text:
    Jacob F. Schoellkopf et al., Appellants, v. The Marine Trust Company of Buffalo, Respondent.

      (Argued April 17, 1935;
    decided May 21, 1935.)

      Charles F. Blair for appellants.

      Fritz Fernow and H. Kenneth Haller for respondent.
   Lehman, J.

In 1913 Jacob F. Schoellkopf, by written instrument, created a trust to continue during the lives of two grandchildren, Wilhelmina Schoellkopf and Jacob Schoellkopf IV, who are not otherwise mentioned in the instrument. Under its terms the income from the trust fund is to be paid to Hermann Schoellkopf, one of the sons of the settlor, during bis life and after the death of Hermann Schoellkopf to Ernst Schoellkopf, another son. Upon the termination of the trust the principal is to be paid over “ unto the person or persons at that time entitled to the income under the terms of this instrument.” Thus in the event that the trust should terminate during the life of either Hermann or Ernst Schoellkopf, no other person would share in the income or principal of the trust. The settlor also provided that each of the successive life beneficiaries might designate the person to whom the income should be paid after his death in case he should survive his brother but die during the continuance of the trust. The person so designated would then also receive the principal upon the termination of the trust.

The settlor has attempted to revoke the trust. He has not in the trust indenture reserved any right of revocation, and he has parted with all his title to the trust property. He can revoke the trust only upon the written consent of all the persons beneficially interested ” therein, given in accordance with the provisions of section 23 of the Personal Property Law (Cons. Laws, ch. 41). Hermann and Ernst Schoellkopf have given their written consent. So, too, have the settlor’s wife and his other surviving children. The trustee maintains that they are not all the persons beneficially interested. Infant grandchildren and great grandchildren of the settlor, the issue of those who have consented, are minors and can give no consent. The controversy has been submitted upon an agreed statement of facts.

Neither Hermann nor Ernst Schoellkopf has exercised the power given to him to designate a person to whom the income and principal would go if both died during the continuance of the trust. If the trust is now revoked, then of course that power can never be exercised hereafter. It follows then that except for Hermann and Ernst Schoellkopf the only persons who have a beneficial interest in the trust ” are those to whom the income and principal would be paid if Hermann and Ernst should die during the continuance of the trust without having designated the person who would receive such income or principal after the death of the survivor. The trust instrument provides that in such event the income shall be paid by the trustee f to the heirs of the party of the first part (the settlor) per stirpes, and not per capita, until the termination of this trust, yin this connection, the word ‘ heirs ’ shall be construed to include those persons only who would be entitled to share in the distribution of personal estate under the laws of the State of New York at the time of such distribution.” As we have already pointed out, the trust indenture further provides that upon the termination of the trust the principal is to be paid to the “ person or persons at that time entitled to the income under the terms of this instrument.”

The words “ persons beneficially interested in a trust in personal property ” as used in section 23 of the Personal Property Law, are broad. There is no express restriction , upon the nature of the “ beneficial interest ” and the courts j may not by implication read such restriction into the ? statute. Any person who under the terms of the instruv'Mnent has a right, whether present or future, whether ) vested or contingent, to income or principal of the trust J fund, has a beneficial interest in the trust. Here there -- — is no room for ancient technical distinctions which enter into the creation or classification of estates. The test is one of substance, not of form. Any right given by the trust instrument to receive a béneSt from the trust in some contingency is a “ beneficial interest ” in the trust.

Such a right is given by the trust instrument to the settlor’s “ heirs ” as defined by that instrument. Who will be the members of that class cannot be determined until the contingency occurs upon which distribution of income or principal must be made to that class. If the settlor were to die today, then only the settlor’s children would be entitled to share in the distribution of his personal estate, and would be his “ heirs ” as defined by the trust instrument. All of the, chüdren _have_ given their consent, and it is said that no others have now a beneficial interest ” in the estate protected by the statute from destruction through revocation of the trust.

The difficulty with this contention is that the trust instrument makes no provision for distribution among a class composed of those who would be entitled to share in the distribution of the personal estate of the settlor if he were to die today. The distribution must be made among the class of those who would be entitled to share irrthe personal estate of the settlor at the time of distribution of fire income or corpus of the trust fund. If the settlor had retained a reversion which would pass upon his death to his " heirs ” or next of kin, then no consent would be necessary from them. They would then take, if at all, not as purchasers through a beneficial right derived from the trust instrument, but through succession to the interest of the settlor and he could consent to the destruction of that interest. (Doctor v. Hughes, 225 N. Y. 305; Livingston v. Ward, 247 N. Y. 97; Berlenbach v. Chemical Bank & Trust Co., 235 App. Div. 170; affd., 260 N. Y. 539.) Here those who are described as “ heirs receive a contingent remainder created by the trust indenture. They take as purchasers through a beneficial right derived from the trust instrument, and all who have a share in that right and who may, by survival or other event, become members of the class entitled to the remainder have a beneficial interest in the trust which cannot be destroyed without their consent. (Whittemore v. Equitable Trust Co., 250 N. Y. 298.)

The appellants seek to distinguish that case on the ground that the consents there withheld were the consents of those persons who would be members of the class entitled to a remainder of the trust fund if the trust terminated immediately, while the consents here withheld are those of infants who cannot share in a remainder in the trust fund -unless their parents die before such remainder vests. The distinction is without substance. Though here no grandchild of the settlor can in any contingency share in the income or corpus of the trust estate, unless before the termination of the trust his or her parent, who has already given written consent, dies, yet the grandchild, in case of the death of the parent before the date at which the class is determined, which is to receive a contingent gift from the settlor, will take as purchaser and not as heir or next of kin either of the settlor or any other ancestor. A person can consent to the destruction of a beneficial interest in a trust which is or may hereafter become vested in him, and thus deprive his heirs or descendants of an expected benefit; yet no person can by his consent destroy an interest, even of his own descendants, derived directly from the trust instrument and not derived from the ancestor by succession.

The present case illustrates with nicety the illusory quality of the attempted distinction. The contingency upon which the contingent remainder in the testator’s heirs ” will ripen into enjoyment is the death of both Hermann and Ernst Schoellkopf during the life of the trust without exercising their powers of designation. Hermann Schoellkopf can, therefore, never be a member of the class described in the trust indenture, i. e., a person who would be entitled at that time to share in the distribution of the income or corpus of the estate. Hérmann Schoellkopf has four infant children who would if then living be members of the class described. The beneficial interest of. these grandchildren in. the trust is as certain as that of the settlor’s children. None can enjoy any interest in the trust fund who does not survive both of the life tenants, and both of the persons whose lives measure the duration of the trust. All who do survive till then will alike be members of the class then entitled to the remainder, unless such right has been defeated by execution of the power of appointment by one of the life tenants.

The question whether unborn grandchildren are also persons beneficially interested ” in the trust has not been argued and has not been considered by us. We decide now only that the consent of^hthe living grandchildren is required, for they have receivedlromthe trust indenture a right to share in the distribution of the income and corpus of the estate, if at the time of such distribution they are members of the class described in the trust instrument upon whom the instrument confers such right. That is instinct in our decision in Whittemore v. Equitable Trust Co. (supra).

The judgment should be affirmed, with costs to respondent payable out of the trust estate.

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

Judgment affirmed, etc.


source: Caselaw Access Project

author: Lehman, J.

license: Public Domain

text:
    Lucy E. Walter, Respondent, v. G. Clarence Hoffman, Appellant.

      (Argued April 22, 1935;
    decided May 21, 1935.)

      William E. Barrett for appellant.

      James O. Moore for respondent.
   Lehman, J.

In an action for the specific performance of an alleged oral contract for the purchase and sale of real property, judgment has been granted in favor of the vendor which requires the purchaser to accept a deed of the property and to pay the unpaid balance of the purchase price. Evidence produced by the plaintiff establishes that the plaintiff agreed to sell and convey the premises to the defendant for the sum of $10,000 in December, 1928. The parties were friends. The defendant was at that time engaged in business with the plaintiff’s husband. The property had been used as the plaintiff’s home. The defendant desired to use it as his own home. The plaintiff and her family moved from their home in January, 1929. The defendant since that time has occupied the property, and has been in sole and exclusive possession of the premises. The parties agreed that payment of the purchase price was to be made from time to time by the purchaser from moneys realized by him from the business venture in which he was engaged and that the? deed should be delivered when the whole price was paid. The purchaser has since then used the property for a home. He has made alterations and improvements. He has paid part of the purchase price. The seller has given possession to the buyer and has executed an undelivered deed of the premises. The most serious question involved in this appeal is whether in such circumstances a court of equity may decree specific performance of the oral contract.

Doubtless, a buyer who enters into possession of real property, pays part of the purchase price and makes improvements upon the property, in- reliance upon an oral promise to convey, might ask a court of equity to enforce the oral contract. The basis for the invocation and exercise of the power of a court of equity to compel specific performance of an oral agreement, in such circumstances, is that otherwise one party would be enabled to practice a fraud upon the other, and thus it would sometimes happen that a statute intended to prevent frauds would operate to secure to one party the fruits of fraud.” (Canda v. Totten, 157 N. Y. 281, 287.) Argument is made that wherever a buyer can invoke the remedy of specific performance of a contract, the seller must have the same remedy; for specific performance of a contract will not be decreed unless there is mutuality of obligation and remedy.

The doctrine of mutuality has, at least in this jurisdiction, not been carried so far. What equity exacts today as a condition of relief is the assurance that the decree, if rendered, will operate without injustice or oppression either to plaintiff or to defendant. [Citing authorities.] Mutuality of remedy is important in so far only as its presence is essential to the attainment of that end. The formula had its origin in an attempt to fit the equitable remedy to the needs of equal justice. We may not suffer it to petrify at the cost of its animating principle.” (Epstein v. Gluckin, 233 N. Y. 490, 494.) Equity in decreeing specific performance of an oral contract for the sale of land assumes “ what is in substance a dispensing power.” (Burns v. McCormick, 233 N. Y. 230, 234.) That power may be invoked in the case of part performance only on equitable grounds, to prevent injustice. Where that is shown, the rule of mutuality of remedy is satisfied if the decree of specific performance operates effectively against both parties and gives to each the benefit of a mutual obligation. A party to an oral contract for the purchase of real property may, if satisfied, stand upon the letter of the Statute of Frauds, unless refusal of complete performance by him would work injustice to the other party. He cannot be compelled to perform against his will because he might assert, if he saw fit, that enforcement of the strict letter of the statute would work injustice to him.

In an equitable action for specific performance founded upon part performance the defendant is really ‘ charged ’ upon the equities resulting from the acts done in execution of the contract, and not (within the meaning of the statute) upon the contract itself.” (Maddison v. Alderson, 8 App. Cas. 467, 475 [1883].) The acts must, in this jurisdiction, be unequivocally referable to the oral contract. (Burns v. McCormick, supra.) They must also put the party resorting to equity in a situation which would work injustice upon him unless the contract be fully performed. (Freeman v. Freeman, 43 N. Y. 34; Miller v. Ball, 64 N. Y. 286; Dunckel v. Dunckel, 141 N. Y. 427.)

Decisions by the courts of this jurisdiction and other jurisdictions that, in a specific case, part performance is sufficient or is insufficient to justify a decree of specific performamce, are sometimes valuable as guides in the application of these general principles in other cases, where the conditions are different. They do not limit or extend these general principles by arbitrary and inflexible rules. They may indicate the general measure to be applied in specific cases, but the correct application depends always upon the facts in the particular case. Here the seller has, as we have said, done nothing except give possession to the buyer. The buyer has expended money upon the faith of the seller’s promise. Part performance by both is referable to the oral contract. It points unequivocally to the existence of such an oral contract. Through such part performance the words are confirmed and illuminated by deeds,” and even though the power of dispensation be exercised, the policy of the law is saved.” (Burns v. McCormick, supra, p. 235; Maddison v. Alderson, supra; Woolley v. Stewart, 222 N. Y. 347; Pound, Equity [Statute of Frauds], 33 Harvard Law Review, 933.) So far the courts may properly take into consideration the acts of part performance by both parties. Even then, the question remains in each case whether a plaintiff has shown that a court should exercise its equitable power to prevent injustice. There the problem is whether part performance of the oral agreement creates irremediable injury to the suitor if complete performance is withheld. Unless there has been part performance by the suitor, there has ordinarily been no change of position by him, and, therefore, no injustice to him if the contract is not performed. To that extent, therefore, the acts of part performance relied on must be the acts of the suitor. (Cf. Rathbun v. Rathbun, 6 Barb. 98.) None the less, resultant injustice or injury may be increased, or, indeed, arise from subsequent acts performed by the other party. That is true, notably, where, as in this case, a seller has given possession of real property to the buyer and the buyer has then used the property.

In some jurisdictions in this country it has been held, following a rule applied in the courts of England, that the mere giving of possession by a seller is sufficient part performance to create a basis for the invocation by him of the equitable powers of the court. There may be doubt whether in this jurisdiction the rule is so broad. Possession, it is said, may be regained by action at law, and that in such case there is no need for the invocation of the equitable powers of the court to prevent injustice. We do not pause now to consider the historic basis or the-logical validity of the English rule. Here there is more.' The possession has been long continued. In the intervening time the buyer has enjoyed the benefit of complete ownership, and the seller has been unable to dispose of the property. Return of possession under such circumstances might be an incomplete measure of justice, (Cf. Harris v. Knickerbocker, 5 Wend. 638.) Then, too, as we have said, there has been alteration of the property. True, the alteration may be an improvement. None the less, if the property is returned to the seller she will receive something different from what she owned before and something that she may not want.

We cannot say that under such circumstances the plaintiff has failed to show that the court should exercise its equitable powers, At least the court had a measure of discretion there which we cannot review.

The judgment should be affirmed, with costs.

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

Judgment affirmed,


author: Per Curiam.

text:
    Elsie B. Forster, Respondent, v. Manufacturers Trust Company, Appellant.
    (Argued April 23, 1935;
    decided May 21, 1935.)

      George W. Whiteside, Horace G. Hitchcock and Charles Pickett for appellant.

      Charles S. Aronstam and Archie S. Karp for respondent.
   Per Curiam.

At the first trial of this action for conversion, tried by the court without a jury, the trial court made findings of fact upon all issues in favor of the defendant and dismissed the complaint. On appeal, the Appellate Division without reversing any of the findings of fact, reversed the judgment upon the law, and granted a new trial upon the ground that the general release under seal, executed and delivered by the plaintiff to the defendant, was without consideration. (240 App. Div. 727.)

At the second trial before the court without a jury, the trial court again made findings of fact upon all issues except as to the general release in favor of the defendant. The Appellate Division reversed certain findings, made new findings and granted judgment in favor of plaintiff.

A question is raised as to the practice adopted by the Appellate Division in making new findings on the second appeal after an appeal had been taken to this court from the judgment of the Appellate Division. Upon the argument in this court counsel stipulated in open court to waive those questions and requested the court to determine the appeal upon the merits. We, therefore, pass those questions, accept the stipulation of the counsel and consider only the question of fact involved as we are required to do where the Appellate Division reverses findings of fact and makes new findings.

Upon the issue of accord and satisfaction, the trial court found in favor of the defendant. The Appellate Division reversed that finding. If the trial court was right in making that finding, as we believe it was, the judgment of the Appellate Division must be reversed. The plaintiff at a meeting of the parties contended that' she was entitled to receive from the defendant the sum of over $57,000, the value of her stocks at the date of the alleged conversion. The representative of the insurance company which insured defendant, who was present at the meeting, denied all liability on the part of the defendant and asserted that the stocks were converted by plaintiff’s personal agent. The difference between the parties was a substantial one, as is evidenced by the fact that two trial courts have found on that issue in favor of the defendant, and the Appellate Division on the last appeal has found in favor of the plaintiff. The insurance company’s representative, after discussion, offered to pay in settlement of the plaintiff’s claim the value of the stocks at the date when plaintiff made her demand for their return. The plaintiff took four days to consider the proposition and then accepted the offer. She was paid $17,480, the agreed value of the stocks at the date of the demand and executed and delivered a release under seal. We are unable to find in the record any evidence that the settlement of the doubtful claim was induced by fraud. The accord and satisfaction was in all respects legal and binding on the plaintiff. (Schuttinger v. Woodruff, 259 N. Y. 212.)

Plaintiff’s case rested almost entirely upon her own testimony. A case is, therefore, presented where the fact that two trial courts have found against her contention should be given weight. (Boyd v. Boyd, 252 N. Y. 422.)

As only a question of fact is presented for determination, it would serve no useful purpose to discuss the evidence in detail.

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

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

Judgment accordingly.


author: Crane, Ch. J.

text:
    George Maltby, Respondent, v. County of Westchester, Appellant.
    (Argued April 30, 1935;
    decided May 21, 1935.)

      William A. Davidson, County Attorney (Grant C. Fox and Ogden C. Noel of counsel), for appellant.

      Durrell L. Lord and Mortimer C. O’Brien for respondent.
   Crane, Ch. J.

On January 13, 1931, near Camp Fire road on Bronx Parkway Extension No. 3, George Maltby, the plaintiff, was injured by a chain connected with a crane which was being operated at that place. The crane was being operated by Simon Morah. The foreman in charge of the job was Edwin Brawley. All the work was being done by Westchester County Park Commission acting as agent for the State of New York by reason of a legislative enactment.

Such is the stipulation of the parties on the trial of this case. It is supplemented by evidence which shows that the work being done was State work paid for by the State, and that at the time the Westchester County Park Commission was the agent of the State in doing the work. The county of Westchester has been sued, and a misunderstanding regarding the party liable has been due to legislation creating the Westchester County Park Commission as a possible agent of the county of Westchester for certain park work, and thereafter making it the agent of the State for the building and construction of the Bronx Parkway extension.

Chester A. Garfield, a representative of the county of Westchester, testified, “ It is a fact that Sawmill River Parkway was built by Westchester County Park Commission and paid for by the County, but where the accident occurred on the Bronx Parkway Extension, the work was done by the Westchester County Park Commission as agent for the People of the State of New York, paid for entirely by the State of New York. * * *

Q. Where does the money come from with which the employees of the County Park Commission were paid? A. If they are on County work, funds come from appropriations from the County to the Park Commission, in the hands of the County Comptroller. If they are on State work, they are paid from the appropriations made available by the State of New York, in these various accounts in which they have designated the Park Commission as their agent.
“ Q. And the County Park Commission is under supervision and subject to the control of the Board of Supervisors of Westchester County? A. Only to the extent of County work. They have nothing to do with and no control of the Westchester County Park Commission while acting as agents of the State.
Q. But isn’t it a fact that before the County Park Commission can do anything in accordance with Legislative enactments, the Board of Supervisors must approve the enactment and permit the County Park Commission to go ahead? A. The Board of Supervisors had nothing to do with the work on the Bronx Parkway Extension either in approval or disapproval.”

The legislation justifying this dual capacity of the Park Commission is found in the following laws: Chapter 292 of the Laws of 1922 provided that the Board of Supervisors of the county of Westchester shall appoint nine citizens and residents of said county who shall constitute a Board of Commissioners under the name and style of Westchester County Park Commission.” It is authorized to control and manage any and all parks which are owned or may thereafter be acquired by the county of Westchester. With the approval of the Board of Supervisors the Board may acquire by condemnation additional property for parks by purchase or by condemnation proceedings. It shall also have the sole and exclusive control and management of all streets and highways and bridges within the limits of any park under its jurisdiction, with the right and power to alter or discontinue them, and may make rules and regulations and ordinances for the use of the parks. This sketchy outline indicates that at the beginning the Commission was created for the purpose of managing and controlling Westchester parks in behalf of and for Westchester county. The county paid the bills and all expenses by bond issues, where necessary. The Commission, in many of these activities, was acting as an agent of the county.

Later, however, the State undertook the extension of some of the parkways connecting the roads with other State highways, and did this at its own expense, using the Commission as a State agent for the purpose.

Chapter 693 of the Laws of 1923 and chapter 602 of the Laws of 1924 made appropriations for the parkway extensions, sections 3 and 4 of the latter statute providing: “ For parkway connections between the Bronx river parkway and the bridge from Peekskill to Bear mountain in Westchester county, $1,000,000 * * *. The moneys for the Bronx parkway extensions and connections shall be expended by the Westchester county park commission as the agent of the state, or otherwise as the legislature may determine.”

In chapter 16 of the Laws of 1926, section 2, subdivision 7, there is this provision, following an appropriation of a million dollars, “ The moneys for the Bronx parkway extension and connections shall be expended and the lands shall be acquired by the Westchester county park commission as the agent for the state. Lands for such parkway extensions and connections shall be acquired in the manner provided by statute for the acquisition of lands by the Westchester county park commission, but such lands, when acquired, and such improvements shall be the property of the state.”

Work, therefore, on the Bronx Parkway Extension No. 3, where George Maltby.was hurt, was being performed and paid for by the State through the Westchester County Park Commission as its agent. Maltby was hurt through the negligence of a State employee, for whose conduct the county of Westchester is not liable.

The Legislature has recognized that the State and not the county should be and is hable for the negligence of its employees working through the Westchester County Park Commission on State work, and a few months after this accident to the plaintiff, and in March of 1932, passed chapter 559 of the Laws of 1932 (amending Conservation Law, § 766, Cons. Laws, ch. 65), which defined the powers of the Westchester County Park Commission as agent for the State and, by section 1 of that act (Conservation Law, § 766, subd. 10), said, All claims against the state or the commission to recover damages for injuries to person or property shall be heard and determined by the court of claims. Such claims must be submitted as provided by, and pursuant to the procedural provisions of the court of claims act.”

Whether the plaintiff may now be heard at the Court of Claims we do not undertake to say as the question has not been presented and is not before us on this appeal.

We are obliged to decide, however, that the county of Westchester is not liable, and that the judgments below should be reversed, and the complaint dismissed, with costs in all courts.

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

Judgments reversed, etc.


author: Loughran, J.

text:
    M. J. Federman Co., Inc., Respondent, v. The American Insurance Company, Appellant.
    (Argued April 26, 1935;
    decided May 21, 1935.)

      Gregory S. Rivkins and Barton P. Ferris for appellant.

      Lucien Hilmer and Monroe Chapin for respondent.
   Loughran, J.

This is a controversy submitted to the Appellate Division upon an agreed statement of facts.

Defendant issued to plaintiff a policy of insurance on goods shipped to plaintiff while “ in custody of Railroads, Express, Motor Transportation Companies * * * Public Truckmen, Trucks of the assured * * * and/or other Common Carrier and Land Conveyances incidental to any of the above or otherwise. * * * To cover all loss and /or damage caused by * * * Theft * * * from the time of leaving the Warehouse, Store or Factory of Shipper until safely delivered into Warehouse, Store or Factory of Consignee. * * * This Policy covers merchandise after arrival at destination while waiting actual unloading and /or removal. * * * ”

Goods consigned to plaintiff at the city of New York Were at Buffalo put into a track of Empire Haulage Corporation, which arrived at plaintiff’s establishment a few minutes before noon on Saturday, April 22, 1933. Noon was plaintiff’s closing time on Saturday. “ Because of this fact plaintiff decided not to and did not receive the merchandise into its premises.” In response to an inquiry of plaintiff’s shipping clerk, Empire Haulage Corporation proposed for twelve dollars to keep the goods until the following Monday morning, April 24. This offer was not accepted.

Broadway Local Express Co., Inc., a licensed public truckman and warehouseman that had done plaintiff’s local tracking, agreed “so to receive and hold said merchandise in consideration of the payment by plaintiff of the sum of $6.00,” and gave to plaintiff a receipt as follows: “ Received in good order from M. J. Federman [plaintiff] * * * goods to be taken from truck of Empire Haulage Corp., to be held on hand for us until 4-24-33.” Plaintiff did not know where its merchandise was to be kept and held nor did it make any inquiry as to where the goods were to be kept and held by the Broadway Local Express Co., Inc.” Transfer of the goods from the truck of Empire Haulage Corporation to a truck of Broadway Local Express Co., Inc., was made on the street. “ An employee of the Broadway Local Express Co., Inc., tied ropes around plaintiff’s merchandise on said Autocar of the Broadway Local Express Co., Inc., which was thereupon driven into a public garage * * * where it was parked and left.” The garage was robbed and the goods removed during the night of April 22, 1933, this policy being then in force.

The question is whether defendant must make good the loss. It has been held by the Appellate Division that the policy covered the goods so long as they were in the possession of Broadway Local Express Co., Inc. We reach a contrary conclusion.

The contract is styled a “ Transportation Policy.” The words in question have an analogy in a provision sometimes made in policies of marine insurance called the “ warehouse to warehouse clause.” (17 Halsbury’s Laws of England, 384.) Whatever otherwise would be the duration of a risk under such a stipulation, it is clear, we think, that an insured may put an end to it by taking delivery outside his own premises (1 Arnould on the Law of Marine Insurance and Average [10th ed.], § 458; 3 Kent’s Comm. 309), and that this is the case here.

The goods arrived at their destination. Pursuant to plaintiff’s direction, they were unloaded from the vehicle upon which they had been carried there, and were placed upon another vehicle provided by plaintiff. With these arrangements and this disposition of the goods, the consignor had nothing to do. The function of the last carrier engaged by the consignor was fulfilled. Another bailee had accepted the goods in plaintiff’s behalf and with its authority, under an agreement exclusively between them which stipulated that the goods were received from plaintiff and were to be held for it. The transportation of the goods covered by this policy was then terminated by complete delivery to plaintiff. That this result was not actually intended is immaterial. To sustain .the decision of the Appellate Division, we must be prepared to hold that plaintiff could itself extend indefinitely the duration of defendant’s policy risk after the goods were at destination. In our opinion, the words of this policy-do not admit of that construction.

The judgment of the Appellate Division should be reversed and judgment directed for the defendant as asked for in the submission, with costs in all courts.

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

Judgment accordingly.


text:
    Charles Khoury, as Administrator of the Estate of Nicholas Khoury, Deceased, Respondent, v. County of Saratoga et al., Appellants, Impleaded with Others. Moses Carma, by Louis G. Carma, His Guardian ad Litem, Respondent, v. County of Saratoga et al., Appellants, Impleaded with Others. Louis G. Carma, Respondent, v. County of Saratoga et al., Appellants, Impleaded with Others.

      (Argued May 1, 1935;
    decided May 21, 1935.)

      John W. Nichols for County of Saratoga, appellant.

      Beecher S. Clother for County of Warren, appellant.

      Lawrence B. McKelvey, Brenton T. Taylor and James J. McNaughton for Town of Moreau, appellant.

      C. E. Fitzgerald, James McPhillips and J. Edward Singleton for City of Glens Falls, appellant.

      Walter A. Chambers and Walter A. Fullerton for respondents.
   Crane, Ch. J.

The bridge over the Hudson river at Glens Falls has been found to be a nuisance as maintained on the day that Nicholas Khoury met his death, November 3, 1932. On that day Charles Izzo and Agnes D. Izzo were crossing the bridge in an automobile, when the car skidded on the ice, ran up on the sidewalk, killing Nicholas Khoury and injuring Moses Carma. The ice was formed from spray dashing up from the falls below. The dangerous character of the place was due not simply to the ice, but because the ice was on the bridge only, all the rest of the highway and approaches being dry. Consequently, one ran onto the ice without previous warning or notice. Evidence was given of previous accidents due to the same cause and of propositions made to the authorities to remedy it. Sometimes the roadway was sanded. On the night in question there were no lights or warning signals and no sand. True the ice had not formed for a sufficient length of time to give notice to the city, if this were a negligence case pure and simple. The court treated the action as one in nuisance due to the condition of the bridge during the winter season which rendered the place so near to the falls more hazardous than the approaching highways. All parties had known of this danger for a long time.

Within the authorities I think the court was justified in this treatment of the facts.

Nuisance growing out of negligence is at times so combined with negligence that any attempt to separate them is a useless task. In these and like situations, the danger being a continuing one, is often characterized as a nuisance, though dependent upon negligence.” (McFarlane v. City of Niagara Falls, 247 N. Y. 340, 344; Koehler v. City of New York, 262 N. Y. 74, 77; Taylor v. City of Albany, 264 N. Y. 539; Klepper v. Seymour House Corp., 246 N. Y. 85.) The insistence, therefore, of the appellants that this case should have been tried in negligence and not nuisance is of little point. If the negligence depended solely on the failure to warn travelers of the ice on the night in question, there could be no recovery, as it had not been there long enough to have furnished notice to the city, but this is not the only claim of the plaintiffs. The continued gathering of ice from spray, not rain or snow, so that this was the only dangerous spot on the highway, was a condition the authorities had faced for some years and had done nothing about it. That it was dangerous to the public at such times is evident and amply proved. Was it a public nuisance? TMs was a question of fact for the court or jury.

The main question on this appeal is the liability of the respective defendants, which are the city of Glens Falls, the town of Moreau, the county of Warren and the county of Saratoga. The city and town do not seriously dispute their liability, provided negligence or nuisance be established, but the counties claim that no duty to maintain this bridge rested upon them.

The liability of town and county for negligence, in the care of highways is entirely statutory. So we turn to the statutes.

The bridge in question is a county line bridge, the southerly end being in the town of Moreau, Saratoga county, and the northerly end being in the city of Glens Falls, Warren county, the Hudson river forming the boundary line between the two counties. This bridge was constructed pursuant to section 250 of the Highway Law (Cons. Laws, ch. 25), during the year 1913, jointly by the town of Moreau and the city of Glens Falls, each paying one-half of the total cost of said construction. Following the completion of the bridge and pursuant to section 251 of the Highway Law, Warren county paid the city of Glens Falls one-sixth of the total cost of said construction, and Saratoga county paid to the town of Moreau one-sixth of the same. The bridge is not located in any single town or municipality. It spans the Hudson river, which not only separates the town of Moreau from the city of Glens Falls, but is also the dividing line between the two counties. It is not located in either county. The Highway Law, section 250, provides for such a bridge.

“ The towns of this state, except as otherwise herein provided, shall be liable to pay the expenses for the construction and repair of its public or free bridges constructed over streams or other waters within their bounds, and their just and equitable share of such expenses when so constructed over streams or other waters upon their boundaries, except between the counties of Westchester and New York; and when such bridge's are constructed over streams or other waters forming the boundary line of towns, either in the same or adjoining counties, such towns shall be jointly liable to pay such expenses. When such bridges are constructed over streams or other waters forming the boundary line between a city of the third class and a town, such city and town shall be liable each to pay its just and equitable share of the expenses for the construction, maintenance and repair of such bridges. Except as otherwise provided by law, a city of the third class shall be deemed a town for the purposes of this article. Each of the counties of this state shall also be hable to pay for the construction, care, maintenance, preservation and repair of public bridges lawfully constructed over streams or other waters forming its boundary line, not less than one-sixth part of the expense of construction, care, maintenance, preservation and repair, and, except in a county containing a portion of the Adirondack park, the whole of such expenses of public bridges lawfully constructed or to be constructed over streams, or waterways, intersecting county roads.”

Section 33, subdivision 1, gives the duties of the County Superintendent of Highways: “ Have the general charge of all highways and bridges within his * * * county and see that the same are improved, repaired and maintained, as provided by law, and have the general supervision of the work of constructing, improving and repairing bridges and town highways in his * * * county.”

Subdivision 2: Visit and inspect the * * * bridges in * * * his * * * county, at least once in each year.”

Subdivision 5: Approve plans and specifications and estimates for the erection and repair of bridges, * * * ”

Note that the duty here placed upon counties is in approximately the same language as that given to towns and cities, “ shall be hable to pay the expenses for the construction and "repair of its public or free bridges.”

At common law a town was not hable for the negligence of its Highway Superintendent; this liability is purely statutory. We, therefore, find section 74 of the Highway Law imposing this liability in these words: Every town shah be hable for ah damages to persons or property sustained by reason of any defect in its highways or bridges, existing because of the neglect of any town superintendent of such town.”

This bridge is not solely a town bridge; it is a county bridge also, within the wording of section 250, above quoted, making the counties hable for one-sixth each for its care and maintenance. The duty then is as much on the counties as on the town and city.

As before stated, the counties’ liability for neglect of any such duty is likewise statutory, so that we find in section 6 of the County Law (Cons. Laws, ch. 11) this provision: When, by law, a county has charge of the repair or maintenance of a road, highway, bridge or culvert, the county shall be hable for injuries to persons or property sustained in consequence of such road, highway, bridge or culvert being defective, out of repair, unsafe, dangerous or obstructed existing because of the negligence of the county, its officers, agents or servants. A civil action may be maintained against the county to recover damages for any such injury; but the county shah not be hable in such action unless a written claim for such damages, verified by the oath of the claimant, containing a statement of the place of residence with reasonable certainty, and describing the time when, the particular place where and the circumstances under which the injuries were sustained, the cause thereof and, so far as then practicable, the nature and extent thereof, shah within three months after the happening of the accident or injury or the occurrence of the act, omission, fault or neglect out of which or on account of which the claim arose, be served upon the county clerk or chairman of the board of supervisors. No action shall be commenced upon such claim' until the expiration of three months after the service of such notice.”

As the duty of care and maintenance of this county line bridge is placed upon the city, town and counties in the same or similar language, and the liability of town and county for neglect of duty is fixed by statute, there is but one conclusion, and that is that all are jointly and severally hable for damage resulting from failure to maintain properly; they are joint tort feasors. The counties are hable for not less than one-sixth each and the town and city for their just and equitable share of the balance. Payment by one of more than its share or proportion can be recovered in a proper proceeding, if necessary. (St. John v. Andrews Institute, 192 N. Y. 382; Clapp v. Town of Ellington, 87 Hun, 542; affd., 154 N. Y. 781.)

In Augustine v. Town of Brant (249 N. Y. 198, 205) this court said, The modern tendency is against the rule of non-habihty. (Borchard, Government Liability in Tort, supra, p. 258.) Liability for highway neghgence has been imposed by statute upon towns (Highway Law, § 75) and counties (County Law, § 6).”

The County Law, section 68, says: The board [of supervisors] shall provide for the care, maintenance, preservation and repair of any draw or other bridge intersecting the boundary line of counties or towns, which bridge is by law a joint charge on such counties or towns, or on the towns in which it is situated.” In Matter of Town of Saratoga (160 App. Div. 60), the Appellate Division directed the town and not the county to erect such a bridge in the first instance. I do not find that this case came to this court. The question of liability for negligence in maintenance was not presented in that decision and it might very well be that, as some one municinality had to do the work, the cost being shared, the towns could do it as well as the counties. Since that decision, moreover, section 6 of the County Law has been added.

In each case, the judgment below should be affirmed, with costs.

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

Judgments affirmed.


author: Finch, J.

text:
    Laura S. L. Newhall, Respondent, Impleaded with Another, v. Margaret McCann et al., Individually and as Executors and Trustees under the Will of James McCann, Deceased, Appellants.
    (Argued April.23, 1935;
    decided May 21, 1935.)

      Charles H. Lane, Stephen H. Maher and David D. Miller for appellants.

      Harry J. Laragh for respondent.
   Finch, J.

Some thirty years ago vault doors were built in the sidewalk of what has now become a busy street in the city of Yonkers. These vault doors projected above the sidewalk about an inch, and over that portion of the doors which overlapped was an iron lip or strap which rose another inch above the sidewalk, making the height of the iron lip two inches above the sidewalk. In addition, the iron lip curved over the outer edge of the doors and extended out beyond the doors an inch. The vault doors extended out into the sidewalk from the building line forty-four and one-half inches. Against this lip the plaintiff, an elderly lady, tripped and fell, thereby sustaining the injuries for which a recovery has been allowed against the owner of the premises to which the vault appertains.

In 1909 the city of Yonkers passed an ordinance, section 21 of which revoked all licenses, permits or consents for the construction of any vault theretofore issued, in the following words:

“ Sec. 21. All existing licenses, permits or consents for the construction of any vault or cistern in the City of Yonkers heretofore granted pursuant to or by virtue of any ordinance of said city heretofore enacted or otherwise in accordance with law, are hereby repealed, vacated and annulled.”

. This ordinance likewise provided that:

Sec. 11. All openings in the roofs of vaults shall be covered with glass set in iron frames, * * * or with iron covers having a rough surface and rabbeted into or made flush with the sidewalk, under penalty of a fine of twenty-five ($25.00) dollars, to be paid by the owner of the land to which such vault shall belong, or the person making or causing the same to be made, severally and respectively.” (Italics interpolated.)

In connection with the above, section 15 of the ordinance is as follows:

Sec. 15. No application for the construction or making of any vault or cistern in the City of Yonkers or for the continued existence of any such already constructed or made, shall be granted if in the opinion of the Commissioner of Public Works the public interests require its denial.”

The plaintiff sued upon a count in negligence and a count in nuisance. The trial court took away from the jury the issue of nuisance, presumably on the ground that the vault had existed for upwards of thirty years.

The court not only refused to consider as evidence the license provisions of the ordinance but also the provision requiring the vault doors to be flush with the sidewalk. This constituted error. This error becomes important by reason of the fact that unless the ordinance applied there is no evidence of negligence. (Hamilton v. City of Buffalo, 173 N. Y. 72; Butler v. Village of Oxford, 186 N. Y. 444; Terry v. Village of Perry, 199 N. Y. 79; Lalor v. City of New York, 208 N. Y. 431; Smith v. City of New York, 223 N. Y. 608; Fessenden v. City of New York, 237 N. Y. 539; DePledge v. City of New York, 239 N. Y. 544; Eger v. City of New York, 239 N. Y. 561.)

While it is true that the above cases involved actions against municipalities, the principle applies to the facts herein. Upon this record there is no evidence apart from the ordinance to sustain an action in negligence. Since the court had instructed the jury to disregard the ordinance, there was no evidence to justify a verdict for the plaintiff. The judgment, therefore, must be reversed, but the refusal to consider the violation of the ordinance as some evidence of negligence was error, which necessitates the granting of a new trial.

The defendants urge that the plaintiff was guilty of contributory negligence as a matter of law, but obviously this was a question of fact with which we are not concerned, since there is some evidence to sustain the finding of the jury.

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

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

Judgments reversed, etc.


text:
    The People of the State of New York, Respondent, v. George Henriques & Co., Inc., et al., Appellants, Impleaded with Others.

      (Argued April 24, 1935;
    decided May 21, 1935.)

      Irving D. Lipkowitz for appellants.

      John J. Bennett, Jr., Attorney-General (Margery Cederstrom and Ambrose V. McCall of counsel), for respondent.
   Lehman, J.

The corporate defendant, George Henriques & Co., Inc., has been engaged in the business of selling securities to the public. The defendant George Henriques manages and controls the corporation. In April, 1933, an order was granted upon the application of the Attorney-General, pursuant to the provisions of section 354 of the General Business Law (Cons. Laws, ch. 20), directing the defendants to appear and be examined concerning alleged fraudulent practices in their business and to produce papers, documents, books and records concerning the same. At that time no action had been commenced but, in accordance with the statute, the application showed that the Attorney-General was about to begin an action pursuant to article 23-A of the General Business Law. The defendant appeared for examination, but failed to produce any books or records covering the period from March 1st, 1932, to October 1st, 1932, when, it was claimed, some of the alleged fraudulent practices took place. After the defendants’ failure in this respect to comply with the order of the Supreme Court, the Attorney-General, on May 23d, served upon the defendants a summons and complaint in an action brought in conformity with section 353 of the General Business Law. The complaint in that action alleged specifically and in detail fraudulent practices from March 1st, 1932, to the date of the complaint. The defendants filed an answer denying these allegations. Motion was then made to punish the defendants for failure to produce their books and records covering the period from March 1st, 1932, to October 1st, 1932. By amendment to the complaint the allegations of fraudulent practices by the defendants were confined to the same period. The motion to punish for contempt was granted, and by order of the court the answer of the defendants was stricken out. Without presentation of any testimony to sustain the allegations of the amended complaint, findings of fact were made in favor of the plaintiff, and judgment was granted enjoining the defendants from selling or offering for sale to the public any securities issued or to be issued, and appointing a receiver to take possession of the property and assets of the defendants “ derived by means of fraudulent acts, practices or transactions in the sale of securities, pursuant to the provisions of Article 23-A of the General Business Law,” and to liquidate the business of the defendants. From that judgment the defendants have appealed.

The courts can never grant judgment depriving a defendant of his liberty or property unless there has been opportunity to defend the action. Without opportunity to meet a charge, there is no due process of law. (Hovey v. Elliott, 167 U. S. 409.) No court can grant such a judgment without a hearing, and a refusal to hear is a denial of due process. Though, by statute, the court may have been granted authority to strike out the answer of a defendant as punishment for a contempt in failing to obey an order for examination or for the production of evidence, yet the court is powerless, because of such contempt, to deny the defendant a hearing upon the charge made against him, except where, from the suppression of evidence by the defendant, an inference or presumption arises that the charge made is in fact true. Disobedience of an order to produce evidence calculated to sustain a charge may, nevertheless, at times take the place of an admission of guilt. Suppression of evidence which if produced would prove the truth or falsity of the charge may, in proper circumstances, dictate an inference of guilt. An order of the court for the production of such evidence may not be flouted. Contumacious disobedience may be punished as a contempt, but such punishment cannot take the form of deprivation of the constitutional right to a trial and hearing before condemnation upon unproven charges. The State has no power to deprive any person of such right; it has power, none the less, to advance justice by reasonable regulation of the form and manner of the exercise of that right. A party who suppresses evidence by which the truth of a charge can be established may render a hearing futile. Where such suppression dictates the inference that the charge is true, a court may treat disobedience of its order for the production of such evidence as a confession of the charge. The recalcitrant party has, then, had opportunity to meet the charges at a fair hearing. He rejects that opportunity when he willfully disobeys the order of the court for the production of evidence. He cannot be heard to claim the right to a hearing after he has refused to co-operate in the hearing by submission to the court of evidence which the court requires for just decision. The limitation upon the power of the court to strike out an answer and to grant judgment pro confessa as punishment for disobedience of its mandate to produce evidence is inherent in the nature of the judicial function. It may exercise that power only in aid of its function to determine the truth of the charges made, after due consideration and after opportunity for a hearing accorded to all parties. (Feingold v. Walworth Bros., Inc., 238 N. Y. 446.) The test in each case is whether refusal to produce evidence sustains the findings of the court.

Before considering whether in the present case the trial judge had power to strike out the defendants’ answer as punishment for a contempt, we must determine whether there is evidence to sustain the finding that in fact there has been a willful disobedience of the court’s order for the production of the defendants’ books and records. It is clear that there can be no willful disobedience unless at the time the order was made the books and records were in the possession or control of the defendants. The order for the production of the books and records was granted ex parte. At that time there was no opportunity for the defendants to urge that the books were lost and destroyed. The question is not before us whether an order, made upon notice, for the production of books and papers constitutes an adjudication that the books and papers are in the possession or control of the party ordered to produce them, or at least places upon such party the burden of proof of showing that they are not within his possession or control. (Cf. Oriel v. Russell, 278 U. S. 358.) The defendants are entitled to a hearing in regard to that at some stage of the proceedings, and the burden of proof rests upon the plaintiff when it seeks to punish the defendants for a willful violation of an ex parte order.

Here it is undisputed that the defendants kept records and books of their proceedings from the time they began business in March, 1932. Business men who have nothing to conceal ordinarily safeguard carefully the records and books of their business transactions, at least for a reasonable time. Only under extraordinary circumstances does a business man lose or part with control of his business records. Thus unless a credible explanation is given for failure to produce, the inference is almost irresistible that a failure to produce books and records is willful. The burden of producing evidence which would constitute explanation or excuse then shifts to the parties who alone have knowledge of the actual facts. So the referee ruled in this case, and the defendants attempted to produce such evidence.

The referee rejected the attempted explanation and found that in December, 1932, when, it appears, the Attorney-General asked to see these books, they were still in existence and in the control of the defendants. Without analysing in detail the testimony of the defendants, we state our conclusion that the finding of the referee was fully justified. What happened to the books between December and April does not appear; and the referee refused to rule that there is a presumption that the existence of the books within the control of the defendants continued until the date of the order of examination. Perhaps when the defendants learned in December that an investigation was being made as to their business practices, they not only suppressed but actually destroyed books and records which might tend to show wrongful practices. At that time no charges against them had been formulated. None had been formulated against them at the time when the order for the production of their books was made in the following April.

Even though we should assume that upon the date set for the production of the defendants’ books and records they were still within the possession or control of the defendants, the question would still remain whether the disobedience of the order justifies the inference that these defendants are guilty of the charges subsequently formulated.

The destruction by the defendants of their books and records or the failure of the defendants to produce such books and records if in their possession or control would be evidence of a consciousness of guilt. If, at the time of such suppression or failure to produce, definite charges had been pending against the defendants, the truth of which could be proven or disproven by the books and records, the defendants’ conduct might even lead to an inference of the truth of the particular charges. To sustain the judgment in this case we must, however, go a step further and find an inference not merely of general consciousness of guilt, but also of guilt of specific charges thereafter formulated. That gap cannot be easily bridged. The justice presiding at Special Term has found every allegation of fraud set forth in the amended complaint. His decision includes nineteen separate findings of fact and twenty-four separate conclusions of law. Certainly guilt of some of the charges embodied in the decision can hardly be inferred from suppression of evidence before these charges were formulated. If disobedience of an order for the production of books and records before an action has been commenced justifies denial of a hearing upon charges subsequently formulated in the complaint, then a plaintiff can obtain judgment upon any charges he thereafter chooses to make. We find no statute of this State which confers such an extraordinary power upon the courts, and no case which would sustain the exercise of such power.

It is said that such power is conferred upon the court by section 405 of the Civil Practice Act. That section provides that the court may strike out a pleading of a party to an action in which he was subpoenaed as an additional punishment for failure to obey a subpoena or to obey an order made by the court or a judge in an action * * * requiring him to attend and be examined, or so to attend and bring with him a book or paper.” The scope of that section is limited to punishment for failure to obey subpoenas or orders in an action. Here, as we have said, no action was pending at the time when the order was served. It is said, however, that testimony which is material to an expected party in the prosecution or defense of an action may be taken pursuant to an order of a court or judge before the action is brought (Civ. Prac. Act, § 295), and that such an order is an order in the action thereafter brought. It may be true that an order of examination before an action is commenced is, for purposes of appeal, regarded as an intermediate .order in the action subsequently brought. (Cf. People ex rel. Morse v. Nussbaum, 55 App. Div. 245.) It does not follow that such an order is an order in the action subsequently brought, within the meaning of section 405 of the Civil Practice Act. The application of that section is plainly confined to disobedience of a subpoena or order in an action after a complaint has been served. In authorizing the court to strike out the pleading of a party, the Legislature, it seems plain, referred to a pleading which attempts to create an issue upon which evidence is willfully withheld. Any construction which would give a broader power to the court would result in denial of a hearing upon a controverted fact essential to judgment.

Moreover, the order for examination in this case was not made pursuant to provisions of the Civil Practice Act but pursuant to the General Business Law, section 354. That section provides that whenever the Attorney-General has determined to commence an action, he may present to a justice of the Supreme Court an application for an order directing the person or persons mentioned in the application to 'appear before the justice of the Supreme Court or referee designated in such order and answer such questions as may be put to them or to any of them; or to produce such papers, documents and books concerning the alleged fraudulent practices to which the action which he has determined to bring relates. * * * The provisions of the civil practice act, relating to an application for an order for the examination of witnesses before the commencement of an action and the method of proceeding on such examination, shall not apply except as herein prescribed.” Even though section 405 of the Civil Practice Act were otherwise applicable to orders of examination before the commencement of an action, orders of examination obtained under section 354 of the General Business Law would still be expressly excluded from its scope. For the result of refusal to produce a book or paper relevant to an inquiry under the General Business Law, we must look to the provisions of that statute. Where upon an application for a preliminary injunction it appears that the defendant named in the action or an officer thereof has refused to produce a book or paper relevant to the inquiry when duly ordered so to do, by the officer or judge duly conducting an inquiry into the subject-matter forming the basis of the application for such preliminary injunction, such refusal shall be prima facie proof that such defendant is or has been engaged in fraudulent practices as set forth in such application and a preliminary injunction may issue from the supreme court without any further showing by the attorney-general.” (§ 353.) The question of whether a preliminary injunction might properly be issued upon the defendants’ refusal to produce their books and records is not presented by this appeal. We do not pass upon it now. Now we decide only that for refusal to produce books and records upon an inquiry preliminary to the bringing of an action under article 23-A of the General Business Law and preliminary to an application for a temporary injunction, the court has no power, statutory or inherent, to strike out the answer of a defendant and to grant final judgment. Perhaps the consciousness of guilt evidenced by suppression of books and records might be sufficient prima facie proof of general, though ■undisclosed fraudulent practices, to justify the issuance of a preliminary injunction for the protection of the public pending a hearing of the charges thereafter formulated. Even so, such suppression would not justify a denial of a hearing upon the charges when formulated. The Legislature has here made a distinction based upon substantial grounds. The courts in the exercise of their judicial function have power to grant temporary injunctions in proper case without a hearing. Before final judgment, there must be a hearing and judgment may be granted in regard to controverted issues only after consideration of evidence produced. Though we assume for purposes of this appeal that the defendants have been guilty of a willful contempt of the order for their examination, and though we assume further that such disobedience is evidence of a consciousness of guilt, punishment for such disobedience cannot include a denial of a hearing upon charges subsequently formulated against them. If the punishment had followed immediately upon the offense, argument could hardly be made that the court would as part of such punishment have power to direct a judgment against the defendants in an action which might be brought thereafter. In principle the same rule should apply when proceedings for the punishment of the contempt are delayed till after the action has been begun and issue has been joined. In both cases the test is whether the contempt constitutes confession of the wrong charged. In neither case can there be confession until the charge has been formulated.

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

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

Judgments reversed, etc.


text:
    In the Matter of the Claim of Abraham Parchefsky against Kroll Bros., Inc., et al., Appellants. State Industrial Board, Respondent.

      (Argued April 17, 1935;
    decided May 21, 1935.)

      William S. Sinclair and James J. Mahoney for appellants.

      John J. Bennett, Jr., Attorney-General (Roy Wiedersum of counsel), for State Industrial Board, respondent.
   Lehman, J.

In August, 1929, the claimant, while in the employ of Kroll Bros., Inc., sustained an injury which, it is undisputed, arose out of and in the course of his employment. That injury consisted of a cut on the wrist. For that injury the claimant was undoubtedly entitled to an award of compensation against his employer and against the carrier, Maryland Casualty Company. Claim for such injury was filed in October, 1929. At that time the claimant had returned to work and had received full wages during the weeks he did not work. A hearing was held in December, 1929; and, because, until then, he had lost no wages, the hearing was adjourned for three months. It was not then clear whether the injury was permanent. At the adjourned hearing it appeared that an operation had been performed on the injured wrist. The claimant’s attorney stated that he did not want ” an award made then, as he was about to begin an action against the carrier, Maryland Casualty Company, for the malpractice of physicians employed by it in the treatment of the original injury. The attorney for the employer and the carrier, Maryland Casualty Company, also objected to an award at that time, stating that the claimant was recently operated.” The hearing was then adjourned with a direction that it was not to be placed upon the calendar until claimant’s attorney gave notice that he was ready to proceed. After several further adjournments, requested on the ground that an action for malpractice was still pending, the claim was taken up for hearing on July 10th, 1933, almost four years after the original injury.

Examination of the wrist then showed that the claimant had sustained a permanent loss of one-third of the use of his hand. Concededly that condition was due primarily to the accident sustained in August, 1929, though perhaps the injury may have been aggravated by malpractice in the treatment of the original injury. The rule is now well established that a wrongdoer is hable for the ultimate result, though the mistake or even negligence of the physician who treated the injury may have increased the damage which would otherwise have followed from the original wrong.” (Milks v. McIver, 264 N. Y. 267, 270.) We have consistently applied the same rule to. awards of compensation. Where the chain of causation between accidental injury and ultimate disability remains unbroken, an injured employee is entitled to the statutory compensation for the ultimate disability resulting from the accidental injury.

Here the claimant has received an award for the ultimate result of the original injury amounting to $1,626.27. He is entitled to that award, at least, if he has not already received compensation for the same injury from the employer, carrier or third person. He has already received from the carrier the sum of $3,500 in settlement of his action for malpractice. In that action the complaint alleged that plaintiff, after the accidental injury of August, 1929, was directed by the defendant Maryland Casualty Company, which had insured the plaintiff’s employer against accidents, to appear at a clinic maintained by the carrier, for the purpose of receiving medical treatment for the accidental injuries incurred in the course of his employment; and that through the negligence of the _ employees of the insurance company in administering such treatment, he was greatly injured. The bill of particulars in that action states: The treatment was given to his right hand and wrist, and as a result of which treatments the plaintiff has lost the use of his right hand.” Thus it appears that the claimant has sought from the insurance carrier, in an action for malpractice, damages caused by the negligence of physicians employed by the carrier which aggravated the result of the original injury, and he has received satisfaction for that cause of action. He has also been awarded compensation from the employer for the original injury including those results which may be traced to the malpractice.

A person who negligently injures another is not a joint tort feasor with a physician whose negligence thereafter aggravates the original injury. Nevertheless, the malpractice coalesces with the original injury at that point and the two independent wrongs become concurrent causes of the ultimate result. Then the position of the independent tort feasors becomes in many respects analogous to the position of joint tort feasors. Action may still be brought, and recovery had, against the original wrongdoer for all the damages caused by his wrong or recovery may be sought and obtained from the physician for the damages which follow upon his wrong. A pending action, brought against the physicians is not an election of remedy which bars a subsequent recovery against the original wrongdoer for damages resultant from the original wrong. (Radman v. Haberstro, 49 Hun, 605; 1 N. Y. Supp. 561; affd., 119 N. Y. 659.) None the less, “ the law does not permit a double satisfaction for a single injury,” and for that reason we have held that “ satisfaction by the original wrongdoer of all damages caused by his wrong bars action against the negligent physician who aggravated the damage.” (Milks v. McIver, supra, p. 270.) For the same reason it is evident that satisfaction by the physician of the damages caused by the aggravation of the original wrong must bar recovery for the same damages as part of the original wrong. Then recovery can be had against the original wrongdoer only for those damages for which satisfaction has not been made by the physician. Otherwise, again there would be a double satisfaction for a single injury. Indeed, it has been held that the original wrongdoer, when mulcted for all the damages caused by his wrong, may become subrogated to a right of action of the injured party against a negligent physician for aggravation of the original injury and damages. (Fisher v. Milwaukee E. Ry. & L. Co., 173 Wis. 57, cited with approval in Chicago & N. W. Ry. Co. v. Nye Schneider Fowler Co., 260 U. S. 35.) Thus, if after settlement of the action for malpractice in aggravating the original injury, the injured party pursued a common law remedy against a wrongdoer who caused the injury, recovery could be had only for those damages which did not follow upon and flow from the physician’s negligence.

The Appellate Division has held that these common law rules do not apply to the statutory proceedings under the Workmen’s Compensation Law (Cons, Laws, ch. 67). It is true that we must look to the statute for definition of the rights of parties; but in seeking that definition we must give effect to the spirit and the letter of the státute read in the light of past history and precedent. The statute gives to an injured employee a right of election whether to take compensation under the statute or to pursue his common law remedy against a third party whose negligence has caused the injury. “ If such injured employee * * * elect to take compensation under this chapter, the awarding of compensation shall operate as an assignment of the cause of action against such other * * * to the person, association, corporation, or insurance carrier liable for the payment of such compensation, and if he elect to proceed against such other, the * * * person, association, corporation, or insurance carrier * * * shall contribute only the deficiency, if any, between the amount of the recovery against such other person actually collected, and the compensation provided or estimated by this chapter for such case.” (Workmen’s Comp. Law, § 29; cf. amendment made by Laws of 1935, ch. 328.) The purpose of the statute is clear. The employer or carrier must provide the statutory compensation for accidental injury arising out of and in the course of his employment regardless of whether or not the injury was due to the employer’s wrong or negligence. Against the employer the statutory remedy is exclusive. The common law remedy against a person not in the same employ whose wrong or negligence caused the injury remains intact. The statute was not intended to inure to the benefit of such person. The injured employee may, if he choses, avail himself of his common law remedy against the third party. If he does, the employer or carrier is hable only for the deficiency between statutory compensation and recovery collected from the third party. If he does not, the employer or carrier upon payment of the award may enforce the common law remedy for its own benefit. In either case the benefit of a recovery against the third party inures to the advantage of the employer or carrier.

It is said, however, that these provisions of the statute do not apply here because the injury for which compensa,tion has been awarded is the cut on the employee’s wrist and the negligence of the attending physician did not cause that injury but only aggravated it. The suggestion has some force. When the injury occurred, the employee had, in truth, no right of election whether he would take compensation or sue the insurance carrier for the negligence of its physician, for at that time the physician’s negligence had not in any way contributed to the injury. That, of course, occurred thereafter. Moreover, recovery for the physician’s negligence in aggravating the original injury would not compensate the claimant for the damages caused solely by the original injury. To that extent, at least, the claimant is entitled to pursue his statutory remedy against the employer, for as to that there has never been any right to proceed against a third party, and there has been no recovery against a third party which could include such damages.

The difficulty in this case arises from the fact that compensation under our statute is awarded for the ultimate results of an injury which follow upon the intervening malpractice. Under the English Workmen’s Compensation Act no compensation is awarded for such results. There the improper medical treatment is regarded as an intervening independent act which breaks the chain of causation. (Humber Towing Co. v. Barclay, 5 Butterworth’s W. C. C. 142; Rocca v. Stanley Jones & Co., 7 Butterworth’s W. C. C. 101; Lakey v. Blair & Co., 10 Butterworth’s W. C. C. 58; Bower v. Meggitt, 10 Butterworth’s W. C. C. 146.) The same rule has been followed in some jurisdictions in this country. (Cf. Ruth v. Witherspoon-Englar Co., 98 Kan. 179; Smith v. Golden State Hospital, 111 Cal. App. 667; Viita v. Fleming, 132 Minn. 128.) In such jurisdictions an award of compensation and a recovery in an action for malpractice cannot result in double compensation for the same injury.

We have preferred to apply to awards under the Workmen’s Compensation Law the same rule applied to damages in common law actions. Compensation for the original injury includes the ultimate results of the injury, though the injury has been aggravated by intervening malpractice. Other jurisdictions have applied the same rule. (Booth & Flinn, Ltd., v. Cook, 79 Okla. 280; Ross v. Erickson Constr. Co., 89 Wash. 634; Gunnison Sugar Co. v. Industrial Comm., 73 Utah, 535; Vatalaro v. Thomas, 262 Mass. 383; Oleszek v. Ford Motor Co., 217 Mich. 318.) Where that rule is applied, payment of an award for an injury which includes the result following upon negligent treatment of the injury, and payment of a judgment for damages caused by negligence in aggravating that result gives rise to double compensation for the injury, which follows upon and results from the malpractice. Accordingly it has been held that where an employee accepts compensation, under a Workmen’s Compensation Law for an industrial injury including the results, of malpractice in the treatment of such injury, he cannot maintain an action against the negligent physician. (Vatalaro v. Thomas, 262 Mass. 383.) In that event the right of action for malpractice passes under the statute to the party paying the compensation. (Overbeek v. Nex, 261 Mich. 156.) (Cf. Revell v. McCaughan, 162 Tenn. 532; Williams v. Dale, 139 Ore. 105.)

These decisions point the way for the solution of the problem here presented. The injured employee is entitled to receive compensation for the result of the original injury apart from the result of the negligent treatment of the original injury. Here there is no room for election between statutory remedy against the employer and common-law remedy for malpractice. Recovery in the malpractice actions cannot include compensation for results of the original injury apart from the result of the malpractice. After malpractice has aggravated the original injury, the subsequent disablement is due to concurrent causes inextricably intertwined. More than that, these results would not have followed from the original injury but for the independent negligence of the physician. To the extent that the injury for which compensation may be made under the Workmen’s Compensation Law includes the result of malpractice, the injury ” is due to the negligence of the physician within the spirit and letter of the statute. To that extent, then, the injured employee has a common law remedy against the physician and a statutory remedy against the employer. In accordance with the common law rule applicable to tort actions and the statutory rule embodied in section 29 of the Workmen’s Compensation Law, the injured employee has then an election which remedy he will pursue. If he pursues his common law remedy against the negligent physician and collects more than the compensation provided by the statute, the employer or carrier is liable only for the injury, apart from the result of the malpractice. If he elects to take compensation under the statute, including damages for the injury caused by the physician’s negligence, the employer becomes subrogated to the employee’s right of action against the physician. So here the Industrial Board erred in rejecting proof that the employee had received a larger sum as settlement of the malpractice action than he would have received as compensation for the original injury, including the results of the malpractice. Upon that proof the claimant was entitled only to an award for the injury apart from the malpractice.

The injustice of any other rule is aptly illustrated by this case. The carrier has satisfied the claimant’s cause of action for damages caused by the malpractice of its agents in treating the original injury and then has been directed to compensate the claimant for the injury which includes the same damages. The statute cannot fairly be construed to admit such a result.

The order of the Appellate Division and the award of the State Industrial Board should be reversed and the claim remitted to the State Industrial Board to make an award in accordance with this opinion, with costs in all courts.

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

Ordered accordingly.


text:
    In the Matter of the Application of The People of the State of New York, by George S. Van Schaick, as Superintendent of Insurance, Respondent, for an Order to Take Possession of the Property of Bond and Mortgage Guarantee Company, Respondent. City Bank Farmers Trust Company, Appellant.

      (Argued April 22, 1935;
    decided May 21, 1935.)

      Edwin W. Cooney and Edward L. Hunt, Jr., for appellant.

      Louis M. Fribourg and Albert W. Fribourg for Herbert E. Merseles et al., as executors of Theodore F. Merseles, deceased, amici curice.

      John F. Caskey and James B. McDonough, Jr., for respondents.
   Loughran, J.

In this controversy, submitted to the Appellate Division upon an agreed statement of facts, the parties are City Bank Farmers Trust Company (called the Bank), and the Superintendent of Insurance, as rehabilitator of Bond and Mortgage Guarantee Company (called the Guarantee Company).

On May 25, 1931, the Bank became owner of a bond and mortgage to secure the payment on May 14, 1934, of $5,000, with interest at six per cent to be paid on November 1, 1931, and semi-annually thereafter. Thereupon the Guarantee Company delivered to the Bank a “ guarantee policy covering the bond and mortgage, whereby the Guarantee Company guaranteed to the Bank: “ First. Payment at the rate of five and one-half per cent per annum, from May 25th, 1931, out of every installment of interest falling due on the bond and mortgage * * *, within five days after same has become due; Second. Payment of the principal * * * as soon as collected, but in no event later than eighteen months after it shall have become due and payment thereof shall have been demanded in writing by the insured [the Bank], with regular payment meantime of interest at the rate guaranteed.” The policy also provided: “ By the acceptance of this guarantee this [Guarantee] Company is made irrevocably the agent of the insured [the Bank], until the bond and mortgage be paid, with the exclusive right, but at its own expense, * * * to collect the interest as it falls due on the bond and mortgage hereby guaranteed. Out of the interest so collected this [Guarantee] Company is authorized to retain as its premium for this guarantee the excess [one-half of one per cent] over the guaranteed rate named above.”

Appended to the policy are two classes of conditions. (A) “ This [Guarantee] Company is bound: * * * 2. To continue this guarantee on the extension of the mortgage on payment of the same premium per annum as is charged for this guarantee, unless this [Guarantee] Company shall elect to collect said mortgage.” (B) “ The insured [the Bank] is bound: 1. To permit this [Guarantee] Company to collect all interest and the principal secured by said bond and mortgage, and to refrain from collecting any part of the interest or principal secured by said bond and mortgage except through this [Guarantee] Company. * * * 4. To allow this [Guarantee] Company, in the name of the insured [the Bank], to exercise any right or option secured to the insured [the Bank] by said bond or mortgage, and to refrain from exercising any such right without the consent of this [Guarantee] Company. Without further action on the part of the insured [the Bank], this [Guarantee] Company is authorized to enforce payment in the name of the insured [the Bank], from time to time, of any sums which may be or become due under said bond and mortgage * * * 5. To assign said bond and mortgage to this [Guarantee] Company, if requested so to do, upon receipt from it [the Guarantee Company] of the amount due the insured [the Bank], whenever the insured is entitled to require payment of the amount secured.”

In a proceeding under article XI of the Insurance Law (Cons. Laws, ch. 28), the Supreme Court, on August 2, 1933, made an order under which the Superintendent of Insurance is administering the business and property of the Guarantee Company as its rehabilitator.

The bond and mortgage matured on May 14, 1934. The principal is unpaid. Payment thereof by the Guarantee Company has not been demanded by the Bank. Interest to May 1, 1934, has been paid by the mortgagor to the Guarantee Company and (less the policy premium) by that company to the Bank. There are no arrears of taxes on the mortgaged premises.

The question in difference is stated as follows:

The Bank claims that it is entitled to terminate its agreement with the Guarantee Company upon the maturity of the mortgage, provided the Bank * * * makes no demand for performance of the obligations of the Guarantee Company with respect to payment of principal. The Bank admits that the Guarantee Company has duly performed all of the other obligations of its contract, and is prepared to deliver an appropriate release and discharge to the Guarantee Company as evidence of such admission and of the fact that no demand will be made for performance of the obligations of the contract with respect to payment of principal.
“ The Guarantee Company and its rehabilitator claim that the right to act as the Bank’s agent and to exclusively control and service this bond and mortgage is an agency coupled with an interest not revocable except for default and is an asset of value which the rehabilitator is under a duty to preserve for the creditors of the Guarantee Company.”

The Appellate Division has directed judgment for the Guarantee Company and its rehabilitator. We think the Bank is entitled to judgment.

The Guarantee Company has here no power coupled with an interest. (Farmers' Loan & Trust Co. v. Wilson, 139 N. Y. 284; American Law Institute, Restatement of The Law of Agency, § 138.) Nor do the stipulations making the Guarantee Company “ irrevocably the agent ” of the Bank, with the “ exclusive right ” to collect interest on the bond and mortgage, amount to more than an agreement to continue that agency for the life of the policy. The real issue is whether, consistently with that agreement, the Bank may now terminate the authority of the Guarantee Company upon discharging it from further liability.

The rehabilitator stands upon a strict construction of particular terms of the policy, but it is obvious that the policy was never intended to answer the question here presented. It was contemplated by the policy that the mortgage would be collected at maturity. It was intended that the Guarantee Company could then insist on immediate collection. If the Guarantee Company did not so insist, the purpose was “ to continue this guarantee during an extension of the mortgage. How has the contemplated state of things fallen out? The mortgage is now due, but the mortgagor has by law been made independent of both the Bank and the Guarantee Company so far as the time of payment of principal is concerned (Civ. Prac. Act, §§ 1077-a-1077-f), a status unthought of when the policy was issued. The Guarantee Company is by law hr the hands of the rehabilitator under a judicial decree which declares that it is unable to meet the present and early future demands upon it for fulfillment of its obligations as they mature and that its affairs * * * are in such condition that its further transaction of business will be hazardous to its policy holders " — ■ another contingency not suggested when the policy was delivered. It is a mere fiction to say that the parties actually intended anything in so unforeseen an emergency.

While courts neither make nor modify contracts nor dispense with their performance ” (Cameron-Hawn Realty Co. v. City of Albany, 207 N. Y. 377, 381, 382), it is no longer true that the scope of an undertaking is necessarily to be fixed in absolute accordance with the literal meaning of the language used. (3 Williston on Contracts, § 1931; Buffalo & Lancaster Land Co. v. Bellevue Land & Improvement Co., 165 N. Y. 247; Day v. United States, 245 U. S. 159.) Further performance of the form of this policy is still possible, but that is not the test of the right of the Bank. The basis on which the policy was entered into has been removed, and the value of the guarantee impaired, by the force of uncontrollable supervening events. What would a reasonable and fair-minded business man in the place of the Guarantee Company be entitled to expect in the situation in which the parties now find themselves without fault of either? (See Stewart v. Stone, 127 N. Y. 500; Buffalo & Lancaster Land Co. v. Bellevue Land & Improvement Co., supra; 15 Harv. L. Rev. 63, 64; The Kronprinzessin Cecilie, 244 U. S. 12; 3 Williston on Contracts, §§ 1935, 1937.) It seems plain to us that the substantial injustice of the present one-sided result dictates the answer that the Bank should be absolved when the Guarantee Company is released.

The judgment of the Appellate Division should be reversed and judgment directed for the petitioner City Bank Farmers Trust Company as asked for in the submission, without costs.

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

Judgment accordingly.