text:
    Canadian Industrial Alcohol Company, Ltd., Respondent, v. Dunbar Molasses Company, Appellant.
    (Argued December 3, 1931;
    decided January 5, 1932.)

      Jay Leo Rothschild, Louis Rivkin and Walter S. Beck for appellant.
    The contract between the parties contemplated the purchase of specific and identified molasses, the failure of which to come into existence terminated the obligations of both. Future unascertained goods may be specific goods within this rule. It is not necessary that they be presently identified and appropriated to the contract. (Nitro Powder Co. v. Agency of C. C. & F. Co., 233 N. Y. 294; Taylor v. Caldwell, 3 Best & S. 826; Dexter v. Norton, 47 N. Y. 62; Stewart v. Stone, 127 N. Y. 500; Goldman v. Rosenberg, 116 N. Y. 78; International Paper Co. v. Rockefeller, 161 App. Div. 180.) Where the parties contract with reference to a subject-matter subsequently to come into existence, and such subject-matter does not come into existence, the obligations of both are dissolved by reason of the implied condition that it should have come into existence. (Howell v. Coupland, 1 Q. B. D. 258; Scialli v. Correale, 97 N. J. L. 165; Whipple v. Lyons Beet Sugar Refinery Co., 64 Misc. Rep. 363; 137 App. Div. 881; 202 N. Y. 522; Nitro Powder Co. v. Agency of C. C. & F. Co., 233 N. Y. 294; Clarksville Land v. Harriman, 68 N. H. 374; Ontario Fruit Growers v. Cutting Fruit Packing Co., 134 Cal. 21; Marks Realty Co. v. Hotel Hermitage Co., 170 App. Div. 484; Krell v. Henry, [1903] 2 K. B. 740; Maidment v. Krauss Milling Co., 225 App. Div. 492; McKenna v. McNamee, 15 Can. Sup. Ct. 311.) Where the parties contract with reference to a subject-matter predicated upon a basis or factor which it is assumed will continue to function and make performance possible, then the failure of that basis or factor to function, irrespective of the cause, as long as it be due to no fault of the parties, dissolves the obligation of both, (Lorillard v. Clyde, 142 N. Y. 456; Texas Co. v. Hogarth Shipping Co., 256 U. S. 619; Nitro Powder Co. v. Agency of C. C. & F. Co., 233 N. Y. 294.) The letters should have been admitted in evidence to show the setting in which the contract was made. (Atterbury v. Bank of Washington Heights, 241 N. Y. 231; White’s Bank of Buffalo v. Myles, 73 N. Y. 335; French v. Carhart, 1 N. Y. 96; Emmitt v. Penoyer, 151 N. Y. 564; Gillet v. Bank of America, 160. N. Y. 549; Tamplin S. S. Co. v. Anglo Mexican Pet. Products Co., [1916] 2 A. C. 397.) It was error to permit recovery on the basis of market value, and to exclude evidence of plaintiff’s ability to obtain other molasses from defendant at a lesser cost. (Saxe v. Penokee, 159 N. Y. 371; Lawrence v. Porter, 63 Fed. Rep. 62; Siegel v. Huebshman, 187 App. Div. 548; Silberman v. Faber Piano Co., 190 N. Y. Supp. 629.)

      George de Forest Lord, Thaddeus G. Cowell and Jesse Hoyt for respondent.
    The contract was unconditional and defendant cannot avoid its unrestricted undertaking because of the failure of a third party to manufacture the molasses which defendant expected to obtain in time to make delivery to the plaintiff. (Marsh v. Johnston, 125 App. Div. 597; 196 N. Y. 511; Krulewitch v. National Importing & Trading Co., 195 App. Div. 544; Richards & Co. v. Wreschner, 174 App. Div. 484; Boker v. Demorest Mfg. Co., 28 Misc. Rep. 263; Cannistraci v. Chieves & Co., 165 N. Y. Supp. 933; Booth v. Spuyten Duyvil Rolling Mill Co., 60 N. Y. 487; Ciocca-Lombardi Wine Co. v. Fucini, 204 App. Div. 392; 236 N. Y. 584; Whitehouse v. Staten Island Water Co., 101 App. Div. 112; Hecla Powder Co. v. Sigua Iron Co., 91 Hun, 429; 157 N. Y. 437; Bigler v. Hall, 54 N. Y. 167; Thomas v. Dickinson, 23 Barb. 431; Beebee v. Johnson, 19 Wend. 500; Day v. United States, 245 U. S. 159; Northern Pac. Ry. Co. v. Amer. Trading Co., 195 U. S. 439; Jacksonville, etc., Railway v. Hooper, 160 U. S. 514; The Harriman, 76 U. S. 161; Dermott v. Jones, 2 Wall. 1; City of Minneapolis v. Republic Creosoting Co., 161 Minn. 178; Kingsville Cotton Oil Co. v. Dallas Waste Mills, 210 S. W. Rep. 832; Roberts v. Lumber Co., 76 W. Va. 290; Pennsylvania R. Co. v. Reichert, 58 Md. 261; Stone v. Dennis, 3 Porter [Ala.], 231.) It was not error to exclude the letters. (Elefante v. Pizitz, 182 App. Div. 819; Carthage T. P. Mills v. Village of Carthage, 200 N. Y. 1; Chelsea Exchange Bank v. Weinstein, 248 N. Y. Supp. 47.) A purchaser is not bound to accept goods from a defaulting seller when the goods are offered at a price higher than the price named in the contract. (Havemeyer v. Cunningham, 35 Barb. 515; Saxe v. Penokee Lumber Co., 159 N. Y. 371.)
   Cardozo, Ch. J.

A buyer sues a seller for breach of an executory contract of purchase and sale.

The subject-matter of the contract was approximately 1,500,000 wine gallons Refined Blackstrap [molasses] of the usual run from the National Sugar Refinery, Yonkers, N. Y., to test around 60% sugars.”

The order was given and accepted December 27, 1927, but shipments of the molasses were to begin after April 1, 1928, and were to be spread out during the warm weather.

After April 1, 1928, the defendant made delivery from time to time of 344,083 gallons. Upon its failure to deliver more, the plaintiff brought this action for the recovery of damages. The defendant takes the ground that, by an implied term of the contract, the duty to deliver was conditioned upon the production by the National Sugar Refinery at Yonkers of molasses sufficient in quantity to fill the plaintiff’s order. The fact is that the output of the refinery, while the contract was in force, was 485,848 gallons, much less than its capacity, of which amount 344,083 gallons were allotted to the defendant and shipped to the defendant’s customer. The argument for the defendant is that its own duty to deliver was proportionate to the refinery’s willingness to supply, and that the duty was discharged when the output was reduced.

The contract, read in the light of the circumstances existing at its making, or more accurately in the fight of any such circumstances apparent from this record, does not keep the defendant’s duty within boundaries so narrow. We may assume, in the defendant’s favor, that there would have been a discharge of its duty to deliver if the refinery had been destroyed (Stewart v. Stone, 127 N. Y. 500; Dexter v. Norton, 47 N. Y. 62; Nitro Powder Co. v. Agency of C. C. & F. Co., 233 N. Y. 294, 297), or if the output had been curtailed by the failure of the sugar crop (Pearson v. McKinney, 160 Cal. 649; Howell v. Coupland, 1 Q. B. D. 258; 3 Williston on Contracts, § 1949) or by the ravages of war (Matter of Badische Co., [1921] 2 Ch. 331; Horlock v. Beal, [1916] 1 A. C. 486) or conceivably in some circumstances by unavoidable strikes (American Union Line v. Oriental Navigation Corp., 239 N. Y. 207, 219; Normandie Shirt Co. v. Eagle, Inc., 238 N. Y. 218, 229; Delaware, L. & W. Co. v. Bowns, 58 N. Y. 573; and cf. Blackstock v. New York & Erie R. R. Co., 20 N. Y. 48; also 2 Williston on Contracts, § 1099, pp. 2045, 2046). We may even assume that a like result would have followed if the plaintiff had bargained not merely for a quantity of molasses to be supplied fiom a particular refinery, but for molasses to be supplied in accordance with a particular contract between the defendant and the refiner, and if thereafter such contract had been broken without fault on the defendant’s part (Scialli v. Correale, 97 N. J. L. 165; cf., however, Marsh v. Johnston, 125 App. Div. 597; 196 N. Y. 511). The inquiry is merely this, whether the continuance of a special group of circumstances appears from the terms of the contract, interpreted in the setting of the occasion, to have been a tacit or implied presupposition in the minds of the contracting parties, conditioning their belief in a continued obligation (Tamplin S. S. Co. v. Anglo-Mexican P. P. Co., [1916] 2 A. C. 397, 406, 407; Blackburn Bobbin Co. v. Allen & Sons, Ltd., L. R. [1918] 1 K. B. 540; Lorillard v. Clyde, 142 N. Y. 456; 3 Williston on Contracts, § 1952).

Accepting that test, we ask ourselves the question what special group of circumstances does the defendant lay before us as one of the presuppositions immanent in its bargain with the plaintiff? The defendant asks us to assume that a manufacturer, having made a contract with a middleman for a stock of molasses to be procured from a particular refinery would expect the contract to lapse whenever the refiner chose to diminish his production, and this in the face of the middleman’s omission to do anything to charge the refiner with a duty to continue. Business could not be transacted with security or smoothness if a presumption so unreasonable were at the root of its engagements. There is nothing to show that the defendant would have been unable by a timely contract with the refinery to have assured itself of a supply sufficient for its needs. There is nothing to show that the plaintiff in giving the order for the molasses, was informed by the defendant that such a contract had not been made, or that performance would be contingent upon obtaining one thereafter. If the plaintiff had been so informed, it would very likely have preferred to deal with the refinery directly, instead of dealing with a middleman. The defendant does not even show that it tried to get a contract from the refinery during the months that intervened between the acceptance of the plaintiff’s order and the time when shipments were begun. It has wholly failed to reheve itself of the imputation of contributory fault (3 Williston on Contracts, § 1959). So far as the record shows, it put its faith in the mere chance that the output of the refinery would be the same from year to year, and finding its faith vain, it tells us that its customer must have expected to take a chance as great. We see no reason for importing into the bargain this aleatory element. The defendant is in no better position than a factor- who undertakes in his own name to sell for future delivery a special grade of merchandise to be manufactured by a special mill. The duty will be discharged if the mill is destroyed before delivery is due. The duty will subsist if the output is reduced because times turn out to be hard and labor charges high (cf. Day v. United States, 245 U. S. 159, 161; Northern Pac. Ry. Co. v. American Trading Co., 195 U. S. 439, 467).

The defendant assigns as error the exclusion of correspondence that passed between itself and the plaintiff after April 10, 1928, when deliveries began. The letters, if received, would not have affected the result.

Error also is assigned in a ruling as to damages.

The plaintiff kept the contract alive till October 25, 1928, when it gave notice that it would go out into the open market, buy what molasses it required, and charge the defendant with the difference.

On June 27, 1928, while the defendant was still holding out the hope that deliveries might be made, it offered to supply the plaintiff with other molasses (400,000 gallons), the output of a different refinery, at six and one-half cents per gallon, about a cent less than the average market price in June. The offer was coupled with a notice that it would be deemed to be revoked unless the plaintiff’s, order for the molasses so offered was received by the defendant not later than July 2.

The price quoted in this offer was less than the market price in June, but substantially more than the price (four and three-quarters cents per gallon) at which the plaintiff had agreed to buy.

We see no merit in the claim that plaintiff, while still keeping the contract .open, was chargeable with a duty to accept the substitute for performance tendered by the delinquent seller (Havemeyer v. Cunningham, 35 Barb. 515).

The defendant, in making the tender, did not suggest that the plaintiff was under a duty to accept it. The tender was made “ not as a matter of obligation,” but for accommodation solely. The plaintiff might accept or reject as it preferred.

Another tender of substituted performance was made by the defendant on October 26, 1928, upon receipt of notice from the plaintiff that there would be a purchase in the market. Again in a spirit of accommodation ” the defendant made a tender, not of molasses, but of another contract for molasses. “ We are willing to let you have 400,000 to 850,000 gallons of molasses, at our option, 7-1 /4 / per gallon, f. o. b., New York or Philadelphia/’ the offer to be deemed revoked if not accepted by return mail. The market price at that time was about one-half a cent higher.

The plaintiff replied in substance that it had no longer any faith in the defendant’s readiness or ability to live up to its engagements, and did not wish to add another contract to the one already broken.

The law did not charge it with a duty to make such an experiment again.

Other rulings complained of by the defendant have been considered, and no error has been found in them.

The judgment should be affirmed with costs. (See 258 N. Y. 603.)

Pound, Crane, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur.

Judgment affirmed.


source: Caselaw Access Project

author: Pound, J.

license: Public Domain

text:
    Stanley C. Eaton, Respondent, v. Bernard Reich, Appellant.
    (Argued December 3, 1931;
    decided January 5, 1932.)

      Harry A. Gordon for appellant.
    A subscription for bonds is an agreement to lend money, and upon breach the amount of the loan is not recoverable. No special damages were alleged or proved and the recovery should have been limited to nominal damages. (Brownell v. Town of Greenwich, 114 N. Y. 518; Avalon Construction,

      Corp. v. Kirch Holding Co., 256 N. Y. 137; B. E. & C. R. R. Co. v. N. Y., L. E. & W. R. R. Co., 123 N. Y. 316; All American Securities Co. v. Foundation Co., 211 App. Div. 684; Spielvogel v. Veit, 197 App. Div. 804; First Nat. Bank v. Story, 200 N. Y. 346.)

      Abraham Unger for respondent.
    The correct measure of damage is the amount of the defendant’s subscription. (Keuka College v. Ray, 167 N. Y. 96; Allegheny College v. National Chautauqua County Bank, 246 N. Y. 369; Thomas County Cooperative Business Assn. v. Pearson, 124 Kan. 430; Matter of South, 205 Ala. 31; Huron Lodge v. Hinckley, 50 S. D. 355; United Masonic Temple v. Harris, 242 Ill. App. 296; American Legion v. Thompson, 121 Kan. 124; Bradford R. R. Co. v. New York R. R. Co., 123 N. Y. 316; Johnson v. Marks, 66 Misc. Rep. 153; Baldwin v. United States Telegraph Co., 45 N. Y. 744; Southern Cotton Oil Co. v. Hiflin, 99 Fed. Rep. 309.) The agreement was intended to and did create a subscription contract between the Level Club and the defendant. (Keuka College v. Ray, 167 N. Y. 96; Locke v. Taylor, 161 App. Div. 44; Russian Symphony Society v. Halstein, 199 App. Div. 353; Allegheny College v. National Chautauqua County Bank, 246 N. Y. 369; Thomas County Cooperative Business Assn. v. Pearson, 124 Kan. 430; Busch v. Stromberg Carlson Tel. Mfg. Co., 217 Fed. Rep. 328; Laney v. Faulkner County Hospital, 292 S. W. Rep. 364; G. & S. W. R. R. Co. v. Ennor, 116 Ill. 55; Huron Lodge v. Hinckley, 50 S. D. 355; United Masonic Temple v. Harris, 242 Ill. App. 296; American Legion v. Thompson, 121 Kan. 124; Eastern Plank Road Co. v. Vaughn, 14 N. Y. 546; Eastern States Agricultural & Industrial League v. Vial’s Estate, 97 Vt. 495; Matter of South, 205 Ala. 31.)
   Pound, J.

The action is on a subscription agreement, assigned to plaintiff, which reads as follows:

“ Subscription to Building Fund of the Level Club, Inc.,
“ 922 St. Nicholas Avenue, New York.
“ The undersigned hereby subscribes for the number of 6% Gold Bonds of the Building Fund of the Level Club, Inc., indicated below, and does hereby agree to pay the Treasurer of the Building Fund of the Level Club, Inc., for said bonds at the rate of $100 per bond, in equal monthly installments.
“It is hereby distinctly understood and agreed that said bonds shall be used for the purpose of creating a fund to be known as the Building Fund of the Level Club, Inc., to obtain, construct, furnish and equip the New Building for said Level Club.
“ Interest will be paid on each unit of $100 received.
“ Name, Bernard Reich. No.
“ Residence, 838 West End Avenue.
Business Address, 40 St. and 7th Ave.
“ Business Phone, Penn. 2800. Home Phone, Riverside 0867.
“ Number of Bonds Subscribed, 60. Amount Subscribed, $5,000.00.
“ To be paid in 4 installments.
“ Dated, New York, Feb. 15th, 1927.
“ BERNARD REICH.”

The Level Club, Inc. is a membership corporation. In reliance on this and other like subscriptions it built and equipped a club house. Defendant contends that the paper sued on is nothing more than an agreement to make a loan and that on the subscriber’s default, in the absence of pleading and proof of special damages, only nominal damages are recoverable. (Avalon Construction Corp. v. Kirch Holding Co., 256 N. Y. 137.) The courts below have held that the paper is a subscription of money made to the Level Club, Inc. which is sustained by a consideration ■ and may be enforced for the full amount thereof. (Allegheny College v. National Chautauqua Co. Bank, 246 N. Y. 369.)

When a club or other membership corporation seeks to raise a building fund for the purpose of erecting a club house at least three courses are open to it:

First. It may solicit subscriptions to the fund and, while such subscriptions may not be squared with the doctrine of consideration in all its ancient rigor ” (Cardozo, Ch. J., in Allegheny College v. National Chautauqua Co. Bank, supra, p. 374), the courts have been solicitous to enforce them by holding whenever possible that a consideration was given whereby an offer was converted into a promise and a contract was created. Such is not the case before us for no intention to make a gift to the building fund appears. The subscriber might have thought that he would not see his money again but the transaction took the form of an offer to buy bonds if the club would build a club house and not of a promise to give money in that event.

Secondly. It may organize a stock corporation for the purpose of erecting and equipping the club house and solicit subscriptions to its stock. Subscriptions to the shares of a corporation may be collected by it. (Stock Corp. Law; Cons. Laws, ch. 59, § 68.) The subscriber purchases a shareholder's right in the corporation for which he must pay in accordance with the terms of his subscription. The consideration may be inadequate but that is the subscriber’s affair. The result may be no dividends and nothing to distribute at dissolution but the contract is definite and certain. Here we have no promise to purchase property of any sort. The bonds were to be issued as evidence of a debt owing from the Level Club, Inc. to the subscriber. The bond of the obligor is in the hands of the obligee a mere promise to pay. Refusal to take such a bond is the breach of a promise to loan money. Nothing more.

Thirdly. It may borrow the money. It may endeavor to obtain a single building loan from some bank or loan association but, of tener it undertakes to sell bonds to as many of its members or prospective members as possible in small denominations. Such a transaction is essentially a loan of money on a promise of repayment. Subscribers to the agreement to take such bonds may be willing to forego the prospect of collecting principal and interest in full yet they have at least the hope that the bread which they cast on the water may return after many days. Such was the course pursued by the Level Club, Inc. The distinction between a charitable subscription, a stock subscription and an agreement to loan money is basic and may not be disregarded.

The club house was built without the money which defendant agreed to lend it. It is elementary that “ a breach of contract to make a loan, standing by itself, involves no legal damage. (Kellogg, J., in Avalon Construction Corp. v. Kirch Holding Co., supra, 141.)

It may be inferred that the subscriber would not have made a “ gift ” of his money to the Level Club, Inc. if the proposition had been put to him in that form. At least, the corporation did not ask him to promise to give money if it would use the money to build the house. If it would build the house, defendant promised to lend $5,000 to that end. The money may have been obtained from other sources. In that event, no legal damage was involved. One man’s money was as good as another’s. An inability to obtain the money elsewhere may have caused the corporation special damage, but no peculiar circumstances are disclosed which suggest that fact.

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

Cardozo, Ch. J., Crane, Lehman, Kellogg, O’Brien and Httbbs, JJ., concur.

Judgments reversed, etc.


author: Crane, J.

text:
    Frieda Schaffran, Appellant, v. The Press Publishing Company, Respondent.
    (Argued December 3, 1931;
    decided January 5, 1932.)

      Arthur Hutter for appellant.
    A comparison between the publication and the trial it purports to report establishes conclusively that the report was neither fair nor true and, therefore, not privileged. (Warner v. Press Publishing Co., 8 N. Y. Supp. 341; 132 N. Y. 181; Breslin v. Star Co., 85 Misc. Rep. 609; 166 App. Div. 89.)

      Charles B. Brophy for respondent.
    The defense of privilege under section 337 of the Civil Practice Act was made out. (Lee v. Brooklyn Union Pub. Co., 209 N. Y. 245; D’Auxy v. Star Co., 31 Misc. Rep. 388; Hemmens v. Nelson, 138 N. Y. 517.)
   Crane, J.

This is an action of libel in which the complaint has been dismissed on the ground that the article appearing in the defendant’s newspaper was a fan and true report of a judicial proceeding.

The complaint sets forth the alleged libelous article to be the following:

Asking no alimony and encountering no opposition, Mme. Bronislawa Lamprecht de Petschenko obtained a divorce decree yesterday in Supreme Court against Conrad Lamprecht.

“ Justice Townley awarded the decree when she produced testimony that her husband lived during parts of 1925 and 1926 with a woman known as Mrs. Schafran, and that he and an unidentified woman were surprised by a divorce raiding party at No. 27 West 94th Street, Jan. 31, 1927. Mr. Lamprecht was not in court. She was.

Mme. de Petschenko, sometimes known as c Countess de Petschenko ’ or as 1 Baroness de Petschenko ’, was the centre of a society turmoil last December in connection with her promotions of benefits for refugee Russian children in Europe. On Dec. 21 she appeared before the Department of Public Welfare to vindicate herself of scandal in the use of the funds by showing her accounts.

“ Her activities were investigated and she was given a clean slate.”

It further states that the plaintiff, Frieda Schaffran, is a married woman living with her husband, and the article imputes to her unchastity in that the court adjudged her guilty of adultery with a Mr. Lamprecht. The answer sets forth as an affirmative defense to this complaint the pleadings in the divorce case in which Bronislawa Lamprecht sued her husband, Conrad Lamprecht for divorce, alleging improper conduct with Mrs. Schaffran at 14 West One Hundredth street, New York city, and also with an unknown woman at 27 West Ninety-fourth street, New York city. The answer then contains portions of the evidence given upon the default trial of this divorce case, wherein it appears that the janitor of the apartment house, 14 West One Hundredth street, swore that Mrs. Schaffran lived in an apartment in his building, and that Mr. Lamprecht lived there also. There were two bedrooms. He does not attempt to say that they lived there as man and wife or that any improper relations existed between them. Further testimony was also given, as in this libel trial all the evidence in the divorce case was introduced. As to the unknown woman the testimony was conclusive. A raid had been made on 27 West Ninety-fourth street and Mr. Lamprecht found in bed with the woman who was unidentified. There was no defense. At the close of the trial of the divorce case the judge said: “ I will give judgment for the plaintiff. Submit findings and decree.” He did not say that he found Mrs. Schaffran had committed adultery with Mr. Lamprecht or had lived in improper relations with him. The findings and decree were not entered in the case until after the publication in the newspaper of which complaint is made. However, in the decree the judge exonerated Mrs. Schaffran and based his findings upon the evidence against the unknown woman.

Of course the reporter could know nothing about these findings or the judgment on the thirtieth day of March, when he wrote the article appearing in print. This was the day after the trial. He undertook, however, in writing his article, to complete that which the judge had left incomplete; he attempted to make the findings which the judge had reserved for a later day, for in the publication he wrote, Justice Townley awarded the decree when she produced testimony that her husband lived during parts of 1925 and 1926 with a woman known as Mrs. Schafran.” The decree had not been signed nor entered. By the very instruction of the judge it was to be submitted with the findings. The judge had not found, as these words implied, that Mrs. Sehaffran had committed adultery with Mr. Lamprecht. On the hearing of the libel case counsel for the defendant conceded that the words of the printed article implied and meant to charge improper conduct upon the part of Mrs. Sehaffran. This is the effect of his concession that the publication is libelous per se.

We think that the reporter went too far. Looking at the matter as a pure proposition of law, without intimating that the reporter acted willfully or recklessly, we think that the article was not a fair and true report of the default divorce action and does not come within the protection of section 337 of the Civil Practice Act. (Lee v. Brooklyn Union Publishing Co., 209 N. Y. 245; Campbell v. New York Evening Post, Inc., 245 N. Y. 320.) The evidence which the reporter heard did not prove to the mind of the judge, as he stated that it did, the adultery of Mrs. Sehaffran. He made a guess at what the judge would find and guessed wrong.

The complaint should not have been dismissed, but all the facts and circumstances should have been submitted to the jury to determine whether, considering the divorce action in which Mrs. Sehaffran was alleged to be a corespondent and the evidence given against her as to a joint habitation with Mr. Lamprecht, the defendant’s publication did or could have caused her any damage.

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

Caedozo, Ch. J., Pound, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur.

Judgments reversed, etc.


author: Kellogg, J.

text:
    Philip Arcara, Respondent, v. Mario Moresse, Appellant, Impleaded with Another. Antoinette Arcara, Respondent, v. Mario Moresse, Appellant, Impleaded with Another. Josephine Arcara, Respondent, v. Mario Moresse, Appellant, Impleaded with Another.

      (Argued November 19, 1931;
    decided January 5, 1932.)

      Frank Gibbons for appellant.
    While the defendant-appellant owned the automobile involved in the collision, it was not at the time of the accident being legally used or operated, with his permission. (Ferris v. Sterling, 214 N. Y. 249; Potts v. Pardee, 220 N. Y. 431; Rose v. Balfe, 223 N. Y. 481; Swackhamer v. Fallon, 226 N. Y. 444; Dean v. Metropolitan Elevated Ry. Co., 119 N. Y. 540; Psota v. Long Island Ry. Co., 246 N. Y. 388; Leppard v. O’Brian, 225 App. Div. 162; Fluegel v. Coudert, 244 N. Y. 393; Grant v. Knepper, 245 N. Y. 158; Jorgensen v. Jaeger, 257 N. Y. 171; Legenbauer v. Esposito, 187 App. Div. 811; Owen v. Gruntz, 216 App. Div. 19; Atwater v. Lober, 133 Misc. Rep. 652.) The owner of an automobile has a right to restrict the use of his car as he may please and when he does so and there is a deviation from his restriction by the person to whom he loans it, he is not liable. (Chaika v. Vanderberg, 252 N. Y. 101; Owen v. Gruntz, 216 App. Div. 19; Feitelberg v. Matuson, 124 Misc. Rep. 595.)

      Ford White for respondents.
    By employing the words, “ legally using or operating the same,” the Legislature evidently, intended that Lability should not be restricted to negligent driving by the bailee of the car. (Feitelberg v. Matuson, 124 Misc. Rep. 595.)
   Kellogg, J.

The plaintiffs in these actions were occupants of a c.ar with which an automobile owned by the defendant came into collision. There was evidence that the collision was occasioned by the negligence of the driver of the defendant’s car. The resulting damage to each plaintiff was stipulated, and motions for a directed verdict were made by counsel for the opposing parties. Thereupon the court directed verdicts in favor of the plaintiffs against the defendant owner for the amounts stipulated.

It is conceded that, prior to the collision, the defendant owner had loaned his car to Maggio, his nephew, for his personal use; that Maggio was in the car when the collision occurred; that the car was then being driven by Barone, the friend of Maggio, with the latter’s permission; that Barone was negligent; that Maggio, except as the acts and omissions of Barone were his, was not guilty of negligence. It was shown that, although the defendant owner had permitted Maggio to make use of the car for his own personal ends, his assent to such use was accompanied by instructions that Maggio must not let Barone, or any person other than himself, drive or operate the vehicle.

The question to be determined is whether or not the recoveries were authorized by the provisions of section 282-e of the Highway Law (now section 59 of the Vehicle and Traffic Law; Cons. Laws, ch. 71) which impose liability upon the owner of every motor vehicle for death or personal injuries “ resulting from negligence in the operation of such motor vehicle * * * by any person legally using or operating the same with the permission, express or implied, of such owner.”

We think that Maggio was at the time using ” the car, though Barone was driving, for Maggio did not abandon the car or its use when he surrendered to another the guidance of the wheel;” he was “ still the director of the enterprise, still the custodian of the instrumentality confided to his keeping, still the master of the ship.” (Per Cardozo, Ch. J., in Grant v. Knepper, 245 N. Y. 158, 165.) We think, also, that Maggio was at the time using the car with “ the permission ” of the defendant owner. True it is, that if the collision had occurred in a territory where use had been expressly proscribed by the owner, Maggio would then have been using the car without permission. (Chaika v. Vandenberg, 252 N. Y. 101.) Nor would it have been a permitted use, if Maggio, against the express instructions of the owner, had employed the car to provide a pleasure trip for Barone. (Psota v. Long Island R. R. Co., 246 N. Y. 388.) An owner in loaning his car may reasonably restrict the uses to which it may be put; consequently, its employment for a proscribed purpose cannot be a permitted use. On the other hand, if the hunting instructions relate to the manner of operation, such as the speeding or careless pilotage of the car, though the instructions be disobeyed, nevertheless the use is with permission ” of the owner. Maggio was not instructed that Barone should not be accepted as a guest; he was merely told that Barone must not drive. The thing forbidden related to the operation of the car, not to the use which might be made of it. We conclude that Maggio was using ” the car with the permission of the owner.

The statement has been made that throughout the Highway Law (Cons. Laws, ch. 25) the word “ operate ” is used as signifying a personal act in working the mechanism of a motor vehicle. The driver operates the car for the owner, but the owner does not operate the car unless he drives it himself.” (Per Pound, J., in Witherstine v. Employers Liability Assur. Corp., 235 N. Y. 168, 172.) These words were written, and the case decided prior to the introduction into the Highway Law of section 282-e, through the enactment of chapter 534 of the Laws of 1924. In so far as the quoted words carry the implication that, to operate ” a motor vehicle, one must himself manipulate the steering wheel, they cannot be regarded as conclusively determining the significance of the word “ operation ” or the word “ operating ” as employed in the section. This, not only for the reason that the section had not been enacted when the case was decided, but because there is self-contained in the statute a word combination belying the signification which the words quoted from the case might otherwise be thought to impress upon the statutory words. To bind the owner, there must be “ negligence in the operation ” of the motor vehicle; but the negligent act may be performed either “ by any person legally using ” the motor vehicle, or by any person “ operating the same.” Thus, the legal user may be guilty of negligence in “ operation,” though not “ operating ” the car, in the sense that he is driving with his own hands. The clear implication is that, if the legal user at the time be present in the car, still “ the director of the enterprise,” still the master of the ship,” the operation of the car is his operation, though the hands at the wheel are those of a substitute, and the negligent driving will bind the owner, with whose permission the car is used. That such is the meaning of the statute is indicated by the opinion in Grant v. Knepper (supra), when it was said: We think the effect of the statute is to read into our law the rule of liability laid down in Geiss v. Twin City Taxicab Co. (120 Minn. 368) ” (p. 165). This is the rule to which reference was made: “We approve the rule that, when the master entrusts the performance of an act to a servant, he is liable for the negligence of one who, though not a servant of the master, in the presence of his servant and with his consent negligently does the act which was intrusted to the servant.” (Geiss v. Twin City Taxicab Co., 120 Minn. 368, 371.) There were cases at the common law, other than Geiss v. Twin City Taxicab Co. (supra), which lend support to the rule as stated. Such was the case of Booth v. Mister (7 C. & P. 66), in which Lord Abinger said: “As the defendant’s servant was in the cart, I think that the reins being held by another man makes no difference;” and such the case of Simons v. Monier (29 Barb. 419, 422), involving the liability of a master for the negligence of a servant in causing a bonfire to be lighted by his son, where the court said of the servant: It was his immediate personal act, for although it was done by the hand of the son, the hand was directed, guided and controlled by the mind and will of the father.” We think that, in our case, there was negligence in the operation ” of the motor vehicle, committed by a person legally using ” it, with the permission ” of the owner, so that the owner, under section 282-e, became hable for the damage done.

The judgment in each action should be affirmed, with costs.

Cardozo, Ch. J., Pound, Crane, Lehman, O’Brien and Hubbs, JJ., concur.

Judgments affirmed.


author: Cardozo, Ch. J.

text:
    Cortlandt F. Bishop, Individually and as Executor of and Trustee under the Will of David W. Bishop, Deceased, Appellant, v. Beatrice B. Bishop et al., Respondents.

      (Submitted November 30, 1931;
    decided January 5, 1932.)
   Cardozo, Ch. J.

Upon the decision of this cause in July, 1931, the court directed that the form of the remittitur be settled upon notice (Bishop v. Bishop, 257 N. Y. 40, 54).

Important differences have developed between the parties in interest in the attempted adaptation of the accounting decree to the new situation brought about by our ruling that the trusts are in part invalid. As to some of the differences there should be a statement of our views.

The court held in disposing of the appeal that the validity of the trusts as to personal property was governed by the law of Massachusetts, the State of the testator’s domicile; that the validity of the trusts as to real estate situated in New York was governed by New York law; that under that law there was created by the testator an illegal perpetuity in respect of the first of the three shares of the residuary estate; and that by reason of such perpetuity, Cortlandt Field Bishop became on the death of Mrs. Parsons the absolute owner in fee of the real estate in New York thus illegally devised.

By the terms of the will, the trustees were empowered in their discretion to use the personal estate in the improvement of real estate then included in the trust or in the purchase of other real estate in the city of New York.

The trustees (Mrs. Parsons, now deceased, and the plaintiff, Cortlandt Field Bishop) did, so it is said, improve the New York real estate, part of the first residuary share, and acquire additional New York real estate, allocated to that share, through the use for those purposes of the personal estate.

The plaintiff takes the position that by force of this application of the personal estate, he turned it into realty; that by so doing he succeeded in divesting or destroying the remainders, vested and contingent, bequeathed to the issue and to the charities (257 N. Y. at p. 50); and that he is for all purposes the absolute owner both of the newly acquired real estate and of the accretions to real estate previously acquired, free from a duty to account to any one therefor.

We are unable to approve the argument. The will, as we have pointed out (257 N. Y. at p. 52), was either valid or invalid at the time it took effect, the date of the testator’s death. In respect of the New York real property then included in the estate, the will was then invalid in so far as it suspended the power of alienation for more than two fives in being. In respect of personal property it was valid, for it did not create an illegal perpetuity under the law of Massachusetts. The remainders, vested and contingent, legal and equitable, appointed by the testator in respect of his personal estate, were immune from destruction by any act of the plaintiff, and surely so by any act for the aggrandizement of his own interest at the expense of the beneficiaries whom he was under a duty to protect. If any other conclusion were accepted, he might have turned the whole share into real estate, though there had been none at the beginning, and thus taken the whole from others and given it to himself. A trustee who exercises a discretionary power of sale or of investment does not in so doing add anything to or detract anything from the validity or invalidity of the gifts effected by the will (Butler v. Green, 65 Hun, 99, 102).

We are not forgetful of the fact that the statutes of New York governing perpetuities in respect of real estate are the expression of a local policy (Carrier v. Carrier, 226 N. Y. 114, 122), which may not be evaded by the mere device of purchasing the real estate with moneys belonging to non-residents. The investment being made, the power of alienation will be governed by our laws. This does not mean, however, that the trustee will be relieved in such circumstances from a duty to account to his beneficiaries, the equitable owners of the personal estate, whose moneys will otherwise have been diverted to his use. The land may be sold whenever the period of limitation permitted by our laws will authorize a sale, but the proceeds to the extent that they represent an investment of the personalty will become part of a trust under the law of Massachusetts, and must be accounted for as such. If personal property has been used in the improvement of the real estate, the result will be a lien to be measured by the increment of value. If personal property has been used in the purchase of additional real estate, the proceeds of the sale must be accounted for to those contributing the moneys by which the investment became possible. In the meantime, the trustee will be accountable for the rents and profits in submission to the same equities that would affect him if the land so improved or acquired had already been sold and reconverted into money. The policy of the statute of perpetuities is not violated if there is capacity to pass to a purchaser an absolute fee in possession, a fee undiminished and unaffected by any trust or limitation. The policy has nothing to do with the disposition of the proceeds in a case where the land has been acquired after the death of the testator, and acquired by the investment of personalty subject to a foreign law (Cross v. United States Trust Co., 131 N. Y. 330; Robb v. Washington & Jefferson College, 185 N. Y. 485, 496; cf. Goodrich on Conflict of Laws, p. 336). The situation might be different if the investment had been made with moneys subject to our law or had been made in execution of a mandatory power (Robert v. Corning, 89 N. Y. 225, 239). The power being discretionary and the moneys before investment being part of a lawful trust created under the laws of Massachusetts, they resume their original quality, when released from the investment, and become part of a lawful trust again, to be accounted for as proceeds and no longer to be viewed as land.

We find nothing to the contrary in White v. Howard (46 N. Y. 144). The question in that case was one as to the capacity of a grantee to take, and the ruling was that this capacity, where foreign moneys were laid out in lands within our borders, must be governed by our law. The decision tells us nothing as to the duty of a trustee who has applied the moneys of remaindermen for the enhancement of his own estate.

As to other differences between the parties, we state our conclusions without argument.

The court did not intend by its previous opinion to intimate a belief that any of the limitations of the second and third shares of the residuary estate were ineffective or unlawful.

The power of appointment conferred upon Mrs. Parsons in respect of the first share was lawfully exercised, so far as it designated Cortlandt Field Bishop as the appointee thereunder. What was held to be invalid was the provision of the will of Mr. Bishop, separable from the general power, whereby the estate so appointed was declared to be subject to a trust and to limitations for the benefit of issue and others.

The moneys withdrawn by the plaintiff from the trust and now subject to be refunded should be secured by a lien to the extent and in the form proposed by counsel for the defendants.

The lien is not superior to any inchoate right of dower belonging to the plaintiff’s wife, except to the extent, if any, that the moneys so withdrawn have been used in the improvement of the real estate to which such right of dower has attached.

The court believes it inexpedient to declare with greater particularity at this time the method of adjusting the equities that may call for declaration and settlement in an action of partition, but will leave to the Supreme Court the power to dispose of such questions as they may hereafter arise.

The form of the remittitur will be settled accordingly.

Pound, Crane, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur.

Ordered accordingly.


author: Lehman, J.

text:
    In the Matter of the Claim of Sigrid Lofstedt, Appellant, against United States Gypsum Company, Respondent. State Industrial Board, Respondent.
    (Argued November 18, 1931;
    decided January 5, 1932.)

      Philip A. Sullivan for appellant.
    The claims of the widow and dependent child of the deceased are new claims, distinct from that of his disability claim and under the facts death benefits to them should be allowed. (Workmen’s Compensation Law, § 16.)

      Clarence B. Tippett for respondent.
    The employer should not be held legally chargeable under the Workmen’s Compensation Law for the death of the decedent. (Kunasek v. New York Consolidated Car Co., 176 App. Div. 135; Polloni v. Brooklyn-Manhattan Transit Corp.,
      215 App. Div. 634; Fischer v. Hoe & Co., 224 App. Div. 335; Frost v. Franklin, 204 App. Div. 700; 236 N. Y. 649; Tomasi v. Bonsignore, 210 App. Div. 805; Germantan v. American Radiator Co., 214 App. Div. 746; Tromowitz v. North American Knitting Mills, 214 App. Div. 827.)
   Lehman, J.

In June, 1925, the decedent sustained a fracture of the femur resulting in a deformity of the leg and a functional loss of the use of the leg of fifty per cent. He received a schedule award for the permanent loss of the use of the leg. The accident causing the injury concededly arose out of and in the course of the employment. Before the award was made the physician of the employer and self-insurer advised a further operation of a bone graft. The decedent refused any further operation. The employer and self-insurer made no claim that the refusal was unreasonable or that by such an operation the functional loss of the use of the leg would be reduced. It paid the award and again employed the decedent.

The decedent continued in that employ till August, 1928, at increased wages. He regretted his refusal to submit to the operation which the employer’s physician had advised. Then he asked whether the employer would still be willing to have the operation performed at its expense. He was referred to the company’s physician who again advised the operation. He went to the hospital and there the operation was performed. He died as a result of the operation. The award to his dependents for his death made by the State Industrial Board has been reversed by the Appellate Division. The question is whether the death was the result of the original injury.

The evidence shows that the operation was performed to counteract or reduce the effects of the original fracture which would otherwise be permanent. We may assume that if it was reasonable for the decedent to submit to an operation for that purpose after August, 1928, it would have been reasonable for him to submit to a similar operation in October, 1926, when it might have been performed with greater safety. None the less, after experience had demonstrated to the decedent the full disadvantage of his condition he could still avail himself of remedies reasonably calculated to reduce that disadvantage. The chain of cause and effect is longer, but it remains unbroken. The earlier refusal postponed the operation, but it did not cause it. The evidence even of the employer’s physician establishes that the operation was resorted to as a reasonable attempt to reduce the effect of the original injury. The fact that the employer had already paid the award made for the original injury is irrelevant when it appears that death resulted thereafter from a reasonable effort to reduce the effect of the injury.

The order of the Appellate Division should be reversed and the award of the State Industrial Board affirmed, with costs in this court and in the Appellate Division.

Cardozo, Ch. J., Pound, Crane, Kellogg, O’Brien and Hubbs, JJ., concur.

Ordered accordingly.


text:
    The People of the State of New York, Respondent, v. Jacob Schenkel, Appellant.
    (Argued November 19, 1931;
    decided January 5, 1932.)

      A. F. Walsh for appellant.
    Where the wife abandons the husband, he cannot be convicted as a disorderly person. (People v. Demos, 115 App. Div. 410; People v. DeWolf, 133 App. Div. 879; People v. Boettcher, 141 App. Div. 531; City of New York v. Itzkowitz, 200 App. Div. 839; People v. Pettit, 74 N. Y. 320.)

      John B. Smith, District Attorney (William E. Bennett of counsel), for respondent.
    The defendant was guilty of a violation of subdivision 1 of section 899 of the Code of Criminal Procedure. (People ex rel. Commrs. of Charities v. Cullen, 153 N. Y. 629; Williams v. Williams, 130 N. Y. 193.)
   Lehman, J.

Upon the complaint of his wife, the defendant has been adjudged a disorderly person ” as defined by subdivision 1, section 899 of the Code of Criminal Procedure, in that he actually abandoned his wife without adequate support and has left her in danger of becoming a burden upon the public, and he neglects to provide for her according to his means.

The parties were married in 1928. It was a marriage of convenience. Dissension immediately arose. The wife left her husband’s home in April, 1929. Reconciliation was followed by further dissension and husband and wife have not lived together since November, 1929. There has been no decree of separation, yet the husband has not provided his wife with any means of support and, unless she is able to earn sufficient to maintain herself, she must rely on the charity of others and is in danger of becoming a burden upon the public.

“It is the duty of the husband to support his wife, but he is not bound to support her away from his home, even though such home may be disagreeable to her.” (People ex rel. Comrs. of Charities v. Cullen, 153 N. Y. 630, 635.) So long as a husband is willing to support his wife in his home, he “ cannot be made a vagrant and a disorderly person, and held amenable to this statute by not complying with any condition in respect to support which the wife may see fit to impose, nor is it proper to refer the reasonableness of the conditions to the decision of a jury.” (People v. Pettit, 74 N. Y. 320, 324.) The criminal courts are not the proper forum for the determination of marital disputes. The husband’s obligation of support continues as long as the marriage relation is not dissolved or limited by a decree of divorce or separation. It ceases when such a decree is made, except as otherwise provided in the decree. True, a wife’s adultery or other misconduct, her failure to perform her own marital obligations, may deprive her of the right to insist upon performance of the husband’s obligation. Rights and obligations are usually relative. The obligation though unsatisfied is a shadow, when right to enforce it is lost. In the civil courts the relative rights and obligations of the parties to a marriage, like other relative rights and obligations, must be adjudged in accordance with the conduct of the parties. There, at times, faul't may be balanced against fault and obligation dissolved by loss of right to enforce it. A penal law may make failure to perform a duty to the State a crime, where the public interest demands its performance. Then the misconduct of the person to whom primarily the duty is owed becomes irrelevant. The only question before the court is whether the statute is directed, in the public interest, against failure to support a wife, regardless of her own conduct, and whether the evidence shows that the defendant has failed to perform this duty.

In England the Vagrancy Act (5 Geo. IV, ch. 83) was directed against failure to provide support where the husband is legally bound to maintain ” the wife. There the test was whether the husband owed a duty to the wife; and where her misconduct freed him from that duty the penal statute had no application. It is the same test which is applied in the civil courts when remedy is sought for the husband’s failure to provide necessaries to the wife. So the courts have construed the statute. (Rex v. Flintan, 1 B. & Ad. 227 [1830]; Flannagan v. Overseers of Bishop Wearmouth, 8 El. & Bl. 451.) The Poor Law amendment of 1868 (31 & 32 Viet. ch. 122) leaves open to the justices a wide discretion where balance of fault may be the determining factor. They have in general exercised this discretion in accordance with the rule embodied in the Vagrancy Act, though they have held that in some respects the later statute has wider application. (Thomas v. Alsop, L. R. 5 Q. B. 151; Culley v. Charman, L. R. [1881] 7 Q. B. D. 89.)

Even in England, where a wife willfully leaves her husband’s home “ the relief of the husband from the obligation of maintenance continues only so long as she voluntarily remains absent. * * * Nothing has happened to dissolve the relationship of husband and wife.” (Per Earl of Reading, C. J., in Jones v. Guardians, etc., [1920] 3 K. B. 381.) There the wife while still living apart from her husband became a lunatic unable to exercise any judgment, and it was said: She cannot elect to return home and while in that condition she becomes chargeable to the union. In those circumstances who ought to support her — the ratepayer' or the husband? I think that the answer is that so long as the relationship of husband and wife continues, it is the husband.”

In this State the penal statute leaves no discretion to the courts. A person is “ disorderly ” who leaves wife ■or children in danger of becoming a burden upon the public or who neglects to provide for them according to his means. Duty of provision is absolute and regardless of the wife’s fault. The public interest, in the opinion of the Legislature, requires that the husband, not the taxpayer, shall bear the burden of her support as long as the relationship of husband and wife is not altered or dissolved by decree of the court.

Of course, the statute does not intend to impose upon a husband the duty to provide a separate maintenance for the wife where, expressly or impliedly, he offers and is ready to provide support for her in a joint home. Then the test of whether there is breach of duty is the same under the statute as at common law where a third party seeks recovery for necessaries furnished to his wife because the husband has failed to support her. (People v. Pettit, supra.) If the husband’s home is not open to the wife, then he must provide for her support elsewhere, and the criminal courts will not consider whether the home is closed because of her fault or her husband’s, so long as the obligation of maintenance exists and the relationship of husband and wife continues.

Whether the obligation of maintenance continues after the wife has been guilty of adultery is not now before us. (See Jones v. Guardians, etc., supra.) Perhaps even there the ancient rule has been changed, and only dissolution of the marriage relation can destroy its incidents. (Cf. Real Prop. Law [Cons. Laws, ch. 50], § 196; Dec. Est. Law [Cons. Laws, ch. 13], § 87.) That we do not decide. In this case there is no suggestion that the wife has been guilty of adultery. She left her husband’s home because she found conditions intolerable. Even if she was unreasonable, the obligation to support her remained. Even after reconciliation she demanded change in the conditions of the home, but she has offered to return and the husband has not replied to her offer. Perhaps the husband may be entitled to a decree of separation on the ground of abandonment. Perhaps the wife may be entitled to a decree of separation with separate maintenance on the ground of cruelty. Such questions cannot be litigated in this prosecution. The evidence shows that the husband fails to .provide for his wife; and it supports an inference that his home is closed to her, and the husband produces no evidence to show that he has offered or is willing to support her in a home where she could reside.

The judgment should, therefore, be affirmed.

Cardozo, Ch. J., Pound, Crane, Kellogg, O’Brien and Hubbs, JJ., concur.

Judgment affirmed._


text:
    John A. Harriss, Respondent, v. J. Frederic Tams et al., Doing Business under the Firm Name of Tams, Lemoine & Crane, Defendants, and Charles King, Appellant.

      (Argued October 13, 1931;
    decided January 5, 1932.)

      R. Randolph Hicks and Lloyd F. Thanhouser for appellant.
    It was error to permit the plaintiff, after the conclusion of the trial, to amend his amended complaint so as to substitute a new and different cause of action for the one previously pleaded. (Hernandez v. Brookdale Mills, Inc., 119 Misc. Rep. 824 ; 205 App. Div. 882; Burke v. Bonat, 255 N. Y. 226; First Nat. Nank v. Farson, 226 N. Y. 218; Bierman v. City Mills Co., 151 N. Y. 482; Wait v. Borne, 123 N. Y. 592; Ahern v. Goodspeed, 72 N. Y. 108; Smith v. Tracy, 36 N. Y. 79; Lamphere v. Lang, 213 N. Y. 585; Brightson v. Claflin Co., 180 N. Y. 76; Reed v. McConnell, 133 N. Y. 425; Romeyn v. Sickles, 108 N. Y. 650; Southwick v. First Nat. Bank, 84 N. Y. 420; Beer v. Clyde S. S. Co., 212 App. Div. 463; Myers v. Brown, 142 App. Div. 658; Matter of Wood, 193 App. Div. 473; McNeil v. Cobb, 186 App. Div. 177; Walrath v. Hanover Fire Ins. Co., 216 N. Y. 220.) It was error to permit the plaintiff, long after the Statute of Limitations had run, to amend his amended complaint so as to substitute a new and different cause of action for the one previously pleaded. (Dietz v. Harris, 221 App. Div. 581; Nathan v. Wolverton, 149 App. Div. 791; Luce v. New York, C. & St. L. R. R. Co., 213 App. Div. 374; Northrup v. Village of Sidney, 97 App. Div. 271; Logeling v. N. Y. E. R. R. Co., 5 App. Div. 198; Quimby v. Claflin, 27 Hun, 611; Van Syckels v. Perry, 26 N. Y. Super. Ct. 621; Dobbs v. Pearl, 118 N. Y. Supp. 485.) Defendants, as agents for the seller, made no warranty of the speed of the boat. (Matter of Case, 214 N. Y. 199; Kirsch & Co. v. Benyunes, 105 Misc. Rep. 648; 191 App. Div. 904; Lawton v. Keil, 61 Barb. 558.) Assuming that defendants did warrant the speed of the boat and that such warranty was unauthorized when made, it was subsequently ratified by the seller, who retained the purchase money with knowledge of the warranty, and defendants were thereby relieved of liability. (Bloomquist v. Farson, 222 N. Y. 375; Taylor v. Commercial Bank, 174 N. Y. 181; Fairchild v. McMahon, 139 N. Y. 290; Krumm v. Beach, 96 N. Y. 398; Garner v. Mangam, 93 N. Y. 642; Baker v. Union Mut. Life Ins. Co., 43 N. Y. 283; Elwell v. Chamberlin, 31 N. Y. 611; Bennett v. Judson, 21 N. Y. 238; Sharlette v. Lake Placid Co., 194 App. Div. 844; Washburn v. Rainier Co., 130 App. Div. 42.) It was error to award judgment against defendants for the full purchase price of the boat, as that would only be the proper recovery upon a rescission of the sale, and rescission cannot be asserted against an agent. (Commercial Credit Corp. v. Wells, 228 App. Div. 402; Zimmele v. American Plaster Board Co., 1 App. Div. 327; Levy v. Horsfall, 179 N. Y. Supp. 564; Moore v. Maddock, 251 N. Y. 420; Taylor v. Nostrand, 134 N. Y. 108; White v. Madison, 26 N. Y. 117.)

      C. Frank Reavis, Jr., and Martin D. Jacobs for respondent.
    The amendment of the pleadings was a discretionary act clearly within the power of the trial court, and since this exercise of discretion has been upheld by the Appellate Division, there can be no question of law for the Court of Appeals. (Deyo v. Morss, 144 N. Y. 216; Feizi v. Second Russian Ins. Co., 199 App. Div. 775; Meyer v. Redmond, 205 N. Y. 483; Dahlstrom v. Gemunder, 198 N. Y. 449; Luckes v. Meserole, 132 App. Div. 20; White v. Madison, 26 N. Y. 117; New Georgia Nat. Bank v. Lippman, 249 N. Y. 307; Shirley v. Bernheim, 123 App. Div. 428.) That the amendment was allowed at a time when the new cause of action would have been barred by the Statute of Limitations, while a matter to be considered by the trial court in the exercise of its discretion, was no bar to the relief. (Foster v. Central Nat. Bank, 183 N. Y. 379; Eighmie v. Taylor, 39 Hun, 366; Hatch v. Central Nat. Bank, 78 N. Y. 487; Sherri v. National Surety Co., 243 N. Y. 266; Martin v. Home Bank, 160 N. Y. 190; Hodges v. Tennessee Marine & Fire Ins. Co., 8 N. Y. 416.) The evidence is sufficient to support a recovery for breach of the implied warranty of authority. (Hawkins v. Pemberton, 51 N. Y. 198; Coleman v. Simpson, Hendee & Co., 162 App. Div. 335.) Defendant cannot avoid liability on the ground that plaintiff could have recovered from the seller, for there was no liability or ratification on the part of the seller. (Smith v. Tracy, 36 N. Y. 79; Baldwin v. Burrows, 47 N. Y. 199; Deyo v. Hudson, 225 N. Y. 602.) The damage caused by the breach of the implied warranty of authority consisted of the money paid to the seller for a boat which plaintiff did not accept because it did not conform to the warranty made. (Gotham Nat. Bank v. Sharood, 23 Fed. Rep. [2d] 567; Taylor v. Saxe, 134 N. Y. 67; Moore v. Maddock, 251 N. Y. 420; Taylor v. Nostrand, 134 N. Y. 108; White v. Madison, 26 N. Y. 117.)
   Lehman, J.

The defendants acting as brokers negotiated the sale to the plaintiff of a motor boat belonging to one Richards for the price of $18,000. The evidence supports findings of the trial judge that the defendants represented to the plaintiff that the motor boat would be in first class condition and repair when delivered to the plaintiff, and that it was capable of making a speed of twenty-eight miles an hour. The motor boat was never capable of making such a speed, and the owner testified that the defendants were not authorized to represent that it was capable of making such a speed or that its engine would be put in a condition which would make the boat capable of such speed. The trial judge further found that the boat was never delivered to or accepted by the plaintiff and that the plaintiff is entitled to recover from the defendants the purchase price he paid to the owner, in advance of delivery, with interest from May 1st, 1919, the date of such payment.

An agent impliedly warrants his authority to make the representations through which he induces another to make a contract with the principal. For the breach of that implied warranty the agent is liable to the injured party for all damages which flow naturally from reliance upon the agent’s assertion of authority. (Moore v. Maddock, 251 N. Y. 420, and cases there cited.) The injured party in an action for moneys had and received cannot recover from the agent moneys paid upon the contract to the principal, for the agent has never received such moneys and they would be recoverable from the principal only upon a rescission of the contract made with the principal. (American Nat. Bank v. Wheelock, 82 N. Y. 118.) The courts below have not ignored these well-established rules, though in this case the damage assessed against the agent is the amount paid to the principal, as the purchase price of the boat with interest from the date of payment. They have held that in spite of these rules, these damages flow naturally from the agent’s failure to bind his principal upon the collateral warranty of speed because through that failure the buyer in this case has been deprived of a right he would otherwise have had to reject the boat and to recover the purchase price from the seller.

Even if the alleged representation of the speed of the boat had been authorized by the seller and constituted a warranty, the buyer could not have rejected the boat and recovered the purchase price without rescission of the sale or contract to sell. It is, at least, doubtful whether the loss flowing from a failure to obtain a right to rescind a contract can be measured by the consideration paid upon the contract, for the gain from restitution upon a rescission would be, to some extent, balanced by the loss of the benefits which might have been obtained from enforce-meat of the contract, authorized by the principal. We do not reach that question here, because the buyer in fact has the same right to rescind the contract he would have had if all the agent’s representations and warranties had been authorized by the principal.

The seller delivered to the plaintiff in this case the muniments of title to the boat at the time he received the purchase price. At that time the seller did not know that the agent had falsely represented or warranted the speed of the boat. The seller’s receipt of the purchase price and its retention without such knowledge can constitute no ratification of the agent’s authority, and will not render him hable upon a collateral warranty or contract made by the agent in excess of his actual or apparent authority. So this court has held in Baldwin v. Burrows (47 N. Y. 199); and the court there stated that this was true even though such collateral contract may have been the means by which the agent was enabled to effect the authorized contract, and the principal retain the proceeds thereof after knowledge of the fact” (p. 215). None the less, the court, in that case, recognized that a principal cannot enforce a contract which is tainted and vitiated by the fraud employed by his agent in obtaining it; and the principal, though himself innocent, takes it subject to that taint” (p. 215). (See, also, Smith v. Tracy, 36 N. Y. 79; Krumm v. Beach, 96 N. Y. 398.)

No obligation can be imposed upon the principal by the act of an agent outside of his real or apparent authority; but a contract made on behalf of the principal may be rescinded by the other party if tainted by fraud in its inception, though the principal was himself innocent of any fraud. (Bennett v. Judson, 21 N. Y. 238.) That is not because through' retention of moneys received upon a contract made by an authorized agent, an innocent principal ratifies the unauthorized acts of the agent in procuring the contract, but because a principal who asserts the validity of a contract made by the agent holds the contract subject to any invalidity or taint in its inception. That distinction runs through all the cases in which rights based upon unauthorized representations or warranties of an agent have been asserted against the principal. It was pointed out in the opinion of Pound, J., in Deyo v. Hudson (225 N. Y. 602).

Here the plaintiff does not assert that he has lost a right to rescind the contract on the ground of fraud. We are not called upon to decide whether the proof is sufficient to show fraud. We point out only that where there are misrepresentations in negotiating a contract, the injured party has the samé right to rescind the contract, though the representations were made by an agent without authority, as he would have if the representations were authorized by the principal. The same rule applies where as here the injured party asserts that because the agent was not authorized to give a warranty, he has lost the remedy which would have been, otherwise, available against the seller to rescind the contract to sell or the sale and refuse to receive the goods, or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid.” (Pers. Prop. Law; Cons. Laws, ch. 41, § 150, subd. 1 [d].)

“ The remedy of rescission, if allowed at all, is allowed on broad principles of justice. The basis of the remedy is that the buyer has not received what he bargained for.” (2 Williston on Sales, § 608.) The price is the consideration paid for the bargain, and here the plaintiff has not received the full benefit of his bargain. He accepted the muniments of title without knowledge that what he received was other than what he had agreed to buy; but the seller accepted the price without knowledge that it was the consideration for something other than what he agreed to sell. So long as retention of the purchase price even after the seller has knowledge of the unáuthorized warranty is not inconsistent with a repudiation of any obligation arising from the warranty, no ratification of the agent’s acts can be inferred from such retention. At least until the buyer offers to return the goods and to rescind the sale or contract to sell, the seller is entitled to retain the proceeds of the sale he authorized without impliedly agreeing to accept additional obligations which he never authorized. The situation changes when the seller refuses to relinquish an advantage he gained through an unauthorized misrepresentation of his agent. The morality of taking advantage afterward of false statements innocently made, by insisting on retaining the advantage of a sale induced thereby, is almost as questionable as that of making knowingly false statements to bring about the sale.” (2 Williston on Sales, § 608.) In the old case of Elwell v. Chamberlin (31 N. Y. 611, at p. 619) this court has held that principals who after offer to rescind, retain or demand the fruits of a contract obtained by unauthorized representations of an agent stand in the same position as if they had made the representation or authorized it to be made.” We have never departed from that rule, and it has been accepted generally. (See 2 Williston on Sales, § 445-a, and cases there cited.)

It follows that the plaintiff lost no right to rescind the contract and to recover the purchase price from the seller by reason of the agent’s breach of warranty of authority to make representations or give warranties of speed in behalf of the principal. He did lose the right to recover damages against the principal for breach of warranty of speed. That measures the damages recoverable against the agent, and the judgment must be reversed because there is no proof of such damages.

So far we have treated the action as one for breach of the defendant’s warranty of authority to make representations on behalf of his principal. In truth, the complaint served on the defendants alleges no such cause of action. The complaint alleges that the defendants were engaged in the business of' buying and selling yachts and ships as principals and agents.” That the defendants made certain representations “ for the purpose of inducing the plaintiff to purchase a certain motor yacht or boat known as the Oet There belonging to one Fred L. Richards.” Nowhere is there any allegation that the defendants in making these representations acted in behalf of the owner of the boat or impliedly asserted that they had authority from him to sell the boat or to make representations binding upon him. The complaint does not even allege a purchase of the boat from the owner. On the contrary, the complaint alleges that thereupon the plaintiff and the defendants duly entered into a contract whereby the defendants duly agreed to deliver the motor yacht in accordance with the representations hereinabove set forth for the sum of Eighteen thousand dollars, said moneys to be paid either to the defendants or the said Fred L. Richards as the defendants should elect, and the defendants then and there duly agreed that if said motor boat did not accord with the representations so made as aforesaid, that the defendants would return the Eighteen Thousand Dollars to the plaintiff.” It is for breach of the alleged agreement, made by the defendants, to deliver a motor yacht in accordance with their own representations and warranties, or return the purchase price to the plaintiffs, that this action is brought.

The parties went to trial upon the issues raised by the answer to this complaint. At the opening, the plaintiff’s counsel stated, in answer to a question by the trial judge, that the complaint set forth a cause of action against a broker upon a dual theory, “ first, on an alleged promise to bind that broker individually ” and secondly that the representations and agreements made by that broker were not authorized by the principal.” Counsel for the defendants did not acquiesce in this statement nor did the court rule upon it at -that time. Throughout the trial, counsel for the defendants assumed the attitude, in which the court acquiesced, that recovery could be had only in accordance with the allegations of the complaint, unless a motion to amend the complaint was granted. During the trial some evidence was admitted that the owner of the boat had not authorized any warranty of speed, but as the pleadings then stood the defendants were not called upon to offer a defense to a cause of action which was not pleaded in the complaint. At the close of the trial the defendants were entitled to a dismissal of the cause of action alleged for breach of contract.

Then for the first time the plaintiff moved to amend the complaint to conform to the proof.” That motion was denied and the plaintiff thereupon moved to amend the complaint to allege a cause of action for breach of the brokers’ implied warranty of authority to make the representations they did. The court reserved decision upon this motion but in its opinion granting judgment in favor of the plaintiff stated that plaintiff’s motion to amend was granted. For the purposes of this appeal we will assume that a ruling made in the opinion effectively amended the complaint. The defendants urge that they cannot by such an amendment be deprived of their right to interpose as a defense the bar of the Statute of Limitations to a cause of action which concededly arose in 1919 and which was not pleaded till 1930.

Amendment of a complaint is a procedural step in bringing a dispute before the court for arbitrament. Where the parties to the dispute are before the court, the court is not required to dismiss them from its presence because the issues in that dispute have not been formulated by the pleading. The court may by amendment mould the pleadings to formulate such issues and a defendant may not complain so long as he receives notice and opportunity to defend. Forms of pleading and procedure were originally devised as an aid to the administration of justice. They defeat their purpose when they result in an inflexible formalism. Each extension of the power to amend pleadings results in greater flexibility in the administration of justice. When that power shall be exercised rests in the discretion of the court. We do not review that discretion, even where the power to amend is exercised in order to avoid the bar of the Statute of Limitations. (Hatch v. Central Nat. Bank, 78 N. Y. 487.) Where the complaint alleges facts which though insufficient to constitute a cause of action yet apprise the defendant that the action is brought to remedy an alleged wrong, the fact that unless the complaint is amended the plaintiff may be barred from all remedy may indeed be a potent factor in moving the court to exercise its power to permit an amendment. This court has said that “ the power of the Supreme Court to grant an amendment is most plenary. It may permit a plaintiff by an amendment of a pleading to bring in additional claims which at the time would be barred by the Statute of Limitations if a new action were then brought upon them.” (Foster v. Central Nat. Bank, 183 N. Y. 379, 385.) What was said there about the Statute of Limitations was merely intended as an illustration of the extent of the power of the court. In fact, the court there decided that, however wide the power, it had in that case been exceeded by the court. Certainly there was no intention to decide, by dictum, that by an amendment to a complaint a plaintiff can avoid the bar of the statute to any cause of action which he chooses to substitute for the cause of action originally pleaded, or preclude a defendant from interposing any defense to the new cause of action.

The rule established in this State is that: There is no doubt that the court may, at Special Term, allow an amendment of a complaint by introducing therein even a cause of action barred by the Statute of Limitations. But in such case the defendant must not be deprived of his defense of the statute.” (Davis v. N. Y., Lake Erie & Western R. R. Co., 110 N. Y. 646, 647.) The same rule is generally followed throughout the United States (Union Pacific Ry. Co. v. Wyler, 158 U. S. 285, and cases there cited), at least where the courts have been given plenary power to permit an amendment. The Statute of Limitations provides that an action upon a contract obligation or liability express or implied ” must be commenced within six years after the cause of action accrued (Civ. Prac. Act, § 48). Until the complaint is served in an action, perhaps even until the time has elapsed during which the complaint may be amended as of right, it may be impossible to determine definitely upon what obligation or liability the action is brought. After that time the nature of the action is definitely determined; it is brought upon the obligation or liability set forth in the complaint. Then the Statute of Limitations has ceased to run against a cause of action founded upon that obligation or liability. It continues to run against all other causes of action. No doctrine that an amendment of the complaint relates back to the beginning of the action can change the fact that though the plaintiff may, with leave of the court, abandon the cause of action originally pleaded upon a specified obligation or liability and substitute a cause of action upon a different obligation or liability, yet until the substitution is made no action has been commenced or is pending upon the substituted cause of action. Upon that cause of action the statute has continued to run, and its bar may be interposed when by amendment to a complaint it is substituted for a cause of action brought upon another obligation.

It would serve no purpose to analyze the multifarious cases in different jurisdictions where the courts have been called upon to decide whether the Statute of Limitations constitutes a defense to a cause of action set forth in an amended complaint. Though they agree on the general principle that a defendant is not precluded from setting up the Statute of Limitations as a bar to a cause of action substituted by amendment to a complaint for another cause of action upon a different obligation or liability, it is difficult, perhaps impossible, to formulate from these decisions any test, universally applicable, of what constitutes a different obligation or liability. If the amendment merely expanded or amplified what was alleged in support of the cause of action already asserted, it related back to the commencement of the action and was not affected by the intervening lapse of time [citing cases]. But if it introduced a new or different cause of action, it was the equivalent of a new suit, as to which the running of the limitation was not theretofore arrested [citing cases].” (Seaboard Air Line Railway v. Renn, 241 U. S. 290, 293.) Perhaps in these cases we can discern an .increasing liberality in determining what constitutes a new or different cause of action.”

The amendment may constitute for some purposes more than an amplification or extension of the cause of action already asserted, and may introduce what might, if technical considerations or ancient formulas apply, constitute a new and different cause of action. The question here is whether the action from its commencement was upon the same obligation or liability, though the cause of action to enforce that obligation or liability has been changed, or a new remedy has been asserted. So the Supreme Court of the United States has said: Of course an argument can be made on the other side, but when a defendant has had notice from the beginning that the plaintiff sets up and is trying to enforce a claim against it because of specified conduct, the reasons for the Statute of Limitations do not exist, and we are of opinion that a liberal rule should be applied.” (N. Y. C. & H. R. R. R. Co. v. Kinney, 260 U. S. 340, 346.)

Perhaps the judicial formulation of a definite test in determining what constitutes a different obligation or liability might hamper rather than guide the courts. Perhaps to some extent the determination must be made pragmatically, based on considerations of fairness. (See Clark on Code Pleading, pp. 75, 83, 513; Clark and Yerion, Amendment and Aider of Pleadings, 12 Minn. L. Review, 97; McCaskill, Actions and Causes of Action, 34 Yale Law Journal, 614.) Even where an action in equity for rescission of a contract on the ground of fraud is by amendment changed to an action at law for damages, it has been said that the proceeding at law was but pursuing toward a conclusion, in another form, the same cause of action stated in the original bill, so that the suspension of the Statute of Limitations continued, which began with the date of the service of the subpoena in chancery.” (Friederichsen v. Renard, 247 U. S. 207, 210.)

Here it is clear that, however liberal the rule, the amendment introduced a cause of action upon a different obligation or liability, and for different conduct from that specified in the original complaint. The original complaint, as we have shown, was for breach of a contract made by the defendants as principals to deliver a boat which would comply with representations made by them or to return the stipulated purchase price of the boat. Though the complaint alleges that the boat was owned by another party, the complaint contains no allegation, express or implied, that, the defendants in making the representations acted as agents of the owner or that the plaintiff was induced to enter into a contract with the owner. The defendants from the beginning of the action had notice that the plaintiff claimed that the representations they made as principals were, untrue, but an agent assumes no personal obligation and is subject to no liability if he, innocently, makes false representations in behalf of his principal. The defendants could meet the cause of action originally pleaded by proof that they had given no personal warranty and had made no personal representations and had entered into no personal contract with the plaintiff to return the money if the representations they are alleged to have made proved untrue. They had no notice until the trial that if the plaintiff failed to sustain the allegations of the complaint he would try to enforce • a different claim, negatived, indeed, by the allegations of the complaint, that the defendants had throughout acted as agents and had given an implied warranty of their authority to act for their principal in all they did. Until an action is brought to enforce a claim upon the alleged obligation of the defendants incurred by making representations or giving a warranty in behalf of the principal without authority from him the reasons for the Statute of Limitations exist and the statute by its terms continues to run. It may be interposed when a cause of action to enforce that obligation is pleaded either in a new or an amended complaint.

A different situation would be here if upon a new trial the plaintiff should be granted leave to amend his complaint to set up a cause of action against the defendants upon an obligation arising from a warranty that the boat would make a speed of twenty-eight miles an hour personally given by the defendants, in order to induce the plaintiff to purchase the boat. Perhaps the evidence would be sufficient to sustain a finding that the defendants assumed such obligation; perhaps the action might be said to have been brought originally to enforce that obligation, though the complaint served alleged the obligation imperfectly and asked a remedy for its breach by enforcement of an alleged promise to return the purchase price if the representations embodied in the warranty were untrue. We do not now attempt to pass upon possible questions which may arise upon a new trial. Now we decide only that the defendants have the right to interpose the bar of the Statute of Limitations to a cause of action upon an implied warranty of an agent’s authority, and that the damages awarded for breach of that implied warranty are erroneous.

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

Cabdozo, Ch. J., Pound, Cbane, Kellogg, O’Bbien and Hubbs, JJ., concur.

Judgments reversed, etc.