text:
    Willy R. Vogeler et al., Respondents, v. Alwyn Improvement Corporation, Appellant.
    Appeal — vendor and purchaser — real property — covenants — Court of Appeals may consider pleadings on appeal from judgment entered upon order striking out answer as if no previous motion to dismiss complaint had been made and denied — exaction as part consideration for conveyance of land of covenant restricting use — restriction enforced against subsequent owner who takes with notice of covenant — benefit of covenant not restricted to lands retained by grantor — owner of adjoining parcel may enforce covenant when intent to establish it for his benefit is clear.
    1. On appeal from a judgment of the Appellate Division, affirming a judgment entered upon an order granting a motion to strike out the answer and for judgment on the pleadings, a contention that a prior decision in favor of plaintiff, upon a motion by defendant to dismiss the complaint, stands as the law of the ease, since the notice of appeal from the subsequent judgment does not bring up the earlier order for review, cannot be sustained. The Court of Appeals may consider the pleadings as if no - motion for judgment dismissing the complaint had been made and denied before the answer was interposed. (Ansorge v. Kane, 244 N. Y. 395, followed.)
    2. Where a vendor of land exacts as a part consideration for the conveyance a covenant restricting the use to which the grantee, its successors and assigns, may put the land, acceptance of title subject to that restrictive covenant imposes upon the grantee an obligation which a court of equity will enforce not only against the grantee but against any subsequent owner who takes with notice of the covenant.
    3. The benefit of such a covenant is not restricted to lands which the grantor retained, and where the intent to establish the restriction for the benefit of the owner of an adjoining parcel is clear he may enforce it.

      Vogeler v. Alwyn Improvement Corp., 220 App. Div. 829, reversed.
    (Submitted December 2, 1927;
    decided January 10, 1928.)
    Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered June 24, 1927, which affirmed a judgment in favor of plaintiff entered upon an order of Special Term granting a motion by plaintiff for judgment on the pleadings.

      Charles M. Rosenthal and Max Horowitz for appellant.
    The separate defense contained in defendant’s answer sets forth a cause of action. (Harris v. Curtis, 139 App. Div. 393; Hart. v. Little, 103 Misc. Rep. 620; Hall v. Sterling Iron & R. Co., 148 N. Y. 432; Huttmeier v. Albro, 18 N. Y. 48; Lampman v. Milks, 21 N. Y. 505; Wilson v. Wightman, 26 App. Div. 41.) The principle of estoppel does not preclude the defendant from an opportunity of proving it is not a stranger to the conveyance. (Tuscarora Club v. Brown, 215 N. Y. 543; Westcott v. Jupiter, 175 App. Div. 734.)

      Samuel D. Macpeak and James A. Beha for respondents.
    The defense consisting of new matter is insufficient in law. (Tuscarora Club v Brown, 215 N. Y. 543; Leonard v. Clough, 133 N. Y. 292; Kidder v. Hesselman, 119 Misc. Rep. 410.) The court properly decided that the denials interposed by the defendant raise no issue. (Kidder v. Hesselman, 119 Misc. Rep. 410.)
   Lehman, J.

The plaintiffs in this action seek a declaratory judgment decreeing that the restrictions contained in a deed to premises known as 560 West End avenue, New York city, which the plaintiffs now own, are not enforcible in equity and create no easement in favor of the adjoining parcel of land known as 562-568 West End avenue. The allegations of the complaint show that the premises owned by the plaintiffs were conveyed by the Wittnauer Realty Company, Inc., to the plaintiffs’ predecessor in title on July 7th, 1920. The deed contains a clause that as part of the consideration given for this conveyance, the party of the second part, for itself and its successors and assigns, covenants and agrees that no building, addition to or alterations of building, or no structure or sign of any kind shall or will be constructed or erected above the building or structure now standing on the land herein conveyed, and no new building or structure or sign which may be constructed or erected in place of the building or structure now on said land shall or will exceed the height of fifty (50) feet from the sidewalk level, without the consent in writing duly signed and acknowledged of the owner and holder of a certain mortgage bearing date the 7th day of July, 1920, made by the L. & J. Realty Company, Inc., to Wittnauer Realty Company, Inc., in the amount of $189,000, covering the adjoining premises known as No. 562-568 West End Avenue, until said mortgage is fully paid and satisfied, and in addition unless or until the owner of the said adjoining premises known as No. 562-568 West End Avenue, its successors or assigns, consents in writing, duly signed and acknowledged, to the removal and termination of this restricted covenant. This covenant shall run with the land described herein until it be cancelled and terminated as herein provided.” The plaintiffs in this action claim that this covenant is no.longer enforcible.

The defendant is the owner of the adjoining parcel Nos. 562-568 West End avenue. Until July 7th, 1920, the Wittnauer Realty Company owned both parcels. That corporation conveyed both parcels on the same day to different grantees, but the complaint alleges that the parcel owned by the defendant was conveyed first, and that when the Wittnauer Realty Company, Inc., conveyed the parcel No. 560 West End avenue it held no title to, but only a mortgage upon, the adjoining parcel. The intention to restrict the use of the parcel owned by the plaintiffs for the benefit both of the mortgagee and of the owner of the adjoining parcel is clearly expressed in words. The grantee accepted the deed subject to that restriction. The plaintiffs thereafter obtained title to the land with knowledge of the restriction on its use, but they ask the courts to declare that they are not bound by that restriction after the mortgage then owned by the Wittnauer Realty Company has been paid.

The only basis of the plaintiffs’ claim is a contention that a grantor of land may not restrict its use except for his own benefit or the benefit of land which the grantor retains. A motion by the defendant for judgment dismissing the' complaint on the ground that it fails to state facts sufficient to constitute a cause of action was denied. Then the defendant answered, and in its answer alleges that the conveyance of the two adjoining parcels by the Wittnauer Realty Company was simultaneous. A motion by the plaintiff to strike out the answer and for judgment on the pleadings has been granted, and judgment entered as prayed for in the complaint. From that judgment the defendant has appealed.

It is urged at the outset that the decision in favor of the plaintiff upon the motion to dismiss the complaint stands as the law of the case, since the notice of appeal from the subsequent judgment does not bring up the earlier order for review. In the case of Ansorge v. Kane (244 N. Y. 395) we have held otherwise. We may consider the pleadings as if no motion for judgment dismissing the complaint had been made and denied before the answer was interposed. In this State the rule has been firmly established that a reservation or exception in a deed is “ ineffectual to convey any estate or interest whatsoever in the lands described to a stranger to the conveyance.” (Tuscarora Club of Millbrook v. Brown, 215 N. Y. 543.) The courts below have granted judgment in favor of the plaintiffs upon the theory that by analogy a stranger to the conveyance cannot enforce a restrictive covenant contained in the deed to the plaintiff’s predecessor in title.

Here the grantor who created the restriction did not attempt by reservation or exception in the deed to create any legal estate or interest in the lands described either in his own favor or in favor of a stranger. He exacted as part consideration for the conveyance a covenant restricting the use to which the grantee,. its successors and assigns, might put the land. Acceptance of title to the land subject to that restrictive covenant imposes upon the grantee an obligation which a court of equity will enforce not only against the grantee but against any subsequent owner who takes with notice of the covenant. (See Pomeroy’s Equity Jurisprudence, volume 2, section 689.) Even where such a covenant, enforcible in equity, creates what has been called an equitable servitude or equitable easement, no supposed analogy to a common-law estate or interest created by reservation or exception has led courts of equity to restrict the benefit to lands which the grantor retained.

Of course, not every stranger to a conveyance may enforce such a restriction. As in other actions brought upon obligations imposed by contract or covenant, a plaintiff must show a legal or equitable interest which gives him a right to bring the action. Before a stranger to a conveyance may assert rights based upon a covenant or restriction, “ there must be found somewhere the clear intent to establish the restrietioh for the benefit of the party suing or his grantor, of which right the defendant must have either actual or constructive notice.” (Equitable Life Assurance Soc. v. Brennan, 148 N. Y. 661.) Here the intent to establish the restriction for the benefit of the owner of the adjoining parcel is clear.

It would serve no purpose to examine the history or the extent of the right to enforce in equity a restriction upon the use of the land. It is true that in most cases where a grantee of one parcel of land has been permitted to enforce a restriction imposed upon the subsequent conveyance of another parcel to another grantee, it appears that both parcels were part of a larger tract, and the restriction was imposed to carry out a general scheme of development of the whole tract. (Brouwer v. Jones, 23 Barb. 153; Equitable Life Assurance Soc. v. Brennan, supra; Korn v. Campbell, 192 N. Y. 490; Chesebro v. Moers, 233 N. Y. 75; Sprague v. Kimball, 213 Mass. 380; Barton v. Slifer, 72 N. J. Eq. 812; Summers v. Beeler, 90 Md. 474; Nottingham Patent Brick & Tile Co. v. Butler, 16 Q. B. Div. 778; Collins v. Castle, 36 Ch. Div. 243; Spicer v. Martin, 14 App. Cases, 12.) In some cases there are expressions in the opinions which standing alone might seem to indicate that the right of a prior grantee of one parcel to enforce a restriction imposed upon a subsequent conveyance of another parcel by the same grantor is limited to cases where both parcels were embraced in a general plan for development of a larger tract. A critical examination of these opinions will demonstrate that these considerations have been regarded as decisive only where on the face of the subsequent deed no covenant or restriction is found in favor of prior grantees or where the action has been brought in jurisdictions where courts have been compelled to create an exception to a general rule prevailing there that a third party may not enforce a contract made for his benefit.

In the present case no such questions exist. The restriction was imposed for the defendant’s benefit under circumstances where the beneficiary of a promise may sue for its enforcement in accordance with the general doctrines prevailing here. (See, also, Doerr v. Cobbs, 146 Mo. App. 342; Collins v. Castle, supra.)

, The judgment of the Appellate Division and that of Special Term should be reversed, and the plaintiffs’ motion for judgment denied, with costs in all courts.

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

Judgments reversed, etc.


source: Caselaw Access Project

author: Cardozo, Ch. J.

license: Public Domain

text:
    Gladys C. Mertz et al., Respondents, v. Guaranty Trust Company of New York et al., Appellants.
    Trust — powers — deed transferring shares of corporate stock in trust without power of sale — merger of corporation with another and issue to trustee of stock of merged corporation subordinated to large issue of preferred stock — identity of old shares ended by merger — power of trustee to sell substituted shares.
    "Where, by a deed of trust, a grantor assigned to a trustee a number of shares of the common stock of a corporation, in trust, to hold the shares and pay the dividends to designated beneficiaries, with remainder over, retaining no power of revocation and conferring no power of sale on the trustee, and thereafter, during the lifetime of the grantor, the corporation was consolidated with another and new stock issued, so that the trustee received eight times the number of shares in the new corporation that it had held in the old, subordinated, however, to a large issue of preferred stock which had gone exclusively to the stockholders of the merging corporation, the identity of the old shares was ended by the merger and the trustee had the power to sell what was acquired as a substitute. It was not subject to a duty to keep within the trust an interest in a business differing in substance from the interest in the business as it stood at the time of the foundation.

      Mertz v. Guaranty Trust Co., 221 App. Div. 752, reversed.
    (Argued December 7, 1927;
    decided January 10, 1928.)

      Appeal from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered July 18, 1927, affirming a judgment in favor of plaintiffs entered upon a decision of the court on trial at Special Term.

      Theodore Kiendl for Guaranty Trust Company, appellant.
    The courts below erred in voiding the sale as the trustee’s power and corresponding duty to sell the stock in the exercise of reasonable diligence, under the admitted facts, is clear. (Matter of Morrison, [1901] 1 Ch. 701; Matter of Anson’s Settlement, [1907] 2 Ch. 424; Northern Securities Co. v. United States, 193 U. S. 197; Matter of Franklin Trust Co., 84 Misc. Rep. 686; Guaranty Trust Co. v. U. S. Steel Corp., 107 Misc. Rep. 720; 187 App. Div. 889; 226 N. Y. 693.)

      Selden Bacon for George McNeir, appellant.
    The common stock of the Mohawk Carpet Mills was a different investment from the stock of the Shuttleworth Brothers Company and one which the trustee was not authorized to hold under the terms of its trust. The trustee, therefore, had full power to sell. (Matter of Burr, 48 Misc. Rep. 56; Cannon v. Quincy, 65 Misc. Rep. 399; Matter of Franklin Trust Co., 84 Misc. Rep. 686; Matter of Crawshay, [1888] 60 L. T. 357; Matter of Morrison, [1901] 54 L. J. Ch. 388; Matter of New, [1901] 2 Ch. 534; Matter of Anson, [1907] 2 Ch. 424; Ashurst v. Potter, 29 N. J. Eq. 625; Toronto Trusts v. C., B. & Q. R. R. Co., 64 Hun, 1.) The requests of Mr. Clark that the trustee continue to hold the Mohawk stock could not and did not alter the duty and consequent power of the trustee to sell it. (Adair v. Brimmer, 74 N. Y. 537; Wilkinson v. Parry, 4 Russ. 272; Newton v. Rebenack, 90 Mo. App. 650; Mulford v. Muich, 3 Stockt. Ch. 16.)

      Henry K. Heyman and Arthur B. Wilcox for respondents.
    The trustee had no authority or right to sell the eight hundred shares of Mohawk stock. (Matter of

      Franklin Trust Co., 84 Misc. Rep. 686; Guaranty Trust Company v. U. S. Steel Corporation, 107 Misc. Rep. 720; 187 App. Div. 889; 226 N. Y. 693; Matter of Crawshay, [1888] 60 Law Times, 357; Matter of Morrison, [1901] 1 Ch. 701; Matter of New, [1901] 2 Ch. 534; Matter of Anson, [1907] 2 Ch. 424; Smith v. Lewis, [1902] 2 Ch. 667; Costello v. Costello, 209 N. Y. 252.)
   Cardozo, Ch. J.

By a deed of trust made in January, 1913, Nelson S. Clark assigned to the defendant Guaranty Trust Company of New York one hundred shares of the common stock of Shuttleworth Brothers Company, a domestic corporation, in trust to hold the shares and to pay the dividends declared thereon to his daughter, Gladys Clark Mertz, during her life, and upon her death to pay such dividends to her children or issue per stirpes during the life of his granddaughter, Gladys Chesleigh Mertz, with remainders over. No power of revocation was reserved by the grantor, and no power of sale conferred on the trustee.

In September, 1920, during the life of the grantor, Shuttleworth Brothers Company was consolidated with another corporation, McCleary, Wallin & Crouse, the name of the consolidated corporation being Mohawk Carpet Mills, Inc. Of the Mohawk common stock 80.000 shares went to the Shuttleworth stockholders, and 120.000 to the stockholders in McCleary, Wallin & Crouse. There was also an issue of $1,000,000 of preferred 6% stock, which went to the McCleary stockholders exclusively. At the execution of the deed of trust, the hundred shares conveyed thereby represented one per cent of the entire capital stock of the Shuttle-worth corporation. After consolidation, the trustee held 800 Mohawk shares, representing a lower percentage of the common stock of the consolidated corporation, subject, moreover, to $1,000,000 of preferred stock, the preference applying alike to dividends and to principal.

Shortly after consolidation, the grantor (in October, 1920) transferred to the trustee 200 additional shares of the common stock of Mohawk Carpet Mills, Inc., to be held upon the same trusts.

Later, and in 1922 and 1923, he transferred upon the same trusts 442 shares of The Nairn Linoleum Company, which were afterwards exchanged for 3,010 shares of The Congoleum Nairn Company. The latter shares were sold by the trustee in 1924, with the consent of the grantor. No attack is made by the plaintiffs upon the validity of that sale, which, whether lawful or unlawful, brought large profits to the fund.

Upon the death of the grantor in April, 1925, the trust company determined upon a sale of the shares of Mohawk stock, 800 in number, which had come into the trust as a substitute for the 100 shares of Shuttleworth stock, the subject-matter of the fund at the time of its creation. The grantor, though never denying that there was authority to sell, had written the trustee in July, 1923, requesting that the Mohawk shares be retained after his death unless a sale met with the approval of two of his associates. The trust company had answered that it could not legally delegate its responsibilities as trustee, but that it would endeavor to procure an expression of opinion from the men named before disposing of the stock. With this assurance the grantor was seemingly content. Upon his death, the trust company pursued the course that it had marked. It endeavored, though without success, to procure from the men named a statement of their views as to the wisdom of a sale. Failing this, it endeavored, though again without success, to sell the 800 shares at public auction. When this was found to be impossible, it transferred them at private sale to the defendant McNeir, who acted for himself and for other members of a syndicate. The other shares, 200 in number, assigned by the grantor after consolidation was complete, are still subject to the trust. There is a finding as to the 800 shares that the sale was at a price that was reasonable and adequate.

The question is one of power. The plaintiffs, the beneficiaries of the trust, maintain that the object of the trust was the collection of dividends upon specific shares of stock; that, in the absence of a power of sale, the trustee was not at liberty to dispose of the shares thus specifically conveyed; and that a like disability invalidates a sale of the Mohawk shares, which were acquired as a substitute in connection with the merger. On the other side, the defendants (the trustee and its vendee) maintain that the merger destroyed the identity of the shares; that the new shares were not the same either in substance or in form; that the trust company was not under a duty to retain them; and indeed that it would have exposed itself to criticism or even liability if it had kept them an unreasonable time and damage had resulted. The parties are agreed that the wishes of the grantor, expressed after the delivery of the deed, are of no controlling significance, since he had not reserved to himself the power to modify the trusts. The trial court held with the plaintiffs that the sale was unlawful, and gave judgment against the defendants directing restitution of the shares in kind. The Appellate Division affirmed by a divided court.

We think the identity of the Shuttleworth shares was ended by the merger, and that the trustee had the power to sell what was acquired as a substitute. Every case of this sort must be looked at on its merits in order to see whether the investment is the same (Per Buckley, J., in Smith v. Lewis, 1902, 2 Ch. 667, 672; cf. Kekewich, J., in Anson’s Settlement, 1907, 2 Ch. 424, and Buckley, J., in Matter of Morrison, 1901, 1 Ch. 701). Here the mvestment is radically different. The change of identity ías relation not to form only, but to substance. The tale is only partly told when we say that the consolidated corporation is a new juristic person. It is that, but it is something more. The shares have been issued in new proportions and classified in new ways, as common and preferred. The old investment has been subordinated to alien priorities. The ancient venture has exposed itself to strange and unexpected hazards. The finding is that there has been a change in the “ product manufactured,” the marketability of the product,” the capital structure,” the risks and vicissitudes,” both actual and probable. We think the trustee was not subject to a duty to keep within the trust an interest in a business thus differing in substance from the interest in the business as it stood at the time of the foundation. The dividends to be garnered by fostering the one might be altogether different from those to be garnered by fostering the other.

A like problem would arise if a corporation, instead of resorting to a merger, were to sell its franchise and assets to another corporation for stock issued by the purchaser, as under the statute it may do, though subject to certain restrictions for the protection of shareholders dissenting (Stock Corp. Law, §§ 20, 21 [Cons. Laws; ch. 59]; Matter of Timmis, 200 N. Y. 177; Murrin v. Archbald Consol. Coal Co., 196 App. Div. 107, 112). One might find it difficult in such circumstances to uphold a contention that the trustee would be under a duty to retain within the trust the shares thus given in exchange. Here as elsewhere distinctions' of degree may mark the boundary between right and wrong. Distinctions of that order may exist between mere enlargements of corporate powers, or even changes of corporate structure, that are kept within the bounds of corporate identity — the same juristic person cóntinuously existing — and changes accompanied by a severance of the corporate life — a new juristic person appearing on the legal scene.

Analogies are at hand to guide us to a solution. One of them may be found in the rules governing ademption. If certificates of these shares had been made the subject of a bequest, there is little doubt that the gift would be adeemed if the shares were thus transformed before the will could take effect (Matter of Brann, 219 N. Y. 263, 267). What was said in the case cited is applicable here. It may be that where the change is merely formal, as where a company is reorganized and there is a reissue of the shares, the identity of the gift will be held to be substantially preserved (Mallam v. McFie, L. R. 1912, 1 Ch. 29; Turner v. Leeming, L. R. 1912, 1 Ch. 828), but that is not this case ” (Matter of Brann, supra; cf. Slater v. Slater, 1907, 1 Ch. 665.) Helpful also is the analogy of those decisions which define the duty of trustees under a power to lend the money of the trust to the members of a stated partnership. There are rulings that the power does not outlast a change in the firm members, whether the number of the members be less or greater than before (Matter of Tucker, 1894, 1 Ch. 724; Smith v. Patrick, 1901 A. C. 282; cf. Bennett v. Draper, 139 N. Y. 266).

More nearly decisive than any of these analogies are the provisions of the statute governing the process of consolidation (Stock Corp. Law, § 87). There runs through them all the recognition of the fact that consolidation transforms the essence of the enterprise. So it is that a shareholder, not voting in favor of consolidation, may have his shares appraised,' and receive payment of the value. If the trustee, dissatisfied with the merger, had resorted to that remedy, the money would have taken the place of the shares as the subject of the trust. Failure to invoke one means of getting rid of an investment in an enterprise vitally transfigured, did not impair the right thereafter to have the benefit of another.

The case comes down to this: A trustee is without authority to invest in the shares of a business corporation, or even to continue such an investment made by another, unless authority so to do is conferred by the creator of the trust (Pers. Prop. Law, § 21 [Cons. Laws, ch. 41]; Decedent Estate Law, § 111 [Cons. Laws, ch. 13]; King v. Talbot, 40 N. Y. 76; Perry, Trusts, §§ 454, 456). The creator of this trust did confer authority, and indeed imposed a duty, to continue the investment in the shares of a specified corporation so long as they continued, though even then authority to vary the investment might exist in the face of an emergency (Perry, Trusts, §§ 460, 466). He did not impose a duty, even if we could find that he conferred authority, to retain through every transmutation of form and substance whatever shares might thereafter be offered as a substitute. We do not need to determine at this time whether a sale of the substituted shares would always be a duty either immediate or unqualified. Support is not lacking altogether for the view that the duty to call in an investment no longer appropriate, is not always co-extensive with the liability growing out of an investment unlawful in its origin (Matter of Chapman, 1896, 2 Ch. 763, 767; Costello v. Costello, 209 N. Y. 252; Matter of Wotton, 59 App. Div. 584, 587; 167 N. Y. 629; cf. Perry, supra). Enough for present purposes that there is power, if not duty. A trustee finds upon his hands an investment, mandatory in its origin, but so changed as to be no longer mandatory, even if permitted. A power of sale attaches in such circumstances by implication of law (Toronto Gen. Trusts Co. v. C., B. & Q. R. R. Co., 64 Hun, 1; affd., on opinion below, 138 N. Y. 657; Lockman v. Reilly, 95 N. Y. 64, 71; Haberman v. Baker, 128 N. Y. 253, 261; Costello v. Costello, supra).

The judgment of the Appellate Division and that of the Special Term should be reversed, and judgment ordered in favor of the defendants dismissing the complaint with costs in all courts.

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

Judgment accordingly.


author: Lehman, J.

text:
    Mary A. Dennerlein, Respondent, v. Emma M. R. Martin, Appellant.
    Rescission — false representations — fraud — contract — action to rescind conveyance of real property on ground it was induced by false promise of support — finding that conveyance was induced by fraud unsupported by evidence — plaintiff entitled to relief if defendant refuses support — judgment on that theory unwarranted by findings.
    1. In an action to rescind a conveyance of an interest in real property on the ground that defendant’s promises and representations that she would provide a home for plaintiff and support and maintain her, made as an inducement for and consideration for the conveyance, were false and fraudulent; that defendant never intended to carry out her promises and had failed and refused to perform them, a finding that the conveyance was originally induced by actual fraud is not supported by the evidence where the record discloses that for more than three years thereafter the defendant maintained and supported plaintiff at an expense very much greater than the income received from the property conveyed.
    2. Plaintiff may, nevertheless, bi entitled to a decree rescinding the conveyance, if defendant fails and refuses to carry out her promise to provide suitable support and other remedy would be inadequate-but where findings which show a complete breach and repudiation of her promise by defendant are only partially sustained by the evidence and findings of unkind treatment of plaintiff by defendant are intertwined with findings without support in the evidence, they do not form the basis for a judgment on a theory different from that on which the case was tried.

      Dennerlein v. Martin, 219 App. Div. 829, reversed.
    (Argued December 5, 1927;
    decided January 10, 1928.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered April 4, 1927, affirming an interlocutory judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term.

      William M. Kileullen for appellant.
    In the absence of proof establishing either actual or constructive fraud the complaint herein should have been dismissed and it was error for the trial justice to deny defendant’s motion to dismiss the complaint made at the close of the plaintiff’s case and again at the close of the whole case, and the Appellate Division should have reversed the judgment rendered in favor of the plaintiff. (Calhoun v. Calhoun, 49 App. Div. 520; Spaulding v. Hallenbeck, 35 N. Y. 204; Wood v. Leeka, 262 Ill. 607; William v. Langwill, 241 Ill. 441; Russell v. Robbins, 247 Ill. 510; Dwelley v. Dwelley, 143 Mass. 509; Kinney v. Kinney, 221 N. Y. 133.)

      Frederick P. Close, Lee Parsons Davis and John B. Bushong for respondent.
    Plaintiff’s complaint and the evidence in support thereof clearly made out a cause of action. (Greaves v. Husband, 238 N. Y. 604; Adams v. Gillig, 199 N. Y. 314; Ritzwoller v. Lurie, 225 N. Y. 464; McClellan v. Grant, 83 App. Div. 599; 181 N. Y. 581; Wood v. Rabe, 96 N. Y. 414; Goldsmith v. Goldsmith, 145 N. Y. 313; Kinney v. Kinney, 221 N. Y. 133; Winne v. Winne, 166 N. Y. 263; Harrington v. Schiller, 231 N. Y. 278.) The findings by the trial court that the defendant intended to deceive and defraud the plaintiff are supported by the findings. (Fletcher v. Manhattan Life Ins. Co., 197 App. Div. 484; Gallagher v. Gallagher, 135 App. Div. 457; 202 N. Y. 572; Frank v. Von Bayer, 236 N. Y. 473; Tiedermann v. Tiedermann, 201 App. Div. 614; 236 N. Y. 534.)
   Lehman, J.

The plaintiff in September, 1920, conveyed to the defendant, her sister, her interest in a number of parcels which she owned in common with the defendant and other members of her family. The plaintiff is a retired school teacher. For some years previous to the time she made the conveyance, she had been an invalid and required constant care and attention. She had lived with the defendant and the defendant’s husband. The defendant took care of the plaintiff and did the household work.' The plaintiff paid one-third of the household expenses. Her only income was at that time derived from a pension she received as a retired school teacher, and from her interest in the parcels of land conveyed to the defendant. The defendant had showed the plaintiff until the time of the conveyance the utmost kindness and forbearance. By the conveyance to the defendant in September, 1920, the plaintiff stripped herself of practically all her property and all her income except that derived from her pension. At the time the defendant received the conveyance she promised expressly or impliedly to provide a home for the plaintiff at her own cost and expense and to support, maintain and treat the plaintiff in the same manner as before.

The defendant supported the plaintiff either in her own home or at Atlantic City until March 7th, 1924. Then the plaintiff left the defendant’s home and went to reside with another sister. Thereafter she brought this action to rescind the conveyance on the ground that the defendant’s promises and representations made in 1920 as an inducement for and consideration of her conveyance were false and fraudulent; that the defendant never intended to carry out her promises and that from May, 1923, she had failed and refused to perform them. After a trial, the court has made findings in accordance with the allegations of the complaint and an interlocutory judgment for rescission and an accounting has been entered.

Between the defendant whb provided for the plaintiff until March, 1924, and the sister with whom the plaintiff now lives, there has long been discord. Indeed, it would appear that the whole family is divided into discordant groups. That background of family discord colors most of the testimony presented at the trial. We may not determine where the truth lies where there is conflict of evidence upon an issue of fact. We are bound by the findings made, so far as there is evidence to support them. In our determination that the record is without evidence to support the finding that the conveyance in 1920 was induced by fraudulent representations or promises which the defendant had no intention of keeping, we refer only to facts which are undisputed or embodied in findings of the trial judge.

The record discloses that for three years after the property was conveyed to the defendant, the expenses of maintaining and supporting the plaintiff were greater by thousands of dollars than, the income received by the defendant from the property. For two years of that time the plaintiff lived at Atlantic City. She was provided with a nurse and medical treatment. The defendant, like the plaintiff, was a retired school teacher, and there is a finding that in order to obtain ready cash to help pay the expenses of maintaining and supporting the said plaintiff, the defendant was compelled to and did obtain employment as a teacher in the Public Schools of the City of New York, returning to said teaching profession after an absence of ten years therefrom.”

Even as late as the autumn of 1923, it is undisputed that the defendant paid out over $600 for the expense of an operation intended to make the plaintiff more comfortable. Nowheres is there a suggestion that until after the operation the defendant failed to exercise the utmost kindness and generosity towards the plaintiff. In the face of these undisputed facts it is apparent that the finding that the conveyance was originally induced by actual fraud is not supported by the evidence. Indeed at the trial the plaintiff’s counsel stated that he would not dispute the defendant’s claim of large expenditures, adding: “ Our theory of this case is that you became tired of your burden and you have treated her badly.” Though the evidence does not establish that the conveyance of plaintiff’s property was induced by fraud, yet doubtless she may be entitled tQ a decree rescinding that conveyance if the defendant willfully fails and refuses to carry out her promise to provide suitable support and other remedy would be inadequate. In consideration of that promise the plaintiff stripped herself of her property; if the consideration totally fails she may demand back what she has paid. (See opinion of Kellogg, J., in Rosenwasser v. Blyn Shoes, Inc., 246 N. Y. 340, and case cited therein.) If the case had been tried and findings made upon that theory, the allegations of fraud contained in the complaint might be disregarded as surplusage. There are some findings which would show a complete breach and repudiation by the defendant of her promise. Only in part does the evidence sustain these findings. At least the defendant did furnish an excellent room and plentiful food of the best quality, even if the food may not have been suitable for plaintiff’s condition. Perhaps if the evidence produced by the plaintiff is accepted as true, the defendant from November, 1923, to March, 1924, spoke so unkindly to plaintiff as to make the plaintiff’s life in her home unsupportable. These are matters which should be determined at a new trial. The findings made at this trial as to such treatment are so inextricably intertwined with findings which are without support in the evidence, that they do not form the basis for a judgment on a theory different from that on which the case was tried.

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

The questions certified are answered as follows: First, third and fourth in the negative; second in the affirmative; fifth, not answered.

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

Judgment reversed, etc.


author: Kellogg, J.

text:
    American Pipe and Construction Company, Respondent, v. The State of New York, Appellant.
    Contract — canals — State — contract for construction of Barge canal — claim for extra work and materials furnished ■— term “ excavation ” includes removal of piling and masonry where necessary in performance of work — bulkhead erected to confine materials during construction of embankment but necessarily left in place to prevent embankment from sloughing off into canal — contractor entitled to pay therefor under provision in contract for payment of unit price for “ sheeting and bracing engineer s order not necessary — not a cofferdam within meaning of specifications — contractor not entitled to payment for material obtained outside prism where contract called for building embankment with material excavated therein — provision that excavation will be paid for only once — • contractor not entitled to payipent for re-excavating material deposited on banks and using same for bridge approaches.
    1. Under a written contract for construction of a portion of the Barge canal, by the terms of which the contractor agreed to construct the canal prism and as incidental thereto to make approximately a certain number of yards of excavation at a stated price, the nature of the material to be excavated not being specified but the word “ excavation ” being defined in the specifications as “ the loosening, loading, transportation and depositing of all material, * * * of every name and nature necessary to be removed,” a subcontractor is not entitled to recover for extra work in removing sheet piling, formerly erected by the State within the limits of the Barge canal prism for the purpose of holding in place the banks of the old Erie canal, which had become covered with dirt and silt so as not to be visible when the contract was executed. In removing the piling the subcontractor merely performed the contract duty to make excavation' for the canal prism and was entitled to no more than the contract price for excavation.
    2. Nor may any recovery be had for alleged extra work in removing masonry, a portion of an old lock, which became necessary in prosecution of the work. This too was excavation within the terms of the contract.
    3. Where the contractor was required to erect an embankment between the canal and a ditch and for the purpose of confining the material so that the bank of the canal would retain its line, a subcontractor constructed a “ bulkhead or cofferdam ” of boards supported by posts set in the ground and held in place by struts, wires and banking and filling, which after erection could not be removed for the reason that the soft material in the embankment would otherwise slough off into the canal, the contractor, in agreeing to create the embankment, necessarily agreed to use the sheeting and bracing required to maintain it and is entitled to payment therefor in accordance with a provision in the contract for payment of a unit price for ‘‘ sheeting and bracing.”
    4. A contention that claimant may not recover for this item because the engineer never “ o.dered in writing ” the sheeting and bracing, 'cannot be sustained. The contract itself, in view of the physical character of the material, of necessity required the erection of sheeting and bracing to confine it. It was not a doubtful case where an engineer’s order should have been sought.
    5. Nor does the contract provision that “ there shall be no payment for sheeting and bracing used in the maintenance and construction of cofferdams ” apply. The sheeting and bracing erected to confine the embankment were of a permanent, not a temporary character and were not a cofferdam within the meaning of the specifications.
    6. Where the contract called for the erection of an embankment from material to be excavated from the canal prism, and it is not found that the contractor could not obtain sufficient material therein, payment may not be recovered, at the excavation price, for material procured without the lines of the prism.
    7. By a provision in the specifications that “ excavation will be paid for only once. All cost of rehandling material must be included in the contract price for the original excavation,” claimant is debarred from being paid for the re-excavation and rehandling of material excavated from the prism of the canal, and deposited in embankments, from which, after it had dried, the material was re-excavated and deposited to form bridge approaches. The contract did not provide that the material for bridge approaches be taken from the canal prism and claimant having been paid for its original excavation cannot further recover.

      American Pipe & Construction Co. v. State, 221 App. Div. 785, modified.
    (Argued December 9, 1927;
    decided January 10, 1928.)
    Appeal from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered June 28, 1927, reversing, so far as appealed from, a judgment entered upon an award of the Court of Claims and increasing the award.

      Albert Ottinger, Attorney-General (.Frederick D. Colson of counsel), for appellant.
    Claimant was not entitled to payment for removal of sheet piling and timber construction in the prism of the canal. (Degnon Contracting Co. v. City of New York, 235 N. Y. 487; Jackson v. State of New York, 210 App. Div. 115; 241 N. Y. 563; Kinser Construction Co. v. State of New York, 204 N. Y. 381; Ferguson Contracting Co. v. State of New York, 237 N. Y. 186; Daly v. Busk Tunnel Railway Co., 129 Fed. Rep. 513; Wyckoff v. Woarms, 118 App. Div. 699; Woodruff v. Rochester & Pittsburgh R. R. Co., 108 N. Y. 39; Langley v. Rouss, 185 N. Y. 201; Molloy v. Village of Briarcliff Manor, 145 App. Div. 483; Kelly v. St. Michael’s Roman Cath. Church, 148 App. Div. 767; Traitel Marble Co. v. Brown Bros., Inc., 159 App. Div. 485.) Claimant was not entitled to payment for lumber used in building the so-called bulkhead or cofferdam. (Cameron-Hawn Realty Co. v. City of Albany, 207 N. Y. 377; Lewman v. U. S., 41 U. S. Ct. Cls. Rep. 470; Dermott v. Jones, 2 Wall. 7; Stees v. Leonard, 20 Minn. 494; School Trustees of Trenton v. Bennett, 27 N. J. L. 513; Tompkins v. Dudley, 25 N. Y. 272; Belmar Contracting Co. v. State of New York, 233 N. Y. 189.)

      Frederick W. Newton and John C. Wait for respondent.
   Kellogg, J.

The Bellew and Merritt Co. and the State of New York entered into a written contract, known as Barge Canal Contract No. 49.. The former thereby agreed to construct, in accordance with plans and specifications annexed, a section of the Barge canal in Wayne county having a length of about six miles. The latter agreed to pay, for the work and materials furnished, the unit prices specified in an agreed schedule. The Bellew and Merritt Co. sublet a large part of the work to a subcontractor, which in turn sublet a part of the work undertaken by it. Subsequently the corporate name of the Bellew and Merritt Co. was changed by order of court to the Merritt Construction Company.” The Merritt Construction Company thereafter assigned Barge Canal Contract No. 49, with the consent of the State, to the claimant, the American Pipe and Construction Co. The contract work was carried to completion by the two subcontractors and the claimant, and was accepted by the State. Thereafter the claimant filed this claim for additional compensation, asserting that it had performed work and furnished materials for which it had not been paid, and that it was entitled to payment therefor. The claim set forth a large number of items, but, owing to a stipulation entered into between the parties, we need consider here, none other than the items 47, 42, 43, 40 and 39, as the same were numbered in Schedule A ” attached to the claim. The Court of Claims, after a trial, made findings in reference to these items, determining all issues of fact in favor of the claimant. As to items 47, 42, 40 and 39, it dismissed the claim on the ground that the services performed or materials furnished were performed or furnished by subcontractors and not by claimant, and that the latter had suffered no damage.. As to item 43, it found that the claimant furnished materials and labor of the value of $1,055.32 and made an award in its favor for that amount. As to materials and labor constituting the balance of the item, it dismissed the claim on the ground that they were furnished by the subcontractors and not by the claimant. The claim, as to all other items, was dismissed. Judgment was directed in favor of the claimant for $1,055.32. The claimant took an appeal, stipulating that it would bring up for review the decision of the Court of Claims in respect to the five numbered items only, and that it would rest upon the findings of fact made by the Court of Claims in reference to such items. Accordingly, the record upon appeal was made up to contain the decision of the Court of Claims, the findings proposed by the claimant and the State, with the court’s rulings thereupon, the original contract between the Bellew and Merritt Co. and the State, the plans and specifications, and other proof of a purely documentary character. No testimony given upon the trial was incorporated in the record. The State did not appeal. Upon the record so made the Appellate Division reversed the judgment below and directed judgment for the claimant upon each of the five items. The State appealed from the decision thus made and upon the facts found by the Court of Claims, considered in the light of the documentary proof set forth in the record, asks for a reversal. We will deal separately with the five disputed items.

Item 47. The essential facts found were these: That part of the Barge canal prism which the claimant’s assignor agreed to construct incorporated within its boundaries, for a certain distance, a portion of the old Erie canal. In the improvement of that canal the State had used, at various points, timbers and sheet piling to hold the banks in place. This construction consisted of driven piles, timbers extending to cover the spaces between the piles, and sheet piling covering the timber work. The structure had become covered with dirt and silt and was not visible when contract No. 49 was executed. The claimant’s assignor was not aware of the presence of the piling when it signed- the contract. The State, having erected the piling, was chargeable with knowledge of its presence within the limits of the Barge canal prism. No reference was made to the piling in contract No. 49 or the plans and specifications annexed thereto. Its removal was not specifically called for thereby. However, the claimant does not assert, and the Court of Claims has not found, that the State made any misrepresentation of fact in regard to the presence of the piling. The sheet piling construction was removed by one of the subcontractors in the course of its work of excavation. The piling removed extended- through a distance of 1,658 feet, and the fair and reasonable value of removing the same was $3,863.14.

The essential thing which the Beílew and Merritt Co., under contract No. 49, promised to construct was a canal prism of a certain width and depth as shown upon plans annexed to the contract. To this end it necessarily agreed to remove all material within the lines of the prism of whatever name or kind. It particularly promised to make approximately 1,543,600 cubic yards of excavation ” for twenty-three cents per cubic yard. The nature of the material to be excavated was not specified. Excavation ” was the thing agreed to be made. The word is defined by the contract specifications as follows: Excavation shall consist of the loosening, loading, transporting and depositing of all material, whether wet or dry, of every name and nature necessary to be removed, for the purpose of forming the canal prism, ditches, pits for structures, for obtaining material from borrow pits, or for any other purpose necessary to complete the works under contract * * *.” In removing the piling construction, therefore, the subcontractor merely performed the contract duty of the Bellew and Merritt Co. to make excavation for the canal prism. The contractor was entitled to receive therefor the sum of twenty-three cents per cubic yard and no more. It has been paid that sum. Therefore, the claimant, under item 47, may have no recovery.

Item 42. The facts found are these: The contract called for the construction in the new channel of the Barge canal of a lock known as lock 30. The old channel of the Erie canal was to the south of the new channel. A portion thereof was to be utilized as a ditch for" the purpose of passing water around lock 30, as in time of flood. In this portion of the old canal was lock 61 of the old Erie canal. To construct the by-passing ditch it became necessary to remove about ten cubic yards of masonry from lock 61. This was done by one of the subcontractors. The reasonable value of such work was 1204.

As in the case of item 47, the work performed was work of excavation, within the terms of the contract, for which the contractor was to receive twenty-three cents per cubic yard. The specifications, in the clause heretofore quoted, define excavation to include “ material of every name and nature necessary to be removed ” whether for the purpose of forming the canal prism ” or necessary “ ditches.’ Moreover,'they seem otherwise particularly to provide for the condition here found, for they specify that stones in existing structures removed by the contractor shall remain the property of the State and payment for transporting, piling and storing such material shall “ be included in the contract price for excavation.” No recovery upon this item may be had.

Item 43. The facts found are these: The Barge canal, between certain stations, was to be paralleled on the north by a channel known as the State ditch. The contractor was required to erect an embankment between the canal and the ditch which would sustain a head of water. The material to be excavated from the canal and the ditch was muck, loam, marl and clay, not suitable for the construction of levees. The character of the material, in conjunction with the narrowness of the space between the canal and ditch lines, made it impossible to construct an embankment which would remain within the fines, unless bulkheads or other structures were erected to. confine it. For the purpose of confining the material so that the north bank of the Barge canal would retain its contract fine, one of the subcontractors constructed a bulkhead or coffer-dam ” consisting of fines of boards supported by posts set in the ground and held in place by struts, wires, and banking and filling. After this structure had been erected it was found that it could not be removed for the reason that the soft material in the embankment would otherwise slough off into the canal. Two hundred and eighteen thousand one hundred feet, board measure, of lumber was used in erecting the structure. The fair value thereof was $6,331.90. Lumber of the value of $1,055.31 was furnished by the claimant. The balance was furnished by the subcontractor.

The specifications in terms provided: “ When ordered in writing by the Engineer, the sheeting and bracing necessary for the proper preservation of any excavation, embankment, or structure, shall be placed by the contractor; and will be paid for at the contract price for sheeting and bracing; excepting there shall be no payment for sheeting and bracing used in the construction and maintenance of coffer-dams.” The contract provided for the payment of a unit price for sheeting and bracing ” of fifty dollars per thousand feet board measure. We take this provision to mean that whenever the contract required the contractor to place sheeting and bracing, the State was required to pay therefor the sum of fifty dollars per thousand feet. Did this contract require the contractor to place sheeting and bracing? The contractor agreed to erect an embankment between the Barge canal and the State ditch, using therefor the spoil excavated from the two channels. But such was the fluid nature of the spoil that it would not remain in position to constitute an embankment unless artificially confined. The Court of Claims has found that the erection of the bulkhead set up was absolutely necessary to a permanent embankment. Therefore, the contractor, in agreeing to create the embankment with spoil, necessarily agreed to use the sheeting and bracing required to maintain it.

It is said that the claimant may not recover for this item because the engineer never “ ordered in writing ” the sheeting and bracing. The answer is that the contract itself, in view of the physical character of the material, of necessity required the erection of sheeting and bracing to confine it. It was not a doubtful case where an engineer’s order should have been sought. It was a case where the contractor must, to comply with its contract, have used the bracing. As it must have used it, so must it be paid for having used it in compliance with its contract.

It is also said that the provision that there shall be no payment for sheeting and bracing used in the construction and maintenance of coffer-dams ” applies since the Court of Claims itself has termed the erection a bulkhead or coffer-dam.” The essential characteristic of a coffer-dam is that it temporarily excludes water from the site of work to be done. A coffer-dam is “A temporary enclosing dam built in the water and pumped dry: to protect workmen while some work, as the foundation of a pier, is in progress.” (New Standard Dictionary.) The sheeting and bracing erected in this instance were of a permanent, not a temporary, character. They may have served the purpose of construction. They now serve permanently to maintain the banks of the Barge canal. They are in no true sense a coffer-dam. They clearly are not such within the meaning of the specifications.

The claimant should have a recovery for this item.

Item 40. The facts found are these: The contract called for the erection of an embankment on the south side of the Barge canal, between stations 7,423 and 7,432, to sustain a head of water. This embankment was required to be erected from material to be excavated from the canal prism and was to constitute a Spoil Bank.” Between the two stations there was not sufficient material within the lines of the canal prism to form the embankment when excavated. Accordingly one of the subcontractors procured 5,000 cubic yards of material from without the fines of the prism. It is for this material at the excavation price of twenty-three cents per cubic yard that the claimant has sought recovery. It was not fomid that the contractor could not have secured sufficient spoil within the prism. It was merely found that to secure the spoil it must have gone to points in the prism 2,000 feet distant from the stations.

The claimant’s assignor, when it signed the contract, should have known that the canal prism between the stations did not contain sufficient material to erect the adjacent spoil bank required. It nevertheless contracted to erect the bank with prism material. Having elected to obtain material outside the prism, in defiance of the contract, its assignee should receive no compensation in addition to that which it would have received had it done the work in accordance with the contract. All prism excavation having been fully paid for, the claimant should have no further recovery under this item.

Item 39. The facts found are these: The contractor was required to erect three highway bridges over the Barge canal, together with necessary approaches thereto. One of the subcontractors erected the bridges. In constructing the approaches thereto it deposited in embankments 28,499 cubic yards of dirt and other material. This dirt had originally been excavated from the prism of the canal. It was not deposited in the embankments as it came from the prism. The material was of such a nature that it was unsuitable for the approaches until it had been dried out. Accordingly it was placed in permanent spoil banks and permitted to dry out during an extended period of time. Thereafter the material was re-excavated from the spoil banks and deposited to form the bridge approaches. The original excavation was. paid for at twenty-three cents per cubic yard. The claimant seeks to recover an additional twenty-three cents per cubic yard for the re-excavation of the material from the spoil banks.

The contract did not provide that the material for bridge approaches be taken from the canal prism. Neither did it provide that it should be excavated from borrow pits established beyond the lines of the prism. The claimant did not request the engineer to establish . such borrow pits. It chose for use in the approaches the material excavated from the canal prism. The specifications provided: “Excavation will be paid for only once. All cost of rehandling material must be included in the contract price for the original excavation.” The provision is not ambiguous; it is explicit and conclusive. By it the claimant is debarred from being paid for the re-excavation and rehandling of the same material. Recovery for this item may not be had.

The judgment should be modified to reduce the claimant’s recovery to the sum of $6,331.90, with interest from the date of filing the claim, and, as modified, affirmed, without costs.

Cardozo, Ch. J., Pound, Lehman and O’Brien, JJ., concur; Crane, J., dissents as to the modification in respect of items 39 and 40; Andrews, J., dissents and votes to affirm.

Judgment accordingly.


text:
    H. R. Moch Company, Inc., Appellant, v. Rensselaer Water Company, Respondent.
    Water works companies — negligence — contract — tort — householder without remedy for breach by waterworks company of its contract with city unless intent appears that it be answerable to individuals —• no cause of action for breach of contract through which fire spread to and destroyed its property — action not maintainable as common-law tort — nor as one for breach of statutory duty.
    1. A contract between a city and a water company to furnish water at the city hydrants has in view a benefit to the public that is_ incidental rather than immediate, an assumption of duty to the city and not to its inhabitants, and unless an intention appears that the promisor is to be answerable to individual members of the public as well as to the city for any loss ensuing from the failure to fulfill the promise, a householder is without remedy against it.

      2. A cause of action is not maintainable, therefore, by a property owner against a water works company for breach of a contract whereby the defendant agreed to supply to the municipality, wherein plaintiff’s property was situated, service at fire hydrants, on allegations that by reason of defendant’s failure to furnish an adequate supply of water with adequate pressure to extinguish a fire in a building, the fire spread to plaintiff’s warehouse and destroyed it and its contents. {Lawrence v. Fox, 20 N. Y. 268; Pond v. New Rochelle Water Co., 183 N. Y. 330; Matter of International Ry. Co. v. Rann, 224 N. Y. 83: Smyth v. City of New York, 203 N. Y. 106; Rigney v. N. Y. C. & H. R. R. R. Co., 217 N. Y. 31, distinguished.)
    3. Nor is the action maintainable as a common-law tort. It cannot be said that defendant, when once it entered upon the performance of its contract with the city, was brought into such a relation with every one who might potentially be benefited through the supply of water at the hydrants as to give to negligent performance, without reasonable notice of a refusal to continue, the quality of a tort. In the absence of allegations of malice or other aggravating elements, the negligent failure to furnish an adequate supply of water is at most the denial of a benefit. It is not the commission of a wrong.
    4. Nor is the action maintainable as one for breach of a statutory duty. There is nothing in the provisions of the Transportation Corporations Law (Cons. Laws, ch. 63) prescribing the duties of a water works company, to enlarge the zone of liability where an inhabitant of the city suffers indirect or incidental damage through deficient pressure at the hydrants. The breach of duty is to the city and, though wrongful, is unavailing without more to give a cause of action to another.

      Moch Co. v. Rensselaer Water Co., 219 App. Div. 673, affirmed.
    (Submitted December 9, 1927;
    decided January 10, 1928.)
    Appeal from a judgment, entered March 19, 1927, upon an order of the Appellate Division of'the Supreme Court in the third judicial department, which reversed an order of Special Term denying a motion for a dismissal of the complaint and granted said motion.

      Glenn A. Frank for appellant.
    The duties and obligation of the defendant did not arise solely by reason of its contract with the city of Rensselaer, but had their inception in section 81 of the Transportation Corporations Law. (Waterloo Water Co. v. Village of Waterloo, 200 App. Div. 721; Mamaroneck v. New York City Water

      Co., 203 App. Div. 122; 235 N. Y. 563; City of New York v. Jamaica Water Supply Co., 181 App. Div. 49; 226 N. Y. 572; People ex rel. City of New York v. Queens County Water Co., 232 N. Y. 277; Staten Island Water Supply Company v. City of N. Y., 144 App. Div. 324; Glanzer v. Shepard, 233 N. Y. 236.)

      Thomas F. McDermott for respondent.
    A city assuming the function of extinguishment of fires is not liable to an inhabitant for its negligence. (Springfield Fire Ins. Co. v. Village of Keeseville, 148 N. Y. 46; Maxmilian v. Mayor, etc., 62 N. Y. 160; Oakes Mfg. Co. v. City of New York, 206 N. Y. 221; Matter of International Ry. Co. v. Rann, 224 N. Y. 83; Wainwright v. Queens Co. Water Co., 78 Hun, 146; Wilcox v. Rochester, 190 N. Y. 137.) The non-liability of the city for its negligence in the extinguishment of fires is extended to the defendant, a private water company, to which the city intrusted that governmental function. (German Alliance Ins. Co. v. Home Water Supply Co., 226 U. S. 220; 174 Fed. Rep. 764; Wainwright v. Queens Co. Water Co., 78 Hun, 146; Smith v. Great South Bay Water Co., 82 App. Div. 427; Nichol v. Huntington Water Co., 53 W. Va. 348; Akron Water Co. v. Brownless, 10 Ohio C. C. 620; Dillon on Mun. Corp. [5th ed.] § 1340; Hall v. Passaic Water Co., 83 N. J. L. 771; Baum v. Somerville Water Co., 84 N. J. L. 611; Hone v. Presque Isle Water Co., 104 Maine, 271; Eaton v. Faubin, 37 Neb. 546; House v. Houston W. Co., 88 Tex. 233; Button v. Green Bay Water Co., 81 Wis. 48.) Plaintiff cannot recover in tort. (German Alliance Ins. Co. v. Home W. Co., 226 U. S. 220; Howsman v. Trenton W. Co., 119 Mo. 304; House v. Houston W. Co., 88 Tex. 233; Wilkins v. L. H. W. Co., 78 Miss. 389; Nichol v. Huntington W. Co., 53 W. Va. 348; Root v. Saratoga Spa, 218 App. Div. 237; Fitch v. Seymour Water Co., 139 Ind. 214; Anderson v. Iron Mountain Water Co., 225 Mich. 514.)
   Cardozo, Ch. J.

The defendant, a water works company under the laws of this State, made a contract with the city of Rensselaer for the supply of water during a term of years. Water was to be furnished to the city for sewer flushing and street sprinkling; for service to schools and public buildings; and for service at fire hydrants, the latter service at the rate of $42.50 a year for each hydrant. Water was to be furnished to private takers within the city at their homes and factories and other industries at reasonable rates, not exceeding a stated schedule. While this contract was in force, a building caught fire. The flames, spreading to the plaintiff’s warehouse near by, destroyed it and its contents. The defendant according to the complaint was promptly notified of the fire, “but omitted and neglected after such notice, to supply or furnish sufficient or adequate quantity of water, with adequate pressure to stay, suppress or extinguish the fire before it reached the warehouse of the plaintiff, although the pressure and supply which the defendant was equipped to supply and furnish, and had agreed by said contract to supply and furnish, was adequate and sufficient to prevent the spread of the fire to and the destruction of the plaintiff’s warehouse and its contents.” By reason of the failure of the defendant to fulfill the provisions of the contract between it and the city of Rensselaer,” the plaintiff is said to have' suffered damage, for which judgment is demanded. A motion, in the nature of a demurrer, to dismiss the complaint, was denied at Special Term. The Appellate Division reversed by a divided court.

Liability in the plaintiff’s argument is placed on one or other of three grounds. The complaint, we are told, is to be viewed as stating: (1) A cause of action for breach of contract within Lawrence v. Fox (20 N. Y. 268); (2) a cause of action for a common-law tort, within MacPherson v. Buick Motor Company (217 N. Y. 382); or (3) a cause of action for the breach of a statutory duty. These several grounds of liability will be considered in succession.

We think the action is not maintainable as one for breach of contract.

No legal duty rests upon a city to supply its inhabitants with protection against fire (Springfield Fire Ins. Co. v. Village of Keeseville, 148 N. Y. 46). That being so, a member of the public may not maintain an action under Lawrence v. Fox against one contracting with the city to furnish water at the hydrants, unless an intention appears that the promisor is to be answerable to individual members of the public as well as to the city for any loss ensuing from the failure to fulfill the promise. No such intention is discernible here. On the contrary, the contract is significantly divided into two branches: one a promise to the city for the benefit of the city in its corporate capacity, in which branch is included the service at the hydrants; and the other a promise to the city for the benefit of private takers, in which branch is included the service at their homes and factories. In a broad sense it is true that every city contract, not improvident or wasteful, is for the benefit of the public. More than this, however, must be shown to give a right of action to a member of the public not formally a party. The benefit, as it is sometimes said, must be one that is not merely incidental and secondary (cf. Fosmire v. Nat. Surety Co., 229 N. Y. 44). It must be primary and immediate in such a sense and to such a degree as to bespeak the assumption of a duty to make reparation directly to the individual members of the public if the benefit is lost. The field of obligation would be expanded beyond reasonable limits if less than this were to be demanded as a condition of liability. A promisor undertakes to supply fuel for heating a public building. He is not liable for breach of contract to a visitor who finds the building without fuel, and thus contracts a cold. The list of illustrations can be indefinitely extended. The carrier of the mails under contract with the government is not answerable to the merchant who has lost the benefit of a bargain through negligent delay. The householder is without a remedy against manufacturers of hose and engines, though prompt performance of their contracts would have stayed the ravages of fire. “The law does not spread its protection so far” (Robins Dry Dock & Repair Co. v. Flint, 275 U. S. 303).

So with the case at hand. By the vast preponderance of authority, a contract between a city and a water company to furnish water at the city hydrants has in view a benefit to the public that is incidental rather than immediate, an assumption of duty to the city and not to its inhabitants. Such is the ruling of the Supreme Court of the United States (German Alliance Ins. Co. v. Home Water Supply Co., 226 U. S. 220). Such has been the ruling in this State (Wainwright v. Queens County Water Co., 78 Hun, 146; Smith v. Great South Bay Water Co., 82 App. Div. 427), though the question is still open in this court. Such with few exceptions has been the ruling mother jurisdictions (Williston, Contracts, § 373, and cases there cited; Dillon, Municipal Corporations. [5th ed.]., § 1340). The diligence of counsel has brought together decisions to that effect from twenty-six States. Typical examples are Alabama (Ellis v. Birmingham Water Co., 187 Ala. 552); California (Nichaus Bros. Co. v. Contra Costa Water Co., 159 Cal. 305); Georgia (Holloway v. Macon G. & W. Co., 132 Ga. 387); Connecticut (Nickerson v. Bridgeport H. Co., 46 Conn. 24); Kansas (Mott v. Cherryvale W. & M. Co., 48 Kan. 12); Maine (Hone v. Presque Isle Water Co., 104 Me. 217); New Jersey (Hall v. Passaic Water Co., 83 N. J. L. 771), and Ohio (Blunk v. Dennison Water Co., 71 Ohio St. 250). Only a few States have held otherwise (Page, Contracts, § 2401). An intention to assume an obligation of indefinite extension to every member of the public is seen to be the more improbable when we recall the crushing burden that the obligation would impose (cf. Hone v. Presque Isle Water Co., 104 Me. 217, at 232). The consequences invited would bear no reasonable proportion to those attached by law to defaults not greatly different. A wrongdoer who by negligence sets fire to a building is liable in damages to the owner where the fire has its origin, but not to other owners who are injured when it spreads. The rule in our State is settled to that effect, whether wisely or unwisely (Hoffman v. King, 160 N. Y. 618; Rose v. Penn. R.R. Co., 236 N. Y. 568; Moore v. Van Beuren & N. Y. Bill Posting Co., 240 N. Y. 673; cf. Bird v. St. Paul F. & M. Ins. Co., 224 N. Y. 47). If the plaintiff is to prevail, one who negligently omits to supply sufficient pressure to extinguish a fire started by another, assumes an obligation to pay the ensuing damage, though the whole city is laid low. A promisor will not be deemed to have had in mind the assumption of a risk so overwhelming for any trivial reward.

The cases that have applied the rule of Lawrence v. Fox to contracts made by a city for the benefit of the public are not at war with this conclusion. Through them all there runs as a unifying principle the presence of an intention to compensate the individual members of the public in the event of a default. For example, in Pond v. New Rochelle Water Co. (183 N. Y. 330) the contract with the city fixed a schedule of rates to be supplied not to public buildings but to private takers at their homes. In Matter of International Railway Co. v. Rann (224 N. Y. 83, 85) the contract was by street railroads to carry passengers for a stated fare. In Smyth v. City of N. Y. (203 N. Y. 106) and Rigney v. N. Y. C. & H. R. R. R. Co. (217 N. Y. 31) covenants were made by contractors upon public works, not merely to indemnify the city, but to assume its liabilities. These and like cases come within the third group stated in the comprehensive opinion in Seaver v. Ransom (224 N. Y. 233, 238). The municipality was contracting in behalf of its inhabitants by covenants intended to be enforced by any of them severally as occasion should arise.

We think the action is not maintainable as one for a common-law tort.

"It is ancient learning that one who assumes to act, even though gratuitously, may thereby become subject to the duty of acting carefully, if he acts at all” (Glanzer v. Shepard, 233 N. Y. 236, 239; Marks v. Nambil Realty Co., Inc., 245 N. Y. 256, 258). The plaintiff would bring its case within the orbit of that principle. The hand once set to a task may not always be withdrawn with impunity though liability would fail if it had never been applied at all. A time-honored formula often phrases the distinction as one between misfeasance and non-feasance. Incomplete the formula is, and so at times misleading. Given a relation involving in its existence a duty of care irrespective of a contract, a tort may result as well from acts of omission as of commission in the fulfillment of the duty thus recognized by law (Pollock, Torts [12th ed.], p. 555; Kelley v. Met. Ry. Co., 1895, 1 Q. B. 944). What we need to know is not so much the conduct to be avoided when the relation and its attendant duty are established as existing. What we need to know is the conduct that engenders the relation. It is here that the formula, however incomplete, has its value and significance. If conduct has gone forward to such a stage that inaction would commonly result, not negatively merely in withholding a benefit, but positively or actively in working an injury, there exists a relation out of which arises a duty to go forward (Bohlen, Studies in the Law of Torts, p. 87). So the surgeon who operates without pay, is hable though his negligence is in the omission to sterilize his instruments (cf. Glanzer v. Shepard, supra); the engineer, though his fault is in the failure to shut off steam (Kelley v. Met. Ry. Co., supra; cf. Pittsfield Cottonwear Mfg. Co. v. Shoe Co., 71 N. H. 522, 529, 533); the maker of automobiles, av uhe suit of some one other than the buyer, though his negligence is merely in inadequate inspection (MacPherson v. Buick Motor Co., 217 N. Y. 382). The query always is whether the putative wrongdoer has advanced to such a point as to have launched a force or instrument of harm, or has stopped where inaction is at most a refusal to become an instrument for good (cf. Fowler v. Athens Waterworks Co., 83 Ga. 219, 222).

The plaintiff would have us hold that the defendant, when once it entered upon the performance of its contract with the city, was brought into such a relation with every one who might potentially be benefited through the supply of water at the hydrants as to give to negligent performance, without reasonable notice of a refusal to continue, the quality of a tort. There is a suggestion of this thought in Guardian Trust Co. v. Fisher (200 U. S. 57), but the dictum was rejected in a later case decided by the same court (German Alliance Ins. Co. v. Home Water Supply Co., 226 U. S. 220) when an opportunity was at hand to turn it into law. We are satisfied that liability would be unduly and indeed indefinitely extended by this enlargement of the zone of duty. The dealer in coal who is to supply fuel for a shop must then answer to the customers if fuel is lacking. The manufacturer of goods, who enters upon the performance of his contract, must answer, in that view, not only to the buyer, but to those who to his knowledge are looking to the buyer for their own sources of supply. Every one making a promise having the quality of a contract will be under a duty to the promisee by virtue of the promise, but under another duty, apart from contract, to an indefinite number of potential beneficiaries when performance has begun. The assumption of one relation will mean the involuntary assumption of a series of new relations, inescapably hooked together. Again we may say in the words of the Supreme Court of the United States, The law does not spread its protection so far” (Robins Dry Dock & Repair Co. v. Flint, supra; cf. Byrd v. English, 117 Ga. 191; Dale v. Grant, 34 N. J. L. 142; Conn. Ins. Co.v. N. Y. & N. H. R. R. Co., 25 Conn. 265; Anthony v. Slaid, 11 Metc. 290), We do not need to determine now what remedy, if any, there might be if the defendant had withheld the water or reduced the pressure with a malicious intent to do injury to the plaintiff or another. We put aside also the problem that would arise if there had been reckless and wanton indifference to consequences measured and foreseen. Difficulties would be present even then, but they need not now perplex us. What we are dealing with at this time is a mere negligent omission, unaccompanied by malice or other aggravating elements. The failure in such circumstances to furnish an adequate supply of water is at most the denial of a benefit. It is not the commission of a wrong.

We think the action is not maintainable as one for the breach of a statutory duty.

The defendant, a public service corporation, is subject to the provisions of the Transportation Corporations Act. The duty imposed upon it by that act is in substance to furnish water, upon demand by the inhabitants, at reasonable rates, through suitable connections at office, factory or dwelling, and to furnish water at like rates through hydrants or in public buildings upon demand by the city, all according to its capacity (Transportation Corporations Law [Cons. Laws, ch. 63], § 81; Staten Island Water Supply Co. v. City of N. Y., 144 App. Div. 318; People ex rel. City of N. Y. v. Queens Co. Water Co., 232 N. Y. 277; People ex rel. Arthur v. Huntington Water Works Co., 208 App. Div. 807, 808). We find nothing in these requirements to enlarge the zone of liability where an inhabitant of the city suffers indirect or incidental damage through deficient pressure at the hydrants. The breach of duty in any case is to the one to whom service is denied at the time and at the place where service to such one is due. The denial, though wrongful, is unavailing without more to give a cause of action to another. We may find a helpful analogy in the law of common carriers. A railroad company is under a duty to supply reasonable facilities for carriage at reasonable rates. It is liable, generally speaking, for breach of a duty imposed by law if it refuses to accept merchandise tendered by a shipper. The fact that its duty is of this character does not make it liable to some one else who may be counting upon the prompt delivery of the merchandise to save him from loss in going forward with his work. If the defendant may not be held for a tort at common law, we find no adequate reason for a holding that it may be held under the statute.

The judgment should be affirmed with costs.

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

Judgment affirmed, etc.


text:
    Buffalo Builders Supply Company, Respondent, v. Menno A. Reeb, Appellant.
    Contract — sale — rescission — plaintiff may not pay purchase price knowing defendant would not fully perform and then claim rescission for failure of consideration — court not bound, as matter of law, to attempt to force defendant to perform agreement which he had evaded and so far as he could nullified — terms upon which rescission granted in sound discretion of court where impossible to restóte parties to former position.
    1. In an action for rescission of a contract whereby plaintiff agreed to purchase defendant’s business, even though findings are sufficient to establish that plaintiff understood that the defendant agreed to transfer to it the good will of the business including that done at wholesale, and that defendant had breached the contract by malting sales to dealers, plaintiff is not entitled to rescission where further findings establish that'it was fully advised, before the business was transferred or the full price paid, that the defendant would -not consider himself bound, under the original contract, to turn over his business with dealers and would not voluntarily do so. Plaintiff might not pay the purchase price for partial performance of the contract, knowing defendant would not voluntarily perform further, and then claim rescission and return of the price paid for failure of consideration.

      2. Where, however, the findings establish that shortly after the transfer to. the plaintiff of the business sold, the defendant was conducting even a retail business, through a corporation controlled by him, and planned to divert from the plaintiff to this corporation the business transferred, and further findings show that the acquisition of the tangible assets was of no importance, value or consequence to the plaintiff, the acquisition of the good will, trade and custom of defendant’s business being the essential and sole object and purpose of plaintiff in making and consummating the contract, it cannot be said, as matter of law, that the court should have attempted to force the defendant by injunction to perform an agreement which he had evaded and so far as he could nullified.
    3. The terms upon which rescission may be granted, where complete restoration of the parties to their former position is impossible, rest in the sound discretion of the courts.

      Buffalo Builders Supply Co. v. Reeb, 217 App. Div. 190, affirmed.
    (Argued December 12, 1927;
    decided January 10, 1928.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered July 6, 1926, unanimously affirming a judgment in favor of plaintiff entered upon the report of a referee.

      AdeTbert Moot and Welles V. Moot for appellant.
    Neither the complaint, nor the evidence, nor the findings, makes out a case for rescission of the contract in question. (Callanan v. K., A. C. & L. C. R. R. Co., 199 N. Y. 268; Weston v. Stoddard, 137 N. Y. 119.) The contract in question here, in the light of its history, its written modification, and defendant’s insistence upon it as modified, before he would accept his pay, is controlling. (Bock v. Perkins, 139 U. S. 628; Mutual Life Ins. Co. v. Hill, 193 U. S. 551; Greenfield v. Gilman, 140 N. Y. 168; Schoonmaker v. Hoyt, 148 N. Y. 425; Genet v. D. & H. Canal Co., 163 N. Y. 173; Walls v. Bailey, 49 N. Y. 464; Chadsey v. Guion, 97 N. Y. 333; Kratzenstein v. Western Assurance Co., 116 N. Y. 54; Heyn v. New York Life Ins. Co., 192 N. Y. 1; Daly v. Busk Tunnel Ry. Co., 129 Fed. Rep. 513.) Plaintiff elected to close the contract, pay the money due thereon, and. accept defendant’s delivery thereon knowing all the facts, and defendant’s claims, and that was fatal to rescission. (Conrow v. Little, 115 N. Y. 387; Sanger v. Wood, 3 Johns. Ch. 416; Terry v. Munger, 121 N. Y. 161.)

      Parton Swift for respondent.
    Defendant’s willful continued violation of his covenants constituted such a substantial failure of consideration as entitles plaintiff to the rescission asked. (Callanan v. K., A. C. & L. C. R. R. Co., 199 N. Y. 268; Rafferty v. World Film Corp., 180 App. Div. 475; Bloomquist v. Farson, 222 N. Y. 375; DeMille Co. v. Casey, 121 Misc. Rep. 78.) Plaintiff has done no act inconsistent with rescission. (Mason v. Bovet, 1 Den. 69; Hammon v. Pennock, 61 N. Y. 145; Moore v. Mutual Fund R. F. S. A., 121 App. Div. 335; Rafferty v. World Film Corp., 180 App. Div. 475; Vail v. Reynolds, 118 N. Y. 297; Allerton v. Allerton, 50 N. Y. 670.)
   Lehman, J.

The plaintiff agreed to buy from the defendant his “ builders’ supply business ” in the city of Buffalo. The contract provided for the transfer to the plaintiff of the equipment used in the business, the stock of salable merchandise on hand, and the good will of the business. The consideration for the transfer was to be the payment of the inventory value of the equipment and the market price of the merchandise plus the sum of $50,000. The defendant agreed that he will for a period of ten years * * * abstain from the retail business of merchandising in mason builders’ supplies of any name or nature either on his own account or in the employ of any other person or corporation within the limits of the City of Buffalo.” The contract expressly provided that the defendant might conduct “ the manufacture and wholesale business of masons’ supplies which vendor now is or hereafter may be engaged in.” Transfer of the tangible assets of the defendant’s retail building supply business was made on December 6th, 1913. On that date the defendant discontinued retail business in the city of Buffalo. The public was informed that the retail business was transferred to the plaintiff and the plaintiff received a list of defendant’s retail customers. On the 12th day of February, 1914, the plaintiff brought this action to rescind the sale on the ground that the defendant had breached his contract by continuing to sell goods to former customers. The plaintiff had not, before bringing the action, offered to return to the defendant the merchandise it had received. Indeed, it had sold much of the merchandise before that time. It offered in the complaint to return the tangible assets still in its possession. It also wrote to the defendant offering to dispose of these assets in any manner the defendant might desire.

After trial of the issues an interlocutory judgment was rendered in favor of the plaintiff decreeing rescission of the sale and an accounting between the parties. Final judgment has now been entered after the accounting. All the findings of fact have been unanimously affirmed by the Appellate Division before July 15th, 1926. Upon this appeal we must conclusively presume that these findings are supported by the evidence.

The courts below have found two substantial breaches of his contract by the defendant. Each breach has been found separately to constitute a substantial failure of the consideration for which the plaintiff paid to the defendant the sum of one hundred and five thousand dollars.” The defendant, as we have stated, continued to sell at wholesale to dealers in Buffalo. It is said that the parties understood that the defendant might not do so and that failure to abide by the understanding constituted a breach of the contract in itself entitling the plaintiff to rescission. The findings are perhaps sufficient to establish that the plaintiff understood that the defendant had agreed to transfer to it the good will of a business which included business done at wholesale with dealers in Buffalo. Even so, it seems difficult in the face of the express language of the contract to find any basis for a conclusion that the defendant agreed not to sell to such retailers thereafter. In any event, the plaintiff is not entitled to a rescission because of such sales. The findings establish that the plaintiff was fully advised before the business was transferred or the full price paid that the “ defendant would not consider himself bound to turn over his business with dealers in Buffalo under the original contract and would not turn over such business,” at least voluntarily. Clearly the plaintiff is not entitled to rescind the contract for substantial failure of consideration because of alleged breach of contract when the plaintiff chose to pay the consideration and to accept the tangible assets with knowledge that the defendant would not voluntarily do more. Even if the plaintiff thereafter had the right to insist that the defendant must discontinue business with dealers in Buffalo, the plaintiff might not pay the purchase price and accept a partial performance of the contract knowing that the defendant would not voluntarily perform further, and then claim two months thereafter that there has been a failure of consideration so substantial and pervasive as to justify demand for the return of the price paid.

The findings, however, also establish that a little more than a month after the transfer to the plaintiff of the business sold, the defendant was conducting even a retail business through a corporation controlled by him in fact, though the corporate stock was owned by members of his family. No purpose would be served by setting out these findings in full. They are sufficient to show a plan calculated to divert from the plaintiff to this corporation controlled by the defendant the business transferred to the plaintiff shortly before. At the time the action was begun this corporation had regained less than fourteen per cent of the business transferred; but the findings present a reasonable basis for a conclusion that the plaintiff would as time went on lose more and more of the benefit of its purchase. Ordinarily an agreement by a vendor of a business to refrain from doing business thereafter is merely collateral to the transfer of the business. Breach of a collateral agreement is not in itself ground for the rescission of a contract. The breach must be so fundamental and pervasive as to result in substantial frustration before total rescission may be ordered. In most cases too the less drastic remedy of injunction would afford full relief. Here, however, the circumstances are peculiar. The findings establish that all the tangible property covered by the contract of sale could be purchased at any time and in any quantity in the open market and the price paid was no less than the market value. The acquisition of the tangible assets was of “no importance, value or consequence to the plaintiff.” The acquisition of the good will, trade and custom of the defendant’s business was the essential and sole object and purpose of plaintiff in making and consummating the contract of sale. Ordinarily the good will of a business attaches itself, at least in part, to the name under which, and the place where, a business has been conducted. Here the plaintiff did not by the contract obtain any right to use either the name or the place. The plaintiff could hold the good will purchased only if the defendant refrained from doing business himself. There is basis for a conclusion that under these circumstances the defendant’s agreement not to do business was the dominant purpose of the contract and not merely a collateral part. The defendant’s breach was not open and defiant. He sought by evasion to retain the benefit he had contracted to transfer, and that evasion began promptly after he received the consideration for the transfer. Under these peculiar circumstances we may not say as matter of law that the court should have attempted to force the defendant by injunction to perform an agreement which he had evaded and so far as he could nullified.

The courts below have fixed the terms upon which restitution must be made. The terms are as fair as the circumstances permit. The plaintiff must restore to the defendant at least the value of the tangible chattels no longer in its possession. Restoration of the chattels themselves would give the defendant no greater benefit. Perhaps the plaintiff made some sales it would not have made if defendant had not sold his business. These circumstances do not bar the equitable remedy of rescission for wrong done. The terms upon which rescission may be granted where complete restoration of the parties to their former position is impossible rests in the sound discretion of the courts. (United Zinc Companies v. Harwood, 216 Mass. 474.)

The judgment should be affirmed, with costs.

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

Judgment affirmed, etc.