounting action brought to recover profits obtained by a corporate director or officer through breach of a fiduciary duty owed the corporation, where the profits realized exceeded the correlated loss resulting to the corporation. In such a situation, it was held that the remedy at law was not adequate, that an accounting in equity was necessary, and that, therefore, the statute governing the remedy in equity was to be applied. (Equity Corp. v. Groves, 294 N. Y. 8; Dunlop’s Sons, Inc., v. Spurr, 285 N. Y. 333; Goldstein v. Tri-Continental Corp., 282 N. Y. 21; Potter v. Walker, 276 N. Y. 15.)

Here, the first cause of action seeks an accounting to recover profits received by defendants as directors “ beyond the amount of losses caused to plaintiff by their wrong. ’ ’ More is involved than merely breach of contract or injury to property. By wrongfully substituting themselves as beneficiaries under the corporation’s exclusive sales and distribution contract — while it was still existent and subject to renewals on expiration — defendants appropriated to themselves the expectancy of profit from an arrangement which would have redounded to the corporation’s advantage. Obviously, defendants were not privileged to cancel the corporation’s contract and obtain it for themselves. Equity will regard the new contract an offshoot of the old, will deem it made for the benefit of the corporation, and will enforce the resulting trust in its favor. (Cf. Meinhard v. Salmon, 249 N. Y. 458.)

The corporation’s loss is represented by the destruction of the unexpired portion of the exclusive sales contract. Defendants’ opportunity for profit, however, was not limited to what the corporation might lose during the period which the agreement still had to run, since the new contract — acquired by defendants for their own venture — might well have endured beyond, that term. A faithless fiduciary may not reap the fruits of his misconduct to the exclusion of his principal. Manifestly, defendants’ profits, as the complaint recites, may exceed the loss caused plaintiff by their wrong. Under such circumstances, defendants, stamped as trustees, must account in equity for the profits, and, accordingly, the ten-year limitation governs. (Equity Corp. v. Groves, supra; Dunlop’s Sons, Inc., v. Spurr, supra; Goldstein v. Tri-Continental Corp., supra; Potter v. Waliker, supra.)

As to the second cause of action — which seeks, in part, to impress a trust on the assets of plaintiff still in defendants’ possession — we deem it evident that equity’s intervention is essential. (Equity Corp. v. Groves, supra; cf. Hifler v. Calmac Oil & Gas Corp., 258 App. Div. 78.) Consequently, the ten-year Statute of Limitations provided for by section 53 applies here too.

Though subdivision 8 of section 48, added to the Civil Practice Act in September, 1942 (L. 1942, ch. 851), was made applicable to actions for an “ accounting ” brought against a corporate director or officer, its six-year statute did not affect these second causes of action. As to actions already accrued, the amending act (ch. 851, § 2) specifically provided, if, on September 1, 1942, less than six years remained of .the time theretofore limited for their commencement, that period was to continue unaffected. In 1938, when the cause of action came into being, the ten-year statute governed. Therefore, on September 1, 1942, a period of five and a half years still remained, and it was not shortened by the amendment. It follows, then, that since it was asserted within ten years from its inception, the second cause of action — as well as the first — was not barred. The complaint should not have been dismissed.

The judgment should he reversed, and the plaintiff’s motion to strike out the first and second affirmative defenses granted, with costs in all courts.

Loughran, Ch. J., Lewis, Conwat, Desmond and Thacher, JJ., concur; Dye, J., taking no part.

Judgment reversed, etc.


author: Lewis, J.

text:
    In the Matter of Rachel Scholtz, Appellant, against Central Hanover Bank and Trust Company, as Trustee, Respondent.
    Argued May 28, 1946;
    decided July 23, 1946.

      Bernard Jacobson and William J. Jones for appellant.
    I. Section 23 of the Personal Property Law has been complied with and the trust should therefore be revoked. (Doctor v. Hughes, 225 N. Y. 305; City Bank Farmers Trust Co. v. Miller, 278 N. Y. 134; Beam v. Central Hanover Bank & Trust Co., 248 App. Div. 182; Pibus v. Mitford, 1 Vent. 372; Smith v. Title Guarantee & Trust Co., 287 N. Y. 500; City Bank Farmers Trust Co. v. Miller, 278 N. Y. 134.) II. Article 79 of the Civil Practice Act has been complied with and the trust should, therefore, be revoked. (Thatcher v. Empire Trust, 277 N. Y. S. 874; Corbett v. Bank of New York, 242 N. Y. S. 638; O’Leary v. Grant, 155 Misc. 98; Kane v. O’Dell, 171 App. Div. 324.) III. The trend of the law favors the revocation of the trust. (Fish v. Chemical Bank & Trust Co., 270 App. Div. 251.)

      Harold A. Donegan and Francis S. Bensel for trustee, respondent.
    I. All persons now living who may, at the date of the death of settlor’s son, comprise “ the Settlor’s next-of-kin under the laws of the State of New York ”, have a remainder interest in the trust. They are persons beneficially interested in the trust and no effective revocation thereof may be had under section 23 of the Personal Property Law without their consents in writing.. (Matter of Chalmers, 264 N. Y. 239; Montignani v. Blade, 145 N. Y. 111; Engel v. Guaranty Trust Co., 280 N. Y. 43; Sehoellkopf v. Marine Trust Co., 267 N. Y. 358; Mine v. Chase National Bank, 263 App. Div. 141; Whittemore v. Equitable Trust Co., 250 N. Y. 298; Hopkins v. Bank of New York, 261 App. Div. 465, 262 App. Div. 712, 285 N. Y. 857; Rockland-Rockport Lime Co. v. Leary, 203 N. Y. 469; Shiya v. Erickson, 156 Misc. 738.) H. Article 79 of the Civil Practice Act has no bearing on the ascertainment of “ all the persons beneficially interested ” in a trust under section 23 of the Personal Property Law.

      Jacob Shientag as guardian ad litem, respondent.
    I. No reversion was created in or intended by the settlor; all those who may constitute the settlor’s next of kin at the time of her son’s death are beneficially interested in the trust estate and their consents to revoke are necessary. (Doctor v. Hughes, 225 N. Y. 305; Matter of Chalmers, 264 N. Y. 239; Engel v. Guaranty Trust Co., 280 N. Y. 43; Whittemore v. Equitable Trust Co., 250 N. Y. 298; Schoellkopf v. Marine Trust Co., 267 N. Y. 358.) II. The necessary consents to revocation of the trust agreement by all those beneficially interested in the trust estate have not been obtained as required by section 23 of the Personal Property Law. The order denying revocation should be affirmed. III. The trust instrument evidences a clear, deliberate intention to eliminate any reversionary interest in the grantor; remainders were intended so as to exclude the trust property from settlor’s gross estate. (Klein v. United States, 283 U. S. 231; Commissioner of Internal Revenue v. Estate of Field, 324 U. S. 113; Goldstone v. United States, 325 U. S. 687; Knapp v. Hoey, 24 F. Supp. 39,104 F. 2d 99.) IV. No appeal lies from the order of September 27, 1944, denying petitioner’s motion for reargument. (Trifoglio v. M. & M. Transp. Co., 200 App. Div. 723; Matter of Friedlander, 261 App. Div. 924; Babho Realty Co., Inc., v. Feffer, 230 App. Div. 866; Bendan Holding Corporation v. Rodner, 242 App. Div. 233.) V. The order of June 7, 1944, appointing a guardian ad litem was proper and should be affirmed. Petitioner made the unknown remaindermen parties to the proceeding. The appeal from said order was not timely taken and should be dismissed. (Goepel v. Kurtz Action Co., 158 App. Div. 879, 216 N. Y. 343; Bausch & Lomb Optical Co. v. Rochester Photo Works, Inc., 173 App. Div. 919; Sutton v. Bayles, 132 N. Y. S. 327; McGregory v. Schedler, 180 N. Y. S. 419; Corporation of Scholes v. Ficke Warehouses, Inc., 204 App. Div. 329; Naftal v. Jarvis, 203 App. Div. 75.)
   Lewis, J.

Upon this appeal we are to determine whether the evidence before us is sufficient, within the requirements of s'ection 23 of the Personal Property Law, to accomplish the revocation of an inter vivas trust.

The appellant is a widow whose only child is G-eorge C. W. Scholtz — a person over twenty-one years of age, unmarried and without issue. She has two brothers, two sisters, and two nephews and a niece who are the children of a deceased brother. On December 28, 1937, there was delivered to the respondent trust company a deed of trust executed by the appellant which transferred to the respondent cash and securities in trust for the following purposes: To• pay the net income thereof to G-eorge C. W. Scholtz, the Settlor’s son, as nearly as possible in equal weekly installments during each and every week of his life; and upon his death to transfer, assign and pay over the principal thereof to the descendants of said George C. W. Scholtz, if any, him surviving, in equal shares, per stirpes and not per capita, and if he shall have no descendants him surviving, to transfer, assign and pay over the same to the Settlor’s next-of-kin under the laws of the State of New York at the date of her said son’s death, per stirpes and not per capita.”

On April 10, 1944, when the trust had been administered for more than six years, the appellant served upon the respondent as trustee a written notice of her demand for and her consent to the revocation of the trust agreement. Simultaneously there was delivered to the respondent a written consent to the revocation of the same trust agreement executed by the petitioner’s son, G-eorge C. W. Scholtz.

Our inquiry goes to the question whether the demand for revocation thus made by the appellant, accompanied by her son’s written consent thereto, satisfies the requirements of section 23 of the Personal Property Law. That statute provides: “Upon the written consent of all the persons beneficially interested in a trust in personal property or any part thereof heretofore or hereafter created, the creator of such trust may revoke the same as to the whole or such part thereof, and thereupon the estate of the trustee shall cease in the whole or such part thereof.”

The determination of the question thus presented • depends upon whether the trust instrument here involved reserved to the appellant as settlor a reversion of the trust estate or created a remainder therein. At Special Term the petitioner’s motion for an order revoking the trust agreement was denied upon the ground that “ It has not been established that all those persons beneficially interested have consented to the revocation. Specifically the • nephews and nieces of the settlor have not consented. * * * ” Thereafter the order entered upon such determination and two other orders by Special Term — one of which appointed a guardian ad litem for unknown contingent beneficiaries and the other denied a motion for reargument — were affirmed by the Appellate Division, one of the justices dissenting.

We may assume that the ruling by Special Term, as affirmed by the Appellate Division — that all persons beneficially interested had not consented to the revocation of the trust — had for its basis the conclusion that the trust instrument created a remainder and that the settlor had not reserved a reversion.

Our construction of the trust agreement has led us to the opposite conclusion. As we read the language used by the appellant its legal effect was to reserve a reversion — not to create a remainder. Here the direction to transfer the trust estate to the settlor’s next of kin is — as in Doctor v. Hughes (225 N. Y. 305, 311) —“ * * * equivalent to the reservation of a reversion. * * * The reservation of a- reversion is not inconsistent with the creation of a trust to continue until the death of the reversioner. (Dome v. Mercantile Trust Co., 160 N. Y. 494; Matter of Asch, 75 App. Div. 486, 495).” (See, also, Smith v. Title Guarantee & Trust Co., 287 N. Y. 500, 504-505; Guaranty Trust Co. v. Armstrong, 294 N. Y. 666.)

We apply here the rule which was decisive in Doctor v. Hughes [supra, p. 312): “ * * * that to transform into a remainder what would ordinarily he a reversion, the intention to work the transformation must be clearly expressed. Here there is no clear expression of such a purpose. ’ ’

Our decision in the present case is not inconsistent with the rulings in Whittemore v. Equitable Trust Co. (250 N. Y. 298) and Engel v. Guaranty Trust Co. (280 N. Y. 43) where the language of the trusts involved led this court in each instance to conclude that it was the intention of the grantor to create a remainder rather than to reserve a reversion.

The order of the Appellate Division, insofar as it affirms the order of Special Term denying petitioner’s motion for an order revoking the trust, should be reversed without costs, and the matter remitted to Special Term for proceedings not inconsistent with this opinion. Insofar as the Appellate Division order affirms two Special Term orders which, respectively, appointed a guardian ad litem for unknown contingent beneficiaries and denied a motion for reargument, the appeal should be dismissed upon the ground that such orders do not finally determine a special proceeding within the meaning of the Constitution.

Loughban, Ch. J., Conway, Desmond, Thacher and Fuld, JJ., concur; Dye, J., taking no part.

Ordered accordingly.


author: Loüghran, Ch. J.

text:
    Commissioners of the State Insurance Fund, Appellants, v. Farrand Optical Co., Inc., Respondent, et al., Defendants.
    Argued May 20, 1946;
    decided July 23, 1946.

      Harry Schechter, William H. Stieglitz and Bernard Katzen for appellants.
    I. The first three separate and distinct defenses are legally insufficient. The scheme of the Workmen’s Compensation Law is, under all circumstances, to make the employer primarily liable to the employee who suffers an injury arising out of and in the course of the employment, but when such injury is caused by the negligence of another not in the same employ, such other remains liable for his negligence, and a recovery from him must be applied to the amount payable under the Compensation Law, and the employer’s liability under the law is for the deficiency only. (Matter of Curtin, v. City of New York, 287 N. Y. 338; Matter of Woodward v. Conklin & Son, Inc., 171 App. Div. 736; Sabatino v. Crimmins Construction Co., 102 Misc. 172; Matter of Breital v. Hinderstein, 236 App. Div. 203; Matter of McCann v. Baker Elevator Corp., 264 N. Y. 529; Matter of Beekman v. Brodie, 249 N. Y. 175; Matter of Roth v. Harlem Funeral Car Co., 243 App. Div. 459, 268 N. Y. 681.) II. Appellants’ cause of action is not a separate and distinct cause of action from that of the employee. It is the employee’s action. (Zurich G. A. & L. Ins. Co. v. Childs Co., 253 N. Y. 324; Travelers Ins. Co. v. Brass Goods Mfg. Co., 239 N. Y. 273.) III. It is not mandatory that all defendants be joined in one cause of action as section 211 of the Civil Practice Act is permissive only. (Kranzer v. Automobile Ins. Co., 124 Misc. 866; Roberts v. Johnson, 58 N. Y. 613.) IV. Though two different actions are commenced on the basis of one injury, one by the employee against another tort-feasor and the action herein, there can be but one satisfaction. (Spencer & Son Corp., 165 Misc. 143.)

      George J. Conway and George A. Garvey for respondent.
    I. There was no assignment' of the employee’s cause of action to plaintiffs-appellants. (McCue v. Shea Co., Inc., 175 Misc. 557, 260 App. Div. 946; Christison v. Wallace, 265 App. Div. 937; Calagna v. Sheppard-Pollak, Inc., 264 App. Div. 589, 289 N. Y. 753; Rothman v. Byron, 141 Misc. 770.) II. Appellants have no capacity to sue on the employee’s cause of action. (Grossman v. Consolidated Edison Co., 294 N. Y. 39; Calagna v. Sheppard-Pollak, Inc., 264 App. Div. 589; Calhoun v. West End Brewing Co., 182 Misc. 423, 269 App. Div. 398; Comrs. of State Insurance Fund v. Town of Howard, 177 Misc. 820, 263 App. Div. 1068.) III. The employee is the real party in interest. (Grossman v. Consolidated Edison Co., 294 N. Y. 39; Calagna v. Sheppard-Pollak, Inc., 264 App. Div. 589.)
   Loüghran, Ch. J.

This case presents questions as to the construction and application of section 29 of the Workmen’s Compensation Law, which is captioned: “ Remedies of employees; subrogation.” The relevant provisions thereof are these: “ 1. If an employee entitled to compensation under this chapter be injured or killed by the negligence or wrong of another not in the same employ, such injured employee, or in case of death, his dependents, need not elect whether to take compensation under this chapter or to pursue his remedy against such other but may take such compensation and at any time either prior thereto or within six months after the awarding of compensation, pursue his remedy against such other subject to the provisions of this section. If such injured employee, or in case of death, his dependents, take or intend to take compensation under this chapter and desire to bring action against such other, such action must be commenced not later than six months after the awarding of compensation and in any event before the expiration of one year from the date such action accrues. In such case, the state insurance fund, if compensation be payable therefrom, and otherwise the person, association, corporation or insurance carrier liable for the payment of such compensation, as the case may be, shall have a lien on the proceeds of any recovery from such other, whether by judgment, settlement or otherwise, after the deduction of the reasonable and necessary expenditures, including attorney’s fees, incurred in effecting such recovery, to the extent of the total amount of compensation awarded under or provided dr estimated by this chapter for such case and the expenses for medical treatment paid by it and to such extent such recovery shall he deemed for the benefit of such fund, person, association, corporation or carrier. # * #

“ 2. If such injured employee, or in case of death, his dependents, has taken compensation under this chapter but has failed to commence action against such other within the time limited therefor by subdivision one,, such failure shall operate as an assignment of the cause of action against such other to the state for the benefit of the state insurance fund, if compensation be payable therefrom, and otherwise to the person, association, corporation, or insurance carrier liable for the payment of such compensation. If such fund, person, association, corporation or carrier, as such an assignee, recover from such other, either by judgment, settlement or otherwise, a sum in excess of the total amount of compensation awarded to such injured employee or his dependents and the expenses for medical treatment paid by it, together with the reasonable and necessary expenditures incurred in effecting such recovery, it shall forthwith pay to such injured employee or his dependents, as the case may be, two-thirds of such excess, and to the extent of two-thirds of any such excess such recovery shall be deemed for the benefit of such employee or his dependents. * * * ”

The case is here on the pleadings. The Commissioners of the State Insurance Fund are the plaintiffs. In substance, their complaint alleges: As owner of a building, the defendant engaged a general contractor to make improvements thereto; in the course of that work, a number of subcontractors with the consent of the defendant made a hole in the roof which was left unguarded; Vincent Chiddo, an employee of the general contractor, fell through that hole and was hurt; Chiddo made claim for workmen’s compensation which was paid by the State Insurance Fund as carrier for the employer-general contractor; Chiddo failed to bring any action against the present defendant — the owner of the building — within six months after the awarding of such compensation or within one year from the date of accrual of the action for his injuries; such failure of Chiddo operated as an assignment of his cause of action against the defendant to the State for the benefit of the State Insurance Fund under section 29 of the Workmen’s Compensation Law.

Though the material parts of the answer of the defendant are set forth in the form of three separate defenses consisting of new matter, the allegations thereof are essentially a constructive denial of the alleged assignment to the plaintiffs under the statute of the cause of action pleaded in their complaint. In substance, each of the three defenses says: On the occasion mentioned in the complaint, one of the subcontractors was doing roofing work on the defendant’s building; Vincent Chiddo, within the time limited therefor by section 29 of the Workmen’s Compensation Law, brought an action against that subcontractor to recover damages for the same injuries to Chiddo’s person that are sued for in the present action; such action by Chiddo is still pending; and a lien against any recovery that may be had therein has been filed in behalf of the State Insurance Fund for the payments made by it to Chiddo under the Workmen’s Compensation Law.

A motion by the plaintiffs (the Commissioners of the State Insurance Fund) to strike out the three defenses for insufficiency on the face thereof was denied by the court at Special Term. The Appellate Division affirmed and certified to us the question whether the order of the Special Term was erroneous. Our decision of that question must be limited, of course, to the facts that appear in the pleadings.

On the allegations of the present complaint, the defendant and the subcontractors who created the unguarded hole in the roof of its building were responsible for that act as joint wrongdoers, and on that basis Chiddo had the right to sue any of them separately or all of them jointly for the whole of his damage. Hence upon the facts shown by this record, the statutory assignment to the plaintiffs of Chiddo’s remedy against the defendant would not be “ a splitting of the cause of action ”, as the defendant contends.

In the judgment of the Special Term, a recovery by Chiddo in his own action plus a payment to him by the plaintiffs out of another recovery by them would constitute “ a double satisfaction for his injuries, contrary to the long-established rule.” For such a result the court could find no sanction in the statute. Consequently its conclusion was that “ the act does not authorize the maintenance of the present action if the bringing of the prior action by Chiddo is proved in defense.” (185 Misc. 976, 978.) We hold a different opinion.

The three defenses in question do not allege a recovery by Chiddo of any judgment in his own action. Satisfaction of such a judgment, as we assume, would be a bar to the present action which the plaintiffs — as statutory assignees of Chiddo — have brought against the defendant as a wrongdoer jointly liable for the same damage. (Livingston v. Bishop, 1 Johns. 290.) But this case does not now present and may never present a situation of that kind. In effect the three defenses assert that the mere commencement by the person wronged of suit against one joint wrongdoer releases the others. Since the law has long been settled to the contrary, the three defenses cannot be sustained. (Russell v. McCall, 141 N. Y. 437, 450-451; Squire v. Ordemann, 194 N. Y. 394, 399.)

The orders insofar as appealed from should be reversed, and the motion of the plaintiffs to strike out the first three defenses in the answer of the defendant Farrand Optical Co., Inc., should be granted, with costs. The question certified should be answered in the affirmative.

Lewis, Conwat, Desmond, Thacher and Ftjld, JJ., concur; Dye, J., taking no part.

Ordered accordingly.


text:
    Saltser & Weinsier, Inc., Appellant, v. Joseph D. McGoldrick, as Comptroller of the City of New York, et al., Respondents.
    Argued June 4, 1946;
    decided July 23, 1946.

      Adolph Feldblum and Samuel J. Sussman for appellant.
    I. This action is not barred by the ‘ ‘ exclusive remedy ” provision of the Administrative Code (§ N41-10.0). (Richfield Oil Corp. v. City of Syracuse, 287 N. Y. 234; Matter of Holmes Electric Protective Co. v. McGoldrick, 262 App. Div. 514, 288 N. Y. 635; Dun & Bradstreet, Inc., v. City of New York, 276 N. Y. 198.) II. The provision giving the comptroller the right to redetermine is not retroactive in effect, and the comptroller is therefore without power to make a new determination. (Jacobus v. Colgate, 217 N. Y. 235; Weiler v. Dry Dock Savings Institution, 258 App. Div. 581, 284 N. Y. 630.) III. If the power to redetermine be construed to be operative retroactively, it is in arbitrary violation of plaintiff’s vested rights in the nature of a judgment and therefore unconstitutional. (Germania Savings Bank v. Suspension Bridge, 159 N. Y. 362; Matter of Pell, 171 N. Y. 48; People ex rel. American Surety Co. v. Campbell, 64 Hun 417; People ex rel. Spencerian Pen Co. v. Kelsey, 105 App. Div. 132; People ex rel. Buffalo & L. E. Traction Co. v. Woodbury, 144 App. Div. 812, 203 N. Y. 565; Graham & Foster v. Goodcell, 282 U. S. 409; People ex rel. Beck v. Graves, 280 N. Y. 405.)

      John J. Bennett, Corporation Counsel (Isaac C. Donner, Leroy Handle, Ira Wollison and Harry Katz of counsel), for respondents.
    I. The comptroller was authorized to revise and redetermine taxpayer’s liability for the city sales tax, and on the facts uncovered by the comptroller’s special investigation bureau indicating that the taxpayer had not discharged its true tax liability, the comptroller was justified in, and had a duty of making such revision and redetermination. (Illinois Cent. R. R. Co. v. Minnesota, 309 U. S. 157; Florida Central & Peninsular R. R. Co. v. Beynolds, 183 U. S. 471; Graham & Foster v. Goodcell, 282 U. S. 409; Western New York & Penn. Ry, Co. v. City of Buffalo, 176 Misc. 350, 264 App. Div. 832, 290 N. Y. 702.) II. This action whether regarded as one for an injunction or for declaratory judgment cannot be maintained in view of the express language of the exclusive remedies provision of the city sales tax law barring all forms of procedure other than those provided by statute, and specifically prohibiting such actions except upon compliance with stated conditions precedent not here met or claimed by appellant to have been met. (Olive Coat Co., Inc., v. City of New York, 283 N. Y. 733; Matter of Western Electric Co. v. Taylor, 276 N. Y. 309; Matter of City of New York [801-815 E. New York Ave.], 290 N. Y. 236; Phillips v. Commissioner, 283 U. S. 589; Lewis v. City of Lockport, 276 N. Y. 336; New York Rapid Transit Corp. v. City of New York, 275 N. Y. 258; Oak Hill Country Club v. Town of Pittsford, 264 N. Y. 133.) III. This is not an action for declaratory judgment, but one for an injunction against the comptroller to restrain him from revoking his prior determinations of tax liability against the plaintiff. This action must be dismissed because: (1) the complaint is fatally defective in that it fails to allege that plaintiff will suffer, or is threatened with, irreparable injury, and because on the record it appears that plaintiff is in fact not so threatened; and (2) plaintiff has another adequate remedy for the protection of its rights and for the relief sought in this action, which it had invoked before the commencement of this action. (Postal Tel. Cable Co. v. Grant, 58 Hun 603; Rome, Watertown & O. R. R. Co. v. Smith, 39 Hun 332,101 N. Y. 684; Juran v. Title Guaranty & Trust Co., 151 Misc. 631, 243 App. Div. 695; Frey & Son, Inc., v. Sherburne Co., 193 App. Div. 849; D. & H. C. Co. v. Atkins, 121 N. Y. 246; Gorham Mfg. Co. v. State Tax Commission, 266 U. S. 265; Hegeman Farms Corp. v. Baldwin, 293 U. S. 163; Dairy Sealed, Inc., v. Ten Eyck, 248 App. Div. 352; Domanick v. Triboro Coach Corp., 259 App. Div. 657.)
   Lewis, J.

Was the Comptroller of the City of New York empowered in December, 1943, to revoke determinations of deficiencies in the payment of local sales taxes made against the plaintiff taxpayer for three prior tax periods ending respectively on December 31st of 1935,1936 and 1937, and thereupon to redetermine sales tax deficiencies for those prior tax periods at sums in excess of amounts fixed by the determinations thus revoked?

That question emerges as the decisive issue in this action in equity which arose in the following circumstances: The plaintiff corporation was engaged in the sale of plumbing supplies and related specialties in New York City between December 10, 1934, and December 31, 1937. Upon sales made between those dates the plaintiff was required by local law to collect sales taxes and to pay the same to the city. (Local Laws, 1934, Nos. 20 [published as No. 21], 25 of City of New York; 1935, No. 29 of City of New York; 1936, No. 31 of City of New York; 1937, No. 20 of City of New York.) The plaintiff filed sales tax returns for the three tax periods — December 10,1934, to December 31, 1935, and" the full years 1936 and 1937 — and paid the amounts due under those returns. Thereafter, following an audit by the city’s Department of Finance of -plaintiff’s books and records for each of the three tax periods the deputy comptroller sent to the plaintiff a notice of the comptroller’s determination that there was due a deficiency of sales taxes collected for each of the three tax periods respectively as follows — $13,934.79, $6,292.81 and $8,250.22. Each of those notices contained the following clause which varied only in inconsequential details and was phrased as required by section 7 (formerly § 6 in Local Law No. 21 of 1934) of Local Laws Nos. 21 and 25 of City of New York, 1934; No. 29, 1935; No. 31, 1936 and No. 20,1937 — “ Notice is hereby given that this determination shall finally and irrevocably fix the amount of tax due unless application in writing is made by you for a hearing thereon within thirty days after date hereof.” Upon receipt of each notice the plaintiff paid the amount claimed by the comptroller to be due. Thereafter, on December 4, 1943, the taxpayer received a written notice that the comptroller had revoked the three determinations of sales tax deficiencies, the latest of which was made more than five years prior thereto, and had made redeterminations of such deficiencies upon which demand was made for additional taxes including penalties and interest, amounting in all to $37,351.68.

Meantime — during the years which intervened between the dates of payment of the three deficiency assessments and December 3, 1943, when the comptroller purported to revoke such determinations — the plaintiff had complied with the requirement of applicable local sales tax laws that its records of receipts from sales and of the sales tax payable thereon ‘ ‘ shall be preserved for a period of three years, except that the comptroller may consent to their destruction within that period or may require that they be kept longer.” (Local Laws, 1934, No. 25 of City of New York, § 4; 1935, No. 29 of City of New York, § 4; 1936, No. 31 of City of New York, § 4; 1937, No. 20 of City of New York, § 4.) In that connection we must accept the facts pleaded by the plaintiff that during the period commencing December 10,1934, and ending December 31,1937, it sold millions of dollars worth of merchandise each year; that orders, invoices, records and similar data relating to several hundred thousand items and composing great physical bulk were accumulated each year in connection with the taxpayer’s business; that the comptroller did not require the plaintiff to preserve for more than three years its records of sales for the tax periods here involved — December 10, 1934, to December 31, 1937 — and, accordingly, that such records and data were destroyed by the plaintiff at the end of each three-year period, thus depriving itself of evidence to establish its contention in this case that all sales taxes due for the tax periods in question have been paid to the City of New York.

Asserting that the comptroller was without authority in 1943 to revoke the determinations of deficiencies made for the three tax periods mentioned above — the latest of which ended December 31, 1937 — and that the comptroller was without authority to redetermine such prior deficiencies, the plaintiff instituted the present suit to restrain such action by the comptroller, pendente lite and permanently, and to-obtain a declaratory judgment that the purported revocation by the comptroller in 1943 of his prior determinations of deficiencies was invalid.

At Special Term the plaintiff’s motion for a temporary injunction was denied and a cross motion by the defendants was granted dismissing the complaint for lack of the court’s jurisdiction of the subject matter of the action. At the Appellate Division the order denying a temporary injunction and the judgment dismissing the complaint were unanimously affirmed. The opinion by the Appellate Division informs us that — although contrary to the view of Special Term it held that the challenge to the power of the comptroller to redetermine tax deficiencies made the present action appropriate and available to the taxpayer — the court ruled that the dismissal of the complaint by Special Term was correct on the merits. The present appeal by the plaintiff is by our leave.

We agree with the disposition of the case by the Appellate Division insofar as it held, contrary to the ruling at Special Term, that the remedy by action chosen by the plaintiff was available to it as a means of challenging the authority of the comptroller to redetermine sales tax deficiencies. (Dun & Bradstreet, Inc., v. City of New York, 276 N. Y. 198, 206; Richfield Oil Corp. v. City of Syracuse, 287 N. Y. 234, 239.) We are not in accord with the ruling by the Appellate Division that the judgment entered upon the order at Special Term was correct on the merits.

In support of the right asserted by the comptroller to redetermine on December 3, 1943, the sales tax deficiencies which he had previously determined for tax periods in 1934-1935, 1936 and 1937, the defendants point to language found in local laws effective when the original deficiency assessments were made. (Local Laws 1934, Nos. 20 [published as No. 21], 25 of City of New York; 1935, No. 29 of City of New'York; 1936, No. 31 of City of New York; 1937, No. 20 of City of New York.) Each of those local laws empowered the comptroller ‘ ‘ to assess, revise, readjust and impose the taxes authorized to be imposed under this local law ”. We find in the language last quoted above no indication of a clear legislative purpose to grant to the comptroller the retroactive power which he has exercised in the present case by redetermining in 1943 sales tax deficiencies which he had determined more than five years prior thereto. ‘ ‘ A statute must be read and given 'effect as it is written by the Legislature, not as the court may think it should or would have been written if the Legislature had envisaged all the problems and complications which might arise in the course of its administration. A power not expressly granted by statute is implied only where it is ‘ so essential to the exercise of some power expressly conferred as plainly to appear to have been within the intention of the legislature. The implied power must be necessary, not merely convenient, and the intention of the legislature must be free from doubt.’ (Peo. ex rel. City of Olean v. W. N. Y. & P. T. Co., 214 N. Y. 526, 529.) ” (Lawrence Constr. Corp. v. State of New York, 293 N. Y. 634, 639.)

In an effort to find legislative sanction for the comptroller’s action here challenged the defendants point to section N41-7.0 of the Administrative Code of the City of New York, as amended by Local Laws, 1943, No. 18 of the City of New York which provides in part: Detebmutatiou oe tax. If a return required by this title [i.e., Title N, in effect since July 1, 1938] or by articles seventeen to twenty, inclusive, of title E [i.e., the sales tax laws in effect from December 10,1934, up to June 30, 1938] of chapter forty-one of the code is not filed, or if a return when filed is incorrect or insufficient the amount of tax due shall be determined by the comptroller from such information as may be obtainable * * *. Notice of such determination shall be given to the person liable for the collection and/or payment of the tax. Such determination shall finally and irrevocably fix the tax unless the vendor or purchaser against whom it is assessed, within thirty days after the giving of notice of such determination, shall apply to the comptroller for a hearing, or shall cause the same to be reviewed by a proceeding under article seventy-eight of the Civil Practice Act, or unless the comptroller of his own motion shall re-determine the same. * * » (Italics supplied.)

We do not find in the italicized portions of section 1741-7.0 quoted above — upon which the defendants lay special emphasis — that ‘ ‘ clear expression of the legislative purpose ’ ’ which is required to sanction the exercise retroactively of the power which the comptroller has assumed in this instance. (Jacobus v. Colgate, 217 N. Y. 235, 240; Weiler v. Dry Dock Savings Inst. 258 App. Div. 581, affd. 284 N. Y. 630.) “ It is a settled rule of statutory construction that the provisions of a statute will not be applied retrospectively where they are capable of any other construction unless the intent of the Legislature to the contrary clearly appears ”. (Waddey v. Waddey, 290 N. Y. 251, 254.) In the present case the language of section 1741-7.0 (id.), stressed by the defendants as authorizing the comptroller to perform retroactively the acts challenged by the plaintiff, lends itself with reason to the construction that prospective action is contemplated and that, with respect to the three tax periods here involved — which fall within the period between December 10, 1934, and June 30, 1938 — the comptroller is authorized to redetermine a deficiency assessment in those instances only where a return is not filed and a determination is made subsequent to the effective date of the 1943 enactment, or a return is filed and a determination for the first time is made subsequent to such effective date. “ A law is never to have retroactive effect, unless its express letter or clearly manifested intention requires that it should have such effect. If all its language can be satisfied by giving it prospective operation, it should have such operation only.” (N. Y. & Oswego M. R. R. Co. v. Van Horn, 57 N. Y. 473, 477-478.) Guided by that rule we conclude that the language employed in section 1741-7.0 (id.) does not authorize the retroactive action by the comptroller which is the subject of plaintiff’s challenge.

That conclusion is reinforced by other considerations. “ A tax law should be interpreted as the ordinary person reading it would interpret it.” (Per Htibbs, J. writing in Howitt v. Street (& Smith Publications, Inc., 276 N. Y. 345, 351.) When, in connection with each of the three deficiency assessments mentioned above the corporate plaintiff received a formal written notice — phrased to conform with provisions of local sales tax laws then effective — -by which it was expressly advised that the deficiency assessment demanded would “ finally and irrevocably fix the amount of tax due ” unless within thirty days it applied for a hearing thereon, the plaintiff had the right to assume that, by waiving its right to a hearing and by paying the tax deficiency fixed by such notice, it had paid ‘1 finally and irrevocably * * the amount of tax due ” for the tax period involved. And when three years thereafter, during which time it had kept its records of receipts and of the tax payable thereon ” for inspection and examination at any time upon demand by the comptroller ” without being required by the comptroller to keep them longer — all in conformity with provisions of the local laws then effective — the plaintiff had the right to assume that it could destroy its records of receipts and other data relating to sales in a given tax period without risk of depriving itself of evidence by which it could establish that all sales taxes due to the City of New York for that tax period had been paid. In those circumstances, in the absence of an express legislative declaration that the local law should be given retroactive effect, we cannot ascribe to the local legislative body an intention, by its enactment of Local Laws, 1943, No. 18 of the City of New York, to empower the comptroller to exercise retroactively the authority to redetermine in 1943 those sales tax deficiencies which — according to formal notices to the plaintiff — had been determined “ finally and irrevocably ” for the three tax periods ending on December 31st of 1935,1936, and 1937. It is always legitimate to show that one construction [of a statute] would lead to hardships which another would avoid ”. (Jacobus v. Colgate, supra, pp. 245-246.) In the case at hand there are in the complaint factual allegations which may serve as a legal basis for proof that hardship and injustice will result to the plaintiff if, as the defend-ants contend, the authority given the comptroller by section N41-7.0 as amended by Local Laws, 1943, No. 18 of City of New York to redetermine deficiency assessments may be so construed as to permit its exercise retroactively. In construing that local law, in absence of express language which dictates a contrary interpretation, we are not disposed to attribute to the local legislative body of the city of New York an intent to enact a law which when applied to facts such as those alleged by the plaintiff will work hardship and injustice. (People ex rel. Hannan v. Board of Health, 153 N. Y. 513, 518; Matter of Hering, 196 N. Y. 218, 220; Matter of Meyer, 209 N. Y. 386, 389.)

The plaintiff — assuming arguendo that section N41-7.0 as amended by Local Laws, 1943, No. 18 of City of New York, is construed to operate retroactively — advances the further argument that the enactment would be effective to impair plaintiff’s vested rights and accordingly would be unconstitutional. We know that — “ A statute must be construed, if fairly possible, so as to avoid not only the conclusion that it is unconstitutional but also grave doubts upon that score.” (United States v. Jin Fuey Moy, 241 U. S. 394, 401; Tauza v. Susquehanna Coal Co., 220 N. Y. 259, 267.) We are also aware that legislation which impairs vested rights is unconstitutional. (Germania Savings Bank v. Suspension Bridge, 159 N. Y. 362, 368-369; Matter of Pell, 171 N. Y. 48, 52-53.) Concluding, however, as we do, that neither section N41-7.0 (id.) nor the prior local laws upon which the defendants rely empowered the comptroller to make the redetermination in 1943 which is the subject of this action, we deem it unnecessary to consider plaintiff’s argument based upon the alleged impairment of its vested rights.

The judgments should be reversed, with costs to the plaintiff in all courts and the action remitted to Special Term for further proceedings not inconsistent with this opinion.

Loughran, Ch. J., Conway, Desmond and Fuld, JJ., concur; Thacher and Dye, JJ., taking no part.

Judgments reversed, etc.