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

text:
    In the Matter of Sarah M. Kraus, Individually and as President of Social Investigator Eligibles Association et al., Respondents, against Ole Singstad et al., Constituting the Emergency Relief Bureau for the City of New York et al., Appellants. John J. Bennett, Jr., as Attorney-General of the State of New York, Intervener, Appellant.

      Argued June 8, 1937;
    decided July 13, 1937.

      Paul Windels, Corporation Counsel (Jeremiah M. Evarts, Paxton Blair and Robert H. Schaffer of counsel), for defendants, appellants.
    Section 19 of chapter 798 of the Laws of 1931, as amended, is constitutional. (Matter of Social Investigator Eligibles Assn. v. Taylor, 268 N. Y. 236; Chamberlin, Inc., v. Andrews, 271 N. Y. 1; 299 U. S. 515; Matter of People [Tit. & Mtge. Guar. Co.], 264 N. Y. 69; Home Bldg. & L. Assn. v.. Blaisdell, 290 U. S. 398; Block v. Hirsh, 256 U. S. 135; Chastleton Corp. v. Sinclair, 264 U. S. 543.)

      John J. Bennett, Jr., Attorney-General (Henry Epstein of counsel), intervener, appellant.
    The absence of budget appropriations and the absence of provision for permanent positions in the city service prior to July 1, 1937, are fatal to petitioner’s cause. (Matter of Social I. E. Assn. v. Taylor, 268 N. Y. 233; Matter of Danker v. Dept. of Health, 266 N. Y. 365.) Petitioners have no legal right to the remedy sought, nor a proper standing to attack the)statute. (Civil Service Law [Cons. Laws, ch. 7], § 14; Hurley v. Bd. of Education, 270 N. Y. 275; Ciaccia v. Bd. of Education, 271 N. Y. 336.)

      H. Eliot Kaplan and Albert De Roode for respondents.
    The phrase “ shall not be subject to the provisions of the Civil Service Law,” contained in section 19 of the relief act, is inapplicable to employees not “ on relief.” (Matter of Social I. E. Assn. v. Taylor, 268 N. Y. 233; Matter of Danker v. Department of Health, 266 N. Y. 365; People v. Crane, 214 N. Y. 154.) If the provision in section 19 of the relief act be construed to withdraw from competition the employment of persons not on relief, it is unconstitutional. (People ex rel. McClelland v. Roberts, 148 N. Y. 360; Ottinger v. Civil Service Comm., 240 N. Y. 435; Home Bldg. & L. Assn. v. Blaisdell, 290 U. S. 398; United States v. Schecter Poultry Corp., 295 U. S. 495.) Chapter 358 of the Laws of 1937 does not affect the rights of the petitioners as of May 29, 1936. (Matter of Mullane v. McKenzie, 269 N. Y. 369; Hurley v. Bd. of Ed., 270 N. Y. 275.) .
   Crane, Ch. J.

In 1931 the Legislature of this State undertook to provide a means of support for the unemployed and those in want. It passed an act, chapter 798 of the Laws of 1931, entitled, “ An act to relieve the people of the state from the hardships and suffering caused by unemployment, * * * ” creating a temporary emergency relief administration. It was passed solely for an emergency in unemployment which was defined as the period between the 1st day of November, 1931, and the 1st day of June, 1932. Section 28 of the act read: “ The administration shall be dissolved and cease to function at the time fixed by this act. * * The fact is it did not cease and is still continuing to function, with thousands of employees who have never taken any civil service examination.

This administration has been popularized, as is the modern fashion, by the name TER A.” Local bureaus were defined as temporary emergency work relief bureaus created in cities and counties. The administration agency consisted of three persons appointed by the Governor to serve during his pleasure. Each city of the State was constituted a separate public welfare district. The Mayor of the city was to establish the public welfare district in the city. These local bureaus are to be responsible for the administration of work relief, and may employ necessary clerks and assistants whose compensation shall be fixed by the officer or governing board by which such bureau is created. All these local bureaus are subject to the supervision and direction of the State administration. The legislative body of the municipal corporations shall raise the money for the work of relief and for the expenses. The act also provides for the investigation of home relief. “ In a city public welfare district the city commissioner shall investigate all cases of home relief ” (§ 13).

Special attention must be given to section 19 of the act which is brought into prominence here by reason of the civil service question involved:

§ 19. Employees of city and county commissioners. The administration may authorize city and county commissioners to employ such additional clerical and other assistants or volunteers, with qualifications satisfactory to the administration, who shall not be subject to the provisions of the civil service law, as may be necessary for the administration of home relief in accordance with the rules of the administration and shall determine the number of such additional clerks and assistants and fix their salaries, which shall be paid from the money hereby appropriated. There shall be paid also from the moneys hereby appropriated fifty per centum of the salary of persons in the employment of the emergency work bureau in the administration of work relief approved by the administration whose work is concerned with the registration or investigation of applications for work or the clerical work of the bureau when such salaries have been approved and such work authorized by the administration.”

In 1933 the Legislature passed an amendatory act known as chapter 259 of the Laws of 1933, which created the emergency relief bureau of from three to five persons appointed by the Mayor in place of the local bureaus. Otherwise the law of 1931 continued substantially the same.

Under this authority for appointing all clerks and assistants and administrative workers without any regard to the Civil Service Law (Cons. Laws, ch. 7), upwards of one thousand persons were employed in the position of investigators or social investigators, positions which could easily have been filled by competent civil service examinations, as is conceded. It is stipulated between counsel that forty per cent of this force were not needy persons eligible and entitled to be on the status of recipients of work for home relief. In Matter of Social Investigator Eligibles Assn. v. Taylor (268 N. Y. 233) this court held that, those who are given employment in these local bureaus as a bounty needed to sustain life, that is, those who are given work and wages as emergency relief, come within the direct purposes and object of the law, and were not subject to civil service rules and regulations. These relief laws were not passed for the purpose of giving work to those, such as investigators, clerks and stenographers and the like, who were not in need of relief. We have therefore, the concession, or the fact, that at least four hundred social investigators were employed by the Emergency Relief Bureau without having been taken from any civil service list or having passed any civil service examination, although there was such a list in existence in 1932.

It is also stated, beyond contradiction, that there are clerks, stenographers, typists, telephone operators who have been employed through all these years without any civil service examination and who are still in the employ of these emergency bureaus. No emergency existed regarding these employees nor the social investigators, and it is now conceded, as it must be, that it is practicable and always has been, to have and conduct competitive examinations for such places. Nowhere is it claimed that there have not been plenty of applicants willing to take and pass such examinations.

Since 1931, or for a period of five years or more, these clerks, typewriters, telephone operators, social investigators have been employed at city and State expense, without any consideration being given whatever to the Civil Service Law or the demands of the State Constitution — and all this done under the plea of emergency which never existed regarding employees who did not need relief. At the go-off in the establishment of the relief bureaus it might have been necessary to gather clerks, operators and employees where no lists were in existence for such places, but no claim is made by any one, and in fact I do not see how it could be, that it was not thereafter practicable within a reasonable time, say six months, to establish lists for all these places after competitive examinations. To say that it would have been impossible because of any emergency to hold examinations at any time during the last five years, and in the face of so much unemployment, invites one to believe that the functions of the Constitution and of the municipal civil service authorities had been abrogated.

The Constitution (Art. Y, § 6) reads: “Appointments and promotions in the civil service of the State, and of all the civil divisions thereof, including cities and villages, shall be made according to merit and fitness to be ascertained, so far as practicable, by examinations, which, so far as practicable, shall be competitive; * * *. Laws shall be made to provide for the enforcement of this section.”

This court said in Chittenden v. Wurster (152 N. Y. 345) that if the Legislature failed to make laws to enforce this constitutional provision the duty rested upon the courts to see that it was carried out.

The Appellate Division, in its opinion in this case, said: “The positions of social investigators, clerks, telephone operators, stenographers and typists are all positions for which competitive examinations have for years been held, and proven eminently practicable.” (250 App. Div. 384, 386.)

Mr. Justice Shientag, in the Aversa case (decided herewith), reviewing this situation, said: “ To permit the Legislature or a civil service commission to exempt positions by blanket enactment, irrespective of the practicability of competitive selection would be striking a vital blow at the entire merit system of the State and would tend to undermine the very foundations of the civil service so firmly embedded in state policy as to be safeguarded by our fundamental law against invasion.” (164 Misc. Rep. 162, 166.)

I agree with both these statements. Whatever liberality was allowable in the filling of these positions in 1931 to enable the local bureaus to function does not justify the continuance from year to year, under the guise of emergency, of the employment of thousands in violation of this civil service principle and constitutional mandate. This has been tried before in Matter of Ottinger v. Civil Service Comm. (240 N. Y. 435). Section 359-a of the General Business Law (Cons. Laws, ch. 20), which provided that the Attorney-General might in his discretion, and without civil service examination, appoint and employ and at his pleasure remove such deputies, officers and other persons as he deems necessary to aid in the enforcement of article 23-A of that law, was held unconstitutional as violative of the civil service provision. This court said: “No such sweeping exemption within the limits of the administrative departments of the government has ever been proclaimed since the Constitution set bounds to the discretion of the Legislature in the formation of the civil service ” (p. 443).

On or about December 8, 1932, there was promulgated by the Municipal Civil Service Commission of the city of New York, as the result of competitive examination conducted by it, an eligible list of those passing an examination for social investigator. These seven petitioners, headed by the above named Sarah M. Kraus, are on this list, and it has been stipulated by counsel that if the Civil Service Law applies to these positions, then these seven petitioners are entitled to be appointed, although their list has expired; also by stipulation they waive all back salary and pay. The purpose of this stipulation no doubt has been this: to give to these petitioners those places which they would have had, had the Civil Service Law functioned. The Corporation Counsel has been very just and fair with them in entering into such a stipulation, especially as the whole staff of positions has now been, or may be placed under civil service, in accordance with the following enactments:

Chapter 822 of the Laws of 1936 amended section 19 of chapter 798 of the Laws of 1931 so as to read as follows: “ * * * No person employed pursuant to this act, during the emergency period, shall-be subject to the provisions of the civil service law except that any local emergency relief bureau or other local relief authority may, with the approval of the administration or of the department succeeding to its functions, appoint its employees in accordance with the civil service law and rules from eligible lists established as a result of civil service examinations held subsequent to the time this section as hereby amended takes effect, in the grading of which due credit shall be given for experience with the local emergency relief bureaus or other local relief authorities.”

By chapter 358 of the Laws of 1937, approved May 17, 1937, the emergency relief bureaus established under chapter 798 of the Laws of 1931, as amended, shall terminate on June 30, 1937. Persons employed in cities, to which the provisions of the Civil Service Law and rules have been extended, shall hold temporary positions in the competitive class of the civil service until appointment shall be made from civil service eligible lists. After July 1, 1937, the Commissioner of Public Welfare of each city shall determine what number of positions for the administration of home relief shall be established as permanent positions and what number as temporary positions. Appointments to permanent and temporary positions shall be made from eligible lists established by competitive examinations. Eligible lists established by civil service examinations heretofore held shall be valid only if the examination was held pursuant to the provisions of section 19 of chapter 798 of the Laws of 1931, as amended. The qualifications for examinations held prior to July 1, 1938, shall be subject to the approval of the State Department of Social Welfare in consultation with the Civil Service Commission; and any person employed for a period of not less than three months, between July 1, 1936, and June 30, 1937, in an equivalent position in a public welfare department or an emergency relief bureau, established under chapter 798 of the Laws of 1931, as amended, shall,be deemed eligible for admission to the examination. In the grading of such examinations a higher rating shall be given for experience in administration of home relief gained as an employee in an equivalent position in a public welfare department or emergency relief bureau than for experience gained in any other department or agency, public or private. The-policy of the State was declared to be that civil service should apply to all these positions, and that those continued should only hold temporarily until appointments could be made from eligible lists. We, therefore, see that if these seven petitioners are given the places to which they should have been appointed heretofore, having passed the civil service examination, they may be continued in the new Department of Public Welfare.

No reason is apparent why these seven social investigators who passed the regular civil service examination for such a position should not have been taken by the relief bureaus in place and instead of those who had passed no examination, and it is in accordance with the spirit and the words of our Constitution and Civil Service Law and in the maintenance of their due administration that these seven related appointees should have the privilege of continuance in the permanent service. Whether or not the civil service examinations for these permanent appointments can be made subject to the approval of the Department of Social Welfare, as provided in this law of 1937, is not here for discussion as we are merely dealing with the qualifications, in this case, of the seven petitioners.

The order of the Appellate Division is modified so as to confine its operations solely to the petitioners in this case who are the only applicants before the court. The stipulation of the Corporation Counsel and of the attorney for the petitioners states that if the positions of social investigator are in the civil service and competitive class, then these seven petitioners should have heretofore been certified from the eligible list of social investigator and would have teen appointed. These petitioners, therefore, under this stipulation, should receive the position which they would have received if the law as we have stated it had been followed. A peremptory mandamus should issue directing that these seven applicants be given the position of social investigator as described in this opinion, and if necessary seven others who had not passed the civil service examination must be removed to make places for these petitioners. Also by stipulation these seven petitioners are not to receive any back pay.

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

Lehman, J.

(dissenting). The Legislature by chapter 798 of the Laws of 1931 created a temporary emergency relief administration ” to continue only during the period of “ emergency in unemployment which the Legislature found existed at that time. The emergency period ” as. defined by the act “ means the period between the first day of November, nineteen hundred thirty-one, and the first day of June, nineteen hundred thirty-two.” Before the date fixed in advance as the limit of the “ emergency. period ” it became evident that the need for extraordinary relief would not be over at that time. Successive Legislatures have renewed the powers of the “ temporary emergency relief administration ” and by new definition have extended the “ emergency period.” Until 1936, the successive statutes, with the exception, perhaps, of chapter 9 of the Laws of 1933, did not, in manner material to any question presented upon this appeal, change the provisions of the original statute

Section 19 of that statute provides for the appointment by city and county commissioners of such additional clerical and other assistants or volunteers, with qualifications satisfactory to the administration, who shall not he subject to the provisions of the.civil service law, as may be necessary for the administration of home relief.” Even in that form the legislative intent to exempt all employees of local bureaus from the provisions of the Civil Service Law (Cons. Laws, ch. 7) is reasonably clear. Any possible doubt is removed by the amendment to section 19, made by chapter 9 of the Laws of 1933. The section now provides that no person employed pursuant to this act, during the emergency period, shall be subject to the provisions of the civil service law.”

It is admitted that in January, 1936, the Emergency Relief Bureau of New York city employed “ for the work of investigating circumstances and conditions of persons on Home Relief upwards of one thousand (1,000) persons as investigators, visitors and /or social investigators.” None of these persons, or indeed any other persons of the thousands employed by the bureau, have taken a civil service examination or have been appointed from eligible lists. The petitioners have successfully passed an examination for the position of social investigator and their names were placed upon an eligible list in December, 1932. In 1936, while the list was still in force, they instituted a mandamus proceeding to compel, among other things, the Emergency Relief Bureau to employ only such persons hereafter as shall be selected pursuant to the Civil Service Law and Rules ” and forthwith to desist from and discontinue the employment of the persons as hereinbefore set forth unless and until they shall have been duly appointed pursuant to the Civil Service Law and Rules.” The Appellate Division has held that a peremptory order should be issued. The question presented upon this appeal is whether in 1936 the Emergency Relief Bureau was authorized by the Legislature to employ persons, without competitive examination and without any other restriction imposed by the Civil Service Law.

It seems clear that the Legislature intended to confer such authority. Its power to do so is challenged. The Constitution requires that “ appointments and promotions in the civil service of the State, and of all the civil divisions thereof, including cities and villages, shall be made according to merit and fitness to be ascertained, so far as practicable, by examinations, which, so far as practicable, shall be competitive.” (Art. Y, § 6.) No person has the temerity to argue that it is not practicable to determine by competitive examination fitness for the position of social investigator, and indeed for most, if not all, of the other employments in the Emergency Relief Bureau. Even if that were not true, the Legislature could not by sweeping exemption determine that the constitutional test is impracticable for all positions thereafter to be created, even before these positions are enumerated or described and while they are without known or determinate duties.” (Matter of Ottinger v. Civil Service Comm., 240 N. Y. 435, 441.) Any attempt to do that would be patently futile. The Legislature was faced with a situation without precedent — one which perhaps the framers of the constitutional provision had not envisaged. New positions in the civil service are created ordinarily to meet needs which are more or less permanent, and appointments to such positions in most cases are made with some assurance of permanence of tenure. A sudden need for public relief had arisen. Nobody could be certain how long it would last. The Legislature planned an administration of relief which it hoped would be temporary. The duration of the administration was to last only a few months. The Legislature could not know in advance what positions should be created to cope with the new situation. A large proportion of the population of the State was in crying need. Starvation would not wait until the new administration had determined what positions should be created; till the Civil Service Commission had determined what competitive examinations would provide a test of merit and fitness for such positions; till a host of applicants, needy or otherwise, had been examined for the thousands of positions required in the city of New York, alone, for the administration of relief; and till appointments could be made from eligible lists prepared after such examinations. The constitutional provision serves a reasonable and very desirable purpose when applied to the “ civil service ” of the State as the term civil service ” is usually -understood; i. e., to regular and stable positions in the State service. The constitutional provision becomes unreasonable and destructive of good government if it precludes the Legislature from providing speedy and efficient remedy in emergency and immediate relief for urgent needs, through persons employed by the State temporarily without appointment to any position in the civil service.” The Legislature adopted the only course which was practicable in connection with a temporary relief administration which was intended to last for only nine months. It may be assumed that it knew that it could not create civil service positions and then create a sweeping exemption of such positions. It authorized employment without appointment to a position in the civil service of the State.

We have held in Matter of Social I. E. Assn. v. Taylor (268 N. Y. 233, 237) that the Legislature had power to do so. We there said of the constitutional provision: The command of that section is addressed to conventional and stable duties of the functionaries of civil government,” and we held that persons who receive work relief ” may be employed as “ social investigators ” without violation of the Constitution. The reason is that The positions in which they are said to be employed never actually existed.” In the instant case it appears that of the thousand persons employed, only about sixty per cent are on work relief, forty per cent are paid from appropriations made for that purpose. If employment as social investigator ” is a position with conventional and stable duties,” then the position falls within the scope of the constitutional provision and the Legislature could not remove it. If the employment does not fall within the scope of that provision, the Legislature might properly provide that it should not be subject to the Civil Service Law. No sound basis 'exists for any distinction between employment of persons on work relief and employment of other persons.

It may be argued, however, that even if the Legislature might authorize temporary emergency employment without appointment to a position in the civil service, it could not continue to do so indefinitely. The Legislature saw the force of the argument and has now enacted statutes which place the temporary Emergency Relief Administration upon a permanent basis and requires that appointments there shall be made in accordance with the Civil Service Law. Perhaps many may think that the Legislature should have acted earlier, but there is some room there for the exercise of legislative judgment in that regard, and we cannot say that the Legislature has exceeded its limits.

We sustained, in July, 1935, the practice authorized by the Legislature; though, it is true, with a warning that in time the practice might become illegal. By chapters 822 and 873 of the Laws of 1936, the Legislature at its next session provided for change in the status of the Relief Administration and employment thereunder. To provide for the appointment of thousands of persons to positions in the civil service after competitive examinations and at the same time to maintain efficiency of operation of temporary employment requires planning. Employment legally initiated does not in such circumstances become illegal through lapse of time alone. Orderly government requires that after decision has been made that the employment intended to be temporary has become a stable position, the temporary employment may lawfully be continued until there has been time for appointment to the stable position after determination by the proper authority as to the manner in which fitness for the position should be ascertained. After the Legislature has provided for orderly transition from a temporary status to a permanent status, the courts may not order that present employees be forthwith discharged and persons on eligible lists prepared for other positions with similar duties appointed.

The order of the Appellate Division should be reversed and the order of the Special Term should be affirmed.

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

Ordered accordingly.


source: Caselaw Access Project

author: Lehman, J. Rippey, J.

license: Public Domain

text:
    William Mills, an Infant, by Martha Mills, His Guardian ad Litem, Respondent, v. Jeanette Bluestein, Defendant, and Adolph A. Berle, Jr., as Chamberlain of The City of New York, Appellant.

      Argued May 18, 1937;
    decided July 13, 1937.

      Paul Windels, Corporation Counsel (William S. Gaud, Jr., and Paxton Blair of counsel), for appellant.
    The former Chamberlain was not guilty of a breach of trust in making the investment. (Nepola v. City of New York, 246 App. Div. 15; Chesterman v. Eyland, 81 N. Y. 398; Tompkins County v. Ingersoll, 81 App. Div. 344; 177 N. Y. 543; Donald v. City of New York, 248 App. Div. 860; Matter of Adriance, 145 Misc. Rep. 345; King v. Talbot, 40 N. Y. 76; Purdy v. Lynch, 145 N. Y. 462; Matter of Clark, 257 N. Y. 132; Matier of Flint, 240 App. Div. 217; 266 N. Y. 607.)

      Copal Mintz and Hyman Korn

    for Charles A. Buckley, amicus curiæ. The deposit order did not contemplate any independent investigation, but only an ordinary

      purchase, in due course, of a guaranteed mortgage certificate in the same manner as, and with no greater circumspection than, was being exercised by other investors. (Rector v. Title Guarantee & Trust Co., 246 App. Div. 251; 272 N. Y. 568; Matter of Flint, 240 App. Div. 217.) There is no satisfactory or adequate evidence that the property was worth less than fifty per cent more than the amount of the mortgage. (Matter of Turner, 156 Misc. Rep. 68; 246 App. Div. 741; Waydell v. Hutchinson, 146 App. Div. 448.)

      William Plean for respondent.
    Investments of trust funds are expressly limited by statute. (Nepola v. City of New York, 246 App. Div. 15; King v. Talbot, 40 N. Y. 76; McCabe v. Fowler, 84 N. Y. 314; Costello v. Costello, 209 N. Y. 252; Matter of Cady Estate, 211 App. Div. 373; Gould v. Gould, 126 Misc. Rep. 54; Matter of Randolph, 134 N. Y. Supp. 1117; 150 App. Div. 902; Villard v. Villard, 219 N. Y. 482.) When the investment was made, the premises were incumbered by arrears of taxes and an open tax lien, both of which constituted prior liens on the mortgaged property. Trust funds invested in property incumbered as these were at the time of the investment, did not constitute such investments in bonds and mortgages on unincumbered real property as authorized by statute. (Cons. Laws, ch. 13; Cons. Laws, ch. 41; Title Guarantee & Trust Co., 246 App. Div. 251; 272 N. Y. 568.) Trustees are bound by a strict duty to administer trust funds placed in their care. Delegation of a discretionary power with respect to the handling of the fund constitutes a breach of such trust for which the trustee is liable as a guarantor. (Matter of Clark, 257 N. Y. 135; Matter of Flint, 240 App. Div. 217; 266 N. Y. 607; Purdy v. Lynch, 145 N. Y. 462; Durant v. Crowley, 197 App. Div. 540; 234 N. Y. 581; O’Connor v. Waldo, 83 Hun, 489; Merk v. Behrens, 252 Pac. Rep. 91; Fidelity Deposit Co. v. Butler, 130 Ga. 225.) The duties of a trustee are outlined by strict rules of law. Mere reliance on the guaranty of an interested party is not only contrary to prudence and established rules of law, but imposes a liability on the trustee to make good any loss sustained by a beneficiary of a trust fund, where such reliance caused the loss, whether directly or indirectly. (Matter of Adriance, 145 Misc. Rep. 345; Matter of Frazer, 150 Misc. Rep. 43; Durant v. Crowley, 197 App. Div. 540; 234 N. Y. 581; Matter of Hurlbut, 210 App. Div. 456; Matter of McDowell, 102 Misc. Rep. 275; Matter of Turner, 156 Misc. Rep. 68; Matter of Grunhut, 154 Misc. Rep. 475; Matter of Allen, 142 Misc. Rep. 113; Matter of Dalsimer, 160 Misc. Rep. 906; Matter of Cummings, 193 App. Div. 596; Gilbert v. Kalb, 37 Atl. Rep. 423; Ingle v. Partridge, 34 Beav. 411.)
   Lehman, J.

In February, 1929, an order was entered in an action to recover damages for personal injuries in the Supreme Court of Kings county, which required the defendant in the action to deposit the sum of $1,000 “ with the City Chamberlain of the City of New York to the credit of the infant plaintiff William Mills there to remain on deposit until said infant shall have attained the age of twenty-one years, or until the further order of the Court in the premises, and said City Chamberlain is hereby further authorized and directed to invest the said money so deposited with him to the credit of said infant plaintiff, in a guaranteed mortgage or guaranteed mortgage certificate or other similar securities, the net income therefrom to be held for the account and benefit of said infant plaintiff.”

Pursuant to that order the City Chamberlain invested $980 of the amount so deposited in a guaranteed mortgage certificate. The certificate represented an undivided interest in a bond and mortgage for $72,500 on premises in Flushing, New York city. The certificate is issued by the State Title and Mortgage Company, a corporation subject to the supervision of the Insurance Department of the State of New York. The certificate among other things provides: “The Company guarantees the payment of said principal and interest,” and in capital letters states that: “AT THE DATE HEREOF, THE SHARE IN THIS BOND AND MORTGAGE CONSTITUTES A LEGAL INVESTMENT FOR TRUST FUNDS UNDER THE LAWS OF THE STATE OF NEW YORK.” A mortgage certificate is in fact a legal investment for trust funds under the laws of the State of New York only where the bond and mortgage is “on unincumbered real property in this state worth fifty per centum more than the amount loaned thereon.” (Decedent Estate Law [Cons. Laws, ch. 13], § 111.) The City Chamberlain made no independent investigation to determine whether the mortgaged premises were unencumbered and worth fifty per cent more than the amount loaned. He relied upon the guaranty of the company and its assurance that the certificate constituted a legal investment for trust funds.

In 1935, when the infant plaintiff in the action for damages, to whose credit the moneys had been deposited with the City Chamberlain, attained the age of twenty-one years, demand was made at the City Chamberlain’s office for payment of the moneys deposited. The guaranteed mortgage certificate on which the infant’s money was invested was past due. The Superintendent of Insurance, under order of the court, is liquidating the business of the guarantor. An offer to deliver the mortgage investment to the plaintiff in the action for damages was refused by the plaintiff. Upon his petition, the City Chamberlain has been directed to pay to the petitioner in cash the money deposited to his credit less the legal fees and disbursements of the Chamberlain.

Moneys paid into court are subject to the direction of the court. “ Each court may direct that money paid into that court in any action or proceeding brought therein * * * may, after having been deposited with the county treasurer or city chamberlain, be paid out transferred, invested or reinvested in any manner or form that appears to it best for the interests of the owners thereof.” (Civ. Prac. Act, § 136.) Such directions have, in this case, been embodied in an order of the court as provided in that section. An investment of such money made thereafter, not in accordance with these directions, would be unauthorized and illegal; and the owner of the money would be entitled to disavow the illegal investment and to insist upon payment to him of the moneys paid into court for his benefit. (Matter of Schmidt v. Chamberlain of City of New York, 266 N. Y. 225.) In the instant case there has been no violation of the letter of the order of the court. The direction of the court to invest in a guaranteed mortgage or guaranteed mortgage certificate or other similar securities ” placed upon the City Chamberlain the duty to invest the money deposited in court with him and confined his choice of investment to the class of securities specified in the order. Some scope for choice within that class was, however, left, even though the choice was thus restricted, and the order does not sanction any dereliction of duty imposed by law in making such choice.

As custodian of the moneys paid into court, the City Chamberlain is, at all times, under a duty to exercise, at least the same care and prudence which a reasonably careful man would exercise in the management of his own affairs. That is the test which must be applied when any act done by him is challenged and he is charged with dereliction of duty. His responsibility, is, it has been said, similar to that of a trustee to whom the custody and investment of trust funds have been confided. (Chesterman v. Eyland, 81 N. Y. 398; County of Tompkins v. Ingersoll, 81 App. Div. 344; affd., 172 N. Y. 543.) In this case the petitioner charges that the City Chamberlain acted negligently and wrongfully in accepting without independent examination the assurance of the guarantor that, on February 25, 1929, the date when the investment was made, the bond and mortgage was a legal investment for trust funds. A search of the title of the mortgaged premises would have disclosed that on that date the second half of the taxes for 1928 were unpaid and that the premises were encumbered by an outstanding tax lien for $614.72. These taxes were paid and the tax lien was canceled before the end of 1929. The value of the premises was, it is not disputed, at least $94,000, and the courts below have held that the temporary incumbrance upon the mortgaged premises was relatively too unimportant to render the investment improper. The courts below have, however, also found that the bond and mortgage was not a legal investment because on that date the mortgaged property was worth only $94,200, which is less than “ fifty per centum more than the amount loaned thereon.” Based upon that finding the courts below have concluded that the plaintiff is entitled to disavow the investment and to demand payment of the moneys belonging to him.

We assume that the mortgaged property was in fact worth only $94,200 and that a competent appraiser would not have valued it at fifty per centum more than the amount loaned thereon, or $109,000. Even then, the question remains whether the Chamberlain was under any duty to mahe an independent search of title or an independent appraisal of value. Even a trustee is not to be charged with moneys invested by him in good faith in securities which do not fully meet the standard prescribed by the statute for investment of trust funds where failure to discover the defect is not due to negligence or other fault of the trustee.

It is said that here the custodian in acting upon the assurance of .the guarantor exercised no care himself. A trustee or a custodian with duties analogous to a trustee may not delegate to another an exercise of discretion which is part of his own duty; but reliance upon the assurance of the guarantor was not a disregard or delegation of duty by the Chamberlain. The City Chamberlain could hardly be expected to search the title or appraise the value of every parcel of real estate subject to a mortgage in which court funds are invested. To do so in person would be a physical impossibility and he has no staff of deputies who can do so in his place. All that can be required of him is to make such investigation and to obtain such information as would under the circumstances seem sufficient to a reasonably prudent investor. Since the City Chamberlain could not in person investigate the title or value of the mortgaged premises, action based upon a report or assurance of another is not a delegation of duties or powers. It is indeed the only way in which his powers could be intelligently exercised and reliance upon such assurance or report is not negligence if it comes from a source upon which reliance would be placed by a man of prudence.

The assurance here came from the guarantor. The company was subject to the supervision of the Insurance Department and to all the statutes, rules and regulations intended for the protection of those who relied upon the guaranty or assurance of such a corporation. The company was in good standing. It was permitted by the Department of Insurance to sell guaranteed certificates to investors with the representation that they were legal investment for trust funds. An investor might reasonably assume that such representation was made in good faith and after proper investigation. Indeed, the purpose of the representation was to induce investors to act upon it. Loss caused by error in valuation of the mortgaged premises would fall upon the guarantor under its guaranty.

In 1929, at a time when the solvency and stability of the guarantor was not challenged, the City Chamberlain was not negligent or derelict in duty in relying upon a representation made by the guarantor, with the sanction of the Insurance Department, for the purpose of inducing such reliance by trustees. It cannot be said that prudence then dictated that the representation or assurance should be fortified by a title search and appraisal from another source. The moneys of the petitioner were invested in the guaranteed mortgage certificate as authorized by the order of the court and the loss due to the undisclosed defect in the investment and the insolvency of the guarantor must be borne by the petitioner for whose benefit the investment was made.

Since we find that there is no evidence of negligence or wrong by the City Chamberlain who made the investment, we do not consider the question of whether the order appealed from would have been a proper remedy if there had been such wrong.

The orders should be reversed and the application dismissed, without costs. The question certified should be answered in the negative.

Rippey, J.

(dissenting). I cannot agree with the result about to be announced in this case. As Judge Lehman points out, the fact that the order of the court limited the City Chamberlain to an investment in a “ guaranteed mortgage or guaranteed mortgage certificate or other similar securities ” did not relieve him from liability for any dereliction of duty imposed by law in making such choice.” In any ordinary case, to comply with the duty imposed on him by law, the least that he could have done was to exercise kuch care and prudence which a reasonably prudent man would exercise in the management of his own affairs ” under the same or similar circumstances. It is hard to conceive of a reasonably prudent man in the management of his own affairs blindly accepting the representation of a seller of securities as to their character and quality without inquiry or investigation of any kind. Much less could a man so act where he is responsible for the investment of other people’s money and expect to be relieved from liability for loss in the event that the statement relied upon should prove to be false.

In this case, I think the measure of care required was higher than has been stated. The circumstance was present that the money invested was that of an infant, the protection of whose interests has always been the subject of special care and solicitude. The court order as to the kind of investment to be made did not compel the Chamberlain to make the particular investment at all hazards. It was only permissive and could be used as a shield against attack for loss only in the event that the Chamberlain should be satisfied that the permissive investment was proper after he had exercised the care required of him. Concededly, he made no investigation whatever of the character and quality of the investment. Inquiry or investigation might have indicated to one exercising ordinary prudence that securities other than a guaranteed mortgage certificate ” but of a similar character would have indicated greater safety. Inquiry or investigation might have indicated that some other kind of investment would be preferable, and to the end that an investment offering greater safety might be made the court order would doubtless have been modified to meet the Chamberlain’s recommendations. The Chamberlain may not have been required to make an independent search or appraisal of the underlying security. He could at least have required the seller to exhibit whatever evidences of title and value he had. Furthermore, the intention of the Legislature “ to hold officials and the municipality to strict responsibility for funds, intrusted to their custody, of infants and other wards of the court ” is clear. (Banks v. Jacoby & Sons, Inc., 246 App. Div. 841.) It has established the rule of strict responsibility (Laws of 1927, ch. 185), and so have the courts. (See opinion below, 250 App. Div. 440, for collection of authorities.)

I know of no rule heretofore established in any jurisdiction which absolves a fiduciary from liability for loss where, as in this case, he makes an investment of funds intrusted to his care without personally exercising the slightest diligence to determine its character, quality and safety.

I think the decision of the lower courts was correct and that the order appealed from should be affirmed, with costs.

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

Orders reversed, etc.


author: Lehman, J.

text:
    Wilbur D. Dunkel et al., Respondents, v. Homindustries, Inc., et al., Appellants.

      Argued May 26, 1937;
    decided July 13, 1937.

      Arthur L. Meyham for appellants.
    At the time of the foreclosure of the mortgage, the three children had absolute fee in the premises involved. (Matter of Watson, 262 N. Y. 284; Matter of Chalmers, 264 N. Y. 239; Erwin v. Waterbury, 186 App. Div. 569; 231 N. Y. 592; Tillman v. Ogren, 227 N. Y. 495.) At the time of the foreclosure of the mortgage, the grandchildren had no interest in the property and were not necessary parties thereto. (Erwin v. Waterbury, 186 App. Div. 569; 231 N. Y. 592; Lawrence v. Calam, 236 N. Y. 168; Bacon v. Sayre, 84 Misc. Rep. 462; 164 App. Div. 909; 218 N. Y. 725.) The deed in the foreclosure conveyed the complete title in the mortgaged premises to the purchaser under whom the defendant’s claim. (People’s Trust Co. v. Tonkonogy, 144 App. Div. 333; Continental Ins. Co. v. Reeve, 135 App. Div. 737; Hope v. Shevill, 137 App. Div. 86; 204 N. Y. 563.)

      Edward I. Cristy and Raymond Bentley for respondents.
    The failure to make the issue of the children parties to the foreclosure action makes the title unmarketable. (Hess v. Hess, 233 N. Y. 164; Wanser v. Be Nyse, 188 N. Y. 378; Alkus v. Goettmann, 60 Hun, 470; Moot v. Business Men’s Investment Assn., 157 N. Y. 201; Fleming v. Burnham, 100 N. Y. 1; Matter of Ithaca Trust Co., 220 N. Y. 437; Callahan v. Volke, 220 App. Div. 379; Halliman v. Skillen, 227 App. Div. 125; 253 N. Y. 550; Matter of N. Y., L. & W. Ry. Co., 105 N. Y. 89; Vanderzee
      v. Slingerland, 103 N. Y. 47; Brown v. Gardner, 233 N. Y. 261; Lawrence v. Calam, 236 N. Y. 168.) If the will should be construed to give testator’s children an absolute power of disposition, the referee’s deed did not have the effect of an assignment or exercise of that power so as to convey a fee simple to the grantee. (Crooke v. County of Kings, 97 N. Y. 421; Frear v. Pugsley, 9 Misc. Rep. 316; Matter of Davies, 242 N. Y. 196; Matter of Sonnenburg, 133 Misc. Rep. 42; Farmers’ Loan & Trust Co. v. Mortimer, 219 N. Y. 290.) The easements, on their face, make the title unmarketable and they are not shown to be “ necessary.” (Javierre v. Central Altagracia, 217 U. S. 502.)
   Lehman, J.

The plaintiffs in June, 1935, entered into a contract with the defendant Homindustries, .Inc., whereby they agreed to purchase a lot of land with a house to be erected thereon in accordance with plans and specifications approved by the purchasers at the time of the execution of the contract. The plaintiffs paid $2,000 on account of the purchase price at the time of the execution of the contract and $3,000 thereafter. The seller constructed the house and in January, 1936, notified the plaintiffs that the house was ready for occupancy and demanded that the plaintiff accept a deed for the premises and pay the unpaid balance of the purchase price. The plaintiffs have refused to accept a deed on the ground that the title of the seller to the premises is not marketable. Then the plaintiffs began this action, asking that it be adjudged that the plaintiffs have a lien upon said premises, or the defendants’ interest therein ” for the sums paid upon the contract and for the expenses incurred in searching the title.

The real property which Homindustries, Inc., agreed to sell is a lot in what is known as the McParlan Farm Subdivision.” The McParlan farm was mortgaged in 1911 by its owner, Alexander McParlan and his wife Jemima, to East Side Savings Bank of Rochester. In 1934 East Side Savings Bank commenced an action to foreclose its mortgage. Alexander McParlan had died in 1919, leaving a last will and testament. His wife Jemima died in 1928. The children, who were named as legatees and devisees in the will of Alexander McParlan, were made parties to the foreclosure action. The title of the defendant Homindustries, Inc., is derived from the referee’s deed upon the sale made under the judgment of foreclosure and sale in that action. It subdivided the land it purchased into lots and is engaged in the business of selling the lots with houses erected thereon. The plaintiffs’ rejection of the deed of the lot which the defendant agreed to sell to them is based upon two alleged defects in the defendant’s title. They claim, first, that under the will of Alexander McParlan the issue of his children received a contingent expectant interest in his estate and were necessary parties to the foreclosure proceedings; and, second, that the defendant Homindustries, Inc., had granted certain easements for sewer and water pipes, which constitute incumbrances upon the lot it agreed to sell, and which do not fall within the scope of a reservation of a right to grant “ necessary easements,” which is contained in the contract of sale.

After the defendant interposed an answer the plaintiffs moved for summary judgment. The justice at Special Term denied the motion. He held that under the will of Alexander McParlan the issue of his children received no interest and were not necessary parties to the foreclosure proceedings and that the question of whether the easements granted for sewer and water pipes are necessary easements ” within the meaning of the contract, is one of fact. The Appellate Division affirmed the order denying the motion for summary judgment, stating that in affirming this judgment we are not called upon to determine what the construction of this will should be further than to say that we find questions of fact under both claims, that respecting the easements and that respecting the construction of the will.” Thereafter the parties stipulated that the allegations contained in specified paragraphs of the complaint are true and that neither of the parties has “ any evidence to offer of any further facts bearing upon the question whether the issue of the children of Alexander A. McParlan in being at" the time of the commencement of said foreclosure action by East Side Savings Bank of Rochester were necessary parties to said action.” Both parties asked that a reargument of the appeal be granted and that the court should decide “ upon the facts as hereinbefore stipulated, whether or not the defendant’s title to the premises directed to be sold to the plaintiffs is unmarketable because of the omission of such issue of the children of Alexander A. McParlan, deceased, as parties to said foreclosure action; and in case this Court shall decide, upon the facts as so stipulated, that such title is unmarketable because of such omission, then that said order be reversed and the plaintiffs’ motion be granted; and in case this Court shall decide, upon the facts as so stipulated, that said title is not unmarketable because of such omission, then that said order be affirmed.”

The motion for a reargument was granted. The question presented required a construction of the will of Alexander A. McParlan, the mortgagor. The issue of the children of the testator were necessary parties to the foreclosure action if under his will they received an interest or future estate in the testator’s real property, or at least an interest or estate which could not be divested by a decree against their ancestors.

The McParlan farm was part of the residuary estate of the testator. In the paragraphs of the will which might affect title to the residuary estate the testator provided:

Second. I nominate, constitute and appoint my wife Jemima A. and my son Frank I., the executors of this my last will and testament. *******
Twelfth. All the rest, residue and remainder of my estate real and personal, I give, devise and bequeath to my wife and children, my said wife and each of my children to have an equal share thereof.
“ Thirteenth. If my said wife should die without having conveyed, or by Last Will disposed of her share of my estate, then her said share shall go to my children, share and share alike.
“Fourteenth. If any of my children should die without having conveyed or by Will disposed of his or her or their share or shares of my estate in a good and legal manner and without leaving lawful issue, then the share or shares of such child or children so dying shall go to my said wife and surviving child or children, to have an equal share thereof.
Fifteenth. I hereby authorize and empower my executors to sell and convey any or all my real estate or to lease or mortgage the same as to them may seem necessary or proper.
“ Sixteenth. If any of my children die leaving lawful issue, such issue shall take the place and stand in the stead of such of my children so dying.”

The testator’s widow and three children survived him. His widow died thereafter. Her will was probated in 1928. By her will she devised all her property to the three children. They are still living and were parties to the foreclosure action.

Under paragraph twelfth of the will the testator’s widow and three children received estates in fee in undivided shares in the estate. These estates in fee were, however, not in absolute fee but in base or conditional fee which might be determined by the happening of the events specified in paragraphs thirteenth and fourteenth of the will. Those to whom the property would pass upon the happening of those events received an expectant estate. Under the terms of the will, one who is seized of a determinable fee may convey his estate, but the grantee will ordinarily take it subject to the same conditions or imperfections which adhered to it originally. (Grout v. Townsend, 2 Den. 336.) That is not true here, where one of the conditions attached to the fee was that the original holder should die without having conveyed the fee and without leaving a will.

The widow died without having conveyed her share of the estate. She did leave a will and devised her property to the three children. Thus her share passed to them free from any condition under her will, and, even if no will had been made, it would have passed to them because the expectant estate which was granted to them under the will would in that event have become a present absolute estate. At the time of the foreclosure proceedings the shares devised to the three children were still held in conditional fee. There was still possibility that any of them might die without “ having conveyed or by will disposed of his or her or their share or shares of my estate in a good and legal manner and without leaving lawful issue.” A conveyance upon a sale in an action to foreclose a mortgage is as valid as if it was executed by the mortgagor and mortgagee, and, * * * is an entire bar against each of them and against each party to the action * * *.” (Civ. Prac. Act, § 1085.) Since the three children were parties to the action the estate of each of them has now undoubtedly passed to the defendant Homindustries, Inc. The question remains whether it may also be said without doubt that the expectant estates of those who by gift over might be entitled to take upon the happening of the contingency specified in the will, have passed to Homindustries, Inc., or have been terminated by the foreclosure proceedings. The title derived from the sale in the foreclosure proceedings is not marketable, if there is any room for reasonable doubt here. The Appellate Division has held that such doubt exists. We find no basis for it.

Argument has been made that, since under the will each child may by voluntary conveyance confer an indefeasible title to a share in the farm, the conveyance in invitum made in the foreclosure action, to which all the children were parties, should, under section 1085 of the Civil Practice Act, be given the same effect, and that by such conveyance the purchaser at the sale acquired indefeasible title to all such shares, including any contingent and expectant interest therein, which, under the will, the issue of the children might have received. We recognize that there may be force in the argument. We do not decide whether it is unanswerable, for no resort need be had to it. The issue of the children received no such expectant interest. We find that each of the three children of the testator received under the will not only a present estate in base or conditional fee in a share of the estate, but also future expectant estates in each other’s share, and that the present and expectant estates granted to all the children comprised every estate or interest in the mortgaged land • — • present or future, conditional or unconditional. Under the terms of the condition by which the estate of a child may terminate, the gift over to the surviving children immediately takes effect upon such termination. There is in paragraph fourteenth no gift over to the issue of a child who does not survive. Such issue receive no interest in the testator’s property under that paragraph.

We are told, however, that paragraph sixteenth might be construed as providing for a substitutionary gift over to such issue if any of my children die leaving lawful issue.” We do not find that this paragraph is open to such construction. It is a settled rule of construction that such words of contingency refer to a death in the lifetime of the testator, and this construction is uniformly adopted unless there is some language in the will indicative of a different intention on the part of the testator.” (Matter of New York, Lackawanna & Western Ry. Co., 105 N. Y. 89, 92; Vanderzee v. Slingerland, 103 N. Y. 47.) The rule may yield to slight evidence found in the terms of the will that the testator meant death without issue occurring at any time either before or after his own decease. (Brown v. Gardner, 233 N. Y. 261.) We do not find even slight evidence ” in the will we are now construing. On the contrary, even without resort to any artificial rule of construction, we find the language of the will evidences clearly an intention that the share devised to a child who died leaving issue before the testator, should go to such issue; but no intention that any estate or interest, present or expectant, devised to a child should be divested or cut down by the death thereafter of such child leaving issue. It follows that the issue of children now living take no interest under the will and were not necessary parties to the foreclosure action. The deed at the sale under the judgment of foreclosure conveyed a complete and indefeasible title to the premises sold, which is not subject to any reasonable doubt.

After the Appellate Division had upon the first reargument of the appeal decided that the title was subject to reasonable doubt and, therefore, not marketable, the defendant attempted to cure the alleged defects. Upon a second reargument, granted at the request of both parties, the court held that the doubt was not entirely removed. The question raised upon the second reargument becomes academic under our decision that the title obtained at the foreclosure sale was marketable. There remains only the question whether the holder of that title thereafter incumbered, by grant of easements, the lot which it agreed to convey to' the plaintiffs in manner which made it impossible to transfer title in accordance with its contract. In the contract of sale the defendant received the right to grant “ necessary easements.” The courts below have held that a question of fact is presented as to whether the easements granted are necessary ” easements. Certainly it cannot be said as matter of law that the easements are not necessary.”

The judgment of the Appellate Division should be reversed and the order of the Special Term affirmed, without costs.

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

Judgment accordingly.


text:
    In the Matter of the Estate of Martin J. Cregan, Deceased. Sarah V. Cregan et al., as Executors of Martin J. Cregan, Deceased, et al., Appellants; State Tax Commission, Respondent.

      Argued May 19, 1937;
    decided July 13, 1937.

      Simon M. Platt for appellants.
    The Surrogate correctly allowed an exemption to each of the six children of the decedent. (Cons. Laws, ch. 60, §§ 249-q, 249-v). The bequests to the children became vested at the time of testator’s death. (Matter of Crane, 164 N. Y. 71; Matter of Leonard, 143 Misc. Rep. 172.) Any doubt must be resolved in favor of the taxpayer. (Lucas v. Mercantile Trust Co., 43 Fed. Rep. [2d] 39; Matter of Dunn, 118 Misc. Rep. 426.)

      Seth T. Cole for respondent.
    Exemptions under section 249-q of the Tax Law (Cons. Laws, ch. 60) are allowable only when it is certain that the persons specified therein will receive property from the estate of a decedent, and cannot be permitted where transfers to such persons are contingent. (Matter of Chollet, 148 Misc. Rep. 782; Matter of French, 148 Misc. Rep. 313; Matter of Weiden, 263 N. Y. 107; Matter of Lande, 241 App. Div. 138; Humes v. United States, 276 U. S. 487; Farrington v. Commissioner of Internal Revenue, 30 Fed. Rep. [2d] 915; Matter of Smith, 246 App. Div. 99; Matter of Smith, 147 Misc. Rep. 73; Matter of Mead, 145 Misc. Rep. 893; Matter of Leichtman, 147 Misc. Rep. 589.)
   Lehman, J.

In his last will and testament, probated in Bronx county where the testator resided, Martin J. Cregan provided that after payment of minor bequests, the residue of his property should be held in trust for the following uses and purposes:

“ Ninth: To pay the income thereof to my beloved wife, Cecelia Elizabeth Cregan during her life.
Tenth: At the time of the death of my beloved wife, Cecelia Elizabeth Cregan, I will and direct that my executors and trustees shall pay over to my beloved children hereinafter named, the fractional part of my residuary estate as hereinafter mentioned.
(a) To my beloved daughter, Sarah V. Cregan one-fourth (1/4) of the'said residuary estate.
(b) To my beloved son, John Cregan, one-sixth (1/6) of the residuary estate.
(c) To my beloved son, Martin C. Cregan, five-twenty-fourths (5/24) of the said residuary estate.
(d) To my beloved daughter, Cecelia Hart, one-eighth (1/8) of the said residuary estate.
(e) To my beloved son, Lester W. Cregan, one-eighth (1/8) of the said residuary estate.
“ (f) To my beloved son, Cornelius F. Cregan, one-eighth (1/8) of the said residuary estate.
“ Eleventh: If any of the beneficiaries, who take out of my residuary estate, shall die before my beloved wife, Cecelia Elizabeth Cregan, then in that event I will and direct that the proportionate part that the said beneficiary would have taken shall be divided equally among my remaining beloved children living at the time the said residuary estate is divided as provided in paragraph tenth of my will herein.”

The Tax Law (Cons. Laws, ch. 60) imposes a tax “ upon the transfer of the net estate of every person * * * who, at the time of death was a resident of this state, but net estates which, after deducting the applicable exemptions under section two hundred forty-nine-q of this article, do not exceed two thousand dollars shall not be taxable.” (§ 249-n.) Sections 249-r and 249-s define respectively the gross estate ” and the net estate ” of a decedent and the manner in which each shall be determined. In this case the value of the gross ” estate of the decedent has been fixed at $31,881.52 and the value of the net estate fixed at $26,878.25. The correctness of the value of the net estate so fixed is not challenged upon this appeal. The dispute between the executors of the estate and the State Tax Commission concerns the amount of the applicable exemptions under section 249-q ” which must be deducted from the net estate before the tax is fixed.

That section provides: “ The tax * * * imposed by section two hundred and forty-nine-n * * * shall not be payable with respect to (a) The amount of the net estate not exceeding twenty thousand dollars transferred to a husband or wife; (b) The amount of the net estate, not exceeding five thousand dollars in each instance, transferred to a lineal ancestor or descendant * * *.” The amount of the net estate transferred to the decedent’s wife has been fixed at $7,717.19 and an exemption of that amount has been allowed under subdivision a. The question to be determined upon this appeal concerns the amount of the net estate transferred to each of the decedent’s children for which an exemption must be allowed under subdivision b.

Article 10-C of the Tax Law (Laws of 1930, ch. 710), of which the sections above quoted are a part, substitutes an estate tax similar to the Federal estate tax for the inheritance tax imposed by the earlier statute. It was enacted upon the recommendation of the Commission to Investigate Defects in the Law of Estates. In its report (p. 195) the Commission stated that the statute abolishes the present double system of taxation of estates in New York. The present transfer tax law is repealed and there will be one uniform system of taxation based upon an estate tax. The procedure has been made as similar as possible to that of the Federal Estate tax, with certain necessary changes.” (Legislative Document, 1930, No. 69.) Few cases which involve questions concerning the construction and effect of the provisions of the new statute have heretofore been presented to this court, but in Matter of Weiden (263 N. Y. 107) the court indicated that in determining the effect of provisions of the New York Tax Law, weight should be given- to the construction placed upon analogous provisions in the Federal statute for the purpose of maintaining the uniformity of administration of the Tax Law which the Legislature has sought to achieve.”

The tax is “ upon the transfer of the net estate ” of the decedent and is based upon the value of the estate transferred when the transfer takes place, i. e., the date of the decedent’s death. Every interest of the decedent in real or personal property is “ transferred ” within the contemplation of the statute upon his death and is included in the gross estate, and, subject to the deductions permitted and defined by the statute, becomes part of the “ net estate.” The tax comes into existence before and is independent of the receipt of the property by the legatee. It taxes, as Henson, Death Duties, puts it in a passage cited in 178 U. S. 49, not the interest to which some person succeeds on a death, but the interest which ceased by reason of the death.’ It levies a sum equal to a certain percentage of the value of the net estate, and provides the criteria by which the net estate shall be ascertained.” (Edwards v. Slocum, 264 U. S. 61, 62.)

“ Estates, as respects the time of their enjoyment, are divided into estates in possession, and estates in expectancy.” (Real Prop. Law [Cons. Laws, ch. 50], § 35.) The “ transfer of the net estate ” of a decedent upon which the tax is imposed may result in the creation of an estate in possession which is subject to “ determination, by lapse of time or otherwise,” and a future estate limited to commence in possession at a future day.” (Real Prop. Law, § 37.) Such future estate may be contingent because the person to whom or the event on which it is limited to take effect remains uncertain.” (Real Prop. Law, § 40.) Even if not contingent ” it may be subject to conditions which may defeat it. Thus, although the entire estate of a decedent is transferred upon his death, until some future time thereafter it may be impossible to determine whether an estate in expectancy in the defendant’s property- will ripen into an estate in possession, or, oh the other hand, how long an immediate estate in possession will continue. Such uncertainties necessarily affect the value of separate estates or interests in the property of the decedent to which some person succeeds upon [bis] death.” They do not affect the value of the decedent’s estate which ceased by reason of [his] death.”

The tax is, however, not levied upon the entire gross estate, which is transferred,” but, subject to specified exemption, upon the net estate ” ascertained by the criteria provided in the statute. For the purpose of the tax, the value of the net estate is determined by deducting from the value of the gross estate amounts defined in section 249-s of the Tax Law, including “ the amount of all bequests, legacies, devises, or transfers, to or for the use of * * * any corporation * * * organized and operated exclusively for religious, charitable, scientific, literary, patriotic, historical, bar association, or educational purposes * * *.” To fix the amount of the bequest, legacy, devise or transfer which may be deducted, the value of the estate which is transferred must be determined. Where such determination is impossible, there can be no deduction. So, too, there can be no exemption from the tax as provided in subdivisions a and b of section 249-q of the Tax Law until there has been a determination of the value of the estate transferred to one of the persons enumerated in that section. In such determination any contingency upon which the estate is made dependent becomes an important factor.

Where there is a bequest, devise or transfer of a future contingent estate or a future vested estate which may be defeated by a contingency, there is uncertainty not only as to when but as to whether the future estate will ripen into possession. Where there is a bequest, devise or transfer of a present estate in possession which is subject to determination by lapse of time or otherwise, the uncertainty concerns only the duration of the estate transferred. In the latter class of cases there is usually no difficulty in determining the value of the estate, at least, where from known data such as are embodied in accepted mortality tables, a reasonable estimate of value may be made. “ Like all values, as the word is used by the law, it depends largely on more or less certain prophecies of the future; and the value is no less real at that time if later the prophecy turns out false than when it comes out true.” (Ithaca Trust Co. v. United States, 279 U. S. 151, 155.) The problem may be more difficult where a deduction or exemption is claimed for value of a future estate when there is uncertainty not only as to when but also as to whether it will ripen into possession. There, too, it has been said that the deduction should be made when there is “ no uncertainty appreciably greater than the general uncertainty that attends human affairs.” (Ithaca Trust Co. v. United States, supra, p. 154.) On the other hand, where there is only a speculative possibility that the contingency will arise upon which a future expectant estate will ripen into an estate in possession and there are no known data from which the actual value of such an estate can be determined, no deduction should be made for a contingent gift of such an estate. (Humes v. United States, 276 U. S. 487.)

The provisions of the Federal statute, which the Supreme Court of the United States construed in these cases, are not identical in language, with the provisions of the Tax Law of this State which we are called upon to construe. They are, however, similar both in form and purpose and we do not in this opinion intend to depart from the rule laid down in either case. In Humes v. United States (supra) the court stated the question and answer as follows: Did Congress in providing for the determination of the net estate taxable, intend that a deduction should be made for a contingency, the actual value of which cannot be determined from any known data? Neither taxpayer, nor revenue officer — even if equipped with all the aid which the actuarial art can supply — could do more than guess at the value of this contingency. It is clear that Congress did not intend that a deduction should be made for a contingent gift of that character ” (p. 494). In the prevailing opinion of the Appellate Division in the instant case (249 App. Div. 200, 203) it is said: “ Exemptions under section 249-q of the Tax Law are allowable only when it is certain that the persons specified therein will receive property from the estate of a decedent, and cannot be permitted where transfers to such persons are dependent upon survival of the beneficiary although vested in the legal sense at testator’s death.” (Italics ours.) We are told that the Humes case supports such a rule, at least by analogy. We do not so construe that case. Deduction, it was there said, should be denied for contingent gifts of “ that character.” Assuming that the same test should be applied to exemptions under section 249-q, the problem still remains in each case whether the particular transfer for which exemption is sought are gifts of that character.” We hold that the bequests to the testator’s children are not such gifts but are gifts which are entitled to exemption from the tax.

We do not stress the distinction between the gift of a contingent remainder and the gift of a vested remainder which is subject to divestment upon the happening of a contingency. We base our decision primarily upon the nature and practical effect of the contingency. The testator left $26,000 to his wife and children. No others received any interest, contingent or otherwise, in the fund. If every remainder failed, the children would succeed to the property by virtue of the reversion retained by the testator. The wife’s life estate was valued in accordance with the appropriate mortality tables at approximately $7,000. Each child had a remainder interest in a share of the property dependent only upon survival of the mother. The value of a remainder which would be defeated only by the contingency that the child might die before the mother may of course be estimated upon the basis of mortality tables and involves no uncertainty appreciably greater than the general uncertainty that attends human affairs.” The value of property at a given time depends upon the relative intensity of the social desire for it at that time, expressed in the money that it would bring in the market ” (Ithaca Trust Co. v. United States, supra, p. 155), and if the chance of the happening of the contingency may be estimated from known data like mortality tables, it would appear that a determination of such value may be made with reasonable certainty. There lies, we think, the distinction between Humes v. United States and Ithaca Trust Co. v. United States, as pointed out by Mr. Justice Holmes in the latter case.

In the Humes case, as we have said, deduction was denied for transfer of a future estate dependent upon a remote and speculative chance. The conclusion of the court that Congress did not intend that a deduction should be made for a contingent gift of that character ” rests upon a sound foundation. The expectant estates for which exemption is asked in the instant case are not dependent upon a remote and speculative contingency but on the contrary depend upon a contingency which is probable and which can be appraised from known data. There is nothing in the statute or in the circumstances of this case that suggests that the Legislature did not intend that exemption should be allowed for a contingent gift of that character.”

It may not be easy to determine in every case upon which side of the line an asserted exemption or deduction falls. We do not attempt to lay down a rule which will cover every case. We decide only that under the statute exemption is allowed for the transfer of estates in expectancy as well as estates in possession; that the Legislature did not indicate any intention to confine the exemption to transfers of expectant estates which are not dependent upon any contingency; but that exemption must be allowed under the plain language of the statute for the “ value ” of any estate, whether in possession or expectant, when that “ value ” can be determined with reasonable certainty upon the basis of known data; and that the value of an expectant estate dependent only upon the contingency of survivorship can be so determined.

The order of the Appellate Division should be reversed and the decree of the Surrogate’s Court affirmed, with costs in the Appellate Division and in this court.

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

Ordered accordingly.


text:
    In the Matter of Title and Mortgage Guaranty Company of Sullivan County. Louis H. Pink, Superintendent of Insurance of the State of New York, Appellant; William G. Birmingham et al., as Trustees, Respondents.

      Argued May 17, 1937;
    decided July 13, 1937.

      Harry Rodwin, Irving H. Jurow and Jess H. Rosenberg for appellant.
    The Superintendent of Insurance, as liquidator of the mortgage company, is entitled to share pro rata with all holders of Series S-2 certificates in the proceeds of the bond and mortgage. The relationship between the certificate holder and the mortgage company is that of partial assignee and assignor of the bond and mortgage. (Matter of Lawyers Mortgage Co., 157 Misc. Rep. 813; 248 App. Div. 715; 272 N. Y. 554; Matter of The Westover, Inc., 82 Fed. Rep. [2d] 177; Matter of Bond & Mortgage Guarantee Co., 157 Misc. Rep. 240; Matter of Lawyers Title & Guaranty Co., 157 Misc. Rep. 516; Kline v. 275 Madison Ave. Corp., 149 Misc. Rep. 747; Matter of Nemerov, 149 Misc. Rep. 797; Matter of Bond & Mortgage Guarantee Co., 155 Misc. Rep. 128; Matter of Lawyers Mortgage Co., 154 Misc. Rep. 909; Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415.) The pro rata rule should govern in the absence of a contrary agreement. (Granger v. Crouch, 86 N. Y. 494; Mechanics’ Bank v. Bank of Niagara, 9 Wend. 410; Stafford v. Van Rensselaer, 9 Cow. 316; Kelly v. Middlesex Title Guarantee & Trust Co., 115 N. J. Eq. 592; 116 N. J. Eq. 574; Matter of Lawyers Mortgage Co., 272 N. Y. 554; Matter of New York Title & Mortgage Co., 272 N. Y. 556.) The certificate expressly provides for parity of the mortgage company’s retained share. (Matter of Lawyers Mortgage Co., 151 Misc. Rep. 744; 242 App. Div. 617; 265 N. Y. 508; Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415; Matter of Fidelity Union Title & Mortgage Guaranty Co., 118 N. J. Eq. 155; Matter of New York Title & Mortgage Co., 155 Misc. Rep. 651; 157 Misc. Rep. 271; Matter of Lawyers Mortgage Co., 157 Misc. Rep. 813.)

      Paul McDermott for respondents.
    The relationship existing between the Title and Mortgage Guaranty Company and the certificate holders was that of debtor and creditor. (Matter of People [Title & Mortgage Guaranty Co.], 264 N. Y. 69; Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415.) The Superintendent of Insurance, as liquidator, is not entitled to share pro rata with the certificate holders. (Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415; Koles v. Borough Park Co., 142 App. Div. 765; Woolsey v. Funke, 121 N. Y. 87; Matter of Lawyers Mortgage Co., 157 Misc. Rep. 813; 248 App. Div. 715; 272 N. Y. 554; Matter of

      Lawyers Mortgage Co., 151 Misc. Rep. 744; 242 App. Div. 617; 265 N. Y. 508; Gillet v. Bank of America, 160 N. Y. 549; Moran v. Standard Oil Co., 211 N. Y. 187.)

      Michael F. Dee, Morris Amchanitsky, Jesse Freidin, John J. Clarke and Maurice Finkelstein

    for Mortgage Commission of the State of New York, amicus curiæ. The existence of a default by the issuing guarantor mortgage company furnishes a sufficient equitable basis for granting priority in favor of certificate holders as partial assignees of the bond and mortgage over the assignor-mortgage company. (Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415; Matter of Lawyers Mortgage Co., 272 N. Y. 554; Matter of New York Title & Mortgage Co., 272 N. Y. 556; Louisville Title Co. v. Crab Orchard Bank Co., 249 Ky. 736.) There is nothing in the language of the certificate to disturb the application of the priority rule in favor of certificate holders. (Matter of Lawyers Mortgage Co., 272 N. Y. 554; Gillet v. Bank of America, 160 N. Y. 549; Matter of People [Bond, & Mortgage Guarantee Co.], 267 N. Y. 419.)

      Frank W. Chambers and Frederick J. Wilkens

    for Felix A. Muldoon et al., as trustees for Series N-20 mortgage investments of New York Title and Mortgage Company, amici curiæ. The guaranty company is not only a partial assignor of an undivided interest in a bond and mortgage. It is a guarantor and debtor of the certificate holders by a separate and independent obligation running to them. (Matter of Lawyers Mortgage Co., 157 Misc. Rep. 813; 248 App. Div. 715; 272 N. Y. 554.) It would be inequitable to permit the guaranty company to share with the certificate holders in the proceeds of the mortgage until they have been paid in accordance with the terms of the guaranty contained in the certificates. (Hanlon v. Union Bank, 247 N. Y. 389.)
   Lehman, J.

The Title and Mortgage Guaranty Company of Sullivan County issued and sold participation certificates, known as Series S-2, in a bond and mortgage for $5,000. The certificates issued by the company aggregated in amount the sum of $4,800. The company guaranteed to the holder of each certificate payment of the principal and interest due upon the certificates. It retained an unsold interest to the amount of $200 in the $5,000 bond and mortgage. In January, 1933, the Superintendent of Insurance took possession of the property of the mortgage company under an order directing him to rehabilitate the company. On April 13, 1933, in proceedings instituted for the purpose of reorganizing and readjusting the rights of the holders of the certificates in Series S-2, pursuant to the provisions of chapter 745 of the Laws of 1933, popularly known as the Schackno Act, trustees were appointed under a plan of reorganization. On the same day an order providing for the liquidation of the mortgage company was entered. The net proceeds collected by the trustees upon the bond and mortgage for $5,000 are insufficient to pay in full the holders of the certificates. The Superintendent of Insurance, as liquidator of the mortgage company, claimed, upon the judicial settlement of the accounts of the trustees, that it was entitled, as holder of the $200 interest which the mortgage company retained, to share in the distribution of the amount collected upon the bond and mortgage pro rata with the holders of the guaranteed certificates. Its claim has been denied. The courts below have held that the holders of the guaranteed certificates had a prior right to payment out of the proceeds of the mortgage.

An assignor of a part of a bond and mortgage or other assignable chose in action may, by the terms of the assignment, fix the rights and interests of the assignor and assignee. In Title Guarantee & Trust Co. v. Mortgage Commission (273 N. Y. 415) (decided after the Appellate Division handed down its opinion in the instant case) this court said: “We believe that in this State the courts are committed to the proposition that in the absence of an agreement or proven intent to the contrary, the existence of a trust relationship or proof of some equitable reason why priority should exist in favor of an assignee, the assignor of part of a mortgaged indebtedness who has not assumed a liability as guarantor is entitled to share pro rata with his assignee in the proceeds of insufficient security. Such rule we approve and find applicable to the facts as presented in the agreed statement upon which this .action is submitted ” (p. 428). In that case the certificates were not guaranteed by the assignor. There was no relation of debtor and creditor between assignor and assignee, and the language of the certificate did not indicate that the interest retained by the assignor should be subordinated in any manner to the interests assigned to the holders of certificates. In earlier cases, to which the court referred with approval in its opinion in Title Guarantee & Trust Co. v. Mortgage Commission (supra), we had held that in the absence of contractual provisions to the contrary, a corporation which has issued and guaranteed participation certificates in a bond and mortgage is not entitled, as owner of a retained portion of the bond and mortgage, for which no certificate had been issued, to share in insufficient proceeds of the securities, pro rata with the holders of the certificates which had been issued. (Matter of Lawyers Mortgage Co. [545 West End Ave.], 157 Misc. Rep. 813; affd., 248 App. Div. 715; affd., 272 N. Y. 554; Matter of New York Title & Mortgage Co., 272 N. Y. 556.)

The language of the certificates in those cases was similar, though not identical, with the language of the certificates in this case.' All the certificates contained clauses from which the intent might be inferred that the assignor of part of the mortgage debt, even though a guarantor, should share in the proceeds of the insufficient security for the debt on a parity with the assignees. Other clauses seemed, however, to indicate a contrary intent, and reading the certificate as a whole, the court held that its intent was that the assignor should not be entitled to share in the proceeds of the mortgage until the outstanding certificates guaranteed by it had been paid in full. The Superintendent of Insurance, in behalf of the creditors of the corporations which issued the certificates, has moved for a reargument of these cases (motions for reargument denied; see 275 N. Y. 532 and 531), but- seeks also to have this court draw a distinction between the language of the certificates in those cases and in the instant case.

Reconsideration has not altered our conclusion that what the court said in Title Guarantee & Trust Co. v. Mortgage Commission (supra) and what it decided in Matter of Lawyers Mortgage Co. (545 West End Ave.) (supra) and Matter of New York Title & Mortgage Co. (supra) is supported by the weight of authority in this and other jurisdictions and produces an equitable result in accordance with the intent of the parties. (Cf. Fidelity Trust Co. v. Orr, 154 Term. 538; McClure v. Century Estates, Inc., 96 Fla. 568; Lawson v. Warren, 34 Okla. 94; Louisville Title Co. v. Crab Orchard Banking Co., 249 Ky. 736; Parkhurst v. Watertown Steam Engine Co., 107 Ind. 594; Brewer v. Atkeison, 121 Ala. 410; Anderson v. Sharp, 44 Ohio St. 260; Preston v. Morsman, 75 Neb. 358; Matter of Fourth Nat. Bank, 123 Penn. St. 473.) In other cases where the courts have reached the conclusion that an assignor of part of a debt may share in insufficient proceeds of the debt even though the assignor had guaranteed payment of the part assigned, the courts usually found such intention either expressed in the assignment or implied by silence in circumstances which create special equities in iavoF'dFfhe guarantor. (Cf. Pugh v. Holt & Wheless, 27 Miss. 461; Dixon v. Clayville, 44 Md. 573.)

Though in some of the cases cited above, it appears from the opinion that the guarantor and assignor was insolvent when it asserted a claim to share with its assignee or assignees in the proceeds of a debt of which it still retained a part, yet in none of these cases did the court in its opinion indicate that solvency or insolvency might be a factor in its determination of the relative rights of assignor and assignees. However, in the recent case of Kelly v. Middlesex Title Guarantee & Trust Co. (115 N. J. Eq. 592; affd. [“ for the reasons stated in the opinion filed in the court below ”], 116 N. J. Eq. 574) an insolvent guarantor was accorded a right to share with its assignees in the distribution of insufficient proceeds of the debt, though it would not have been accorded the same right if solvent. The decision is placed upon the ground that, in the determination of the right of an assignor of part of a debt to share in the distribution of insufficient proceeds of the debt, avoidance of circuity of action is the logical basis for denying to an assignor, who has guaranteed payment or otherwise assumed the relation of creditor to the assignee, a right which would be accorded to an assignor who has not assumed such relation; and that the reason for such distinction fails where the assignor is insolvent. In such case, it is said, the denial of such right would give to the assignee a preference in payment of his debt over the other creditors which would be inequitable. The appellant leans heavily upon that decision.

If, in truth, avoidance of circuity of action is the logical basis of the rule that, in the absence of contractual provisions to the contrary, an assignor of a part of a debt, who is also a guarantor, may not share in the proceeds of the debt till the assignee has been paid, then insolvency of the guarantor might, we may assume, render the general rule inapplicable. In this State, at least, avoidance of circuity of action has, however, never been the basis of the rule. In this State the determination of the relative rights of an assignor and assignee of part of a cause of action to share in the distribution of its proceeds, depends, in each case, upon the intention of the parties, express or implied, actual or presumed. The decisive test in every case is the intention of the parties, either as actually expressed, or as derived from the natural equity of the situation.” (Granger v. Crouch, 86 N. Y. 494, 498.) In Title Guarantee & Trust Co. v. Mortgage Commission (supra, p. 426) the court indicated that it still uses the same test when it said: “ The difficulty, it seems to us, is not in stating the rule in the absence of special equities or expressed intent, but rather in determining what contractual provisions evidence an intent or the existence of special equities sufficient to warrant a determination that the vendee of part shall be entitled to preference over his vendor in the proceeds of a particular equity.” An analysis of the cases cited from other States would show that only in few opinions did a court advert to avoidance of circuity of action as a relevant factor in its determination.

Where it is the actual intent of the parties that an assignee should have priority over an assignor, who is also a guarantor, or where, in the absence of actual intent disclosed in the language of the assignment, a presumption of such intent is derived from special equities, insolvency of the guarantor cannot deprive the assignee of his right to such priority. Enforcement of contractual rights granted by the guarantor would in such case not give rise to an inequitable preference over other creditors of the guarantor. That is true in this case. The right of the certificate holder to preference in the distribution of the proceeds rests not only upon presumption of intent derived from the guaranty of the assignor, but also upon actual intent clearly implied in the clause of the certificate which provides that upon the collection of the proceeds of the mortgage by the assignor it shall have the right “ out of the proceeds of such collection to retain so much as may remain after paying to the holder hereof whatever may be due to such holder of principal and interest on this certificate as herein provided.”

We do not overlook the fact that in another clause of the certificate it is provided that “ the share assigned by this certificate shall be a coordinate lien with all other certificates of said mortgage now or hereafter issued and any share retained by the company.” (Italics are ours.) Standing alone, that clause might be read as an expression of intent that in the distribution of the proceeds of the mortgage the assignor and the assignee should share ratably. Read in its context, the clause may be given a narrower application and at most renders less clear the inference which would otherwise be inescapable that the parties intended that the certificate holders should be preferred over the mortgage company in the distribution of the proceeds of the mortgage. We are told that this conclusion is inconsistent with the decision of Matter of People (Lawyers Mortgage Co.) (151 Misc. Rep. 744; affd., 242 App. Div. 617). We denied leave to appeal in that case “ on the ground that the order is not final ” (265 N. Y. 508). Some difference, though slight, in the language of the certificate in that case may, perhaps, be sufficient to distinguish it from this case. We could not review the order made in that case, and we express no opinion now upon its correctness.

The order should be affirmed, with costs to respondents filing briefs, payable out of the fund.

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

Order affirmed, etc.