author: Lewis, J. Finch, J.

text:
    Julius H. Kamerman, Respondent, v. William B. Curtis, Appellant.
    Argued February 26, 1941;
    decided April 17, 1941.

      Roscoe S. Conkling and John Preston Phillips for appellant.

      Jacob I. Goodstein for respondent.
   Lewis, J.

The action is in equity for an accounting. Although a trial has been had, we meet at the outset questions of law referable to the pleadings.

By the complaint the plaintiff alleges that he entered into a partnership agreement with the defendant to carry on a business brokerage agency specializing in the sale of drug companies and allied businesses. From further averments in the complaint and from a bill of particulars furnished by the plaintiff it appears that the partnership was based upon an oral agreement by which plaintiff and defendant were to share equally in all profits and losses which might result from the venture. The plaintiff also alleges that while the partnership was in existence the defendant, on its behalf, brought about the sale of a drug company; that plaintiff does not know the exact details of the sale, the date thereof or the amounts actually received by the defendant but he states, upon information and belief, that the sale was consummated at a price which, under an arrangement with another broker who participated in the transaction, entitled the partnership to commissions in the amount of $70,000; that upon the consummation of that sale the defendant received the sum of $70,000 as such commissions and thereafter paid over to the plaintiff $2,500, but that he has since refused to pay the balance of the full one-half share of such commissions to which the plaintiff was entitled as a partner despite the plaintiff’s demand therefor. The plaintiff seeks in this action a judgment dissolving the alleged partnership and directing the defendant to account for all partnership transactions in which he has participated and for all partnership moneys received by him.

The amended answer by the defendant denies the existence of the partnership and denies that a transaction took place, as alleged by the plaintiff, by which brokers’ commissions in the amount of $70,000 were payable to the parties to this action as copartners or were received by him as such a partner. The defendant admits that prior to the commencement of this action he had paid to the plaintiff the sum of $2,500 and, as a separate and complete defense, he alleges that for this sum of $2,500 and other valuable consideration paid by him to the plaintiff on May 25, 1939, the plaintiff executed and delivered to the defendant a written instrument whereby the plaintiff released and discharged the defendant from all claims, damages or causes of action which he had or claimed to have including the present cause of action.

The reply interposed by the plaintiff contains an admission that on May 25, 1939, he signed a paper purporting to be a general release and that he then received the sum of $2,500, but it is alleged by the plaintiff that in doing so his acts were induced by and he relied upon statements and representations made by the defendant which were false and that the falsity thereof was then known to the defendant.

Such was the state of the pleadings when the trial opened, at which time — before any witness was called — counsel for the defendant objected to further proceedings in the action upon the ground that the general release, pleaded by the defendant and admitted by the plaintiff, was a bar to the prosecution of the action. The release was produced in court and thereupon demand was made, on behalf of the defendant, that before the plaintiff should be permitted to proceed with the trial the consideration, concededly received by him, should be restored to the defendant. To this demand the court replied: He doesn’t have to.” Thereupon counsel for the defendant stated: I think I am entitled to have it on the record, whether or not the plaintiff will restore the consideration.” The following colloquy ensued: “ Mr. Conkling [counsel for the defendant]: The Court says that the plaintiff does not have to restore the consideration? The Court: You have made the request. Mr. Conkling: I make a demand. The Court: You made the motion and I denied your motion.” We regard this ruling as erroneous.

The pleadings make it clear that the plaintiff has not chosen as his remedy an action at law for money had and received. The action is for an accounting in which the recovery to be had, if any, is a sum unliquidated in amount and not certainly recoverable. Indeed, when referring to commissions due the alleged partnership from a single sale said to have been brought about by the defendant, the complaint states: “That the plaintiff herein does not know * * * the amounts actually paid to and received by the defendant but expects to prove the same on the trial of this action.” Thereafter it is alleged: “ That defendant herein has failed to account to this plaintiff or to the said copartnership for the moneys received and collected by him as a result of the aforesaid transaction although duly requested so to do by the plaintiff.” Finally the demand for a dissolution of the partnership and for an accounting by the defendant clearly imports an objective by the plaintiff to recover an unliquidated sum to be determined only after proof of “ all partnership transactions and * * * all moneys received and collected by the defendant.”

Another fact of importance to our inquiry is that nothing appears in the pleadings which amounts to a concession that any sum of money is due the plaintiff from the defendant. On the contrary, by his amended answer the defendant denies the existence of the partnership alleged by the plaintiff and denies any indebtedness on his part to the plaintiff by reason of the single brokerage transaction pleaded by the plaintiff. In view of this fact — appearing on the face of the pleadings — that nothing is admittedly due the plaintiff from the defendant against which the consideration for the release may be credited, the present case is removed from that class of decisions in which a tender or restoration of the consideration is held to be not necessary before proceeding to a rescission of a contract. (Joslyn v. Empire State Degree of Honor, 145 App. Div. 14, 17-19; revd. on dissenting opinion in the Appellate Division, 204 N. Y. 621.)

Having admitted by his reply the execution of the release, the plaintiff cannot treat the instrument as void. “ Fraud in the factum renders the writing void at law, whereas fraud in the treaty renders it voidable merely.” (Whipple v. Brown Brothers Co., 225 N. Y. 237, 241; Boxberger v. N. Y., N. H. & H. R. R. Co., 237 N. Y. 75, 78.) Accordingly the release for which the plaintiff received considerátion was voidable if, as alleged in his reply, its execution was induced by fraud. (Adams v. Gillig, 199 N. Y. 314, 317.) But in seeking to avoid the release, because of alleged false representations by the defendant, the plaintiff did not execute a rescission by returning the consideration he had received for the release; nor has he brought an action for a rescission in which is pleaded a tender or offer to return the consideration. The money turned over to him by the defendant in exchange for the release has been retained by the plaintiff ever since its payment. Bestoration was not offered either before or after the present action was commenced; nor was a tender pleaded in the complaint herein. In such circumstances the plaintiff cannot proceed with the present action in disaffirmance of the release, while retaining the payment made by the defendant in exchange for that release. (Gould v. Cayuga County Nat. Bank, 86 N. Y. 75, 79; Joslyn v. Empire State Degree of Honor, supra, pp. 19, 20.) The release, being voidable only, is a bar to the present action unless it be rescinded, “ and rescission can be effective only by returning or tendering back the consideration received.” (Gilbert v. Rothschild, 280 N. Y. 66, 72. See, also, Gould v. Cayuga County Nat. Bank, supra, pp. 79, 82; Vail v. Reynolds, 118 N. Y. 297, 302, 303; E. T. C. Corp. v. Title Guarantee & Trust Co., 271 N. Y. 124, 127, 128.)

The application of the principles outlined above leads us to conclude that the plaintiff would be entitled to retain the consideration received by him for the release, only in the event he would certainly be entitled to that sum whether or not he was successful in the present suit. But, as we have seen, the pleadings disprove such a certainty because in the present accounting action it might have been found that there was no partnership, or that the plaintiff’s profits from the alleged partnership were less than the sum paid the plaintiff as consideration for the release. The release, therefore, is a bar to the plaintiff’s present action unless prior to the commencement thereof he had rescinded the release by restoring the consideration paid therefor, or unless, as a part of the equitable relief demanded in the present action for an accounting, he had asked for a rescission of the release and, as an incident thereto, had offered to return the consideration.

The judgments should be reversed and the complaint dismissed, with costs in all courts.

Finch, J.

(dissenting). It is submitted that a reversal of this judgment would in any event be placing too much emphasis on procedure at the expense of the merits, in addition to disregarding the command of the statute that we disregard errors if any which would not change the result. (Civ. Prac. Act, § 105.) But where is the error which compels a reversal?

The opinion as submitted seeks a reversal upon a consideration of the pleadings alone, taking no notice of the fact that a trial has been had in which findings of fact and conclusions of law have been made, that an interlocutory judgment has been entered from which an appeal has been taken directly to this court. Since appellant comes to this court under the provisions of section 590 of the Civil Practice Act, such an appeal brings up for review only the determination of the appellate division which, in the case at bar, affirmed an interlocutory judgment based on uncontroverted findings establishing the following facts:

Plaintiff and defendant composed a partnership as brokers. Practically the only business done by this partnership was to bring about a sale in which the commissions of the partnership were approximately $48,000. When the commission was about to be paid, defendant requested that two checks be drawn to him, one for $43,000 and one for $5,000. Defendant cashed the check for $5,000, and with the cash in his hand induced plaintiff to believe that that was the total amount of the commission, gave plaintiff one-half of the $5,000, or $2,500, and obtained from plaintiff a release, upon the ground that all concerned in the transaction were executing releases. Plaintiff subsequently learned of the real amount of the commission received, and started this suit to make defendant account and pay over one-half of the commission. Defendant in Ms answer pleaded the release as a defense. The attorney for defendant then made a motion for judgment on the pleadings on the ground that plaintiff had not alleged in Ms complaint an offer to return the $2,500 wMch he had received at the time of giving the release. Plaintiff served a reply in wMch he alleged that the sum received by defendant for brokerage was approximately the sum of $48,000, and hence plaintiff need not return the $2,500 as he brought himself witMn the exception to the general rule that, where the plaintiff shows that he would be entitled to recover at least the sum which he has been paid, he need not either allege or prove an offer to return this sum. (Kley v. Healy, 127 N. Y. 555; Strout v. Cross, Austin & Ireland Lumber Co., 283 N. Y. 406, 416.) The motion was denied at Special Term and the denial was unanimously affirmed by the Appellate Division. For the purposes of a proper disposition of this appeal we may assume, however, that the court erred at Special Term and in the Appellate Division and that the motion should have been granted. This motion, however, has been rendered academic for the reason that subsequently the parties appeared for trial. At this trial defendant, although appearing, put in no evidence whatsoever to dispute the claim of the plaintiff. In fact, defendant admitted the receipt of $48,880 as commissions. As a result, plamtiff showed, and the court found, that the story of plaintiff was true and that plaintiff had received $2,500 as one-half of a commission of $5,000 and was entitled to receive much more than the sum of $2,500 and hence need not either allege the return of the sum of $2,500 already received or offer to do so. In addition, plaintiff showed without dispute that he was entitled, and the court so found, to one-half of the partnersMp commission of approximately $48,000 instead of the sum of $5,000 which defendant had falsely represented. Not only did the court make tMs finding, but he sent it to a referee who took the account and upon whose report judgment was entered in the sum of approximately $24,000.

As to the lack of allegation by plaintiff in his complaint that he had returned or offered to return the sum of $2,500, not only has the trial rendered this motion academic and moot, but the cases are clear that this court has the power in order to sustain a judgment, to order that the pleadings shall conform to the proof at the trial. (Livingston v. Livingston, 246 N. Y. 234.) In addition, it is provided that, in order to prevent just such a result as is herein occurring, this court shall disregard errors which do not materially affect the result. (Civ. Prac. Act, § 105.) On all these grounds it would seem clear that the judgment appealed from should be affirmed.

It is said, however, that we may not consider the final judgment because the appeal is taken directly from the final judgment to this court and that upon this appeal we may only consider the interlocutory judgment. Although we may consider only the interlocutory judgment upon this appeal, as already indicated, it appears by that judgment, without any evidence on behalf of defendant to contradict, that on any reasonable consideration of the facts, out of the sum of $48,000 admittedly received, plaintiff would be entitled in any event to keep the sum of $2,500, especially as it is found by the trial court that the only business which this partnership did was this one brokerage sale.

It is, therefore, submitted that the judgment appealed from should be affirmed.

Lehman, Ch. J., Loughran and Desmond, JJ., concur with Lewis, J.; Finch, J., dissents in opinion in which Rippey and Conway, JJ., concur.

Judgments reversed, etc,


source: Caselaw Access Project

author: Lewis, J.

license: Public Domain

text:
    Harry Mead, Respondent, v. Abram V. Louer, as Trustee of the Schenectady Railway Company, Appellant. John Little, Respondent, v. Abram V. Louer, as Trustee of the Schenectady Railway Company, Appellant.
    Argued March 12, 1941;
    decided April 17, 1941.

      Emil Peters, Frank S. Higgins and William C. Maynard for appellant.

      James A. Leary and Walter A. Fullerton for respondents.
   Lewis, J.

In an action involving a highway grade crossing accident we are to sustain the defendant’s challenge to the charge by the trial justice in which we find error which we cannot say did not lead to verdicts in the plaintiffs’ favor and thus prejudiced the defendant’s rights.

The accident occurred at Brookline crossing in Saratoga county where the private right-of-way of the Schenectady Railway Company crosses a county road at grade and at an angle slightly less than ninety degrees. In the late afternoon of a clear day in May the plaintiff Little, driving a light motor truck, with the plaintiff Mead seated at his side, approached Brookline crossing from the west. At the same time an interurban trolley car, operated by the defendant’s agents, was approaching from the north along a track which is straight for more than fourteen hundred feet north of the crossing, When the automobile reached a point two hundred feet from defendant’s tracks its speed was reduced to six miles an hour. Meantime, according to the plaintiffs’ claim, the speed of the oncoming trolley was between forty-five and fifty miles an hour. Although there is testimony by the plaintiffs that, as they drew near the crossing, they looked to the north in the direction from which the trolley came, without seeing its approach, the record is clear that the truck had not entirely passed over the south-bound track when it was struck by the trolley and overturned.

As bearing upon contributory negligence by the plaintiffs there is a conflict in the evidence which relates to the extent to which plaintiffs’ view to the north was obstructed by intervening trees, shrubs and an embankment. Likewise on the question of the defendant’s negligence there is conflicting testimony as to whether a bell or whistle was sounded as a warning that the trolley was about to pass over the crossing.

These issues of fact — quite common to cases of this character — appear in the record before us to be so close that we cannot say the jury’s verdicts were not influenced by an instruction in the charge, to which an exception was duly taken, which we regard as a prejudicial misstatement of applicable law.

In defining the duty of care impressed by law upon the defendant’s motorman, the trial justice said: The motorman knew that people passed on this highway; that is what it was for. Therefore, when he came up to the highway with the trolley he ought not to have been going at such rate of speed that he could not bring his trolley to a stop and prevent crashing into an automobile that was crossing the track, even though that automobile driver, in so doing, took his chances in crossing, if it were otherwise reasonably possible to do so.”

That statement gave to the jury an erroneous impression of the duties which the law required of the plaintiffs and the defendant’s motorman. The charge, thus phrased, disregarded the common-law duty of care to be exercised by the plaintiffs. Indeed, in effect, it eliminated contributory negligence by the plaintiffs as a defense available to the defendant. If the jury found that the plaintiff Little took his chances in crossing ” the defendant’s tracks, the charge may well have been interpreted as casting upon defendant’s motorman a duty to anticipate any danger which might attend “ chances ” thus taken by the plaintiffs and would assume to make the defendant responsible for harm which might befall them. The law is not so unreasonable in its demands; it does not compensate for harm which follows “ chances ” taken in such circumstances. The risk which was reasonably to be foreseen by the plaintiffs in the exercise of care for their own safety defined their duty as they approached defendant’s tracks. “ If the crossing [was] dangerous, the care should [have been] commensurate with the obvious risk.” (Crough v. New York Central R. R. Co., 260 N. Y. 227, 232; Cote v. Boston & Maine Railroad, 278 N. Y. 78, 85.)

In each action, the judgments should be reversed and a new trial granted, with costs in all courts to abide the event.

Lehman, Ch. J., Loughran, Finch, Conway and Desmond, JJ., concur; Rippey, J. dissents.

Judgments reversed, etc.


text:
    In the Matter of Hilda L. O’Brien, Appellant, against Morris S. Tremaine, as Comptroller of the State of New York, Respondent.

      Argued March 6, 1941;
    decided April 17, 1941.

      Elliot S. Benedict, Royal E. T. Riggs and W. L. L. Peltz for appellant.

      John J. Bennett, Jr., Attorney-General (Joseph M. Mesnig of counsel), for respondent.
   Lewis, J.

In 1939, while John F. O’Brien was rendering the thirteenth year of his distinguished service as an Associate Judge of this court, he suffered a serious impairment of health. By reason of that fact, and on December first of that year, he filed with the State Comptroller, as the administrative head of the New York State Employees’ Retirement System, a written application for retirement from active judicial service and for payment to him, beginning January 1, 1940, of a retirement allowance in conformity with article 4 of the Civil Service Law (Cons. Laws, ch. 7; L. 1920, ch. 741, as amd.). Judge O’Brien was then sixty-five years of age. He had joined the Retirement System in 1928 and thereafter, by taking advantage of section 53 (subd. 5) of the Civil Service Law, he made the required contributions to the annuity savings fund, which contributions covered both his prior public service of more than twenty-eight years as an Assistant Corporation Counsel of the City of New York and his entire service as an Associate Judge of the Court of Appeals. By his application filed December 1, 1939, he selected Option No. 2 • as defined by section 68 of the Civil Service Law — to be the form of optional benefit under which he elected that payments should be made, and nominated his wife, Hilda Lockwood O’Brien, the present appellant, to receive any benefit payable according to law after his death.

Judge O’Brien died December 25, 1939, six days before the date which he had fixed for his retirement. Thereafter, on May 18, 1940, his widow applied to the State Comptroller for payment of the optional retirement benefits to which she claimed to be entitled as a beneficiary under Option No. 2.

After affording the appellant a full hearing the Comptroller denied her application upon the ground that the death of Judge O’Brien had pccurred before his retirement and at a time when his status was that of a member of the Retirement System, not a beneficiary thereof, and that the statutory period of thirty days had not elapsed between December 1, 1939, when his application for retirement was filed, and the date of his death. (Civil Service Law, §§62 [subd. 1], 65-b, 68.) The Comptroller also ruled that, in accord with section 61 (subd. 2) of the Civil Service Law, the appellant was entitled to the return of all contributions made by her deceased husband and, in addition thereto, the death benefit provided by section 65-b. The appellant thereupon made the determination by the Comptroller the subject of review in the present proceeding under section 54 (subd. 5) of the Civil Service Law and article 78 of the Civil Practice Act. In that proceeding we now review an order of the Appellate Division affirming by a divided vote an order of Special Term which denied, as a matter of law and not in the exercise of discretion, the appellant’s application in so far as it sought to modify the determination of the Comptroller which denied payment to the appellant of benefits in excess of the accumulated contributions standing to the credit of Judge O’Brien and in addition thereto the death benefit provided for by section 65-b of the Civil Service Law.

Our decision must follow the clear dictates of statutes which bear upon the problem presented. We have seen that on December 1, 1939, the date when Judge O’Brien filed with the Comptroller his application for a retirement allowance, he was more than sixty years of age and was then a member of the Retirement System. In these circumstances his rights as an applicant for a retirement allowance were governed by section 62 (subd. 1) of the Civil Service Law which provides:

“ § 62. Superannuation retirement. Retirement of a member for superannuation shall be made by the comptroller as follows:
“ 1. Any member may retire upon written application to the comptroller setting forth at what time, not less than thirty days nor more than sixty days subsequent to the execution and filing thereof, he desires to be retired, provided that said member at the time so specified for his retirement shall have attained the age of sixty years or over while in state service.”

Within the requirement of the statute the application here involved fixed January 1, 1940, as the date when the applicant desired to be retired.” That date met the further requirement of being “ not less than thirty days nor more than sixty days subsequent to the execution and filing ” of his written application. But we cannot escape the untoward fact that before the lapse of thirty days after his application was filed, and while Judge O’Brien was still a member of the Retirement System, death intervened to thwart his declared purpose to retire on January 1, 1940. He never did retire — he died in service. That fact made effective section 65-b of the Civil Service Law which provides for the payment of a prescribed death benefit, Upon the death of a member in the state service, or within the thirty-day period provided in section sixty-eight of this article * *

By the statutory reference last mentioned the Legislature again made the element of time controlling when it restricted by a time factor the right of an applicant for a retirement allowance to select the form of optional benefit by which he elected to have payments made. By section 68, which defines Option 2 ”— selected by Judge O’Brien — the Legislature has limited an applicant’s right of election by the express restriction that “ * * * No election of an optional benefit shall become effective in case a member dies within thirty days after the filing of an application for a retirement allowance * * *.” (Emphasis supplied.)

The appellant’s present claim for benefits payable under Option 2 as defined by section 68 of the Civil Service Law, to which she claims to be entitled, “ * * * in the same manner as if John F. O’Brien had retired on January 1, 1940,” is defeated by the fact that his untimely death occurred within the thirty-day period which the Legislature has chosen to insert as a restriction in both section 62 (subd. 1) and section 68. (Cf. Matter of Hogan v. N. Y. State Teachers’ Retirement System, 242 App. Div. 868; affd., 268 N. Y. 554.)

The policy which dictated the enactment of a statute which both defines and limits the rights which the appellant now asserts, is a matter solely for the Legislature. No power is granted to the courts by interpretation to vary the clear and positive mandate of the statute. Mindful of our duty to construe that statute liberally, we must not be unmindful of the rule that “ freedom. to construe is not freedom to amend.” (Sexauer & Lemke v. Burke & Sons Co., 228 N. Y. 341, 345.)

The order should be affirmed, without costs.

Lehman, Ch. J., Loughran, Finch, Rippey, Conway and Desmond, JJ., concur.

Order affirmed.


author: Desmond, J.

text:
    In the Matter of Edna W. Stern, Respondent. Walter T. Stern, Appellant.
    Argued February 25, 1941;
    decided April 17, 1941.

      Nathan A. Smyth for appellant.

      Isaac H. Levy for respondent.
   Desmond, J.

Appellant and respondent are husband and wife. They separated in December, 1939. Desiring to reach an agreement as to (1) the amount of the allowance to be made by the husband for the support of the wife ” and (2) “ the amount of the allowance to be made by the husband for the support of a daughter,” then seventeen years of age, the parties by a written stipulation submitted these matters to an arbitrator, who took testimony and made an award fixing the amounts to be paid by the husband. Upon a motion by the respondent wife this award was confirmed by Special Term and judgments were entered (1) in favor of the wife in accordance with the terms of the award in her favor and (2) in favor of the wife as guardian ad litem of the daughter in accordance with the terms of the award in the daughter’s favor. The Appellate Division modified the judgments by reversing the judgment in favor of the wife as guardian ad litem and including the amount thereof in the judgment in favor of the wife individually. The reason stated for this modification was that the daughter was a minor and not a party to the arbitration agreement. It had been agreed before the arbitrator that such amounts as were awarded to the daughter should be paid pursuant to her instructions and since her instructions were that the money should be paid to her mother, the wife, only one judgment could be entered.

On this appeal we must decide whether the arbitration here was of such a character that the award could on motion be confirmed by the court and a judgment entered thereon, pursuant to section 1464 of the Civil Practice Act. The subject of the arbitration was the amount of support that the husband should pay to his wife and daughter. It is well established that such matters cannot be made the subject of an action. (Ramsden v. Ramsden, 91 N. Y. 281; Johnson v. Johnson, 206 N. Y. 561.) The fact that the court has the power under section 1164 of the Civil Practice Act to provide for support in a separation action even though a judgment be not rendered obviously does not change the rule that a dispute over the amount to be paid by the husband for support can never, in and of itself, be the subject-matter of an action. Thus, whatever the parties may have intended, the proceeding could not be considered as one under the statute (Civ. Prac. Act, § 1448) as the submissions therein described are those controversies “ which may be the subject of an action.” Respondent answers that the words “ which may be the subject of an action ” mean no more than that the controversy must be a justiciable controversy, that there shall be obligation, that this obligation may be measured in a judicial manner, and that the determination is such as may be enforceable in accordance with the remedies provided by law.” This contention was advanced in the case of Matter of Buffalo & Erie Ry. Co. (250 N. Y. 275) and there rejected. The decision in the case of Matter of Mohawk Mfg. Co. v. Cavicchi (281 N. Y. 629) is not authority to the contrary.

Respondent would have us construe the written submission as a contract to provide support. Such a construction seems unwarranted. The submission amounted simply to an agreement that an arbitrator measure and fix the amount that a husband should pay for the support of his wife and daughter, without reference to the causes of the separation, or fault, or the right of either to a separation decree against the other. As was said by Lehman, J., in Matter of Fletcher (237 N. Y. 440, 451): “ The provisions of the Arbitration Law are properly applicable to any contract where .the parties have agreed to substitute for the courts an informal tribunal of their choice in the settlement of a controversy, but they are not applicable where the parties have agreed only to permit third parties to decide a particular matter instead of attempting to reach an agreement themselves.” In the case, at bar “ the parties have agreed only to permit third parties to decide a particular matter instead of attempting to reach an agreement themselves.”

Taking as we do, the position that the submission here is not a controversy within the purview of the statute, we need not consider appellant’s claim that the parties themselves, by using the phrase non-statutory arbitration ” in certain correspondence, agreed that it was not to be enforced in the manner described in the Civil Practice Act.

The judgments should be reversed and the proceeding dismissed, without costs. (See 285 N. Y. 846.)

Loughran, Finch, Rippey, Lewis and Conway, JJ., concur; Lehman, Ch. J., taking no part.

Judgments reversed, etc.


author: Per Curiam.

text:
    In the Matter of the Bank of New York, as Trustee under the Will of Charles F. McKim, Deceased. American Academy in Rome, Appellant; William J. Maloney, as Executor of Margaret McK. Maloney, Deceased, Respondent.
    Submitted February 25, 1941;
    decided April 17, 1941.

      Jesse Hoyt for appellant.

      L. Hollingsworth Wood, Moses Ely and George Gruberg for respondent.
   Per Curiam.

Section 230 of the Tax Law (Cons. Laws, ch. 60) as it stood at the date of death of the decedent and when the tax in question was paid, directed that where the transfer was to a person or corporation exempt from taxation or taxable at a rate less than the rate imposed and paid, the amount of any overpayment of such a tax with interest thereon should be returned to such person or corporation. This direction has not been abrogated by subsequently enacted provisions of the statute regulating the right to interest on deposits made thereunder. (L. 1911, ch. 800; L. 1925, ch. 144.) However unjust to the life tenant the result may be in this case, we are here bound to enforce section 230 as it stood when the tax in question was paid.

The order of the Appellate Division should be reversed and the decree of the Surrogate’s Court modified so as to direct that the interest on the transfer tax refund be paid to the appellant American Academy in Rome and, as so modified, affirmed, with costs in all courts to both parties payable out of the fund.

Lehman, Ch. J., Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Ordered accordingly.


author: Finch, J. Rippey, J.

text:
    In the Matter of George H. Eberle, Respondent, against Fiorello H. LaGuardia et al., Constituting the Board of Estimate of the City of New York, as Trustees of the New York City Employees’ Retirement System, et al., Appellants.

      Argued January 20, 1941;
    decided April 17, 1941.

      William C. Chanler, Corporation Counsel (Jeremiah M. Evarts and Paxton Blair of counsel), for appellants.

      Moses Altmann for respondent.
   Finch, J.

The question presented by this appeal is whether the Legislature by provisions of the Administrative Code of the City of New York (effective January 1, 1938) has authorized the Board of Estimate to grant the application for payment of a pension to a person who has been removed from his position as a member of the city service on charges involving fault and delinquency which he has not disproved.

The facts are not in dispute. The petitioner was in the city service for forty-three years and at the time of his dismissal occupied the position of chief clerk to the Municipal Civil Service Commission. He had been a member of the Retirement System since its inception in 1920 and had attained the minimum retirement age, namely, sixty, of the group of which he was a member. On April 4, 1939, he was suspended from his position pending the filing of formal charges as follows: (1) that he had delayed payment of moneys due to the city; (2) that his accounts were in a confused and disordered state; (3) that there was a substantial shortage in his accounts; and (4) that he had failed to report the shortage and the confused state of his accounts to his superiors. On April 12, 1939, a bill of particulars showing a net cash deficit of $1,300.48 in his accounts, subsequently raised to $2,929.77, was served upon petitioner and a hearing set for April 18, 1939.

On April 17, 1939, while the charges were pending and the day before they were to be heard, the petitioner filed with the Board of Estimate his written application for retirement from the city service. Pursuant to his request at the hearing, petitioner on April 19, 1939, sent a letter to the Commission setting forth his defense to the charges. On April 20, 1939, the Commission found the petitioner guilty of the above charges. Petitioner thereupon was dismissed from the service and his name removed from the civil service rolls. The propriety of this dismissal by the Commission has never been attacked by the petitioner.

The Board of Estimate, on December 14, 1939, granted the petitioner’s application for retirement. It later reconsidered the resolution after the Mayor, who had not been personally present when it was passed, disapproved. On reconsideration by the Board of Estimate, the pension was denied by a vote of fourteen to two. The question of the right of the Board of Estimate to reconsider its original resolution is not presented here but rather the right of the Board to pass the resolution in the first instance.

This is a proceeding brought by the petitioner to compel the Board of Estimate as the Trustees of the Employees’ Retirement System to grant his application for retirement and to determine the amount of his retirement allowance. It is respondent’s position that he was a member in the city service at the time that he filed his application for retirement. Since he had attained the minimum retirement age, he contends that notwithstanding his dismissal for fault and delinquency three days after he filed the application, the Board of Estimate must grant such retirement allowance and its action in so doing is purely ministerial. His position is based upon his interpretation of section B3-36.0 of the Administrative Code (L. 1937, ch. 929) and rule 58 of the Rules of the Board of Estimate.

Petitioner did not apply for retirement until after he had been suspended and charges involving fault and delinquency had been filed against him. Upon those charges he was removed from the city service and this removal took place before the earliest date on which the Board could or did act upon his application. Under the provisions of the Administrative Code formerly contained in the Charter of the City of New York (L. 1901, ch. 466, as amended) the members of the retirement system are entitled to certain rights, which rights have been characterized as being in the nature of contractual or quasi-contractual rights. (Roddy v. Valentine, 268 N. Y. 228, 231.) Where the statutory conditions for retirement have been met those rights become vested and payment of the pension cannot be withheld in the absence of fault or delinquency at the mere whim of any administrative officer or body. (Rees v. Teachers’ Retirement Board, 247 N. Y. 372; People ex rel. Fitzpatrick v. Greene, 181 N. Y. 308, 312.) In the case at bar the question presented is whether these rights include retirement allowance for a prior member of the system who has been suspended from the service upon charges before his application for retirement was made and where the charges have been sustained and the member dismissed from the service before the date set in the application for actual retirement. Under these circumstances have the statutory conditions been met?

Section B3-36.0 of the Administrative Code, upon which the petitioner relies, provides that “ any member in city-service may retire upon written application to the board setting forth at what time, not less than thirty days subsequent to the execution and filing thereof, he desires to be retired, provided that such member at the time so specified for his retirement shall have attained the minimum age of retirement provided for the group of which he shall be a member at such time. * * * ” (Italics interpolated.) The statutory conditions for retirement are entirely clear. The applicant must (1) have attained the minimum age of retirement, and (2) he must be a member of the city service at the time so specified for his retirement. It is obvious that an applicant could not be “ retired ” from the service if prior thereto he has been removed. In the case at bar, the petitioner has failed to comply with this second requirement.

Since the application for retirement in this case was not filed until April 17, 1939, it could not become effective or be acted upon by the Board of Estimate until at least thirty days after that date. Before May 17, 1939, the petitioner had been involuntarily removed from the city service. Under section B3-36.0, the petitioner, having been removed from the service before his application became final, has no right to a pension. The effect of the petitioner’s dismissal from the city service is the same as if he had died before the effective date of his application. In such case the right to a pension is lost. (Matter of O’Brien v. Tremaine, 285 N. Y. 233; Matter of Creveling v. Teachers’ Retirement Board, 255 N. Y. 364.) Following this principle, we held in Matter of McMeekan v. Dept. of Health of the City of New York (157 Misc. Rep. 620; affd., 249 App. Div. 609; affd., 274 N. Y. 521) that voluntary retirement was not effective until the Board of. Health by resolution approved. In that case, petitioner, an employee of the city, having learned that charges were to be preferred against him filed his application for retirement. The next day he was suspended and thereafter dismissed upon charges. To the same effect, see Matter of Murnane v. LaGuardia (242 App. Div. 823).

The petitioner contends that the defect in his application is remedied by rule 58 of the Rules of the Board of Estimate which provides that the rights of an applicant to retirement shall not be forfeited by separation from service or other change in status subsequent to the filing of an application for retirement . * * The language of this rule would not seem inconsistent with the provisions of the Administrative Code. It would seem to refer to acts which might lead to removal occurring subsequent to the filing of the application. If, however, its language is inconsistent it cannot stand. A mere rule must give way to an act of the Legislature.

It is submitted that the above construction of section B3-36.0 would seem to follow from reading the retirement law as a whole. The petitioner having served upwards of forty years, the provision of the retirement law under which he normally would make application would be section B3-35.0 which applies to twenty years or more of service. But this petitioner is expressly excluded from section B3-35.0 because he was removed from bis position for fault and delinquency. Therefore he has applied for a pension under section B3-36.0 which he contends permits retirement in spite of removal for fault or delinquency. If we sustained that contention, the result which we would adopt would allow a member of the city service who had attained the minimum age to compel the payment of a pension to him after dismissal from the service no matter how serious the charges filed against him and even though his city service falls far short of twenty years, whereas a member of the service who had completed twenty years of service and had been removed therefrom upon charges would have no right to a pension. It would not seem that the Legislature intended to produce so inconsistent a result. It is unnecessary, however, to pass upon this question for the reason as already noted that the petitioner had been properly removed from the service before his application became final and hence has no right to a pension.

It has been urged by the petitioner that the deductions from his salary and the expected benefits of the retirement plan constituted a part of his compensation during his tenure of office and that to deprive him of such benefits now would deprive him of compensation which has already been earned. Since the petitioner was not in the service of the city at the time his application for retirement became final he is not entitled to a pension under section B3-36.0 but may recover his accumulated deductions from salary under section B3-29.0 which provides for such payment in all cases except death or retirement. Even though a member be removed for fault or delinquency he is still entitled under section B3-29.0 to the accumulated deductions. Thus there arises no forfeiture and petitioner is in no way penalized.

Petitioner also urges that he has an adequate defense to the charges made against him and upon which he was dismissed. Such question is not before us upon this appeal. The propriety of his dismissal is reviewable only upon a petition for reinstatement under article 78 of the Civil Practice Act. Nor does the fact that petitioner has made restitution of a part of the amount of the shortage found in his accounts alter the character of the charge. Restitution cannot be considered as a criterion for the purpose of the determination of whether the charge involves fault or delinquency. Until the petitioner’s dismissal has been set aside upon review by the courts, the finding of the Commission that petitioner was guilty of fault and delinquency is conclusive upon this court for the purposes of this appeal.

It follows that the orders should be reversed and the petition dismissed, without costs.

Rippey, J.

(dissenting). Respondent entered the service of the Municipal Civil Service Commission of the City of New York as junior clerk on March 4, 1896, at the age of eighteen years, as the result of being chosen from a civil service list for that position. After advancing through several grades of service, he was finally promoted to the position of chief clerk on July 1, 1910, which position he held until April 4, 1939, when he was handed a letter from the President of the Civil Service Commission stating that he was suspended without pay pending the filing of formal charges on certain counts involving alleged inefficient performance of the duties of his office and lack of co-operation with his superiors. Up to the last-mentioned date he had rendered continuous faithful service to the Municipal Civil Service Commission for a period of more than forty-three years without complaint. . After an alleged hearing before the President of the Commission who himself had made the charges, the Commission found him guilty on the first four counts on April 20,. 1939, and he was dismissed from the service and his name stricken from the civil service rolls. Thereupon certification of such dismissal was sent to the Comptroller and to the New York City Employees’ Retirement System. On April 17, 1939, while still in the city service and having passed the voluntary retirement age, he filed an application for service retirement under section B3-36.0 of the Administrative Code with the Board of Estimate. The application came before the Board on May 4, 1939, was on the calendar several times and was finally granted on December 14, 1939. By resolution of the Board the petitioner was retired to take effect as of May 17, 1939, subject to subsequent determination and fixation of the amount of his service retirement allowance. At the request of the Mayor the Board rescinded that resolution on December 22, 1939, and, on January 11, 1940, the Board denied the application. Petitioner thereupon brought this proceeding under article 78 of the Civil Practice Act to compel the Board to grant retirement and fix the allowances to which he was entitled, according to the applicable provisions of the Administrative Code. The motion was granted and, on appeal from the order granting that relief, the Appellate Division affirmed.

The issue of the correctness of the dismissal of respondent from the city service is not here. Nevertheless, the entire record in that connection is a part of the record in these proceedings and is claimed to have some bearing upon matters to be here decided. The charges were, in substance, (1) that he had delayed payment of moneys due the city on behalf of the Commission, (2) that his accounts were in a confused and disordered state, (3) that substantial shortages existed in such accounts, (4) that he had failed to report to his superior the existence of such confused and disordered accounts and the existence of such shortages, and (5) that he had failed to include in the budget request for 1939-1940 a request for the filling of the vacancy of $3,300 left by John C. Lapham, clerk of the Commission, a transfer. On April 12, 1939, a bank reconciliation statement as of April 7, 1939, was transmitted to respondent showing a net cash deficit of $1,300.48 as of that date and, upon the foregoing charges as supplemented by that statement, he was directed to appear before the Commission for a hearing on April 18, 1939. Respondent appeared on the date mentioned. He had previously written to the President of the Commission and asked for a postponement of the hearing, and when he appeared he orally renewed the request to enable him to prepare a defense. On April 18th the President of the Commission and respondent had a running conversation which, as the Justice at Special Term pointedly stated, To call it a trial, would be a travesty.” (175 Misc. Rep. 272, 275.) It was also pointed out at Special Term that the charges were inconsequential except possibly the charge of shortage and the respondent advised the President of the Commission at the so-called hearing that he had already seen that the item of alleged shortage was deposited in the bank account. No additional shortage was called to his attention nor was he given any opportunity to check up with the Comptroller prior to his summary dismissal from the city service. At the end of the so-called hearing he was given until noon of April 20th to present to the Commission in writing whatever defense he wished to present. He sent a letter to the Commission on April 19th in which he clearly pointed out, as to charges 1 to 4 inclusive, that the reports to the Comptroller of fees, etc., collected in his office could not be prepared until the close of business at the end of each month, that whatever delays had occurred were due to the inability of the employees of his office to sort and tabulate the large quantity of documentary receipts at hand and that whatever delay had occurred in making returns to the Comptroller was due to the failure of the Commission to furnish sufficient employees promptly to handle that and other duties required of them. The great mass of work required by an insufficiently large office force was detailed and attention was called to the recent filing of applications and fees for 33,000 patrolmen candidates which took at least six weeks to tabulate and complete. Respondent asserted that deposits were made daily at the National City Bank except for certain sums withheld for the purpose of making change, that the accounts were not in a confused or disordered state, that he had promptly checked and deposited in the bank the moneys of the alleged shortage of $1,300.48, that at various dates during 1937 and 1938 he had submitted reports and recommendations to the Commission suggesting improvements in the methods of collecting fees and of accounting therefor by the office, including the installation of a cash register to aid in the efficiency of the work and that the application bureau had also called attention without result to the difficulty in expeditiously and properly handling and tabulating fees received. The trivial character of the charges was clearly indicated in the reply to the fifth charge where it appeared that the reason why omission had been made in filling the vacancy was that the President of the Commission himself in submitting the departmental request to the Director of the Budget, had asked approval of certain salary increases for employees of the Commission whereby the funds required for that purpose were the same funds as would have been required for the filling of the vacancy. The Commission thereupon dropped that charge. There is no claim in this record that Eberle took any money belonging to the city of New York and without that there could be no personal fault or delinquency ” in connection with any alleged shortage. He has not been charged with larceny or with any other crime. As head of the department, he would, of course be required to make good any losses even though the losses were caused by subordinates and he knew nothing about them. As the Comptroller’s office pointed them out, so far as they appeared to exist they were promptly made good.

The New York City Employees’ Retirement System was established on an actuarial basis on October 1, 1920, and is subject to the supervision of the State Department of Insurance (L. 1920, ch. 427; Administrative Code, ch. 3, tit. B, §§ B3-1.0 to B3-53.0). The relative statutory provisions are, in detail, complete and all comprehensive. The system is a separate and distinct entity with all the powers and privileges of a corporation (§ B3-10.0). Various funds for various purposes are made up from compulsory contributions from its members during city service, from the city, from public benefit corporations and from profits from interest and from investments, from which, according to circumstances, loans are to be made and member accumulations, death benefits, disability benefits, retirement allowances and pensions in amounts fixed by statute must be paid. Such benefits, allowances and pensions.are not gratuities: they are based on strictly defined legal rights. The system maintains its own actuary, medical board, secretary and other necessary employees. The members of the Board of Estimate are trustees of the various funds with the direction, control, disposition, investment and management thereof and with other definitely defined duties and obligations. The Comptroller of the city is the custodian of the funds and disbursement can be made by him only upon vouchers by the secretary of the system.

Membership in the system of city employees covered by the system is compulsory. Members of the system are classified into groups. Eberle was grouped in class 3. He became a member of the system on October 1, 1920. Such a membership has been continuous and has not been suspended or terminated. Involuntary terminations from city service is one thing; termination of membership in the retirement system is quite a different proposition. By specific provisions of the statute, membership could terminate only on the happening of one or more of the events provided for in section B3-31.0 and, so far as Eberle is concerned, none of these events have occurred. His membership in the system could not be involuntarily terminated under the provisions of the act until he had received all the benefits to which he was entitled. However that may be, his membership in the system in no event could terminate or be involuntarily terminated by the express provisions of the act until he “ shall be retired on a pension ” (§, B3-31.0, subd. 6). He has not been retired on a pension and he cannot be retired for service on a pension until the Board of Estimate has, on his written application, in fact, retired him (§r§ B3-36.0; B3-42.0; B3-46.0). Hence he was still a member of the system when and after he was found guilty on the charges filed against him and dismissed from city service.

His application for retirement was filed with the Board on April 17, 1939, under section B3-36.0. It is claimed that the Legislature prohibited service retirement to any member of the system who has been removed for a cause involving fault or delinquency on his part and that such a prohibition must be read into that section. Reliance for that idea is based on the provisions of section B3-35.0 of the Code. Any such contention cannot be maintained as even the merest cursory examination of the provisions of the Code will clearly indicate.

If material to a discussion here, we have already pointed out the arbitrary manner in which Eberle’s dismissal from city service was conducted and accomplished and that the notion that there was any personal fault or delinquency on his part could not be sustained. Nevertheless, the fact that he was involuntarily separated from city service, whether or not on the basis of fault or delinquency, has no bearing upon the decision in this case. Section B3-35.0 of the Code (p. 32) provides that a member who is removed or otherwise involuntarily separated from city-service for any cause other than fault or delinquency on his part after having completed twenty years of allowable service, * * * shall receive in lieu of the benefit provided in section B3-29.0 of the code, as he may elect: 1. The amount of his accumulated deductions; or, in lieu thereof, 2. An annuity of equivalent actuarial value to his accumulated deductions, and, in addition, a pension beginning immediately,” etc. Section B3-29.0, referred to in the above section, excludes termination of membership through discontinuance of city service by death or retirement. The retirement age for the group of which Eberle was a member was sixty years and he had arrived at that age more than a year previous to the date on which he filed his application. Section B3-36.0 (p. 33) provides: “ Retirement of a member for service shall be made by the board as follows: 1. Any member in city-service may retire upon written application to the board setting forth at what time, not less than thirty days subsequent to the execution and filing thereof, he desires to be retired, provided that such member at the time so specified for his retirement shall have attained the minimum age of retirement provided for the group of which he shall be a member at such time.” Section B3-42.0 (p. 36) provides that upon retirement for service a member shall receive a retirement allowance which shall consist of ” certain specifically enumerated and definitely defined benefits to be received according, among other things, to length of service, and section B3-46.0 (pp. 38, 39) provides for certain options open for election by the beneficiary as to how he may desire to have such benefits distributed.

It is obvious that sections B3-29.0 and B3-35.0 have to do, as expressly provided, only with a particular class of city employees who are involuntarily separated from the city service without fault or delinquency after twenty years of allowable service in distinction to that class of employees who may voluntarily retire for service after reaching the minimum retirement age for their group under sections B3-4.0 and B3-36.0 of the Administrative Code. The two classes do not overlap. Between the two classes there is clear statutory distinction. The right to allowances of an employee involuntarily separated from the city service becomes fixed only after the city has acted to terminate this service, when there is left open to the Board of Estimate a certain field of discretion. An employee reaching the minimum service age for retirement may retire and his rights to benefits become fixed at his own option a,t the time he elects to be retired. If that were not so, the right to be retired under section B3-36.0 would be discretionary with the Board of Estimate. Sections B3-29.0 and B3-35.0 have no reference to voluntary retirement for service, while voluntary retirement for service is solely and specifically provided for in section B3-36.0. The latter section makes no reference to removal by the Board for or without fault or delinquency on the part of the member. The Board has no. power to remove a member from service against his will under section B3-36.0, while under sections B3-29.0 and B3-35.0 the wishes of the member to leave the service need not be considered.

It is asserted, however, that there must be read into section B3-36.0 a limitation on the right to relief when the employee is removed or is involuntarily separated from the city service. Such an addition to and limitation upon the provisions of the section would destroy its purpose. There is no such limitation expressed or implied in the statute, however, and we have no power to rewrite it to suit the occasion (Sexauer & Lemke v. Burke & Sons Co., 228 N. Y. 341, 345). The rights of respondent are definitely and expressly fixed through the wisdom of those who legislated and may not here be modified or limited by fiat of those who construe. There is nothing ambiguous about the statutes under consideration. When we give attention to all the provisions relating to the retirement system, it seems clear that the expressed legislative intent and purpose were, among other things, to provide for relief to two separate and distinct classes of employees, each class being separately, clearly, without ambiguity and distinctly defined in the statutes themselves, which classes are unrelated in the specific cases to which they refer. So reading them makes sense and makes them serve their avowed purposes; reading them otherwise does not.

Sections B3-36.0 and B3-42.0 are largely self-executory and are mandatory since the former provides that retirement shall be made by the Board upon application by the employee who may make application for retirement if he attains the minimum age for retirement provided for the group of which he is a member and the latter provides that upon the member retiring for service the Board shall make him the allowance therein fixed. This court so construed provisions relating to retirement for service contained in the Teachers’ Retirement System, parallel in scope and purpose to those in the Employees’ Retirement System and, in applicable provisions, in identical words (Greater New York Charter, § 1092, L. 1901, ch. 466, as amd.; Administrative Code, §§ B20-41.0, B20-44.0, B20-46.0; Rees v. Teachers’ Retirement Board, 247 N. Y. 372; Matter of Creveling v. Teachers’ Retirement Board, 255 N. Y. 364; Matter of Murray v. Teachers’ Retirement Board, 258 N. Y. 389). Refusal to follow well-considered judicial precedent is not ordinarily passed by without explanation. When Eberle went into the Retirement System, a compact was made whereby he might voluntarily retire for service and, at his option, be voluntarily retired when he reached the age of sixty years and the Board of Estimate was mandated to grant him retirement allowances and pension rights according to the provisions of sections B3-42.0 and B3-46.0. No discretion was left to the Board of Estimate on the question of whether he could retire or could not be retired. Nor was any loophole left whereby a situation might be created by others by which any such discretion could be given to the Board. No strings were attached to his own absolute option to retire or be retired. When preliminary conditions authorizing retirement had been met, the pension rights became vested and beyond the power of the Board of Estimate or any one else to condition, curtail or deny (Roddy v. Valentine, 268 N. Y. 228). If, before such conditions had been fully met, pension rights were only an expectancy and subject to legislative change, it has never before been suggested that they might be changed, modified, curtailed or defeated by administrative fiat, whim or caprice or by judicial legislation. The election to be retired was the last remaining preliminary condition to mandatory action by the Board of Estimate to fix the amount of benefits to which Eberle was entitled under sections B3-42.0 and B3-46.0. There is nothing in the statute which indicates that the Board of Estimate was not mandated to act when his rights became finally vested. If he were required to wait until his pension rights were vested by action of the Board of Estimate, his right voluntarily to retire for service might be entirely defeated by no act of his own but by the act of an administrative agency in separating him from city service for disability or for fault or delinquency or perhaps for other reasons upon trumped-up and unfounded charges arbitrarily decided. The statute does not so read; no'such legislative intent' is expressed or inferable. Such a result can be reached only by construction, where there is no ambiguity or room for construction, or by judicial legislation through the transfer into section B3-36.0 of section B3-35.0, where no such action finds any warrant in fact or in law or is within the province of this court. It makes the right of an employee of voluntary retirement from the retirement system, as written into the statute, an illusion and nullifies completely the legislative purpose of section B3-36.0 and the section as written.

The right of Eberle to be retired for service and to the designated retirement allowances and pension could not be defeated by the order of the Municipal Civil Service Commission terminating his city service on charges. If anything more were necessary to demonstrate that the conclusion which I have reached is correct, it is found in the construction which the Board of Estimate itself has placed upon the section relating to voluntary retirement for service. By rule 58 of the Board it is provided that the rights of an applicant to retirement shall not be forfeited by separation from service or other change in status subsequent to the filing of an application for retirement, but he shall not be credited with any subsequent time to his separation from service.”

Appellants’ claim that the petitioner’s proper remedy was by a proceeding for reinstatement cannot be sustained in view of the above. The petitioner is asking for retirement and a pension and if he obtained restoration to the service and remained in the service he could not have the retirement allowances to which he is entitled after reaching the retirement age, after forty-three years of continuous city service.

The orders should be affirmed, with costs.

Lehman, Ch. J., Lotjghran, Lewis and Desmond, JJ., concur with Finch, J.; Rippey, J., dissents in opinion; Conway, J., taking no part.

Orders reversed, etc.


author: Lehman, Ch. J.

text:
    Richard H. Sarver, Respondent, v. John H. Towne et al., Individually and as Trustees under the Will of Henry R. Towne, Deceased, Appellants.

      Argued March 11, 1941;
    decided April 17, 1941.

      F. Carroll Taylor, Louis H. Porter and W. Mason Carliss for appellants.

      William C. Young and Samuel Gordon for respondent.
   Lehman, Ch. J.

Frederick T. Towne filed a voluntary petition in bankruptcy and was adjudicated a bankrupt in May, 1935. He was discharged in the following September. ’ He listed among his assets an “ interest as cestui que trust in a spendthrift trust under the will of Henry R. Towne, deceased. Exempt. New York State Trust, but under laws of State of New York 10% of beneficiary's income may be attached by a judgment-creditor.”

Under the will of Henry R. Towne, the bankrupt's grandfather, the testator directed trustees to pay over the net interest and income of a trust fund established by such will quarter-yearly or semi-annually, to and for the use of my said grandson, Frederick Tallmadge Towne, during the term of his natural life * * *.” The beneficiary’s interest in the income from such a trust is not assignable by him (Personal Property Law, § 15 [Cons. Laws, ch. 41]); but a judgment creditor may obtain a garnishee order directing that an execution issue against the income from the trust fund. On presentation of such execution for collection to the trustees, it becomes “ a hen and a continuing levy upon the * * * income from trust funds * * * to the amount specified therein which shall not exceed ten per centum thereof, and said levy shall be a continuing levy until said execution and the expenses thereof are fully satisfied and paid * * (Civ. Prac. Act, § 684.)

Before the petition in bankruptcy was filed by Frederick T. Towne, a judgment creditor had, in fact, obtained such a garnishee order, and levy upon the income of the trust funds had been made thereunder. The trustee in bankruptcy, “as to all property not in the custody of the bankruptcy court, shall be deemed vested with all' the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied.” (Bankruptcy Act § 47, subd. a [2]; 30 Stat. 557, amd. 36 Stat. 840; U. S. Code, tit. 11, § 75.) Such rights, remedies and powers include the right to obtain, in garnishee proceedings, an order for an execution; and a levy under such order remains “ a lien and a continuing levy ” even after the discharge in bankruptcy of the judgment debtor. (Matter of Irving Trust Co., 267 N. Y. 102, 106.)

Accordingly, the trustee in bankruptcy, appointed in the Towne bankruptcy proceedings, obtained an order which directed that the garnishee execution, previously procured by Towne’s judgment creditor, and the levy thereunder upon Towne’s income from the trust fund, should be vacated and that a garnishee execution issue in favor of the trustee in bankruptcy. The Sheriff of the County of New York served such execution upon the trustees and collected ten per cent of the income. In March, 1937, in order to facilitate the settlement of the bankrupt estate, the referee in bankruptcy authorized the trustee to sell at public auction to the highest bidder “ all right, title and interest in and to 10% of. the income of said Bankrupt, during his life expectancy from the estate of Henry It. Towne under certain trust funds.” At the sale, held on April 26, 1937, such right, title and interest ” was sold to the plaintiff Richard H. Sarver and, after confirmation of that sale, the trustee executed an assignment to the purchaser of all my right, title and interest * * * in and to the execution ” issued out of the Supreme Court and all rights thereunder, for ten per cent of the income from the trusts created by * * * the Last Will and Testament of Henry R. Towne, deceased * * * together with all my right, title and interest as such Trustee in Bankruptcy in and to ten per cent of the income of the aforesaid trusts * *

Doubtless until the bankrupt estate was finally settled the trustee might have continued to enforce the rights vested in him under the execution to receive the income from the trust as it came due and was collected by the Sheriff. The inconvenience of postponing indefinitely the settlement of the estate induced the trustee to sell this interest in the trust fund, derived from the levy of the execution, and induced the bankruptcy court to confirm such sale. We are not concerned with any question of whether the advantages of such a sale would outweigh its disadvantages; we are concerned with the question whether such interest is assignable under the law of the State of New York or may be sold upon a judicial sale. The law of this State determines what interests in trusts here established are assignable; the extent and maimer in which such interests may be taken in invitum under executions issued by courts of this State, and the rights derived from a levy of such executions. (Allen v. Tate, 6 Fed. Rep. [2d] 139.) The policy of the Bankruptcy Act is to respect state exemptions.” (Eaton v. Boston Safe Deposit & Trust Co., 240 U. S. 427, 429.)

Before the present action was brought the beneficiary of the trust fund challenged successfully the rights of the assignee of the trustee in bankruptcy to collect any part of the income of the fund. Claiming that rights under the execution levied upon his income did not constitute property which came into the custody of the bankruptcy court and were not assignable, the beneficiary moved in the Supreme Court of the State for an order vacating the garnishee execution. The motion was granted “ without prejudice to such other remedies as respondent may be advised to pursue for the collection of the claim.” The order was affirmed. (Matter of Towne, 253 App. Div. 795; 278 N. Y. 597.)

The assignee, with the approval of the bankruptcy court, then began this action to obtain a declaratory judgment determining that he is entitled to a one-tenth interest in all distributable income from said trust funds ” and directing the defendant trustees to pay over to the plaintiff that portion of the income. It seems clear to us that our decision in Matter of Towne (supra) destroys completely the foundations of the plaintiff’s claim. The income of the trust fund is concededly not assignable by the beneficiary under the statutes of New York. Though ten per cent may be taken from the beneficiary against his will under execution issued for the collection of the debts of the beneficiary, the rights of a judgment creditor or of a trustee in bankruptcy to obtain such income are derived solely from the execution and cease when the execution is vacated.

It is true, as the Appellate Division has pointed out, that the rule is that where one for whom property is held in trust is adjudicated a bankrupt, his entire interest in the trust estate passes to the trustee, providing the bankrupt’s beneficial interest is transferable or subject to judicial sale.” The trustee in bankruptcy is vested by operation of law with the title of the bankrupt * * * to all * * * property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him.” (260 App. Div. 615, 617, 618.) The fact that income from the trust fund may not be assigned voluntarily by the bankrupt is not, standing alone, decisive, if under the statute of New York it might be sold under judicial process against him;” but the law of the State of New York not only provides expressly that the income from the trust is not assignable (Personal Property Law, § 15) but it makes no provision that any part of his interest in the income may be sold under judicial process against him.

The amendment to the Bankruptcy Act (36 U. S. Stat. 840) vesting the trustee “as to all property not in the custody of the bankruptcy court ” (U. S. Code, tit. 11, § 75) with the right to obtain a garnishee execution, did not transfer to the bankruptcy court any title to the income. Indeed, these rights are conferred only as to property not in the custody of the bankruptcy court. “ The amendment afforded the trustee in bankruptcy new remedies which prior to its enactment were only available to the creditors themselves; but it did not enable him to treat the income of a bankrupt derivable from a testamentary or inter vivos trust as in the constructive possession of the bankruptcy court.” (Matter of Whitney, 113 Fed. Rep. [2d] 426, 428.) The remedy available to the creditors was only to receive the income collected under levy of the execution by the Sheriff. That remedy did not include any right to the fund, or its income, or any part thereof, upon judicial sale. The remedy of the trustee was not greater or different. A continuing lien arose from service of the garnishee order but no property passed to the Sheriff or to the judgment creditor or the trustee in bankruptcy until a part of the income was collected. The trustee’s rights could not be transferred and when the bankrupt estate was finally settled the trustee no longer functioned and could not enforce the garnishee order. Consequently the order was vacated, the hen ceased, and the assignee of the trustee in bankruptcy had no rights which could be enforced against the trust funds. That was our decision in Matter of Towne (supra).

It is said, however, that though the bankrupt’s interest in future income is not assignable and is not property which passed by operation of law to the trustee in bankruptcy, and though the trustee has no power to transfer his right to reach a part of such income by garnishee execution, yet that “ the right to collect the income, distinguished from the remedy to enforce it, is property belonging to the bankrupt, an asset which the trustee acquired and which he may sell and assign.” (260 App. Div. 615, 618.) As we have pointed out, the remedy given by the Bankruptcy Act to the trustee applied only to property not in the custody of the bankruptcy court.” Right to collect the income is not distinguishable from the remedy which the law of New York confers upon a judgment creditor. The existence of the remedy creates the right and the right is co-extensive with the remedy. When we decided that the remedy could not be transferred, it necessarily followed that the trustee had no right which he could sell.

The judgments should be reversed and complaint dismissed, without costs.

Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Judgments reversed, etc.


text:
    New York Foreign Trade Zone Operators, Inc., Appellant, v. State Liquor Authority et al., Respondents.

      Argued March 14, 1941;
    decided April 24, 1941.

      Samuel S. Allan for appellant.

      Monroe I. Katcher, II, and Francis V. McHugh for respondents.
   Desmond, J.

Plaintiff is a domestic corporation engaged in operating Foreign Trade Zone No. 1 located on Staten Island, N. Y. The zone was established pursuant to the Foreign Trade Zone Act (48 U. S. Stat. 998; Public Law No. 397 of the Seventy-third Congress, June 18,1934.) The act provides for the establishment, operation and maintenance of zones in ports of entry of the United States where foreign merchandise may be brought to be “ stored, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, or otherwise manipulated,” but not manufactured or exhibited,” without being subject to the customs laws of the United States. The purpose of the act is “ to expedite and encourage foreign commerce.” If the manipulated merchandise isthere after brought into other ports of entry in the United States a custom duty is imposed; if it is shipped to another country no duty is imposed. The zone on Staten Island was established upon an application by the city of New York, authorized by the State of New York (L. 1935, ch. 246). The city of New York granted plaintiff the right to operate Zone No. 1.

As a part of its business of manipulating foreign merchandise in the trade zone, plaintiff adds pure water to foreign distilled spirits, reducing the alcoholic proof ” and increasing the volume. Plaintiff has been doing this without a distiller’s license from the State Liquor Authority. By this action plaintiff seeks a declaratory judgment that it may continue to perform the above-described acts without obtaining such a license.

The complaint alleges that defendants, the State Liquor Authority and its members, have threatened to prevent plaintiff by injunction and otherwise from performing the above-described acts unless the plaintiff first obtains a distiller’s license, and asks that the court declare whether the acts constitute rectification ” within the meaning of the laws of the State of New York as asserted by defendants, and declare whether defendants have any power, authority or jurisdiction over the acts performed or caused to be performed by plaintiff within Foreign Trade Zone No. 1.

The complaint has been dismissed at Special Term on the ground that it appears on the face thereof that it does not state facts sufficient to constitute a cause of action. Special Term said, There is no basis in the law for any such action in this case,” and, There can be no declaratory judgment in this case because the law affords an adequate remedy to the plaintiff.” (173 Misc. Rep. 540, 541.) The judgment has been affirmed by the Appellate Division with two of the justices dissenting.

The power to grant or deny a declaratory judgment rests in the discretion of the Supreme Court. (Civ. Prac. Act, § 473; Rules Civ. Prac. rule 212.) That power, however, is not unlimited (Westchester Mortgage Co. v. Grand Rapids & Ionia R. R. Co., 246 N. Y. 194); nor are its bounds unmarked (Dun & Bradstreet, Inc., v. City of New York, 276 N. Y. 198; Reed v. Littleton, 275 N. Y. 150). Further, if the court declines to pronounce a declaratory judgment, it must state the grounds upon which its discretion is so exercised (Rules Civ. Prac. rule 212); and if the ground stated is untenable, the discretion has been improperly exercised. (Dun & Bradstreet, Inc., v. City of New York, supra. Cf. Newburger v. Lubell, 257 N. Y. 383.)

We have here to consider: First, whether the Supreme Court has the power to render a declaratory judgment under the circumstances set forth in the complaint; second, if it has, was it justified in declining to consider the complaint on the ground that there are other reasonably adequate forms of action available to plaintiff.

The scope of the power vested by statute in the Supreme Court, To declare rights and other legal relations on request,” is not therein specifically defined. Implicit in the statute and the public policy which it expresses, however, are limitations upon the exercise of the power with respect to the nature of the controversy, and the character of the issues. (Civ. Prac. Act, § 473.)

The controversy must involve rights and other legal relations.” (James v. Alderton Dock Yards, 256 N. Y. 298, 305.) Power to render a declaratory judgment does not include the power to decide a moot case. (Borchard, Declaratory Judgments, pp. 57-61.) The remedy is available in cases “ where a constitutional question is involved or the legality or meaning of a statute is in question and no question of fact is involved.” (Dun & Bradstreet, Inc., v. City of New York, supra, p. 206; Bank of Yorktown v. Boland, 280 N. Y. 673.) The remedy, however, is not available to restrain the enforcement of a criminal prosecution where the facts are in dispute, or open to different interpretations. (Mills Novelty Co. v. Sunderman, 266 N. Y. 32; Reed v. Littleton, supra; Guide Escort Service, Inc., v. Moss, 260 App. Div. 920.)

There can be no doubt that the necessary jural relation exists between plaintiff and defendants. Enforcement of the State Alcoholic Beverage Control Law (Cons. Laws, ch. 3-B) and the power to issue licenses thereunder is vested in the State Liquor Authority. (L. 1934, ch. 478, art. 2.) One of the acts which the Authority may license is the operation of a rectifying plant. (Alcoholic Beverage Control Law, § 61, subd. 2.) By this action plaintiff seeks a determination whether it must procure such a license in order to perform the acts described in the complaint. The necessity of a license may be the subject of an action for a declaratory judgment. (Chung Mee Restaurant Co. v. Healy, 86 N. H. 483; Pratter v. Lascoff, 261 N. Y. 509; Reed v. Littleton, supra.)

Defendants do not dispute the assertions that plaintiff merely adds pure water to foreign distilled spirits for the purpose of reducing the alcoholic proof ” and increasing the volume, and that the foreign distilled spirits thus, manipulated by plaintiff are brought into the trade zone from abroad, and are treated by the Federal Government as foreign commerce which has not entered the United States, that is, the same as if it were still on the seas. Therefore, the only questions sought to be determined by this action are: (1) Does the act described in the complaint constitute rectification of alcohol or spirits within the meaning of the statute (Alcoholic Beverage Control Law, § 3, subd. 24, and § 61, subd. 2), and (2) has the State the constitutional power so to control and tax merchandise brought into the trade zone from abroad? These are questions of law (Dun & Bradstreet, Inc., v. City of New York, supra), determination of which will serve some practical end in quieting or stabilizing an uncertain or disputed jural relation,” the general purpose of a declaratory judgment. (James v. Alderton Dock Yards, supra, p. 305.)

Defendants argue that a declaratory judgment in this case would interfere with the administration of the criminal law, and under the rule of Reed v. Littleton (supra) may not be granted. If either of the above questions were answered in the negative in this action, the determination would impede a subsequent action for an injunction under section 123 of the Alcoholic Beverage Control Law or a criminal prosecution under section 130 of that law. But would such a determination improperly interfere with criminal processes? We think not. The only questions involved are of law. A determination of these questions is necessary to¡ enable plaintiff to continue a business authorized by the Federal government for the purpose of expediting and encouraging foreign commerce. To refuse to consider the questions in this action leaves unstable a jural relation, the facts of which are conceded, imposes upon the plaintiff an unnecessary hardship, and may affect foreign commerce. The situation here is distinguishable from the situations presented in Reed v. Littleton (supra), Guide Escort Service, Inc., v. Moss (supra) and International Mutoscope Reel Co. v. Valentine (271 N. Y. 622), for in those cases the facts .were in dispute or open to different interpretations. The nature and purpose of the acts here sought to be tested are not disputed. Under such circumstances equity should not hesitate to define the rights of the parties. (Bank of Yorktown v. Boland, supra.)

The courts below have held that there are other remedies available to plaintiff by which its rights may be adequately protected. The remedies referred to are of a negative character. Plaintiff can bring no other action, but it can wait and defend an action by defendants or any taxpayer residing in the locality for an injunction, when and if such an action is brought. (Alcoholic Beverage Control Law, § 123.) Meanwhile, although the facts are not disputed, it runs the risk of a criminal prosecution. (Alcoholic Beverage Control Law, § 130.) Whether a defense ever may be considered another adequate remedy so as to warrant a denial of declaratory relief, the defense here said to be available to plaintiff certainly is not an adequate remedy. (Kalman v. Shubert, 270 N. Y. 375.)

This is a case where a declaratory judgment will quiet a disputed jural relation involving only questions of law, and where other forms of action are not reasonably adequate. Under the circumstances the complaint should not have been dismissed.

The judgments should be reversed and the matter remitted to the Special Term for further proceedings in accordance with this opinion, with costs in all courts to the appellant.

Loughran, Finch and Rippey, JJ., concur; Lehman, Ch. J., Lewis and Conway, JJ., dissent.

Judgments reversed, etc.


text:
    The People of the State of New York, Respondent, v. John Croes, Appellant.
    Argued March 5, 1941;
    decided April 24, 1941.

      Abraham Brill, Frank F. Bergenfeld and Herbert Baer Brill for appellant.

      William O’Dwyer, District Attorney (Henry J. Walsh of counsel), for respondent.
   Desmond, J.

Defendant has been convicted of the crime of rape, second degree. The indictment reads in part: The defendant on or about July 11, 1939, in the county of Kings, perpetrated an act of sexual intercourse with Viola Jackson, a female, not Ms wife, and aged sixteen years.” On the trial Viola Jackson testified to the circumstances of the crime and her own willing participation in the act. The major question upon tMs appeal is whether her testimony is supported by other evidence.” (Penal Law, § 2013.)

Early in the month of September, 1939, defendant received a telephone summons from complainant’s mother. When he arrived at the house complainant told him that she had been to see a doctor, and that while the doctor had not said so, she thought that she was pregnant. She accused the defendant of being responsible for her condition. He replied that he “ did not believe it — did not see how it was possible.” Thereafter defendant accompanied complainant and her mother to the doctor’s office, and gave the doctor six dollars “ to have an Aschen-Zondek test done for pregnancy.” The trial judge submitted to the jury the question of the inference to be drawn from defendant’s conduct after he had been accused by complainant, with instructions that if the jury found such conduct to be as consistent with innocence as with guilt, then “ they must disregard that evidence as being corroborative of the crime charged.” The trial judge, however, refused to charge the jury that if they so found, defendant should be acquitted, stating, “ that the Jury may find other facts in the case which are corroboration of the complaining witness.”

In view of defendant’s testimony that he did not commit the crime and his reply when first accused, his conduct in taking complainant to a doctor for examination cannot be said as matter of law to constitute an admission of guilt. He may have been attempting to prove thereby his own assertion of innocence. Under the circumstances it was entirely proper for the trial judge to leave to the jury the inference to be drawn from defendant’s acts. What inference the jury drew is not known. We must, therefore, inquire as to the correctness of the trial judge’s charge to the jurors that, if they should find that defendant’s conduct in going to the physician’s office with complainant and paying for the test was consistent with his innocence, they could still find other facts in the case sufficient to corroborate the testimony of the complaining witness.

“No conviction can be had for rape or defilement upon the testimony of the female defiled, unsupported by other evidence.” (Penal Law, § 2013.) “ The ‘ other evidence ’ required by the statute must be of such character as tends to establish, first, that the crime of rape was committed by somebody, and, second, that the defendant was the one who committed the crime (People v. Terwilliger, 74 Hun, 310, affd., on opinion below, 142 N. Y. 629) and whether consisting of facts or admissions must extend to every material fact essential to constitute the crime. (Underhill on Crim. Evidence, p. 74; People v. Page, 162 N. Y. 272, 274.) ” (People v. Downs, 236 N. Y. 306, 308.) (Italics new.)

Apart from complainant’s own testimony there is in this record no evidence that a crime was committed by this defendant. The trial judge refused to permit the introduction of proof of complainant’s pregnancy. When such proof was given by defendant on cross-examination, it was stricken from the record. If complainant, an unmarried female under the age of eighteen, was pregnant, proof of such fact would have been admissible to show that a crime had been committed although it would not, standing alone, satisfy the statutory requirement of other evidence,” (People v. Whitson, 195 App. Div. 910; 234 N. Y. 517.) The doctor who examined complainant testified for the People but his testimony as to her condition is not probative of the commission of the crime. (People v. Brehm, 218 App. Div. 266, 271.) Other witnesses for the People testified to admissions by defendant and other circumstances, tending to establish that defendant was with the complaining witness on the night specified in the indictment. Their statements, however, do not show that a crime was then, or at any time, committed by this defendant.

Defendant, as a witness in his own behalf, denied being with complainant on the night of July 11th and otherwise accounted for his activities on that date. His testimony was supported by that of two other witnesses. The prosecution argues that, since the jury must have found the testimony for defendant in this respect to be false, his false statement permitted an inference that his presence with complainant on the night of July 11th was a guilty one, and constituted other evidence within the intendment of the statute. (People v. Deitsch, 237 N. Y. 300.) In the case cited the defendant was charged with rape, and he likewise, in contradiction of an independent witness, testified that he was elsewhere than at the scene of the crime shortly before it was alleged to have occurred. The court held that “ This testimony reflects upon the character of his presence in the street at the time stated and justifies the inference that it was a guilty presence. Under these circumstances there is sufficient corroboration as to the identity of the criminal.” In the Deitsch case, however, there was independent proof that a crime had been committed. Complainant there was an eight-year old child. The court found that “ Her physical condition immediately after the alleged assault and the result of a medical examination was sufficient to support her story that a rape had been committed ” (pp. 302, 303). In the present case there is no evidence in the record as to complainant’s physical condition that would support her story that a rape had been committed. In the absence of any independent proof that a crime has been committed, a false denial by the defendant of presence at the scene of an alleged crime may give rise to an inference that his presence was a guilty one, but guilt of a particular crime, or even of any crime, may not also be inferred.

As the evidence, aside from the conduct of defendant in taking the complainant to a physician to be examined, does not show that a crime was committed, the trial judge erred in refusing to charge that if the jury found defendant’s conduct in that respect to be consistent with innocence then defendant should be acquitted.

The judgments should be reversed and a new trial ordered.

Lehman, Ch. J., Loughran, Finch, Rippey, Lewis and Conway, JJ., concur.

Judgments reversed, etc.