author: Crane, J.

text:
    Paul Blanshard, Respondent, v. The City of New York et al., Appellants.

      (Argued February 28, 1933;
    decided May 23, 1933.)

      Clarence J. Shearn, Sigourney B. Olney and George D. Yeomans for Brooklyn Bus Corporation, appellant.

      Arthur J. W. Hilly, Corporation Counsel (’William E. C. Mayer and J. Joseph Lilly of counsel), for City of New York et al., appellants.

      Louis Waldman for respondent.
   Crane, J.

The Appellate Division has certified four questions to this court, all of which relate to the sufficiency of the complaint. As we have said in other cases of this nature, the allegations pleaded are assumed to be true, whereas, upon a trial, the plaintiff’s proof may fall far short of establishing them as facts. The main point argued and briefed is the right of a taxpayer, under section 51 of the General Municipal Law (Cons. Laws, ch. 24), to maintain an action to restrain the use of the streets of the city of New York by the Brooklyn Bus Corporation, which is attempting to operate under a void or illegal franchise, granted by a resolution of the Board of Estimate and Apportionment of that city.

The Brooklyn Bus Corporation is a domestic corporation organized and existing under and by virtue of, the Transportation Corporations Law (Cons. Laws, ch. 63). No attack in this action is made upon its corporate franchise. It had no rights in the streets of the city of New York because of its incorporation. Before it could operate its proposed bus line it was necessary to obtain a permit or secondary franchise, pursuant to sections 74 and 1458 of the Greater New York Charter (Laws of 1901, ch. 466; Laws of 1913, ch. 769, as amd.; L. 1914, ch. 467; Local Law, 1925, No. 5). The complaint alleges that these provisions of the charter have not been complied with, and, if this be so, the action by the plaintiff is maintainable.

The Legislature of the State grants the corporate franchise. To dissolve the corporation or take away its corporate franchise, the action must be brought in the name of the People by the Attorney-General. This is separate and distinct from the property right which a railroad or a bus line may have to operate in the streets of a city. While these rights are called franchises ” or secondary franchises,” they are really rights, kept and maintained on certain conditions. (See the distinction in People v. O’Brien, 111 N. Y. 1; also Ghee v. Northern Union Gas Co., 158 N. Y. 510.)

Section 18 of article III of the Constitution provides that the Legislature cannot authorize any railroad to operate in a particular street of a city. The city must give its consent as well as the property owners. To this consent the city may annex such terms and conditions as it pleases. (Matter of Quinby v. Public Service Commission, 223 N. Y. 244; People ex rel. South Shore Traction Co.y. Willcox, 133 App. Div. 556; affd., 196 N. Y. 212.)

This consent is not such a franchise as calls for action by the People through the Attorney-General whenever it has been granted contrary to law.

We said in Beekman v. Third Avenue R. R. Co. (153 N. Y. 144, 152): “ The use or occupation of the streets for such purposes, without the grant or permission of the state through the legislature, constitutes a nuisance, which may be. restrained by individuals injuriously affected thereby. (Fanning v. Osborne, 102 N. Y. 441.) The city authorities have no power to grant the right except in so far as they may be authorized by the legislature, and then only in the manner and upon the conditions prescribed by the statute. (Davis v. Mayer, etc., 14 N. Y. 506; Milhau v. Sharp, 27 N. Y. 611; People v. Kerr, Id. 188.)

<( * *

“ The legislature, however, in virtue of its general power over municipalities, may regulate the mode and manner in which such consent shall be given by the authorities having the control of the street, and may prescribe the conditions upon which it may be given, and all these matters have been regulated by statute. (Laws 1892, chs. 306, 676; Laws 1893, ch. 434.) The questions certified to us by the court below call for a construction of this statute or certain important provisions thereof which affect the validity of the franchise granted to the defendant. In conferring the franchise upon the defendant to operate a railroad in the streets designated, the common council did not act in the exercise of any natural or inherent power pertaining to the city, but under delegated powers, to be used and exercised for public purposes, and, in order to vest the defendant with the right claimed, it must appear that there was a substantial compliance with the "provisions of the statute.”

Section 74 of the Greater New York Charter provides what the city of New York must do to give consent to the operation of a railroad or bus line in its streets. Nothing in the Constitution prevents the Legislature from adding these restrictions and limitations to the granting of consents. (Matter of Thirty-fourth Street R. R. Co., 102 N. Y. 343.) The city may impose others. Thus, section 74 is not challenged. What is challenged by the complaint is the action of the Board of Estimate in failing to comply with this law. Unless a consent be granted, in accordance with section 74, the railroad or bus line has no right in the street. It is a trespasser, and any person may bring action as a taxpayer to enjoin its operation. The same thing holds true when the consents of property owners have not been obtained. Suppose neither the city nor the property owners had consented, would there be no remedy except by action of the Attorney-General? The consent is alleged to be void; there is no consent unless section 74 of the charter has been complied with, and the complaint alleges facts showing that the requisites are lacking.

The Greater New York Charter, section 74, provides that before any grant of a franchise or right ” to use any street shall be made by the Board of Estimate and Apportionment the following things shall be done:

(1) A public hearing shall be held upon the petition therefor.

(2) The Board of Estimate and Apportionment shall make inquiry as to the money value of the franchise.

(3) The Board shall make inquiry as to the adequacy of the compensation proposed to be paid therefor.

(4) The Board shall embody the result of such inquiry in a form of contract.

(5) The Board shall hold a public hearing on the proposed contract after public notice.

The complaint alleges that the Board of Estimate and Apportionment of the city of New York on the 29th day of May, 1931, passed a resolution awarding a franchise to the defendant, the Brooklyn Bus Corporation, to operate twenty certain routes in the city, setting forth the form of the proposed contract and that thereafter on the 4th day of June, 1931, pursuant to said resolution, the Mayor of the city of New York signed such proposed contract.

The pleader then sets forth that the resolution and contract were illegal and void for failure, among other things, to comply with the requirements of section 74 of the charter. The following omissions are alleged:

(1) That the public hearings contemplated and required by law for such purposes were not held.”

(2) That the Board of Estimate and Apportionment failed to make any inquiry as to the money value of the franchise or rights proposed to be granted upon the petition of the Brooklyn Bus Corporation.

(3) That the Board of Estimate and Apportionment failed to make inquiry as to the adequacy of the compensation.

If it be true — and we must assume in discussing the sufficiency of a pleading that the allegations are true — if it be true that these formalities and requirements were not met by the Board of Estimate and Apportionment, then the alleged grant of the rights in the streets was void and illegal. The purpose of these charter provisions is apparent on their face. The city should procure the most advantageous return, all things considered, for the right to operate buses or railroads in its streets and protect the public against favoritism and unfair dealing. Notice must be given of hearings upon the petition. The proposed contract must be published and a further hearing afforded upon its merits. Until- these things have been done the action of the Board of Estimate and Apportionment, in granting a franchise, and the Mayor, in signing the contract, is of no effect. Upon a trial the facts may appear in an entirely different light, but, taking the complaint as our starting point, the plaintiff is entitled to be heard and afforded an opportunity to produce his proofs.

There is a great distinction between attacking the action of the Board of Estimate, the legislative body, for fraud and bad motives, and attacking it for lack of power. The first constitutes an attack upon its legislative action, which cannot be done for fraud or improper motives. This is the sole ruling in Kittinger v. Buffalo Traction Co. (160 N. Y. 377). This case held that the consent given by the common council of the city of Buffalo to the operation of a railroad over certain city streets could not be attacked on the ground of fraud or bad motives of the members of the council. Within their powers they acted as did the Legislature of the State. For this reason it was held that the complaint did not state a cause of action. This did not hold, however, that under section 1925 of the Code of Civil Procedure, or under the Taxpayers’ Act, chapter 531 of the Laws of 1881, an action might not have been maintained to restrain the operation of a railroad when no consent had been obtained.

Eliminating these allegations of motive from the complaint, we have the other allegations, that the consent was not given in accordance with section 74, and that the requirements of that section as to hearings and inquiry were not complied with.

The appellant insists that this action can only be maintained by the Attorney-General in behalf of the People of the State, but this court has held otherwise. (Village of Stillwater v. Hudson Valley Ry. Co., 255 N. Y. 144; Blaschko v. Wurster, 156 N. Y. 437.) (See, also, Norris v. Wurster, 23 App. Div. 124; Gusthal v. Strong, 23 App. Div. 315; and People ex rel. Metropolitan Street Ry. Co. v. Tax Commissioners, 174 N. Y. 417, pp. 435,436.)

The appellant makes much of City of New York v. Bryan (196 N. Y. 158, 166), and insists that this is an authority for its contention. A careful reading and analysis of this case show that it points just the other way. In the first place, the franchise in that case had been legally granted and no question was raised as to its validity. In the second place, a secondary franchise, or the right to build a tunnel under the streets, was so linked up with the primary franchise as to constitute part of its corporate existence or entity. The attack upon the franchise as having terminated was also an attack upon the existence of the corporation or the rights of its stockholders. The New York and Long Island Railroad Company was incorporated under the General Railroad Act of 1850 for the construction and operation of a railroad from Long Island City through a tunnel under the East river and under streets and lands in the city of New York to a connection with the New York Central and Hudson River railroad at Ninth avenue and Thirtieth street. The General Railroad Act prescribed that on the failure of the company to finish its road and put it in operation within ten years from the time of its filing articles of incorporation its corporate existence and powers would cease. The consent and permission of the municipal authorities, however, to construct the tunnel and railroad under the city streets contained no limit of time for completion, which meant that the work had to be completed within a reasonable time.

Upon a submitted controversy the Appellate Division was asked to decide that the privileges granted by the Board of Aldermen to the New York and Long Island railroad ceased and determined on January 1, 1907, with the life of the corporation. That court, in rendering judgment, held that the rights and privileges passed to the trustees, under section 30 of the General Corporation Law (Cons. Laws, ch. 23), and that the occupation.of the tunnels, tracks and' structures was lawful. This court, through Cullen, Ch. J., noted that the agreed statement of facts did not state the extent of the work done by the company and whether the work had been prosecuted with reasonable diligence, or whether the company at the time of its dissolution was still engaged in its prosecution. Whether the street franchises terminated with the corporate franchise was, therefore, the point in question, and the judge, in his opinion, states: The legislature,”- he said, had provided by the act under which the company was organized that unless it finished its road and put it in operation within ten years from the filing of its articles of incorporation, its corporate existence and powers shall cease.’ Though the franchise to maintain the railroad was not dependent on the existence of the corporation, the statute provides not only that the corporate existence shall cease, but the corporate powers also. * * * What possible benefit could accrue from the dissolution of the corporation for failure to exercise its franchises in time, if the franchise itself is to continue for the benefit of the stockholders, who might form a new corporation and to it transfer the franchise? ”

These are the questions bearing upon the rights of the corporation, its trustees and stockholders, and the city authorities, which, the court held, should not be determined without making the people a party to the action to determine the corporate rights. What is more germane to this litigation is the fact that the opinion did state that if the railroad trustees sought to enter upon the streets, or parts of the streets, in the city not already in their possession, the city authorities doubtless could resist such action, for the franchise of the company in respect thereto had ceased. This decision, therefore, does not justify the proposition that a trespass upon the streets of the city of New York by an unlicensed or unauthorized bus corporation cannot be restrained either by the city or a taxpayer, but that the action must be brought by the Attorney-General. Chief Judge Cullen, who wrote the opinion in the Bryan case, concurred in the decision of Norris v. Wurster (23 App. Div. 124), wherein it was held that the granting of a franchise to operate a street railroad in the city of New York for a longer term than twenty-five years being illegal, an injunction would issue in a taxpayer’s action to restrain the railroad from any further proceedings.

The order of the Appellate Division should be affirmed, with costs, and certified questions 1 and 2 answered in the affirmative, and 3 and 4 in the negative.

Pound, Ch. J., Lehman, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not voting.

Order affirmed, etc.


source: Caselaw Access Project

author: Kellogg, J.

license: Public Domain

text:
    White Plains Sash & Door Co., Inc., Respondent, v. John J. Doyle et al., Defendants; Reagan & Ottaviano, Inc., et al., Respondents, and Detroit Fidelity and Surety Company, Appellant.

      (Submitted April 13, 1933;
    decided May 23, 1933.)

      Herman Tocker and Arthur M. Post for appellant.

      Crescens Hubbard for plaintiff-respondent.

      Maurice Iserman and Edgar A. B. Spencer for defendants-respondents.
   Kellogg, J.

The plaintiff, White Plains Sash & Door Co., Inc., the defendant Reagan & Ottaviano, Inc., and the defendant Walter A. Phillips sold and delivered building materials to the defendants John and Mary Doyle for the improvement of real estate owned by them. All the materials so furnished were delivered upon the premises prior to June 5, 1929. During that month each of the persons who thus supplied materials duly filed notices of mecharic’s liens against the premises to protect their claims. On July 26, 1929, the defendant owners, as principals, and the defendant Detroit Fidelity 'and Surety Company, as surety, executed undertakings, in respect to each of the three liens, each undertaking being conditioned for the payment of any judgment which may be rendered against the property for the enforcement of the lien.” On the filing of these undertakings, the court, acting in compliance with the provisions of section 19 of the Lien Law (Cons. Laws, ch. 33), made appropriate orders discharging the three liens. Subsequently, on November 29, 1929, this action was brought to foreclose the plaintiff’s lien, and the two other lienors, who were made parties defendant, demanded that their liens likewise be foreclosed. On December 17, 1929, a notice of pendency of this action was filed. Two years elapsed before the action was tried. Meanwhile, no further act was performed by any of the lienors to continue their liens. It is claimed by the defendant, the surety company, that, through this neglect, the liens expired, and that it was relieved from the obligations assumed by its undertakings.

It is provided in section 17 of the Lien Law that no lien shall be a lien for a longer period than one year after the notice of lien has been filed.” One exception for which the section makes provision is that the general rule shall not apply if, within a year, “ an action is commenced to foreclose the hen, and a notice of the pendency of such action ” is filed. In this instance the plaintiff made literal compliance with the terms of the section. Nevertheless, says the appellant, the filing of the notice of lis pendens was not a true compliance, for the fifing of that notice was ineffective, since the section provides that where a fien is discharged by deposit or by order, a notice of pendency of action shah not be filed.” Another exception is provided for by the section. If “ an order be granted within one year from the filing of such notice [of hen] by a court of record or a judge or justice thereof, continuing such hen,” the hen may be redocketed and will continue for one year after the date of the granting of the order. The section also provides that the filing of a lis pendens in an action to foreclose, by either the plaintiff or the defendant, shall operate to continue ah hens sought to be foreclosed in the action.

The very end to be achieved by the filing of undertakings, conditioned upon the payment of the hens found to be outstanding, is to reheve the real estate from incumbrances, so that the same may freely be ahenated by the owner. The order, which follows the filing of each undertaking, is an order “ discharging the hen,” as provided by the very terms of the statute. Any action brought, whether before or after the filing of the undertaking, although a suit ostensibly to foreclose the hen, in reality is, or becomes, an action to test the validity of the hen, had it not been discharged, and, if found vahd, to procure a judgment upon the undertaking, rather than a judgment of foreclosure against the real estate. The bond, as we have seen, is given to discharge the lien. It is one of the proceedings provided for by the statute, and it was evidently intended that the bond should take the place of the property and become the subject of the lien in the same form and manner as is provided for in the case of the payment of money into court, or the deposit of securities under an order of the court after action brought.” (Morton v. Tucker, 145 N. Y. 244, 248, 249.) Of the deposit of money, under subdivision 4 of section 21 of the Lien Law, to discharge a lien, it has been said: “ In such case the sum deposited is a substitute for the fund to which the hen attached until the deposit was made. A valid hen on the primary fund must, therefore, be established to justify payment out of the deposit.” (Milliken Bros., Inc., v. City of New York, 201 N. Y. 65, 74.) It would seem anomalous that when a hen Upon real estate has been discharged, and a cause of action upon a bond substituted, it should thereafter be necessary to give notice of the discharged hen, by filing a lis pendens, or that an order continuing ” a discharged hen must be made, in order that an action upon the bond might be continued after the lapse of one year from the filing of the original lien. For this reason we should be inclined to hold that the provisions of section 17 did not apply to cases where undertakings had been given to discharge the liens. This we may not do, however, because section 17 expressly provides: “ The provisions of this section in regard to continuing liens shall apply to hens discharged by deposit or by order on the filing of an undertaking.” In respect to such liens, however, there is a manifest inconsistency in the section. A lien will be continued beyond one year if within that time an action is commenced to foreclose the hen, and a notice of the pendency -of such action ” be filed; yet where “ a lien is discharged by deposit or by order, a notice of pendency of action shall not be filed.” We think that since the Legislature conditioned the continuance of the hen upon the performance of two acts, one of which, by its express command, was forbidden to be done, necessarily continuance of the' hen must follow, if the one act permitted to be done is performed. Therefore, we hold that the bringing of the action to foreclose is sufficient in itself to continue the hen, so far as that may be necessary for the continued prosecution of the action against those signing the undertaking.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


author: Pound, Ch. J.

text:
    New York Title and Mortgage Company, Appellant, v. Polk Arms, Inc., Respondent, Impleaded with Others. Israel Freidus, Appellant, v. 198 West 134th Street Realty Co., Inc., et al., Respondents, Impleaded with Others.

      (Argued April 10, 1933;
    decided May 23, 1933.)

      John Vance Hewitt, Morris Woolf and J. Earle Williams for New York Title and Mortgage Company, appellant.

      Ralph E. Freidus for Israel Freidus, appellant.

      George W. Whiteside, Leonard P. Moore and Robert M. Bozeman for Chemical Bank and Trust Company, amicus curice.

      De Coursey Fates and John G. Boston for The Savings Bank Association et al., amici curies.

      Stephen S. Bernstein and Martin Lippman for Polk Arms, Inc., respondent.

      William Davis for 198 West 134th Street Realty Co., Inc., et al., respondents.
   Pound, Ch. J.

These cases are actions to foreclose mortgages on real property owned by corporations. They present the question as to the bearing of section 150 of the General Corporation Law (Cons. Laws, ch. 23) on the appointment of receivers in such actions pendente lite, of the rents and profits of the mortgaged premises. It has been held that orders appointing such receivers in these cases are improperly made if the plaintiff fails to show that the mortgage debt or interest thereon remained unpaid for at least thirty days after payment demanded, although the mortgage itself provides for the appointment of a receiver of rents and profits without notice or demand in the event of any default in the payment of principal or interest.

Section 150 of the General Corporation Law now reads as follows:

§ 150. Appointment of receivers of property of corporations. A receiver of the property of a corporation can be appointed only by the court, and in one of the following cases: * * *
2. An action brought for the foreclosure of a mortgage upon property of the corporation, where the mortgage debt or the interest thereon has remained unpaid for at least thirty days after payment demanded and where either the income of the property is specifically mortgaged or the property itself appears to be insufficient to pay the mortgage debt.”

It is followed by section 151, which provides as follows:

“ § 151. Application for appointment or removal of receiver. An application for the appointment or removal of a receiver of the property of a corporation shall be made at a special term of the supreme court in the judicial district in which the office of the corporation is located, except that such an application in an action brought by the attorney-general in behalf of the people shall be made in the judicial district in which the action is triable.”

Civil Practice Act, section 183, provides that actions to foreclose a mortgage upon real property must be tried in the county in which the real property or some part thereof is located.

The language of section 150 of the General Corporation Law is not clear. An inconsistency between the general purpose of the section and paragraph 2 thereof is obvious. Receivers of the property of a corporation are appointed pursuant to statute in actions for sequestration, in actions to annul a corporation and in other actions where violation of the law or insolvency is shown and judicial supervision of the corporation is required. Such receivers take title to all the corporate property for the benefit of all the creditors and stockholders. The appointment of a receiver of rents and profits is a not unusual incident of an action on mortgage foreclosure. The inconsistency of language may be due to a confusion of ideas. Section 150 of the General Corporation Law has to do in general with the appointment of a receiver of the general assets of an insolvent corporation named to secure equality of payment of claims due creditors by preventing priority through attachments and judgments. Such purpose is not germane to the appointment of a receiver of the rents and profits of the mortgaged property which are assigned by a mortgagor to the holder of the mortgage as additional security for the payment of the mortgage indebtedness.

The section has been made by the courts below to read that no receiver of the rents and profits of mortgaged property owned by a corporation can be appointed unless it appears (1) that the mortgage debt or interest thereon has been unpaid for thirty days after payment demanded and (2) that either (a) the income of the property is specifically mortgaged or (b) the property itself appears to be insufficient to pay the debt, although the mortgagor has otherwise agreed. (Manufacturers Trust Co. v. Roerich Museum, 236 App. Div. 76.)

Whatever possible construction may be placed on the statute, we think that it does not interfere with the power of the court to appoint a receiver of rents and profits in a mortgage foreclosure action as provided for in the mortgage. As Andrews, J., said in U. S. Trust Co. v. New York, W. S. & B. Ry. Co. (101 N. Y. 478, 483): The power of a Court of Chancery to appoint a receiver ;pendente lite, in foreclosure cases, is a part of its incidental jurisdiction, not depending upon any statute, and which, it exercises, whenever by reason of the insufficiency of the security, or other reason, equity requires that the rents and profits of the mortgaged property, pending the litigation, should be impounded and retained, to be applied upon the debt, to be ascertained by the final judgment. The receiver by virtue of his appointment, takes possession of the mortgaged property and receives the rents and profits as the officer of the court, but the title to the property is not changed, but remains in the mortgagor until a sale under the decree in the action. This jurisdiction is not affected by the character of the mortgagor, whether an individual or a corporation. It rests upon grounds quite independent of the character of the parties to the instrument, or the nature of the mortgaged property. But it was held at an early day in this State, that the jurisdiction of chancery did not extend to the sequestration of the property of a corporation by means of a receiver, or to the winding up of its affairs, or to control or restrain the usurpation of franchises by corporate bodies, or by persons claiming without right to exercise corporate powers.”

We have one kind of receiver of the property of the corporation appointed in insolvency and another kind in mortgage foreclosures who is a mere receiver of rents and profits, appointed by the court by or without the consent of parties. The former is appointed only as the court has been given jurisdiction over corporate bodies. ( U. S. Trust Co. v. New York, W. S. & B. Ry. Co., supra.) The latter is appointed without authority from statute. The provisions of section 150 of the General Corporation Law can logically be related only to the former type. We shall not imply an attempt on the part of the Legislature to affect the inherent power of the court over the appointment of the latter type when acting upon the consent of a corporation mortgagor.

While it might be questionable whether the distinction between corporations and natural persons is a substantial basis for the attempted discrimination, it is unnecessary to determine that question. The Legislature may classify litigation and adopt one type of procedure for one class and a different type for • another. (Dohany v. Rogers, 281 U. S. 362, 369.) It is at least doubtful whether it may put holders of corporate mortgage securities in one class and holders of individual mortgage securities in another so as to discriminate against the enforcement of contract rights by the former, without denying the equal protection of the laws. We rest our decision on the reasonable construction to be given to the loose and inconsistent language of the statute and on the inherent power of the court to appoint receivers pendente lite in all mortgage foreclosures and enforce the lawful contracts of parties in that regard.

By answering in the affirmative the question certified in the Polk Arms case, to wit: “ Upon the facts set forth in the moving papers was the plaintiff entitled to the appointment of a receiver pending the foreclosure action notwithstanding the provisions of section 150 of the General Corporation Law? ” we also dispose of all the material questions raised in the other case.

In the Polk Arms case the order of the Appellate Division should be reversed and the order of the Special Term denying defendant’s motion to vacate the order appointing a receiver affirmed, with costs in this court and in the Appellate Division, and the question certified answered in the affirmative.

In the case of 198 West 134th Street Realty Co., Inc., the orders should be reversed and the motion to vacate the order appointing a receiver denied, with costs in all courts. The questions certified are not answered.

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

Ordered accordingly.


text:
    In the Matter of the Estate of Frank A. Seitz, Deceased. State Tax Commission, Appellant; Selma Seitz et al., Respondents.
    (Argued April 25, 1933;
    decided May 23, 1933.)

      Seth T. Cole and William Dale O’Brien for appellant.

      Charles A. Voss for Selma Seitz, respondent.

      Charles G. Stevenson, Jr., for Fred J. Seitz et al., as executors of Frank A. Seitz, deceased, respondents.
   Kellogg, J.

The article was newly added to the Tax Law by chapter 710 of the Laws of 1930, and was made applicable to the estates of all persons dying after the article became effective. (Tax Law, § 249-mm.) Section 249-r of the new article provides, among other things, that, for the purpose of calculating the estate tax, there shall be included in the gross estate of a decedent all property real or personal, “ to the extent of the interest therein of the decedent at the time of his death.” It also provides that there shall be included all properties to the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death.” Certainly, all moneys coming into the hands of the executors of Frank Seitz, from which the $20,000 must be paid to his wife, whether in satisfaction of a debt created by the contract, or of a legacy created by the will, constitute an “ interest ” in property belonging to “ the decedent at the time of his death.” However, even if it were thought that the ante-nuptial agreement created a present transfer by Frank Seitz of the sum of $20,000, nevertheless that transfer would be one intended to take effect in possession or enjoyment at or after his death.” Thus, under either theory, the statute would apply to make the sum of $20,000, which the wife was to receive, a part of the gross estate of Frank Seitz at the time of his death.

The question then arising is whether or not the $20,000 to be paid should be deducted, as a debt of the estate, from the gross assets, to determine the net or taxable estate. Section 249-s provides that there shall be deducted such amounts for * * * claims against the estate * * * to the extent that such claims * * * were incurred or contracted bona fide and for an adequate and full consideration in money or money’s worth * * Obviously, as the ante-nuptial agreement recited that Frank A. Seitz had conveyed all his real estate to a corporation, the promise of Selma Herzfeld to release all claims for dower could not then have constituted a consideration for the promise to pay her $20,000, which was either “ adequate ” or full.” The question, therefore, is reduced to this: Did the promise of Selma Herzfeld to marry Frank A. Seitz constitute a consideration which was adequate and full,” calculated “ in money or money’s worth? ”

In Prewit v. Wilson (103 U. S. 22, 24) the court, in holding that marriage constituted a sufficient consideration to support a conveyance from husband to wife, to defeat the claims of creditors, cited with approval this sentence from Bishop on the Law of Married Women (§§ 775, 776): “ Marriage is to be ranked among the valuable considerations, yet it is distinguishable from most of these in not being reducible to a value which can be expressed in dollars and cents, while still it is in general terms of the very highest value.” In Ferguson v. Dickson (300 Fed. Rep. 961) the question was whether an ante-nuptial settlement constituted “ a bona fide sale for a fair consideration in money or money’s worth,” within the meaning of an act of Congress, excluding from the gross estate of the settlor, for the purposes of assessing an estate tax, the moneys or property involved in such a sale. The court held that it was; but, in so doing, noted this distinction: “ We think Congress, in using the words ‘ fair consideration,’ meant to distinguish them from ' adequate consideration/ as used in the act of 1864. * * * ' Fair consideration ’ means a consideration which under all the circumstances is honest, reasonable, and free from suspicion, whether or not strictly ‘ adequate ’ or ‘ full.’ ” In Floyer v. Bankes (3 DeG., J. & S. 306) the Lord Chancellor, in considering an exemption based upon statutory words, excluding from the gross estate to be taxed moneys to be transferred in satisfaction of a contract for a consideration in money or money’s worth,” held that a transfer contracted to be made in consideration of a promise of marriage was not such a contract. The Lord Chancellor said: “A contract, to be excepted, must be bona fide made in consideration of money or money’s worth — words which appear to have been selected for the purpose of excluding the consideration of marriage.” To the same effect is the opinion in Worcester County Nat. Bank v. Commissioner of Corporations & Taxation (275 Mass. 216).

We think it clear, both in reason and in authority, that a promise to marry is not “ an adequate and full consideration in money or money’s worth,” for a transfer of property real or personal. The cases of Matter of Baker (83 App. Div. 530; 178 N. Y. 575); Matter of Orvis (223 N. Y. 1); Matter of Vanderbilt (184 App. Div. 661; 226 N. Y. 638); Matter of.Schmoll (191 App. Div. 435; 230 N. Y. 559), relied upon by the respondent and the Appellate Division, are not addressed to the question here presented, which arises under the wording of a statute enacted since those decisions were made.

The respondents assert that, if our construction of the new statute be correct, then the statute, under Coolidge v. Long (282 U. S. 582, 594, 597), is unconstitutional. In that case a statute of the State of Massachusetts in terms imposed an estate tax upon all property passing by grant, intended to take effect in possession or enjoyment ” after the grantor’s death, with certain exceptions. It was held that the statute could not constitutionally apply to property conveyed in trust to the grantors for life, with remainders over to children to take effect in possession after the death of the life tenants. “ By the deed of each grantor one-fifth of the remainder was immediately vested in each of the sons subject to be divested only by his death before the death of the survivor of the settlors. It was a grant in prcesenti to be possessed and enjoyed by the sons upon the death of such survivor,” said the court. In our case, there was no present vesting of an estate, in the prospective wife, at the moment when the ante-nuptial agreement was signed. There was no specific property to constitute the subject of a grant. During life, the husband, without offending the agreement, might alienate all his property, leaving no estate from which the agreement might be satisfied. Moreover, the wife must survive the husband for six months, in order to receive any sum whatsoever. Obviously, there was here no present vesting of property. There was merely a promise to pay a sum of money after death, if the promisee survived the death, and lived for six months thereafter. Title to the moneys promised would come to the wife, if at all, after, not before, the death of her husband. Thus, it cannot be said here, as it was said in Coolidge v. Long (supra), that the statute, as construed by us, imposed a tax upon the transfer of property, title to which had vested previously to the death.

The order of the Appellate Division and the order of the Surrogate’s Court modifying the pro forma order assessing the tax should be reversed, and the pro forma order of the Surrogate affirmed, with costs to the appellant in all courts.

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

Ordered accordingly.


author: O’Brien, J.

text:
    The People of the State of New York ex rel. Public Service Interstate Transportation Co., Inc., Respondent, v. Public Service Commission et al., Appellants.
    (Argued April 17, 1933;
    decided May 23, 1933.)

      Melvin L. Krulewitch and Charles G. Blakeslee for Public Service Commission, appellant.

      Colley E. Williams, Jacob H. Goetz and B. Meredith Langstaff for Tappan and Nyack Bus, Inc., appellant.

      Charles L. Craig and Ernest W. Hofstatter for respondent.
   O’Brien, J.

April 25, 1923, the Public Service Commission issued to F. Clay Fisher a certificate of convenience and necessity for the operation of a motor bus line between Suffern, Nyack and Sparkill in Rockland county. It was issued on the express condition that it was terminable upon revocation by the Commission for sufficient cause. Such right, if any, as may have vested in Fisher by virtue of this certificate relating to that portion of the route between Nyack and Sparkill was assigned by him, with the Commission’s consent, to the Rockland Transit Corporation, also upon the express condition that it might be revoked by the Commission for failure to operate or for other sufficient cause. A second assignment was made by that corporation to Northern Valley Bus Line, Inc. To the Commission’s consent to this assignment was also attached the express condition that it was subject to all the conditions in the Fisher grant and that for failure to operate or other sufficient cause a rehearing might be had and the certificate revoked by the Commission. On April 28, 1926, the Commission issued another certificate of convenience and necessity directly to Northern Valley Bus Line, Inc., for operation between South Nyack, Sparkill and the boundary line of New Jersey. Like the certificate issued to Fisher, it was granted on the express conditions that the grantee would comply with all the rules, regulations and orders of the Commission respecting equipment and service, that the certificate should not be leased or assigned without the consent of the Commission and that in case of violation of any of the conditions or for failure to operate or for other sufficient cause, a rehearing, upon the application of any person aggrieved, might be had and the certificate revoked. Thus, in the event that these certificates were valid, the Northern Valley Bus Line, Inc., a New York corporation, the name of which has been changed to Public Service Interstate Transporation Co., Inc., the respondent herein, acquired the right, with the consent of the local authorities of the municipalities on the route described in the certificates, to operate from Nyack to the New Jersey boundary. It did so operate until August 14, 1928. Subsequent to that date the route was operated by Public Service Co-ordinated Transport, a New Jersey corporation. Respondent herein discontinued operation, sold its buses and discharged its employees. On July 25, 1929, the Commission issued to Tappan and Nyack Bus, Inc., one of the appellants herein, a certificate of convenience and necessity over the same route, and by orders dated March 6,1930, after finding the facts on a rehearing upon application of Tappan and Nyack Bus, Inc., as a party aggrieved, the Commission revoked the certificate of April 25, 1923, in so far as it applied to respondent and also the certificate of April 28, 1926. Since there is evidence supporting the findings, the orders of revocation are neither arbitrary nor unreasonable on the facts, and the courts may not interfere with the exercise of the Commission’s discretion on the facts and substitute its own judgment. (Matter of Public Service Interstate Transp. Co. v. Pub. Serv. Comm., 258 N. Y. 455.)

The important question of law argued before us concerns jurisdiction by the Commission, prior to the enactment expressly conferring power (Public Service Law; Cons. Laws, ch. 48, § 63-d, subd. 4, as added by Laws of 1931, ch. 531), to revoke certificates previously issued by it.

Local authorities of a municipality are empowered by statute to attach certain conditions to their consent to the use of its streets (Transportation Corporations Law; Cons. Laws, ch. 63, § 66), and for breach of these conditions they may revoke their consent. (People ex rel. Village of Chateaugay v. Pub. Serv. Comm., 255 N. Y. 232.) At the time of the issue of the certificates in the case before us, no statute conferred jurisdiction upon the Public Service Commission to attach conditions to a certificate of convenience and necessity. (Transp. Corp. Law, §§ 25, 26.) This body possesses no implied power. (Siler v. L. & N. R. R. Co., 213 U. S. 175; City of New York v. Inter- borough R. T. Co., 257 N. Y. 20, 38.) Prior to the enactment of chapter 531 of the Laws of 1931, not only was it without jurisdiction to revoke a certificate of convenience and necessity but it possessed no authority to attach such conditions as appear. The convenience and necessity of people traveling through the territory between Nyack and the New Jersey line either did or did not require the operation of bus service by this respondent. That was the question for the Commission to determine. If in the exercise of its reasonable judgment that service would be convenient and necessary, it had the right to make such declaration in a certificate and issue it to respondent. If it reasonably held a contrary opinion, it could refuse. Its jurisdiction in relation to such a certificate was apparently then confined to granting or refusing an application. (Transp. Corp. Law, §§ 25, 26; People ex rel. South Shore Traction Co. v. Willcox, 196 N. Y. 212.) The statute did not recognize a limited or qualified certificate. After issue the Commission was functus officio in respect to the certificates (People ex rel. Chase v. Wemple, 144 N. Y. 478; People ex rel. Belmont v. Leonard, 87 App. Div. 269), but it could exert its power to compel adequate service by the common carrier in the manner provided by law, and the municipalities could upon proper facts revoke their consents to the use of their streets.

The mere fact that unauthorized conditions are attached to a certificate does not require the conclusion that the certificate is void. The effect of such conditions as bearing upon the purpose of the certificate and the improbability of its issue without conditions must, however, be considered. When all the language of the declaration is clearly indicative of an intent to withhold or cancel a certificate unless the conditions coupled with its grant shall be accepted and compliance had with them in the distant future, then the certificate as a whole must be disregarded. A court is not justified in eliminating and disregarding illegal provisions of an order unless it is apparent that the provisons which are legal in form are not connected with and affected by those which are illegal.” (People ex rel. N. Y. C. & H. R. R. R. Co. v. Pub. Serv. Comm., 227 N. Y. 248, 262.) As in that case, these declarations manifest a purpose to make only limited or qualified certificates. In effect the Commission certified that convenience and necessity for bus operation by this respondent in this locality would continue only so long as respondent complied with the conditions. In one word it affirmed and in another word it denied. The statute at that time gave no such right. Without the conditions and reservations no certificate, within the Commission’s intent, was executed. A power to revoke for condition broken was implied by the statute in no lesser degree than a power to make a condition. An inferential authority to do one would carry the right to do the other. Both or neither existed. For the law to imply jurisdiction in an official body to impose conditions which evince the fundamental purpose of its act and at the same time to deny power to enforce those essential conditions would amount to an absurdity. Inasmuch as respondent never acquired a valid certificate, it suffered no injury by revocation.

The order of the Appellate Division should be reversed and the proceeding dismissed, with costs in this court and in the Appellate Division. (See 262 N. Y. 632.)

Pound, Ch. J., Crane and Crouch, JJ., concur with O’Brien, J.; Lehman and Kellogg, JJ., concur in result; Hubbs, J., not sitting.

Order reversed, etc.


text:
    Robert O. Weston et al., Copartners under the Firm Name of Westchester Construction Co., Appellants, v. The State of New York, Respondent.
    (Argued April 14, 1933;
    decided May 23, 1933.)
    (Claim No. 21969.)

      Horace B. Casey for appellant.

      John J. Bennett, Jr., Attorney-General (James Gibson of counsel), for respondent.
   Pound, Ch. J.

Chapter 752 of the Laws of 1931 reads as follows:

“ Section 1. Jurisdiction is hereby conferred upon the court of claims to hear, audit and determine the claim of Robert 0. Weston and Charlottte Weston, administratrix, et cetera, of James G. Weston, deceased, doing business as copartners under the name and style of Westchester Construction Company, for damages arising out of an unforeseen soil condition affecting the prosecution of the work contemplated by contract executed by and between the people of the state of New York and said Westchester Construction Company, on May eleventh, nineteen hundred twenty-eight, for the reconstruction of a portion of the Peekskill-Fishkill part one highway, number five thousand one hundred and forty-seven, constituting reconstruction contract number one thousand seven hundred and ten. As alleged by claimants, such unforeseen. condition consisted of the encountering of eighty-five per cent solid rock in excavating through a hillside in the elimination of curves on said highway, which condition was not apparent by examination and was unknown to the state, the county of Westchester and the Westchester Construction Company, at the time of the execution of said contract, and that all parties were mutually mistaken with respect thereto, and that said unforeseen condition resulted in greatly increased cost in the performance of the work under said contract, causing great damage to the said Robert 0. Weston and Charlotte Weston, administratrix, et cetera, doing business as before stated. If the court finds that the facts are substantially as above set forth, and that claimants were damaged by reason thereof, and that in justice and equity the claimants should be reimbursed therefor by the state, the claim shall constitute a legal and valid claim against the state, and the state shall be liable therefor, and the court may make an award and render judgment for the claimants in such sum as it may determine will properly compensate the claimants for the damage sustained, provided the claim herein authorized be filed with the court of claims within six months after this act takes effect.
§ 2. Nothing herein contained shall be construed as passing upon the merits of the claim herein and no award shall be made or judgment rendered unless sustained by such legal evidence as would create a liability against an individual or corporation in a court of law or equity.”

When appellants presented their claim to the Court of Claims it appeared that they had entered into a State highway contract for the construction of about a quarter of a mile of the Peekskill-Fishkill State highway in Westchester county. About six hundred feet of the length of the contract site was cut through a hill approximately one hundred feet in height at its peak above the proposed pavement of the highway. This cut was substantially through solid rock. When claimants bid, the engineer’s prehminary estimate ” made up for the purpose of letting the contract and annexed thereto, showed 198,430 cubic yards of unclassified excavation,” with no separation of the amount of rock and earth. Claimants bid $174,407.45, which was some $93,000 less than the engineer’s preliminary estimate of the cost of the work. Their bid for unclassified excavation was sixty-eight cents per cubic yard. Owing to the presence of rock, claimants were caused more expense than they had figured on. They asked for $110,119.09 for excess cost. The Legislature passed chapter 752 of the Laws of 1931 for their benefit. Their claim has been disallowed on the ground that claimants had been compensated at contract price for all the excavation made, and that there is no obligation of any kind requiring the State to pay claimants a sum greater than they agreed to accept for the performance of their contract. This decision was the only one possible.

In the “ Instructions to Bidders ” there appears the following: “ The attention of persons intending to make proposals is specifically called to that paragraph of the contract which debars a contractor from pleading misunderstanding or deception because of estimates of quantities, character, location or other conditions surrounding the same. Special attention is called to the notes on the plans which are made a part of the contract and which may alter or revise the Standard Specifications for this particular contract. Attention also is called to the uncertainty in the quantities of many of the items involved in this contract. The quantities of excavation, foundation, course, etc., are specially subject to such uncertainties.”

The paragraph in the contract referred to reads as follows :

“3. The Contractor further agrees that he is fully informed regarding all of the conditions affecting the work to be done and labor and materials to be furnished for the completion of this contract, and that his information was secured by personal investigation and research and not from the estimates of the State Department of Public Works, Division of Highways; and that he will make no claim against the State by reason of estimates, tests or representations of any officer or agent of the State.”

Now it is argued that although claimants made no adequate investigation as to subsoil conditions at the site of the work, the State may recognize and has recognized a moral or equitable obligation to compensate them for the increased cost of rock excavation. (Williamsburgh Sav. Bank v. State, 243 N. Y. 231, 244.)

In order to establish a claim founded upon a moral obligation the court must find that a moral obligation actually exists. There is no moral obligation to give public money to disappointed contractors. (Farrington v. State, 248 N. Y. 112, 115.) Where is the moral obligation to recompense claimants for their loss on the contract and where is the recognition of such obligation by the State? The claimants must make out their case. They must show not only loss but also a right to compensation therefor.

The preliminary estimate detail sheet made up by the State for its own use showed approximately sixty-five per cent earth and thirty-five per cent rock on the contract site. These were not representations upon which the bidder might rely. If claimants relied thereon they did so at their own risk. “ The most it [they] could ask for in regard to this information was good faith.” (Foundation Co. v. State, 233 N. Y. 177, 186.) The contractors assumed the risk. If the excavation had turned out to be all earth no one would suggest that the State would have a legal or equitable claim against the contractors for reimbursement on the ground of mutual mistake. It would be a strange morality which would permit one party to escape the terms of an unprofitable contract while the other party was held thereto. No one would extend a rule of morality to require the holder of a profitable contract to surrender a portion of his legitimate profits.

One who makes a contract cannot be certain that he will be able to do the work for the amount of his bid. The risk of failure falls on his shoulders. Equity does not reheve from bargains, merely because they are unprofitable.

The contractor had the same opportunity as the State to make investigations. When no claim of deception, inequality or inequity is presented he is bound by the terms of his contract. Justice and equity do not require the State to reimburse a contractor for increased expense unless the mistake was due to the act of the State, not even where the increased cost was due to the unexpected event of the World War. (Swift v. State, 89 N. Y. 52; Matter of Semper v. Duffey, 227 N. Y. 151; Gordon v. State, 233 N. Y. 1, 8.)

Sundstrom v. State (213 N. Y. 68) is not in conflict with these cases. The claimants in that case did not assert that in making the contract they were misled by any estimates prepared by the State, or that they relied .upon anything but their own investigations, or that they were misled by error or mistake as to the special terms of the contract. Their work was made greater because of the negligence of the State after the making of the contract. The court said (p. 72), “there is certainly no liability to contractors in the absence of negligence,” no moral or equitable duty to reimburse them because they have voluntarily assumed the risk of a bad bargain. (Gordon v. State, supra.)

This case resolves itself into an attempt to grant extra compensation to a contractor contrary to the provisions of the Constitution of the State of New York, article III, section 28, which reads as follows:

“ Extra compensation prohibited.— § 28. The Legislature shall not, nor shall the common council of any city, nor any board of supervisors, grant any extra compensation to any public officer, servant, agent or contractor.”.

Extra compensation is compensation over and above that fixed by contract for the work agreed to be done. It would, either in a legal or equitable sense, be in the nature of a gratuity. (Matter of Mahon v. Board of Education, 171 N. Y. 263, 266; Gordon v. State, supra; Board of Supervisors, Cayuga Co. v. State, 153 N. Y. 279, 288. If the claim were for extra work which the contractor was not obligated by the contract to do, or which the conduct of the State alone rendered necessary, the case would be different.

We pass over as not necessary to the decision the pertinency of the saving clause contained in section 2 of the act quoted supra, which explicitly says that “ no award shall be made or judgment rendered unless sustained by such legal evidence as would create a liability against an individual or corporation in a court of law or equity.” This language is in conflict with section 1 of the act, which recognizes a moral obligation rather than an obligation which could be enforced against an individual in a court of justice and, if read literally, would defeat the purpose of the act and take away the remedy it seemed to grant.

The judgment should be affirmed, with costs.

Crane, Lehman, Kellogg and Crouch, JJ., concur; O’Brien and Hubbs, JJ., not sitting.

Judgment affirmed.


text:
    Arthur Brawer et al., Copartners, under the Firm Name of Fayette Silk Mills, Respondents, v. Mendelson Bros. Factors, Inc., Appellant.
    (Argued April 21, 1933;
    decided May 23, 1933.)

      Sidney S. Bobbé and Alexander Slater for appellant.

      James Madison Blackwell and Irving Brawer for respondents.
   Pound, Ch. J.

Plaintiffs are manufacturers and defendant is a factor or commission merchant. Under a written contract dated July 15, 1931, defendant agreed to make sales for plaintiffs through a sales agent. The defendant assumed the credit risk for the merchandise sold, provided that it had approved the credit risk in writing. In the event of dispute between the customer, the sales agent and plaintiffs, the factor had the privilege of charging hack the account. This means that defendant left it to the parties to settle the dispute without assuming the credit risk.

The contract was terminated in January, 1932. Defendant sent plaintiffs a statement showing $3,177.64 due. It sent with the statement a check for the amount in full settlement. Plaintiffs would not take the check on those terms.

There was a sale to one Tananbaum. The selling agent had invoiced a bill of goods of $4,832.89, payable December 3, 1931. Tananbaum had complained about the quality of the goods. Defendant charged back the amount of this sale as it had a conceded right to do and notified plaintiffs. The dispute with Tananbaum was settled by crediting him with $758.10. Defendant took the position that because this was a disputed claim, it was not responsible for the balance remaining unpaid. By letter dated November 12, 1931, however, it stated: “ that though in view of the dispute as to this item our responsibility under our factoring agreement ceased, and though this amount has been charged back to you on our October 31st statement, we, nevertheless, are satisfied to continue our credit checking on this particular item of $4,832.89 up to and including Dec. 3rd, 1931, after which time any responsibility we may have as to this item is to cease and is to be of no force and effect. It is understood that our handling this item in this way is not to be deemed precedent for any other transaction that may arise between us under our factoring agreement with you. To reinstate our responsibility for this item as indicated above, we will ask you to acknowledge by your written acceptance.”

This letter has been construed by the Appellate Division as a binding agreement to carry the item as if it had never been charged back and as a guaranty to the plaintiffs that defendant would pay the balance of Tananbaum’s bill as if the bill had never been disputed.

It is solely on this letter that plaintiffs assert their right to recover the amount of the disputed item. After Tananbaum’s financial condition became known defendant disclaimed responsibility. Summary judgment has been granted by the Appellate Division for the full amount claimed, although the Special Term granted relief only as to the undisputed balance, less a counterclaim which the Appellate Division properly disallowed. The Special Term had held that as to the Tananbaum item a triable issue was raised.

It seems difficult to say as matter of law that the words “ continue our credit checking ” means to credit plaintiffs with this particular item of $4,832.89 ” which had been charged back to them. The letter may be a waiver of any defense defendant may have thereto, because of the dispute over the $758.10 item, up to December 3, 1931. It may be a new contract or promise for which no consideration is shown. The language is not so clear as to justify us in saying that its meaning may be determined by affidavits.

This action is against a surety and summary judgment should not be granted on affidavits where it fairly appears that there is an issue to be tried. Here we have a technical term1— credit checking ”• — to be defined by witnesses, and other questions of fact which should be resolved after a trial. Summary judgment as granted by the Appellate Division was, therefore, improper.

The judgment of the Appellate Division should be modified and the motion for summary judgment as granted by the Appellate Division denied, and judgment of the Special Term granting partial judgment, as modified by the Appellate Division by disallowing the counterclaim, affirmed, with costs in this court and in the Appellate Division. (See 262 N. Y. 562.)

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

Judgment accordingly.


text:
    In the Matter of the Accounting of John J. Fenelon, as Administrator of the Estate of Bessie Fenelon, Deceased, Respondent. Elizabeth Yauch, Appellant.
    (Submitted April 28, 1933;
    decided May 23, 1933.)

      Harry W. Williams for appellant.

      Charles E. Brennan for respondent.
   Kellogg, J.

The Banking Law (Cons. Laws, ch. 2), in section 249, provides that “ when a deposit shall be made by any person in the names of such depositor and another person and in form to be paid to either or the survivor of them ” such deposit “ shall become the property of such persons as joint tenants ” and “ may be paid to either during the life time of both or to the survivor after the death of one of them.” It further provides: “ The making of the deposit in such form shall, in the absence of fraud or undue influence, be conclusive evidence, in any action or proceeding to which either such savings bank or the surviving depositor is a party, of the intention of both depositors to vest title to such deposit and the additions thereto in such survivor.” This statute created presumptions not obtaining at the common law. (Beaver v. Beaver, 117 N. Y. 421; Matter of Bolin, 136 N. Y. 177; Kelly v. Beers, 194 N. Y. 60.) The Appellate Division of the third department has held that, in order that the statutory presumptions may take effect, the form of the deposit, as made, must have been sanctioned by the owner of the moneys directed to be deposited. (Matter of Buchanan, 184 App. Div. 237.) The case never came to this court. However, we approve of the conclusion reached. Obviously, if the law were otherwise, then the whim or error of the banker, in writing the form of the deposit, or a direction by one who had converted the moneys, might operate to transfer title of the true owner to the moneys, without volition on his part. The law does not countenance involuntary transfers of that character. In this case the question is whether or not the true owner directed the making of the deposit in the form in which it appears on the books of the bank where deposited, or acquiesced therein.

The moneys belonged to Bessie Fenelon, now deceased. With her friend, the claimant Elizabeth Yauch, she attended at the Albany Savings Bank, where she had moneys on deposit. She drew a draft or order upon the treasurer of the bank, calling for a transfer of her deposit to “ New account Bessie Fenelon and Mrs. Elizabeth Yauch.” The order contained no word directing the use of the statutory form in recording the deposit. The two women signed their names to a signature card. They also signed their names to a loose leaf which afterwards became a part of a book kept by the bank, which was termed its “ ledger.” After signing these two papers, the bank clerk with whom they dealt applied a rubber stamp to impress upon the two papers, above their signatures, the legend, printed in type so small as to be hardly legible, A joint

account with right of survivorship, payablé to either of the undersigned depositors, or the survivor, is hereby created and the bank notified accordingly.” No evidence was given to show that Bessie Fenelon ever was shown the printed legend or knew that the two papers had been stamped by the clerk to exhibit the same. After all this had been done, a bank pass book was handed to Bessie Fenelon. This bore the heading “ Bessie Fenelon and Mrs. Elizabeth Yauch,” and showed the deposit that day made. It exhibited no words, stamped or written, to indicate that the account was a joint account payable to either or the survivor. Neither the Surrogate nor the Appellate Division was able to draw the conclusion from these facts that Bessie Fenelon directed that the moneys be deposited in a joint account, or acquiesced in the use of the stamp, which made the account appear to be an account jointly held by the two women. We are unable to reach the conclusion, as a matter of law, that Bessie Fenelon directed or authorized the deposit to be made to joint account. We must, therefore, affirm the decision that the moneys belonged to the estate of Bessie Fenelon, and not to Elizabeth Yauch, the survivor of the two women.

The order should be affirmed with costs to the respondent payable out of the estate. (See 262 N. Y. 308, 539.)

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

Order affirmed, etc.


text:
    In the Matter of Inez Evans, Appellant, v. Charles W. Berry, as Comptroller of the City of New York, Respondent.

      (Argued April 24, 1933;
    decided May 23, 1933.)

      Irwin J. Sikawitt for appellant.

      Edwin M. Borchard, amicus curice.

      Arthur J. W. Hilly, Corporation Counsel (J. Joseph Lilly, Henry J. Shields and Thomas W. A. Crowe of counsel), for respondent.
   Pound, Ch. J.

On February 5, 1927, members of the police force of the city of New York, lawfully engaged in the pursuit of robbers who had held up a drug store on Melrose avenue in the borough of The Bronx, fired a number of pistol shots at the fugitives. The appellant, who was at the time passing along Melrose avenue near the scene of the holdup, was struck by a bullet from the revolver of one of the police officers and so wounded that she is now a partial cripple.

On December 10, 1927, the Municipal Assembly of the City of New York adopted a local law known as New York City Local Law No. 13 of 1927, which provided:

Section 1. The board of estimate and apportionment is hereby authorized and empowered, in its discretion, to make an award to a person who has been or hereafter shall be injured by a police officer while such officer is engaged in arresting any person or in retaking any person who has escaped from legal custody or in executing any legal process. Such award shall be of such amount as the board of estimate and apportionment shall deem just and equitable.”

On January 26, 1928 the Board of Estimate and Apportionment of the City of New York adopted a resolution by which the petitioner was awarded $6,740 for damages and expenses resulting from the accident.

The defendant, the Comptroller of the City of New York, refused to pay the award and the Appellate Division has sustained him, reversing the Special Term and holding that municipal liability could not constitutionally be extended by local law so as to cover the case.

The question is thus presented whether the city of New York may constitutionally assume a liability for the act of a police officer who, with or without fault on his part, injures an innocent bystander while engaged in his governmental duty of making an arrest.

The pertinent provision's of the Constitution as to the powers of the city are contained in article XII, section 3, which contains the Home Rule provisions incorporated in the Constitution in the fall of 1923. Section 3 reads as follows:

Power of cities to enact local laws.— § 3. Every city shall have power to adopt and amend local laws not inconsistent with the constitution and laws of the state, relating to the powers, duties, qualifications, number, mode of selection and removal, terms of office and compensation of all officers and employees of the city, the transaction of its business, the incurring of its obligations, the presentation, ascertainment and discharge of claims against it, the acquisition, care, management and use of its streets and property, the wages or salaries, the hours of work or labor, and the protection, welfare and safety of persons employed by any contractor or subcontractor performing work, labor or services for it, and the government and regulation of the conduct of its inhabitants and the protection of their property, safety and health. The legislature shall, at its next session after this section shall become part of the constitution, provide by general law for carrying into effect the provisions of this section.”

Thus was wrought an extensive but not complete separation from the State of the power to govern the cities of the State.

Following the adoption of this amendment to the Constitution the Legislature enacted the City Home Rule Law (Cons. Laws, ch. 76; Laws of 1924, ch. 363, as amd. L. 1928, ch. 670, L. 1929, ch. 646), which, among other matters, provides:

“ § 11. Power of cities to adopt and amend local laws.
“1. Unless hereafter restricted by the legislature under the provisions of section one of article twelve of the constitution, the local legislative body of a city shall have power to adopt and amend local laws in relation to the property, affairs or government of a city including but not limited to the powers, duties, qualifications, number, mode of selection and removal, terms of office and compensation of all officers and employees of the city, the transaction of its business, the incurring of its obligations, the presentation, ascertainment and discharge of claims against it, the acquisition, care, management and use of its streets and property, the wages or salaries, the hours of work or labor, and the protection, welfare and safety of persons employed by any contractor or subcontractor performing work, labor or services for it, the government and regulation of the conduct of its inhabitants and the protection of their property, safety or health.
“2. In the exercise of such powers, the local legislative body of a city shall have power.
a. To delegate to any local authority power, by rule, regulation, resolution or ordinance, to provide for carrying into effect the provisions of any local law.
“ § 31. Construction. This chapter shall be construed liberally. The powers herein granted shall be in addition to all other powers granted to cities by other provisions of law.”
By the General City Law (Cons. Laws, ch. 21; Laws of 1913, ch. 247) it is provided:
§ 20. Grant of specific powers. Subject to the constitution and general laws of this .state, every city is empowered: * * *
“ 5. * * * to pay or compromise claims equitably payable by the city, though not constituting obligations legally binding on it, * *

The power has thus been delegated, both expressly and by implication, to the city to allow equitable claims against it, so that the city has all the power to recognize equitable claims against it that the State had to recognize equitable claims against the State, except as limited by the Constitution itself and by general laws.

Local laws must be consistent with the Constitution. Section 10, article VIII of the Constitution reads in part as follows:

§ 10. No * * * city * * * shall hereafter give any money or property, or loan its money or credit to or in aid of any individual, association or corporation, * * *; nor shall any such * * * city, * * * be allowed to incur any indebtedness except for * * * city, * * * purposes * *

It follows that the local law is invalid if it provides for a gift to an individual or permits the creation of an indebtedness for other than a city purpose.

At common law cities were not liable for the torts of police officers. Although appointed and paid by the city, such officers were not regarded as. municipal agents or servants. When acting in the course of their duty, they were said to be performing a governmental function. The city was immune from liability because the doctrine of respondeat superior was held to be inapplicable. This was a rudimentary survival of the maxim The King can do no wrong.” (Maximilian v. Mayor, 62 N. Y. 160, 164; Augustine v. Town of Brant, 249 N. Y. 198, 204.) In Ohio the courts changed the common-law rule so as to impose liability on the city for the wrongful acts of its policemen and firemen in Fowler v. City of Cleveland (100 Ohio St. 158) only to restore it in Aldrich v. City of Youngstown (106 Ohio St. 342).

It has not been questioned in this court that the Legislature may impose on the cities liability for the negligent acts of their police officers. This was done by Highway Law (Cons. Laws, ch. 25), section 282-g, added by Laws of 1929, chapter 466, enacted to make municipalities hable for the negligence of the operators of their vehicles in the exercise of their statutory duties, in the course of their employment and in the discharge of their governmental functions. (Miller v. City of New York, 235 App. Div. 259.) The Legislature provided that such an operator should, for the purpose of the act, “ be deemed to be an employee of the municipality, notwithstanding the vehicle was being operated in the discharge of a public duty.” The act of the Legislature in thus changing the common-law rule was held by this court not even to involve the construction of the Constitution of the State. An appeal to this court from a unanimous affirmance of a decision upholding the validity of the statute, taken as of right and without leave, under Civil Practice Act, section 588, subdivision 1, was dismissed in Rothman v. City of New York (259 N. Y. 663) on the ground that no constitutional question was involved. There is no lack of power in the Legislature to change the common-law rules of liability and create statutory rules in place thereof without offending any constitutional limitation by the mere fact of change. (Matter of Borup, 182 N. Y. 222.)

The case before us, however, presents another and somewhat different question in that the amendment to the Highway Law covered only the negligent operation of municipally owned vehicles. The local law in question not only changes the common-law rule of non-liability of the city for the torts of police officers in the discharge of their governmental functions but also imposes liability on the city although the police officer may have been without fault and the injury a mere accident. Much that was said in the workmen’s compensation case (Ives v. South Buffalo Ry. Co., 201 N. Y. 271) about the constitutional vice of providing a remedy which takes one’s property without fault on his part was rendered obsolete by Arizona Employers Liability Cases (250 U. S. 400). It was there held that the Legislature might constitutionally shift the risks inherent to hazardous employments from the employer to the employee and thus, in proper cases, impose Lability without fault. Pitney, J., writing for the majority of the court, said (p. 419): The states are left with a wide range of legislative discretion, notwithstanding the provisions of the Fourteenth Amendment; and their conclusions respecting the wisdom of their legislative acts are not reviewable by the courts.”

The power of the State of New York to recognize moral .obligations or equities arising out of the facts has been repeatedly upheld. (Williamsburgh Sav. Bank v. State, 243 N. Y. 231, 240.) Perhaps the most interesting case in point is Munro v. State (223 N. Y. 208), for that is a case where the State assumed liability without fault for injuries sustained by a fireman in a State hospital for the insane who was assaulted when on duty by an insane inmate of the institution. At page 216, Judge Crane, writing for a unanimous court, makes the following pertinent inquiry: Can it be that the legislature may place liability upon the employer irrespective of negligence, and that the state itself cannot recognize as á just and equitable obligation a personal injury received by one of its employees -unless some legal principle the application of which has now been abolished would have created liability in an individual or corporation?”

This brings us to the point of determining whether, assuming, as we must, that the city had the power to recognize a true moral obligation or duty, the power has been properly exercised in this case. We have already taken notice of the fact that in the crowded streets of a great city police officers may shoot at fugitives fleeing from justice and that accidental injuries to people on the street may result therefrom. (Matter of Katz v. Kadans & Co., 232 N. Y. 420, 422.)

A moral obligation is a duty assumed in obedience to the rules of right conduct. People differ as to the standard of right conduct. Some take as their standard of moral duty the letter of the law; others the Golden Rule. The question is not as to our own standard but the standard which the city may adopt. Is it an impossible, quixotic standard whereby the money of the city may be given away without regard to any visible equity or does it rest on common sense conceptions of moral duty? The city may be just but it may not distribute largess.

The question is whether persons so injured should alone assume the risk of such injury or whether the city should compensate them for their loss. The common law fixed a standard of liability which relieved the city. The city has chosen to be more liberal. It cannot be said that the standard of duty which it has adopted has nothing to sustain it.

As was noted in Augustine v. Town of Brant (supra, p. 205) the modern tendency is against the rule of non-liability of municipalities for the acts of firemen and policemen employed by them. The fiction that they are not acting in the course of their duties as city employees is no longer regarded as a part of the fundamental law. • The tendency to apply the rule of respondeat superior has been noted with approval in articles by Professor Borchard entitled Governmental Responsibility in Tort ” (28 Columbia Law Review, pp. 577, 735) and Government Liability in Tort ” (34 Yale Law Journal, 229, 240) and a note on Municipal Responsibility for the Torts of Policemen” (42 Yale Law Journal, 241); an article by the late Attorney-General Hamilton Ward on “ Municipal Liability ” (Vol. 2, No. 7 [Sept. 1930], N. Y. State Bar Assn. Bulletin, p. 402); a note in 16 Cornell Law Quarterly, 359, and “ The Extension of Municipal Liability in Tort ” by Charles W. Tooke (19 Virginia Law Review, 97) and in many other books and articles where the subject of municipal liability is discussed.

Assumption of liability does not constitute a gift or gratuity to the injured person so long as it is the legitimate recognition of an equitable claim. (Farrington v. State, 248 N. Y. 112, 115.) The purpose is a city purpose for it provides for the protection of people who are thus exposed to the risk of injury when on city streets.

The extent to which moral and equitable claims against the city should be recognized is primarily for the city itself to determine (United States v. Realty Co., 163 U. S. 427), provided only that it may not expend the city money for other than a city purpose or give it away. Constitutional local self-government should not be hamstrung by the courts for economic reasons. Prior to the Home Rule amendment, the State might have imposed such liability on the city. Now the city may self-impose such a liability, if it sees fit to assume the burden. The local law should be upheld.

Some question is raised regarding the form of the local law as permitting the Board of Estimate and Apportionment to bestow gratuities on favored claimants in its discretion while it refuses to allow just compensation to others equally worthy. We see nothing in the local law to compel such a construction. The local law might be improved in draftsmanship but its purpose is to give the board the same jurisdiction over claims specified therein as it has over other claims against the city. We must assume that the auditing body under this local law will discharge its duty faithfully and honestly as public officers, as it would discharge any other duty imposed on it by law. (People ex rel. Crammond v. City of Rome, 136 N. Y. 489, 495.)

The fact that the statute applies to persons receiving injuries prior to its enactment is no objection to its validity. (Jackson v. State, 261 N. Y. 134.)

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

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

Ordered accordingly.


text:
    Dominick Meo, Respondent, v. Jacob Bloomgarden, Appellant, Impleaded with Another.
    (Argued April 26, 1933;
    decided May 23, 1933.)

      Theodore H. Lord, James B. Henney and Daniel R. Harvey for appellant.

      Benjamin R. Leinhardt for respondent.
   Pound, Ch. J.

Although we have held repeatedly that any modification by the Appellate Division of the judgment or order appealed from gives the right of appeal under Civil Practice Act, section 588, subdivision 1, the rule seems to be established that an unanimous order of the Appellate Division which reverses an order of the Trial Term granting a new trial and reinstates the verdict is a unanimous affirmance of the judgment based on the verdict of the jury although no judgment was entered thereon, and that leave to appeal must be obtained. (Garrison v. Sun Printing & Pub. Assn., 222 N. Y. 691.)

We reiterated this rule in Markiewicz v. Thompson (246 N. Y. 235) where it is said: By the settled practice of this court, a judgment of the Appellate Division unanimously reversing an order of the trial judge for a new trial, and reinstating the vérdict, is tantamount to the unanimous affirmance of the judgment, and an appeal therefrom will be dismissed if taken without leave.”

The appeal should, therefore, be dismissed, with costs. Crane, Lehman, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not sitting.

Appeal dismissed.


author: Crouch, J.

text:
    Ruth A. Koehler, Appellant, v. The City of New York, Respondent.

      (Argued April 11, 1933;
    decided May 23, 1933.)

      Robert H. Koehler for appellant.

      Arthur J. W. Hilly, Corporation Counsel (J. Joseph Lilly, Henry J. Shields and Edward A. Goebel of counsel), for respondent.
   Crouch, J.

West street between Perry street and West Eleventh street in the borough of Manhattan was originally an exterior street seventy feet wide. In that space there are two sets of freight railroad tracks. Eighteen feet to the west of the railroad tracks there is a line of fire hydrants and electric lights. Presumably that was the former west line of the street. Surrounding the hydrants is a raised platform in which is imbedded iron columns or stanchions about four feet high. Prom that row of hydrants westward to the dock line is a space one hundred and eighty feet wide, now and for many years past used, together with the original seventy feet, as a unified throughfare two hundred and fifty feet wide, with four lanes of traffic permitted. That this one hundred and eighty feet of the street as it actually exists is, for administrative purposes, designated a marginal wharf ” and not a public street ” (Greater New York Charter [Laws [of 1901, ch. 466, as amd. L. 1913, ch. 327], § 819), has no significance upon the question of liability here. The entire two hundred and fifty feet is in fact used and intended to be used for street purposes.

About ten o’clock on the night of October 22, 1928, plaintiff was a passenger in an automobile traveling north on the easterly side of West street. There was a line of freight cars standing on the tracks covering substantially the entire block from Perry street to West Eleventh street. Upon approaching Perry street, the driver of the automobile desiring to cross over to the westerly northbound lane of traffic, turned to his left in front of the parked freight cars, and proceeded in a north to northwesterly direction to reach the desired traffic lane. In so doing he collided with one of the hydrants located about ninety-one feet north of Perry street. To recover damages for the injuries sustained by her in that collision, plaintiff sues the city, alleging (a) that the existence of the hydrant, with the surrounding stanchions and platform, amounted to the maintenance of a nuisance; and (b) that the city while thus permitting the hydrant, stanchions and platform to exist, negligently omitted to place thereon lights or other warning signals, or in any manner to guard and give proper protection at night time to persons using the highway. On the trial the defendant had a verdict which was unanimously affirmed. The case is here by permission of this court.

We are of the opinion that the law of the case is ruled by the decision of this court in the case of Stern v. International Ry. Co. (220 N. Y. 284). It may be assumed that the original location of the hydrants was proper and lawful. It may be true that their continued existence, as so located, was likewise proper and lawful. The question, however, is whether, when the accident occurred, the location of the hydrant in question was dangerous and whether that danger was unreasonable,

That. question is to be answered in the light of all the circumstances shown by the evidence; and if its existence at that time was unreasonably dangerous, it makes little difference whether the danger be said to flow from maintenance of a nuisance or from a negligent omission to guard the wayfarer. “A hydrant answers a useful and necessary purpose, and it is required to be placed somewhere * * *.” (Dougherty v. Village of Horseheads, 159 N. Y. 154, 159.) Whether a hydrant as it is located in a particular instance is a legitimate obstruction, may be a question of fact or a question of law. “Always, however, the ruling [is] made, not absolutely, but relatively to particular conditions of location, of convenience or of necessity.” (Stern v. International Ry. Co., supra, p. 295.)

Considering together the evidence here relating to the surrounding conditions as bearing on convenience and necessity, and the evidence relating to the location and the illuminative effect of the electric lights, of shadows cast by the standing freight cars, and as to whether or not the hydrant and stanchions had been painted with black and white stripes as required by the city ordinance, the question of unreasonable danger was one for the jury. But for errors on rulings of law by the trial judge, the judgment would have to be affirmed.

The court excluded testimony as to the existence of a line of hydrants on the easterly curb of West street, and another line near the docks on the westerly side. This testimony was relevant on the question of necessity. Excluded testimony as to other similar accidents was relevant on the question of notice of an existing dangerous condition. The chief error, however, was in the applicable law as stated by the court to the jury.

After telling the jury, in substance, that the question for decision was whether or not the location of the hydrant was so dangerous and the danger so needless that the choice became an unreasonable one, the court proceeded to deal with the subject in terms of negligence. The jury was told that if they found the city negligent in maintaining the hydrant, as it did under all the circumstances and conditions, they were to determine further whether or not the city was solely responsible for the accident. It was apparently conceded that this plaintiff, as a passenger in the car, was herself guilty of no negligence. The charge is silent on that point. It, therefore, was not necessary for the jury to find that the city was solely responsible for the accident before it could be held hable. The court’s attention was called to the point by a specific exception. The court in the same connection was asked to charge the jury that if the driver of the automobile was guilty of any negligence contributing to the accident such negligence under the law of the state of New York cannot be imputed to the plaintiff and will not bar a recovery by her.” The request was refused. From the charge as given and from the rulings on requests, the jury must necessarily have understood that if the accident was due in any degree to the negligence of the driver, the plaintiff could not recover. The error was vital.

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

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

Judgments reversed, etc.