author: Crouch,

text:
    In the Matter of The New York City Housing Authority, Respondent, against Andrew Muller et al., Appellants, Impleaded with Others.
    (Argued January 30, 1936;
    decided March 17, 1936.)

      Charles Lamb and James A. McKaigney for appellants.
    The State Housing Law (L. 1926, ch. 823) and the amendments thereof contravene and violate the Constitutions of the United States and of the State of New York. ( United States v. Certain Lands in City of Louisville, Ky., 78 Fed. Rep. [2d] 684; People v. Adirondack Ry. Co., 160 N. Y. 225; Matter of Tuthill, 163 N. Y. 133; Coster v. Tidewater Co., 18 N. J. L. 54; Matter of Deansville Cemetery Assn., 66 N. Y. 569; Opinion of Justices, 211 Mass. 624; Salisbury Land & Improvement Co. v. Commonwealth, 215 Mass. 371; Matter of Rochester & G. H. R. R. Co., 12 N. Y. Supp. 566; 128 N. Y. 611; Brevoort v. Grace, 53 N. Y. 245; Board of Black River Regulating District v. Ogsbury, 203 App. Div. 43; Matter of Eureka Basin Warehouse & Mfg. Co., 96 N. Y. 42; Rensselaer & Saratoga R. R. Co. v. Davis, 43 N. Y. 137; Matter of Split Rock Cable Co., 128 N. Y. 408.) The removal of the type of houses and slums described in the Municipal Housing Authorities Law (L. 1934, ch. 4) may be accomplished by virtue of the police power. (Tenement House Dept. v. Moeschen, 179 N. Y. 325.)

      Paul Windels, Corporation Counsel (Paxton Blair of counsel), for respondent.
    The use to which the condemned lands are to be put is a public use. (New York Trust Co. v. Eisner, 256 U. S. 345; People v. Schweinler

      Press, 214 N. Y. 395; 242 U. S. 618; Fallbrook Irrigation District v. Bradley, 164 U. S. 112; Clark v. Nash, 198 U. S. 361; Rindge Co. v. Los Angeles County, 262 U. S. 700; Pocantico Water Works v. Bird, 130 N. Y. 249; Matter of Bloomfield & Rochester Natural Gas Light Co. v. Richardson, 63 Barb. 437; Matter of Town of Whitestown, 24 Misc. Rep. 150; O’Reiley v. Kankakee Valley Draining Co., 32 Ind. 169; Talbot v. Hudson, 16 Gray, 417; Adler v. Deegan, 251 N. Y. 467; State ex rel. Porterie v. Walmsley, 183 La. 139.) The clearance of slums and the erection of sanitary tenements in their place are undertakings well within the police powers of the State. (People ex rel. Durham Realty Co. v. La Fetra, 230 N. Y. 429; People v. Nebbia, 262 N. Y. 259; 291 U. S. 502; Green v. Frazier, 44 N. D. 395; 253 U. S. 233; Lochner v. New York, 198 U. S. 45; Willmon v. Powell, 91 Cal. App. 1; Matter of Mount Hope Development Corp. v. James, 258 N. Y. 510; Roche v. Sexton, 268 N. Y. 594.)

      Ira S. Robbins for New York State Board of Housing, amicus curiæ. The clearance of slum areas and the providing of decent, safe and sanitary dwelling accommodations for persons of low income, pursuant to the provisions of the Municipal Housing Authorities Law, are public uses, within the provisions of section 6 of article I of the Constitution of the State of New York. (Fallbrook Irrigation District v. Bradley, 164 U. S. 112; Strickley v. Highland Boy Gold Mining Co., 200 U. S. 527; Clark v. Nash, 198 U. S. 361; Olmstead v. Camp, 33 Conn. 532; Mt. Vernon-Woodbery Cotton Duck Co. v. Alabama Interstate Power Co., 240 U. S. 30; Rindge Co. v. County of Los Angeles, 262 U. S. 700; Matter of New York, 135 N. Y. 253; Moore v. Sanford, 151 Mass. 285; Matter of Tuthill, 36 App. Div. 492; 163 N. Y. 133; State ex rel. Twin City Building & Investment Co. v. Houghton, 144 Minn. 1; Paxton Canal Co. v. Farmers Irrigation Co., 45 Neb. 884; Hairston v. Danville & Western Ry. Co., 208 U. S. 598; Hagar v. Reclamation District, 111 U. S. 701;
      Houck v. Lillie River Drainage District, 239 U. S. 254; O’ Neill v. Learner, 239 U. S. 244; New Orleans Land Co. v. Board of Levee Commissioners, 132 So. Rep. 120; 283 U. S. 809; State ex rel. Madson v. Houghton, 233 N. W. Rep. 931; Kansas City v. Liebi, 252 S. W. Rep. 404; Matter of Mayor, 28 App. Div. 143; 157 N. Y. 409; Dingley v. City of Boston, 100 Mass. 544; Sweet v. Rechel, 159 U. S. 380; Matter of Cooper, 28 Hun, 515; 93 N. Y. 507; Pocantico Water Works v. Bird, 130 N. Y. 249; Board of Education v. Harper, 191 N. Y. Supp. 273; Rensselaer & Saratoga R. R. Co. v. Davis, 43 N. Y. 137; Stannards Corners Rural Cemetery Assn. v. Brandes, 14 Misc. Rep. 270; Matter of Lyons Cemetery Assn., 93 App. Div. 19; Matter of Cheesebrough, 78 N. Y. 232; Matter of Ryers, 72 N. Y. 1; Board of Black River Regulating District v. Ogsbury, 203 App. Div. 43; 235 N. Y. 600; Board of Hudson River Regulating District v. Fonda, J. & G. R. R. Co., 223 App. Div. 358; Matter of Burns, 155 N. Y. 23; Adler v. Deegan, 251 N. Y. 467; Green v. Frazier, 44 N. D. 395; 253 U. S. 233; Willmon v. Powell, 91 Cal. App. 1; Simon v. O’Toole, 108 N. J. L. 32, 549.) The exercise of the power of eminent domain, pursuant to the provisions of the Municipal Housing Authorities Law, is not in violation of the provisions of section 1 of the Fourteenth Amendment to the Constitution of the United States. (Clark v. Nash, 198 U. S. 361; Green v. Frazier, 253 U. S. 233; Strickley v. Highland Boy Gold Mining Co., 200 U. S. 527; Fallbrook Irrigation District v. Bradley, 164 U. S. 112; Jones v. City of Portland, 245 U. S. 217; Block v. Hirsh, 256 U. S. 135; Hairston v. D. & W. R. R. Co., 208 U. S. 598.)

      Charles Abrams, amicus curiæ. Laws providing for public housing are constitutional. (Mars Realty Corp. v. Sexton, 141 Misc. Rep. 622; Matter of Mt. Hope Development Corp. v. James, 258 N. Y. 510; Lowell v. Boston, 111 Mass. 454; Green v. Frazier, 253 U. S. 233; Willmon v. Powell, 91 Cal. App. 1; Wheelon v. S. D. Land Settlement

      Board, 181 N. W. Rep. 359.) Slum clearance and low-cost housing are public uses. (People ex rel. Hawthorn v. Prendergast, 248 N. Y. 215; Talbot v. Hudson, 16 Gray, 417; Long Sault Development Co. v. Kennedy, 143 N. Y. Supp. 454; Matter of Niagara Falls & Whirlpool R. R. Co., 108 N. Y. 375; Weismer v. Village of Douglas, 64 N. Y. 91; Matter of Tuthill, 36 App. Div. 492; 163 N. Y. 133; Matter of Ryers, 72 N. Y. 1; Hellinger v. City of New York, 168 N. Y. Supp. 271; Board of Black River Regulating District v. Ogsbury, 196 N. Y. Supp. 281; Pocantico Waterworks Co. v. Bird, 130 N. Y. 249; Matter of New York, 63 Hun, 632; 135 N. Y. 253; People v. Adirondack R. R. Co., 160 N. Y. 225; 176 U. S. 335; Matter of City of Rochester v. Holden, 224 N. Y. 386; Matter of Niagara, L. & O. Power Co., 111 App. Div. 686; Mt. Vernon-Wood-berry Cotton Duck Co. v. Alabama Interstate Power Co., 240 U. S. 30; Rindge Co. v. County of Los Angeles, 262 U. S. 700; Strickley v. Highland Boy Gold Mining Co., 200 U. S. 527.)
   Crouch,

J. The petitioner, a public corporation organized under the Municipal Housing Authorities Law (Laws of 1934, ch. 4, comprising §§ 60 to 78, inclusive, of the State Housing Law, being Laws of 1926, ch. 823), seeks to condemn certain premises in the city of New York owned by the defendant Andrew Muller. The public use for which the premises are required is stated in the petition to be “ the clearance, replanning and reconstruction of part of an area of the City of New York, State of New York wherein there exist, and the petitioner has found to exist, unsanitary and substandard/ housing conditions.”

As part of its project the petitioner has acquired by purchase properties contiguous on both sides to the premises in question. Acquisition of the defendant’s property is, therefore, necessary for the carrying out of the project. The premises consist of two old-law tenement houses. The owner resists condemnation upon the ground that the Municipal Housing Authorities Law violates article I, section 6, of the State Constitution and the Fourteenth Amendment of the Federal Constitution, because it grants to petitioner the power of eminent domain for a use which is not a public use.

Briefly and broadly stated, the statute provides that a city may set up an authority with power to investigate and study living and housing conditions in the city, and to plan and carry out projects for the clearing, replanning and reconstruction of slum areas and the providing of housing accommodations for persons of low income. It .is empowered under certain limitations to issue and sell bonds which, however, shall not be a debt of the State or of the city; and it may not in any manner pledge the credit of the State or city or impose upon either any obligation. It is granted the power of eminent domain, to be exercised as provided, and it is exempted from the payment of certain taxes and fees. In enacting the statute, the Legislature, after thorough investigation, made certain findings of fact, upon the basis of which it determined and declared the necessity in the public interest of the provisions enacted and that the objects thereof were public uses and purposes for which public money may be spent and private property acquired.” (§ 61.) The facts found were that in certain areas of cities of the state there exist unsanitary or substandard housing conditións owing to over-crowding and concentration of population, improper planning, excessive land coverage, lack of proper light, air and space, unsanitary design and arrangment, or lack of proper sanitary facilities; that there is not an adequate supply of decent, safe, and sanitary dwelling accommodations for persons of low income; that these conditions cause an increase and spread of disease and crime and constitute a menace to the health, safety, morals, welfare, and comfort of the citizens of the state, and impair economic values; that these conditions cannot be remedied by the ordinary operation of private enterprise.”

It is true that the legislative findings and the determination of public use are not conclusive on the courts. (Pocantico Water Works Co. v. Bird, 130 N. Y. 249.) But they are entitled at least to great respect, since they relate to public conditions concerning which the Legislature both by necessity and duty must have known. (Block v. Hirsh, 256 U. S. 135; People v. Schweinler Press, 214 N. Y. 395.) The existence of all the conditions adverted to by the Legislature was alleged in the petition and proved with reference to the area included in the project, of which the premises in question are a part. The public evils, social and economic of such conditions, are unquestioned and unquestionable. Slum areas are the breeding places of disease which take toll not only from denizens, but, by spread, from the inhabitants of the entire city and State. Juvenile delinquency, crime and immorality are there bom, find protection and flourish. Enormous economic loss results directly from the necessary expenditure of public funds to maintain health and hospital services for afflicted slum dwellers and to war against crime and immorality. Indirectly there is an equally heavy capital loss and a diniinishing return in taxes because of the areas blighted by the existence of the slums. Concededly, these are matters of State concern (Adler v. Deegan, 251 N. Y. 467, 477), since they vitally affect the health, safety and welfare of the public. Time and again, in familiar cases needing no citation, the use by the Legislature of the power of taxation and of the police power in dealing with the evils of the slums, has been upheld by the courts. Now, in continuation of a battle, which if not entirely lost, is far from won, the Legislature has resorted to the last of the trinity of sovereign powers by giving to a city agency the power of eminent domain. We are called upon to say whether under the facts of this case, including the circumstances of time and place, the use of the power is a use for the public benefit ■ — ■ a public use — within' the law.

There is no case in this jurisdiction or elsewhere directly in point. Governmental housing projects constitute a comparatively new means of remedying an ancient evil. Phases of the general subject were before the courts in Green v. Frazier (44 N. D. 395; affd., 253 U. S. 233) and in Willmon v. Powell (91 Cal. App. 1), where the power to spend public funds for such projects was upheld. (See, also, Simon v. O’Toole, 108 N. J. L. 32; affd., 108 N. J. L. 549.) In United States v. Certain Lands in Louisville (78 Fed. Rep. [2d] 684) it was held that while such a project might be within the scope of a State’s activities, it was not one which the Federal government had power to undertake.] The cases in this State, which, perhaps, affordTthe closest'analogy are the drainage cases, where land was permitted to be taken by eminent domain in the.interest of public health, even where there was incidental benefit to private interests. (See e. g., Matter of Ryers, 72 N. Y. 1; Board of Black River Regulating District v. Ogsbury, 203 App. Div. 43; affd.; 235 N. Y. 600.) To take,” said the court, “ for the maintenance and promotion of the public health, is a public purpose.” (Matter of Ryers, supra, p. 7.) Over many years and in a multitude of cases the courts have vainly attempted to define comprehensively the concept of a public use and to formulate a universal test. They have found here as elsewhere that to formulate anything ultimate, even though it were possible, would, in an inevitably changing world, be unwise if not futile. Lacking a controlling precedent, we deal with the question as it presents itself on the facts at the present point of time. The law of each age is ultimately what that age thinks should be the law.” (People ex rel. Durham R. Corp. v. La Fetra, 230 N. Y. 429, 450.)

The fundamental purpose of government is to protect the health, safety and general welfare of the public. All its complicated activities have that simple end in view. Its power plant for the purpose consists of the power of taxation, the police power and the power of eminent domain. Whenever there arises, in the State, a condition of affairs holding a substantial menace to the public health, safety or general welfare, it becomes the duty of the government to apply whatever power is necessary and appropriate to check it. 1,There are differences in the nature and characteristics of the powers, though distinction between them is often fine. (People ex rel. Durham R. Corp. v. La Fetra, supra, p. 444.) But if the menace is serious enough to the public to warrant public action and the power applied is reasonably and fairly calculated to check it, and bears a reasonable relation to the evil, it seems to be constitutionally immaterial whether one or another of the sovereign powers is employed.

The menace of the slums in New York city has been long recognized as serious enough to warrant public action. The Session Laws for nearly seventy years past are sprinkled with acts applying the taxing power and the police power in attempts to cure or check it. , The slums still stand. The menace still exists. What objections, then, can be urged to the application of the third power, least drastic, but as here embodied probably the most effective of all?

It is said that private enterprise, curbed by restrictive legislation under the police power, is adequate and alone appropriate. There is some authority to that effect in other States. ^ A sufficient answer should be the page of legislative history in this State and its result referred to above. Legislation merely restrictive in its nature has failed because the evil inheres not so much in this or that individual structure as in the character of a whole neighborhood of dilapidated and unsanitary structures. To eliminate the inherent evil and to provide housing facilities at low cost — the two things necessarily go together — require large scale operations which can be carried out only where there is power to deal in invitum with the occasional greedy owner seeking excessive profit by holding out. The cure is to be wrought, not through the regulated ownership of the individual, but through the ownership and operation by or under the direct control of the public itself. Nor is there anything novel in that. The modern city functions in the public interest as proprietor and operator of many activities formerly and in some instances, still carried on by private enterprise.

It is also said that since the taking is to provide apartments to be rented to a class designated as “ persons of low income,” or to be leased or sold to limited dividend corporations, the use is private and not public. This objection disregards the primary purpose of the legislation. Use of a proposed structure, facility or service by everybody and anybody is one of the abandoned universal tests of a public use. (Mt. Vernon-W oodberry Cotton Duck Co. v. Alabama Interstate Power Co., 240 U. S. 30, 32; Strickley v. Highland Boy Gold Mining Co., 200 U. S. 527; Rindge Co. v. County of Los Angeles, 262 U. S. 700; Fallbrook Irrigation District v. Bradley, 164 U. S. 112, 161, 162.) The designated class to whom incidental benefits will come are persons with an income under $2,500 a year, and it consists of two-thirds of the city’s, population. But the essential purpose of the legislation is not to benefit that class or any class; it is to protect and safeguard the entire public from the menace of the slums. > The so-called limited dividend corporations referred to were provided for in the State Housing Law (Laws of 1926, ch. 823), and embody another and different attempt to solve the problem. The constitutionality of the scheme was unsuccessfully attacked in the courts. (Mars Realty Corp. v. Sexton, 141 Misc. Rep. 622; Roche v. Sexton, 268 N. Y. 594; cf. Matter of Mount Hope Development Corp. v. James, 258 N. Y. 510.) After ten years of experiment its use, for economic reasons, has proved inadequate as a solution.

Nothing is better settled than that the property of one individual cannot, without his consent, be devoted to the private use of another, even when there is an incidental or colorable benefit to the public. The facts here present no such case. In a matter of far-reaching public concern, the public is seeking to take the defendant’s property and to administer it as part of a project conceived and to be carried out in its own interest and for its own protection. That is a public benefit and, therefore, at least as far as this case is concerned, a public use.

The orders should be affirmed, with costs.

Crane, Ch. J., Lehman, Hubbs and Loughran, JJ., concur; Finch, J., concurs in result; O’Brien, J., dissents and votes to reverse.

Orders affirmed.


source: Caselaw Access Project

author: Crane, Ch. J.

license: Public Domain

text:
    In the Matter of Philip H. Duer et al., as Directors and Trustees in Dissolution of Geo. P. Ide & Co., Inc., Appellants. Spencer Trask & Co., Respondent.

      (Argued March 4, 1936;
    decided April 14, 1936.)

      John A. Sherman and Frederick E. Draper for appellants.
    Respondent, a preferred stockholder, cannot share in the proceeds of corporate liquidation, its rights being subordinate to those of the holders of participating preferred stock. (Cons. Laws, ch. 59, § 105.)

      Michael D. Reilly and Joseph Besch, Jr., for respondent.
    Every holder of the original preferred stock possessed a vested, indefeasible right, under the amended certificate of incorporation, to have two and sixty-eight one-hundreths shares of the prior participating preferred stock issued to him in exchange for one share of the original preferred stock. (Stokes v. Continental Trust Co., 186 N. Y. 285.) The right and power to effect the exchange survives the order of dissolution. (Cons. Laws, ch. 59, § 29; City of New York v. New York Ferry Co., 231 N. Y. 18.)
   Crane, Ch. J.

Section 36 of the Stock Corporation Law (Cons. Laws, ch. 59) provides for changes in respect to shares, capital stock or capital of corporations, and subdivision 11 of section 38 gives to any holder of stock not voting in favor of such alteration the right to object and have his shares appraised pursuant to section 21.

Geo. P. Ide & Co., Inc., was in financial difficulty and planned reorganization and recapitalization. Its stock set up consisted of 20,000 shares of preferred stock ($100 par) and 75,000 shares of common stock (no par). On December 31, 1927, the company had dividends in arrears on its preferred stock of $640,000, and a capital deficit (without taking into account such dividends in arrears) of more than $560,000. The plan of reorganization was stated in a circular sent to all stockholders to be the following:

“ Proposed Capitalization of the Company

The amount of capital of the Company is to be reduced to an amount at least equal to the sum of the aggregate par value of all issued shares having par value plus $1 in respect of every issued share without par value, plus such amounts as from time to time by resolution of the Board of Directors may be transferred to capital but, in on event, less than $2,128,600, which, when the Plan shall have been fully consummated, will be represented by:

Approximate Approximate

No. of Shares No. of Shares

Kind.of Stock Authorized Issued

Participating Preferred Stock

(No par)............... 56,280 53,600

Preferred Stock ($100 par). 20,000 None

Common Stock (No par)... 85,000 75,000

161,280 128,600

With this capitalization the dividends in arrears on the present Preferred Stock of the Company will be disposed of by the issue of stock, the capital deficit will be eliminated, and the Company, on the basis of its balance sheet as of December 31, 1927, will have a surplus of $585,811.86, which stockholders becoming parties to the Plan thereby agree shall be available for dividends to the same extent to which earned surplus would be so available. * * *

Terms of Recapitalization Holders of the present Preferred Stock of the Company who become parties to the Plan as herein provided, * * * will be entitled to receive, as and when issued and ready for delivery, in exchange for their respective shares of the present Preferred Stock deposited under the Deposit Agreement and in full satisfaction of all their rights in respect thereof, two and sixty-eight one-hundredths (2 68 /100) shares of the Participating Preferred Stock for each share of the present Preferred Stock so deposited. * * *

“ The Plan makes no provision for holders of the present Preferred Stock who do not become parties hereto in the manner herein provided.

Participating Preferred Stock “ The authorized Participating Preferred Stock is to consist of approximately 56,280 shares without nominal or par value. The holders of the Participating Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Company, regular dividends at the rate of $3 per share per annum and no more, payable quarterly, from the beginning of the quarterly dividend period in which issued, before any dividends shall be paid upon the present Preferred Stock . or the Common Stock. * * *

Upon the liquidation or dissolution of the Company, each holder of shares of the Participating Preferred Stock shall be entitled to receive, before any distribution or payment to the holders of the Present Preferred Stock or the Common Stock, $55 per share plus an amount equal to $3 per share per annum from the date of accumulation, or the beginning of the quarterly dividend period in which such shares shall have been issued if such shares shall have been issued after the date of cumulation, to the time of payment upon such liquidation or dissolution less the amount of any regular dividends paid thereon from such date of cumulation. * * *

Depositary — Method of Deposit under Plan “ Holders of present Preferred Stock of the Company may become parties to the Plan and entitled to the benefits thereof by depositing the certificates for their stock under the Deposit Agreement, as therein provided, with National Bank of Commerce in New York, Depositary, 31 Nassau Street, New York City, on or before April 4, 1928, or on or before such later date as the Committee may fix, or in any other manner which the Committee in its discretion may permit. Stockholders who do not become parties hereto in the manner herein provided within the time fixed therefor shall not be entitled to become parties to the Plan or to share in any of the benefits thereof except upon obtaining the express written consent of the Committee. * * * ”

The time to exchange stock was extended by the reorganization committee to April 30, 1933, a circular letter being sent to the holders of preferred stock, reading:

" Out of 20,000 shares of Preferred Stock originally outstanding, Preferred Stockholders owning 19,560 shares have made the exchange on the basis indicated so that at the present time there are outstanding only 440 shares of preferred Stock which have not been exchanged. * * *

“ As a result, you are now advised that if you desire to make the exchange, you may do so on the same basis as if you had made the exchange within the original period in which the exchange was permitted, provided

“ (a) that you deposit your stock for exchange on or before the 30th day of April, 1933, and * * *

“We think it proper to advise you that counsel for the Company have expressed the opinion that the Participating Preferred stock has priority, both with respect to assets and dividends, over the Preferred Stock. * * * “ If you conclude to make the exchange, you are requested to forward your certificate of stock, duly endorsed, with the enclosed letter of transmittal (which contains a waiver of fractional shares) to Guaranty Trust Company of New York, No. 140 Broadway, New York City, and that you do so on or before April 30,1933.” Spencer Trask & Co. owned 100 shares of preferred stock and received all the notices referred to above. It did not consent to or approve the plan; it did not seek to have its stock appraised as a dissenting stockholder, pursuant to section 21 of the Stock Corporation Law; it did not at any time surrender its stock for exchange.

On June 15, 1933, Geo. P. Ide & Co., Inc., was dissolved, pursuant to section 105 of the Stock Corporation Law, since which time the petitioners, as directors and trustees in dissolution, have been in charge of the liquidation and distribution of the corporate assets.

A settlement of the accounts and the final discharge of these petitioners have been requested of the Supreme Court, as permitted by section 106 of the Stock Corporation Law, which has resulted in Spencer Trask & Co. coming into court with a request to be treated as if it had made an exchange of stock and to participate equally in the assets with the new participating preferred stockholders. The committee of reorganization has never given its consent to such exchange, nor was any such exchange requested before dissolution.

The plan of reorganization was put through and adopted according to statute and the new stock issued with rights and privileges as stated in the plan. These terms are binding on the company, the liquidators, all the stockholders and courts. When purchasers bought the new participating preferred stock and when preferred stockholders made the exchange giving up what might have been valuable rights to them, such as accumulated dividends, a contract was made which cannot now be varied. This contract provided that the new stock had certain preferences on dissolution and these the court cannot vary. As quoted above, “ Upon the liquidation or dissolution of the Company, each holder of shares of the Participating Preferred Stock shall be entitled to receive,” etc., etc. Until these stockholders receive the sums due them Spencer Trask & Co. get nothing. The courts cannot change priorities created by contract; the time limit to exchange stock had expired and even the committee had no power to consent to the exchange after dissolution. At that time, if not before, the respective claims to the assets became fixed.

So much of the order appealed from as gives to Spencer Trask & Co. the rights of a holder of participating preferred stock should be reversed, with costs in all courts.

Lehman, O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Order reversed, etc.


author: Hubbs, J.

text:
    The Trusts and Guarantee Company, Limited, et al, as Executors of Samuel V. Venning, Deceased, Appellants, v. William N. Barnhardt, Respondent.
    (Argued January 29, 1936;
    decided April 14, 1936.)

      Robert H. Koehler for appellants.
    The substantive law of Canada governs upon the trial of the action. (Waters v. Spencer, 44 Misc. Rep. 15; Merchants’ Bank of Canada v. Brown, 86 App. Div. 599.) The testimony of the defendant, that he had not received the notice, is wholly insufficient as a matter of law to raise an issue requiring submission to the jury. It is the mailing that is the vital part, and not the receipt of the notice. (Gawtry v. Doane, 51 N. Y. 84; Arnold v. Railroad Co., 5 Duer, 207.) Under the Canadian Bills of Exchange Act, all of the formalities were strictly complied with and there was no such question as indicated by the Appellate Division to submit to the jury under the substantive law of Canada. (Canadian Bills of Exchange Act, §§ 103, 104, 106, 109, 114, ¶ 2.)

      Guy O. Walser and Howard J. Grace for respondent.
    The plaintiffs’ proof of service of notice of dishonor was wholly insufficient. (Meise v. Newman, 76 Hun, 341; Townsend v. Auld, 10 Misc. Rep. 343; White & Sons v. United States Food Products Corp., 203 App. Div. 787; Shoenbrun v. Tubby, 222 App. Div. 56; Hawkes v. Salter, 4 Bing. 715; Skillbeck v. Garbett, 7 Q. B. 846; Ontario Bank v. Burke, 10 Ont. P. R. 561.)
   Hubbs, J.

This is an action to recover upon a demand promissory note made by Newton Wylie to the order of Samuel V. Venning, deceased, and indorsed by respondent. A verdict was directed for plaintiffs-appellants. The Appellate Division reversed and ordered a new trial upon the ground that it was error to refuse to receive testimony offered by respondent to the effect that he never received notice of dishonor and protest.

The note was made and payable in Toronto, Canada. It is conceded that the Canadian law controls and the Canadian statute was introduced in evidence. It does not differ in effect from our Negotiable Instruments Law (Cons. Laws, ch. 38). Under both statutes, a plaintiff makes a case against an indorser by proof of the indorser’s signature, the production of the note and the introduction in evidence of the notary’s certificate showing the dishonor of the note and the mailing of the notice of protest.

The question presented for determination is whether testimony by a defendant indorser to the effect that he never received the notice of dishonor and protest raised a question of fact as to whether it was in fact mailed to him as certified by the notary in his certificate. If such testimony did not raise an issue of fact, the trial court was right in refusing to receive such testimony. On the other hand, if it did raise a material question of fact, the judgment of the Appellate Division must be affirmed.

It is a general rule that the law presumes that a letter properly addressed, stamped and mailed is duly delivered to the addressee. (Calkins v. Vaughan, 217 Ala. 56; News Syndicate Co. v. Gatti Paper Stock Corp., 256 N. Y. 211.)

That presumption applies in an action against an indorser of a note both under the common law rule and •under Canadian and New York statutes. Statutes making the certificate of a notary competent evidence do not preclude evidence, however, to the effect that a certificate of a notary is false in its statement that a notice was mailed. The falsity of such a certificate may be shown like any other material fact in a case by any competent evidence and as bearing on that question of fact evidence that the notice was not received would undoubtedly be competent.

The question still remains whether the testimony of an indorser that he did not receive the notice standing alone is sufficient to raise a question of fact which must be sent to a jury.

In some jurisdictions it has been decided that such evidence is sufficient to create a question of fact. (Calkins v. Vaughan, supra; Kewanne Nat. Bank v. Ladd, 175 Ill. App. 151; Radin v. Creran, 106 N. J. L. 460.)

The same rule has been announced by some courts in this State although the question has never been passed upon by this court. (Union Bank v. Deshel, 139 App. Div. 217; Latham v. Sheff, 193 App. Div. 576; Reardon v. Olympic Theatre Corp., 231 App. Div. 875.)

In Canada the rule seems to be that a mere denial of the receipt of the notice does not create a question of fact.

A Canadian authority, Falcon bridge on the Law of Banking and Bills of Exchange (4th ed., p. 486), says a mere denial of receipt is not an answer.

Other jurisdictions have adopted the rule that a mere denial of receipt of a notice does not create an issue of fact. (Bovay v. Fuller, 63 Fed. Rep. [2d] 280; Bitten-bender v. Bergen, 277 Penn. St. 27; First Nat. Bank of Manistee v. Star Watch Case Co., 187 Mich. 224; Wilson v. Richards, 28 Minn. 337; Roberts v. Wold, 61 Minn. 291.)

The Canadian statute (Bills of Exchange Act, R. S. ch. 119), provides:

Section 11. “A protest of any bill or note within Canada, and any copy thereof as copied by the notary or justice of the peace, shall, in any action be prima facie evidence of presentation and dishonour, and also of service of notice of such presentation and dishonour as stated in such protest or copy.” (Revised Statutes of Canada, 1927, p. 280.)

Section 103. Subd. 2. Such notice so addressed shall be sufficient, although the place of residence of such party is other than either of the places aforesaid, and shall be deemed to have been duly served and given for all purposes if it is deposited in any post office, with the postage paid thereon, at any time during the day on which presentment has been made, or on the next following juridical or business day” (p. 301).

By section 104 it is provided: “ Where a notice of dishonour is duly addressed and posted, as provided in the last preceding section, the sender is deemed to have given due notice of dishonour, notwithstanding any miscarriage by the post office ” (p. 301).

The above quoted provisions apply to promissory notes. (§ 186, p. 316.)

In an action in this State against an indorser of a note made and payable in Canada, proof of presentment, non-payment and protest may be made in any manner authorized by the law of Canada. (Civ. Prac. Act, § 369.)

At common law a notary’s certificate was not competent evidence. Notice of dishonor and of protest had to be established by common-law evidence. (Schofield v. Palmer, 134 Fed. Rep. 753.)

The statutes in question make the certificate prima facie evidence which, of course, means that it constitutes sufficient evidence until disputed by competent affirmative evidence offered by the indorser. Testimony that the notice was not received is competent as bearing upon the question of whether it was mailed. Is it sufficient to constitute a question of fact for a jury? To hold that it is, seems contrary to section 104 of the Canadian statute which provides in substance that if a certificate is properly mailed, it is sufficient even though it is lost in the mail.

In the case of Wilson v. Richards (supra) the court said: But evidence of the non-receipt of the notice is, standing alone, incompetent to contradict the certificate. It might be competent or corroborating evidence if there were any testimony tending to show that the notice was not in fact deposited in the post-office, but not otherwise. If mere evidence of the non-receipt of the notice would justify the jury in finding the facts against the prima facie case made by the certificate, then it would be in the power of the jury to cast all the risks arising from delinquencies or accidents in the post-office department upon the holder of the paper, which is contrary to the design and purpose of the statute. One jury might find one way upon it, and another the other way, so that practically there would be no certain established rule on the subject. The only way in which the holder could insure a reasonable degree of certainty in the matter would be to forego the provisions of the statute and of the law-merchant in regard to depositing the notice in the post-office, and send it by messenger. A vast amount of the business of the country is transacted by the instrumentality of commercial paper negotiated at great distances from the maker, and if the certificate of protest may be regarded as contradicted by the mere non-receipt of the notice, it is not difficult to see that a clog would be put upon its circulation, and the usefulness of this system of credits, which is so essential to commercial prosperity, would be seriously impaired.” (Cf. Shed v. Brett, 1 Pick. 401.)

We are in accord with the reasons so clearly stated by the Minnesota court and believe that those reasons are applicable under the Canadian statute.

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

Crane, Ch. J., Lehman, O'Brien, Crouch, Loughran and Finch, JJ., concur.

Ordered accordingly.


author: Finch, J.

text:
    In the Matter of Ira Fink, Appellant, against James E. Finegan et al., Constituting the Municipal Civil Service Commission of the City of New York, Respondents.

      (Argued March 2, 1936;
    decided April 14, 1936.)

      Arthur G. Syran for appellant.
    The Municipal Civil Service Commission failed to conduct a competitive examination and, therefore, violated section 6 of article 5 of the State Constitution. (Barthelmess v. Cukor, 231 N. Y. 435; Barlow v. Berry, 245 N. Y. 500; Matter of Ottinger v. Civil Service Comm., 240 N. Y. 435; People ex rel. Leary v. Knox, 166 N. Y. 444; People ex rel. Braisted v. McCooey, 100 App. Div. 240.) An admittedly perfect oral examination was marked a failure unreasonably, arbitrarily and capriciously. (Baird v. Supervisors, 138 N. Y. 95; People ex rel. Empire City Trotting Club v.
      State Racing Comm., 190 N. Y. 31; People ex rel. Hultman v. Gilchrist, 114 Misc. Rep. 651; 196 App. Div. 964; 232 N. Y. 598; Peck v. Belknap, 130 N. Y. 394; Matter of Potts v. Kaplan, 264 N. Y. 110.) The Municipal Civil Service Commission violated the mandate of the Constitution because it failed to mark the oral examination on a competitive basis and in accordance with its true merit. (Barthelmess v. Cukor, 231 N. Y. 435; Matter of Ottinger v. Civil Service Commission, 240 N. Y. 435; Barlow v. Berry, 245 N. Y. 500; Potts v. Kaplan, 264 N. Y. 110; People ex rel. Leary v. Knox, 166 N. Y. 444; Matter of Picone v. City of New York, 241 N. Y. 157; People ex rel. Hultman v. Gilchrist, 114 Misc. Rep. 651; 196 App. Div. 964; 232 N. Y. 598.)

      Paul Windels, Corporation Counsel (Edmund L. Palmieri and Paxton Blair of counsel), for respondents.
    The petitioner cannot properly avail himself of a mandamus proceeding as a means of reviewing the action of a civil service commission in the conduct of an examination, when there are no charges of fraud or bad faith. (Matter of Simons v. McGuire, 204 N. Y. 253; Matter of Allaire v. Knox, 62 App. Div. 29; 168 N. Y. 642; People ex rel. Braisted v. McCooey, 100 App. Div. 240; People ex rel. Caridi v. Creelman, 150 App. Div. 746; People ex rel. Bartholomew v. Municipal Civil Service Comm., 171 App. Div. 916; Matter of Campbell v. Moskowitz, 171 App. Div. 911.) The petitioner cannot set up an exclusive standard for his own benefit in the rating of his oral examination. (People ex rel. Leary v. Knox, 166 N. Y. 444; Hale v. Worstell, 185 N. Y. 247; Barlow v. Berry, 245 N. Y. 500; People ex rel. Sweet v. Lyman, 157 N. Y. 368; People ex rel. Moriarty v. Creelman, 206 N. Y. 570.)
   Finch, J.

This is an appeal to this court by leave of the Appellate Division, first department, from an order of that court unanimously afihming, without opinion, an order of the Supreme Court denying an application for an order of mandamus.

The petitioner sought to compel the Municipal Civil Service Commission of the City of New York to re-rate an oral test taken by him in an examination for medical examiner.

The petitioner, a physician, participated in an examination conducted by the Municipal Civil Service Commission for the purpose of preparing an eligible list for the three positions of police surgeon, medical officer in the fire department and medical examiner in the department of sanitation.

Subjects and weights upon which the examination was to be conducted are as follows: Experience, 3.70 per cent required; technical, 5.75 per cent required; oral, 2.70 per cent required, and 70 per cent general average required.

Petitioner passed the technical or written test and submitted thereafter to an oral examination consisting of technical questions of a medical nature, which concededly he'answered correctly. He was thereafter notified that he had failed to pass the oral examination. The reasons given for his failure were that in the opinion of the examiners, although he was pleasant in manner and bearing and in comprehension fairly quick, he lacked force and executive ability and was altogether too mild. The examiners were unanimous in remarking, “We do not believe he would make an acceptable P. S. and M. 0.”

An affidavit by the president of the Municipal Civil Service Commission contends that the province of an oral examination is not to test the technical fitness of a candidate. That has already been done by the technical written examination. “ An oral examination is a test only of personality. * * * or the very important element of personal equation ’ which enters into the determination of the fitness of any candidate to fill high and responsible positions in the public service, such as the positions for which this examination was held.” In making their determination as to the personality of the candidate the expert examiners were required by the Commission to observe and rate the candidate with regard to the five following elements: 1. Manner and bearing. 2. Quickness of comprehension. 3. Force. 4. Executive ability, and 5. General fitness. It is uncontradicted that it was the unanimous determination of the examiners that the petitioner lacked the personality required of persons who could efficiently discharge the duties of the respective positions for which this examination was held and the Commission itself was powerless to overrule this determination. It is further alleged that all of these positions are of a high executive character. Police surgeons rank as inspectors; in the fire department the medical officer ranks as a battalion chief, and in the sanitation department the duties of a medical officer do not differ from those of a police surgeon in the police department and medical officer in the fire department. It is further alleged that the oral test as a necessary and required subject is not an innovation but has always been had “ * * * for the reason that personality is a paramount and controlling factor and mere technical or professional knowledge, as tested in a written examination, does not suffice to determine the fitness of candidates.”

The petitioner makes no claim of fraud or bad faith in the conduct of the examinations. He claims, however, that his oral examination should have been rated on the same.basis as the technical examination; that is solely on a basis of the accuracy of the information given by him. It may be added that the oral test was conducted and rated by three eminent physicians and surgeons who were nominated for the position of expert medical examiner by the New York Academy of Medicine and each of whom rated the candidates independently of the other examiners. In this connection it may be noted that thirty per cent of the candidates failed; petitioner alone complains.

The State Constitution requires that appointments and promotions in the civil service “ * * * shall be made according to merit and fitness to be ascertained, so far as practicable, by examinations which, so far as practicable, shall be competitive * * *.” (N. Y. Const., art. V, § 6.) This mandate has been rendered effective by appropriate legislation.

The keynote of civil service is merit and fitness, comprising not only efficiency but character and loyalty to duty. This must be ascertained, as far as practicable, by examinations which, as far as practicable, shall be competitive.

The constitutional provision for civil service has not left the mandating to implication but expressly provides that Laws shall be made to provide for the enforcement of this section.” (Canst, art. V, § 6.) In accordance therewith the Legislature has enacted the Civil Service Law (Cons. Laws, ch. 7) and the amendments thereto. The Civil Service Law divides the civil service into the classified and the unclassified service (§ 9) and subdivides the classified service into four divisions: the exempt class; the competitive class; the non-competitive class; and, in the cities, the labor class (§ 12). The positions of police surgeon, medical officer and medical examiner have been classified by the New York City Municipal Civil Service Commission as competitive. (Rules of Commission, rule X, part XII.)

No one questions that in all the tests given the petitioner, except perhaps the oral one, there was competition. Nor is the oral test questioned in so far as it tested technical ability. The examiners, however, in giving the oral test also attempted to test the personalities of the candidates. They have eliminated the petitioner on the ground that he is lacking in force and executive ability. The test or measure of executive ability nowhere appears. All that the record shows is the conclusion that the candidate lacks these qualities.

A test or examination, to be competitive, must employ an objective standard or measure. Where the standard or measure is wholly subjective to the examiners it differs in effect in no respect from an uncontrolled opinion of the examiners and cannot be termed competitive. (Cf. Matter of Barthelmess v. Cukor, 231 N. Y. 435; Barlow v. Berry, 245 N. Y. 500.)

This does not mean that competitive examinations must be limited to tests of knowledge and physical ability. Objective tests have been devised and are being developed which measure many qualities and characteristics. For example, tests of intelligence such as the army Alpha test and the Binet-Simon tests have been generally accepted. Mental alertness tests and special ability and aptitude tests of many kinds are widely recognized.

The oral test serves its purpose in a competitive examination. Obviously it may be employed as a test of knowledge. In addition, it may be used to test other qualities. For example, in the selection of teachers it may be necessary to appraise their voices for carrying power, distinctness and absence of speech defects. Such tests are necessary, particularly where the pupils are young and prone to learn through imitation. A teacher who answers all the technical questions correctly may not be acceptable or may be given a lower rating because he stutters or has so feeble a voice as to preclude his being heard throughout a large classroom.

The above qualities may be tested objectively, albeit orally. A definite standard may be formulated. In the case at bar no standard appears. An examination cannot be classed as competitive unless it conforms to measures or standards which are sufficiently objective to be capable of being challenged and reviewed, when necessary, by other examiners of equal ability and experience.

Some positions in the civil service may require that the person who fills them have certain qualities which cannot be measured by existing objective tests. This fact should not make it necessary to place the position wholly in the non-competitive class. The Constitution requires that the examination be competitive as far as practicable. Thus, for such positions, the examination should be competitive except for the testing of the qualities not measurable by objective tests. (Cf. People ex rel. Sweet v. Lyman, 157 N. Y. 368.) However, before a noncompetitive test is made part of an examination for a competitive position it should be found that the quality to be tested is essential for the position and that no objective standard or measure is available. That industry examines for these qualities by non-competitive examination, relying upon the subjective reactions of the examiners, should not be conclusive. The employer in industry generally has a self-interest in the selection of capable and efficient employees which is not so strong in the case of civil service examiners. Non-competitive examinations may readily be manipulated by the unscrupulous with little likelihood of detection. Politics, passion and friendship may play their part. Even the most scrupulous examiner may be influenced in his determination by unconscious prejudice and bias. For these reasons, the non-competitive test should not be employed unless the need is imperative.

The determination of the necessity for such a test is a discretionary one to be made by the Municipal Civil Service Commission subject to review by the State Commission and, if the discretion is abused, by the courts. In the case at bar, however, there has been no finding that executive ability and force are qualities necessary for the position, nor did the announcement of the examination reveal that these qualities would be tested. There has been no finding that these qualities cannot be measured objectively. Upon the face of the record before us these examiners, without warning or notice, and without a finding by the Commission that the qualities of force and executive ability are necessary for the positions and cannot be measured objectively, have employed what amounts in effect to a non-competitive test of these qualities, and have eliminated the petitioner on the ground that he lacks these qualities. From all appearanees this is not an exercise of discretion in accordance with the Constitution and the Civil Service Law.

The Civil Service Law and rules would seem to require that the Commission prepare lists of preliminary requirements and subjects of examination and publish them with the notice of examination. (Civil Service Law, § 14; Rules of Municipal Civil Service Commission, rule V, § II [1], § IV [8-b].)

Unless the Commission can show that the test of force and executive ability was objective or that it properly exercised its discretion and determined that a noncompetitive test was necessary and gave notice thereof, the examination of the petitioner should be re-rated or the examination set aside and a new official list established.

The orders should be reversed and the motion for an alternative order of mandamus granted, with costs to abide the event.

Crane, Ch. J., Lehman, O’Brien, Hubbs, Crouch and Loughran, JJ., concur.

Ordered accordingly.


author: O’Brien, J.

text:
    Henry Oeters, Appellant, v. The City of New York, Respondent.

      (Argued March 12, 1936;
    decided April 14, 1936.)

      Joseph S. Byrne for appellant.
    The Bureau of Buildings acted in a proprietary capacity causing damages for which the city of New York is liable. (Metzroth v. City of New York, 241 N. Y. 470; Bieling v. City of Brooklyn, 120 N. Y. 98.)

      Paul Windels, Corporation Counsel (Paxton Blair and Arthur B. Hoff, Jr., of counsel), for respondent.
    To the mere ultra vires act of a municipal employee cannot be attributed the effect of violating the plaintiff’s rights under the due process clause of the Constitution. (Owensboro Water Works Co. v. Owensboro, 200 U. S. 38; New Orleans Water Works Co. v. Louisiana Sugar Refining Co., 125 U. S. 18; Hamilton Gas light & Coke Co. v. Hamilton City, 146 U. S. 258; McGovern v. New York City, 229 U. S. 363; Roberts v. New York City, 295 U. S. 264; Civil Rights Cases, 109 U. S. 3; United States v. Wheeler, 254 U. S. 281.) The city is not liable for the tortious and unauthorized acts of the Superintendent of Buildings or his servants. (Matter of Evans v. Berry, 262 N. Y. 61; Kearney v. London, B. & S. C. Ry. Co., 5 Q. B. Div. 411; Doll & Sons v. Ribetti, 203 Fed. Rep. 593; 229 U. S. 616; Stubley v. Allison Realty Co., 124 App. Div. 162; Connors v. Mayor, 11 Hun, 439; Lawton v. Steele, 152 U. S. 133.)
   O’Brien, J.

Plaintiff owned a building in the borough of Queens which abutted upon a public street. On the theory, as alleged in the answer, that this structure was unsafe and that its removal was necessary to prevent it from falling into the street and thereby endangering the lives of persons using the highway, employees of the Bureau of Buildings of the City of New York caused it to be demolished. This destruction was effected without notice to the owner and was an illegal official act.

The question to be decided is whether the employees of the Bureau of Buildings who participated in this transaction may be deemed agents of defendant, The City of New York. In Connors v. Mayor (11 Hun, 439) the General Term held that employees of that bureau, in failing to take precautions to' prevent the collapse of a building which fell and killed a person on adjoining premises, were not agents of the city. A similar decision is Stubley v. Allison Realty Co. (124 App. Div. 162), where the Appellate Division held that such employees, in approving defective building plans resulting in the injury of a workman engaged on a structure which collapsed, are not such agents as render the municipality liable. In that case the court apparently gave some consideration to the possibility of municipal liability in the event that the building had fallen into the street and had injured one using the highway but prudently refrained from expressing an opinion on assumed facts which were not present. This court has never proceeded to the extent of deciding that the Bureau of Buildings is limited to the performance of an exclusively governmental function when it either participates in the creation of a nuisance on the highway or acts beyond its powers in an attempt to render the highway safe by illegally engaging in the destruction of private property. Indeed, decisions pointing in the opposite direction are found in Parks v. City of New York (111 App. Div. 836; affd., 187 N. Y. 555) and Metzroth v. City of New York (241 N. Y. 470). In the Parks case an employee of the Building Department inspected a temporary bridge over an excavation in the highway and pronounced it safe when in fact it proved to be unsafe. In the Metzroth case the Building Department issued a permit for the construction of a shed over a sidewalk which collapsed and killed a pedestrian. The present chief judge observed (p. 474): Whatever may be the nature of the duties of the building department regarding buildings, in so far as the employees of that department interfere with the streets and highways, they are the servants and agents of the city, by and through whom it may have notice of conditions or be liable for nuisances created.” No decision actually deals with facts such as are presented in the case now before us but strong inferences may be drawn from expressions of judicial opinion in recent years that the doctrine of exemption of municipal liability from acts of employees appointed by municipal authority and paid with municipal funds should not be extended. (Augustine v. Town of Brant, 249 N. Y. 198, 205, 206; Matter of Evans v. Berry, 262 N. Y. 61, 70, 71; Matter of Horn v. Gillespie, 267 N. Y. 333, 338.) Although a municipality in cleaning its streets, acts in the interest of public health, nevertheless it discharges a special power which is regarded as proprietary rather than governmental. (Missano v. Mayor, 160 N. Y. 123.) No less so is the duty to preserve the safety of its streets by whatsoever agency it may employ for that purpose. To hold that the Bureau of Buildings may and does act in a dual capacity does not result in any inconsistency. When it approves or disapproves plans for the construction of buildings it may be held to perform a public or governmental function; when it takes action and expends municipal funds for the purpose of rendering a highway safe, it may be held to be engaged in a corporate function and its officers and employees when acting in that capacity may be deemed agents of the municipality.

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

Crane, Ch. J., Lehman, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Judgments reversed, etc.


author: Per Curiam.

text:
    In the Matter of the Application of The City of New York, Respondent, Relative to Acquiring Title to Real Property Required for Opening and Extending Wooley Avenue in the Borough of Richmond. Loualed Development Company, Inc., Appellant.

      (Argued March 3, 1936;
    decided April 14, 1936.)

      H. Spencer Bregoff for appellant.
    The conveyances made by appellant did not in any respect burden damage parcel No. 2 with easements of any nature express or implied; nor was there any dedication for street purposes by the appellant of the land in the damage parcel. (Matter of City of New York [East 177th St.], 239 N. Y. 119; City of Cohoes v. D. & H. C. Co., 134 N. Y. 397; N. Y. C. & H. R. R. R. Co. v. Village of Ossining, 141 App. Div. 765; 207 N. Y. 648; Lehigh & H. R. R. Co. v. Village of Warwick, 164 App. Div. 55; Lynbrook Homes, Inc., v. Frey, 217 App. Div. 164; Niagara Falls Suspension Bridge Co. v. Bachman, 66 N. Y. 261; Johnson v. City of Niagara Falls, 230 N. Y. 77; Matter of City of New York [Roosevelt Ave.], 186 App. Div. 457; Reis v. City of New York, 188 N. Y. 58; Nichols Copper Co. v. Connolly, 208 App. Div. 667; 240 N. Y. 596; Matter of City of New York [Sedgwick Ave.], 213 N. Y. 438; Lord v. Atkins, 138 N. Y. 184; Matter of Brook Ave., 40 App. Div. 519; 161 N. Y. 622; Matter of Ninety-sixth St., 243 App. Div. 809; Matter of City of New York [Sixty-fourth St.], 183 App. Div. 708; Matter of West 229th St., 135 Misc. Rep. 710; 235 App. Div. 608; Matter of City of New York [Northern Blvd.], 258 N. Y. 136.)

      Paul Windels, Corporation Counsel (Lewis Orgel, Paxton Blair and Reuben Levy of counsel), for respondent.
    Sales by the appellant with reference to the map created easements of access over damage parcel No. 2 to the city system of streets. (Matter of City of New York [Northern Blvd.], 258 N. Y. 136; Reis v. City of New York, 188 N. Y. 58; Matter of City of New York [East 177th St.], 239 N. Y. 119.) The award represented just compensation. (Matter of Adams, 141 N. Y. 297; Matter of City of New York [Decatur St.], 196 N. Y. 286; Matter of City of New York [Johnson Ave.], 135 App. Div. 630; 198 N. Y. 505; Matter of City of New York [Northern Blvd.], 258 N. Y. 136; Matter of City of New York [East 177th St.], 239 N. Y. 119; City of Buffalo v. Pratt, 131 N. Y. 293; Matter of City of New York [Westchester Ave.], 126 App. Div. 839.)
   Per Curiam.

We are not in accord "with the ruling below that private easements were created in damage parcel No. 2 as laid out on the map filed by the appellant’s predecessor m title. The lots conveyed by the appellant with reference to this map front on other streets as shown thereon, do not abut upon damage parcel No. 2, and do not require the use of any part of damage parcel No.- 2 for access to the city system of public streets.

The orders, in so far as they relate to damage parcel No. 2, should be reversed, with costs to the appellant in this court and in the Appellate Division, and the proceeding remitted to the Special Term for further action.

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

Ordered accordingly.


author: Httbbs, J.

text:
    In the Matter of the Claim of Lillian Vleck, Respondent, against Samuel Parry et al., Appellants. State Industrial Board, Respondent.

      (Argued March 4, 1936;
    decided April 14, 1936.)

      F. A. W. Ireland for appellant.
    The direction of payment of compensation by the carrier during pendency of, the appeal is erroneous. (Matter of Ryan v. American Bridge Co., 243 App. Div. 498.)

      John J. Bennett, Jr., Attorney-General (Roy Wiedersum of counsel), for State Industrial Board, respondent.
   Httbbs, J.

The deceased employee sustained a hernia on November 2, 1923. On April 24, 1933, section 25-a of the Workmen’s Compensation Law (Cons. Laws, ch. 67) was enacted, providing for a special fund from which payments are to be made in proceedings involving a claim made over seven years from the date of injury or death where there was no previous award, or seven years from the date of injury or death and also after the lapse of three years from the last payment of compensation, or in case of a lump sum payment, three years from the date to which the payment would extend. It was also provided that where death resulted after such lapse of time, awards therefor should be against the special fund. The section further provided: The provisions of this section shall not apply * * * during the pendency of an appeal * * * provided, however, that such provisions shall be retroactive in effect except as to payments into the special fund.”

Four days after the section went into effect the injured employee died. The Industrial Board made an award to the widow against the employer and carrier. The Appellate Division reversed and directed an award against the special fund and also directed the carrier to pay compensation during the pendency of the appeal.”

From so much of the order as directed the carrier to pay compensation during the pendency of the appeal, one justice dissented, and the employer and carrier appealed. In its opinion the Appellate Division said: “ By its terms the section is retroactive as to all cases * * *. However, payments are not to be made from this fund ‘ during the pendency of an appeal.’ ” (245 App. Div. 418.)

The respondent contends that since the case must be returned to the calendar for the making of an award payable from the special fund,” the order of the Appellate Division is not final and the appeal untimely. It is obvious that no question of fact remains to be determined and no discretion remains to be exercised by the Industrial Board. Its duty under the order of the Appellate Division is purely ministerial. Therefore, the order is final and an appeal lies.

The appellants contend that the direction of payment of compensation by the carrier during pendency of the appeal is erroneous in that the unsuccessful employer or carrier in a proceeding before the Industrial Board is penalized irrespective of the ultimate outcome of an appeal. The purpose of the fund is to relieve in part the burden upon the employer or carrier resulting from stale claims, that is, claims where there has been a recurrence of a malady after a lapse of years. The purpose of" the Legislature in providing that payments are not to be made from the fund during pendency of an appeal was to prevent inroads upon the special fund until final determination of the proceeding. There is no irreconcilable conflict between the provision against payments from the fund during pendency of an appeal and the portion of the section making its provisions retroactive. If it is ultimately determined that an award should be against the special fund, the award should not be different in amount by reason of the appeal. Where, pending an appeal, an employer or carrier has paid, reimbursement may be provided without offending against the provision against payment out of the fund during pendency of an appeal and in so doing the portion of the act making its provisions retroactive is given effect. "While the act is not to apply “ during the pendency of an appeal ” it may become applicable for the period covered by the appeal under the clause making its provisions retroactive. To hold otherwise is to create inequality in liability of carriers and employers, depending not upon the date of injury or death of the injured employee, but upon a variable factor, the time during which an appeal may be before the courts. The only fair interpretation of the legislative intent is to so construe the act as to prevent inroads upon the fund pending final determination of an appeal, but in the event of an award against the fund as the result of an appeal to make the award commence when it would have commenced but for the erroneous award against the employer or carrier. That portion of the fund necessary to reimburse the employer or carrier for payments made during the pendency of the appeal to be so applied, and subsequent payments to be made to the successful claimant.

Since here it does not appear that the carrier or employer has paid, it is sufficient to modify the order of the Appellate Division by striking out the provision directing the carrier to pay compensation during the pendency of the appeal, and as so modified to' affirm.

The order of the Appellate Division should be modified in accordance with this opinion and as so modified affirmed, with one bill of costs to appellants in this court against the State Industrial Board.

Crane, Ch. J., Lehman, O’Brien, Crouch, Loughran and Finch, JJ., concur.

Ordered accordingly.


text:
    Emmerich Kalman, Appellant, v. Jacob J. Shubert, Respondent.
    (Argued March 4, 1936;
    decided April 14, 1936.)

      John J. Sweedler for appellant.
    The complaint states a cause of action for a declaratory judgment. (James v. Alderton Dock Yards, 256 N. Y. 298; Newburger v. Lubell, 257 N. Y. 383; Strobe v. Netherland Co., 283 N. Y. Supp. 246.)

      Milton R. Weinberger, William Klein and Adolph Lund for respondent.
    The complaint does not state a cause of action for a declaratory judgment, and the court rightfully exercised its discretion in dismissing the complaint. (Russian Commercial & Industrial Bank v. British Bank, 90 L. J. [K. B.] 1089; Joannes Bros. Co. v. Lamborn, 237 N. Y. 207; Tilton v. Schwarz, 199 App. Div. 607; James v. Alderton Dock Yards, 256 N. Y. 298; Cohan v. Robbins Music Corp., 244 App. Div. 697; Loesch v. Manhattan Life Ins. Co., 128 Misc. Rep. 232; 220 App. Div. 828; Newburger v. Lubell, 257 N. Y. 383; Post v. Metropolitan Casualty Ins. Co., 227 App. Div. 156.)
   Finch, J.

The question presented for decision is whether the complaint is sufficient to entitle the plaintiff to a declaratory judgment.

The Special Term dismissed the complaint and the Appellate Division has affirmed. Since the complaint has been dismissed these allegations must be deemed to be true and fix bounds beyond which we cannot go. It is alleged that the plaintiff, the author, composer and owner of five operettas, offered to grant to the defendant the right to perform these in the United States and Canada in stock performances upon payment of specified royalties in accordance with a written instrument which is made a part of the complaint. The dispute arose concerning this written instrument. The defendant claims that because the plaintiff signed the instrument a binding agreement has arisen giving the defendant exclusive rights to perform the operettas in the United States and Canada. The plaintiff on the other hand insists that he did no more than make an offer to the defendant which has never been accepted and that, therefore, no binding contract exists between the parties. The plaintiff asks that the court declare that the defendant has no rights in the said operettas by reason of this instrument. He also asks that if the court should find that a binding and enforceable agreement does exist that the court order the defendant to account and pay the plaintiff the royalties provided for in the instrument. He does not allege that there have been any performances by the defendant but alleges that defendant has failed to pay for any performances although the instrument requires payment of $100 a week for each week that an operetta is performed. Plaintiff also alleges that if any agreement was formed that it has been terminated by reason of the failure of defendant to pay a yearly stipend provided for in the instrument even though no performances have been given.

Upon these facts the issue being the existence of a contract, if no existing form of action furnishes adequate relief, a' situation is presented calling for a declaratory judgment. (Borchard on Declaratory Judgments, p. 407; Lovesy v. Palmer, [1916] 2 Ch. 233.)

From the standpoint of the plaintiff the writing in the hands of the defendant creates a cloud on the titles of the operettas of which the plaintiff alleges he is the sole owner. These rights are of substantial value and unless and until there is an adjudication of defendant’s rights and liabilities the defendant by the assertion of a claim based upon the writing in his possession, effectively prevents the plaintiff from selling or negotiating a sale of his rights in the operettas since a prospective vendee does not desire to purchase a law suit. The plaintiff must have affirmative relief before he can remove this cloud from his property created by the claim of the defendant.

The court at Special Term proceeded on the theory that the plaintiff has * * * an adequate remedy * * * by existing forms of actions ” and this has been affirmed by a majority in the Appellate Division. Plaintiff, however, cannot sue at law either for damages for breach of a contract which he claims does not exist nor for damages for failure to accept his offer. For a like reason plaintiff cannot sue in equity for a rescission or for an accounting. A suit in the Federal courts for plagiarism may not be had unless the defendant has performed the operettas and apparently no performances have been had. The plaintiff should not be required to sit idly by and await the pleasure of the defendant in pirating his property. The operettas have a present value which may disappear if public taste changes. Equitable relief by way of injunction is of no avail since the defendant may never attempt to exercise the rights which he now asserts. He may be satisfied to prevent competition from the operettas owned by the plaintiff with others in which he is interested.

This is not a case where adequate relief by means of an existing form of action is available to the plaintiff. (Newburger v. Lubell, 257 N. Y. 383.) Nor is it a case where the plaintiff does not need a declaratory judgment to establish his rights but chose that form of action for the purpose of procuring a lien which is dependent not upon procedure but upon an agreement subjecting the property to a lien. (James v. Alderton Dock Yards, 256 N. Y. 298.) On the contrary, we have here a case where the plaintiff must have affirmative relief to quiet a disputed jurai relation as to both present and prospective obligations, and existing forms of action, aside from that of declaratory judgment, are not reasonably adequate. No contention is here made that this is not a case of actual controversy. (United States v. West Virginia, 295 U. S. 463.)

It follows that the judgment of the Appellate Division and the order of the Special Term dismissing the complaint should be reversed, with costs in all courts.

Crane, Ch. J., Lehman, O’Brien, Hubbs, Crouch and Loughran, JJ., concur.

Judgment accordingly.


text:
    William Lurie, Respondent, v. New Amsterdam Casualty Company et al., Appellants.
    (Argued March 10, 1936;
    decided April 14, 1936.)

      Frederick Mellor for appellants.
    The plaintiff failed to prove a cause of action against the defendants. (Matter of Krooks, 257 N. Y. 329; Matter of Tillman, 259 N. Y. 133; Martin v. Camp, 219 N. Y. 170; Andrewes v. Haas, 214 N. Y. 255; Matter of Snyder, 190 N. Y. 66; Randall v. Van Wagenen, 115 N. Y. 527; Ryther v. Lefferts, 232 App. Div. 552; Beardsley v. Kilmer, 236 N. Y. 80; Ochs v. Woods, 221 N. Y. 335; Reno v. Bull, 226 N. Y. 546.) The case was submitted to the jury on a theory not pleaded or proved. (Matter of Weitling, 266 N. Y. 184; Matter of Krooks, 257 N. Y. 329; Martin v. Camp, 219 N. Y. 170; Walrath v. Hanover Fire Ins. Co., 216 N. Y. 220; Matter of City of New York, 219 N. Y. 192; Matter of Driscoll, 131 Misc. Rep. 613.)

      Paul J. McCauley and David S. Konheim for respondent.
    Plaintiff pleaded and proved a cause of action against the defendants for willfully inducing and coercing the client to repudiate his contract with the plaintiff. (People v. Connolly, 253 N. Y. 330; Powell v. Powell, 71 N. Y. 71; Frankenberger v. Schneller, 258 N. Y. 270; Posner Co. v. Jackson, 223 N. Y. 325; Lamb v. Cheney & Son, 227 N. Y. 418; Campbell v. Gates, 236 N. Y. 457; Hornstein v. Podwitz, 254 N. Y. 443; Gonzales v. Reichenthaler, 197 App. Div. 277; 233 N. Y. 607; Gordon v. Mankoff, 146 Misc. Rep. 258; Hitchman Coal & Coke Co. v. Mitchell, 245 U. S. 229; Warschauser v. Brooklyn Furniture Co., 159 App. Div. 81; Third Ave. R. R. Co. v. Shea, 109 Misc. Rep. 18.) The complaint does not allege any theory of damages. Its legal sufficiency required no such allegations. No request was made upon the trial that plaintiff be required to make an election of any theory of damages. (Winter v. American Aniline Products, 236 N. Y. 199; Weber & Heilbroner v. Holbrook C. & R. Corp., 192 App. Div. 93; Colrick v. Swinburne, 105 N. Y. 503; G. C. P. Fire Relief Assn. v. Sonneborn Sons, 263 N. Y. 463; Randall v. Packard, 142 N. Y. 47; McAvoy v. Schramme, 238 App. Div. 225; 263 N. Y. 548; Lazier Gas Engine Co. v. Du Bois, 130 Fed. Rep. 834.)
   O’Brien, J.

Plaintiff is an attorney at law and was retained by a client, Harry Tryhubets, who had been injured by an automobile owned by one who had been insured by defendant New Amsterdam Casualty Company. The action is based on allegations that the casualty company through its agents, the defendants Skelly and Sergeant, wrongfully induced and procured the client, Tryhubets, to repudiate his retainer with plaintiff and thereby breach the contract. These allegations are fully supported by evidence.

No action was ever instituted by plaintiff in behalf of his client. He and a member of his office staff performed services in interviewing witnesses, causing photographs to be taken and generally investigating the facts in relation to the acts which caused the injury to his client. While this investigation was in progress, the defendants Skelly and Sergeant, so the jury found on competent evidence, threatened Tryhubets that, unless he repudiated his retainer with plaintiff, he would receive no compensation for his injuries and after such repudiation, induced by Skelly and Sergeant, defendant casualty company, without plaintiff’s consent, paid to the client the sum of $25,000 and obtained from him a general release.

Plaintiff concedes, of course, that the cause of action growing out of the automobile accident belonged to his client and not to him nor does he assert any authority to obstruct such a settlement as his client may have elected to make. (Matter of Levy, 249 N. Y. 168, 170.) The rule of law is certain that a contract of retainer may be canceled at any time and in such a case the attorney is entitled only to the reasonable value of his services to the date of cancellation. (Martin v. Camp, 219 N. Y. 170; Matter of Krooks, 257 N. Y. 329; Matter of Tillman, 259 N. Y. 133.) This attorney complains, not because his client canceled his retainer, a right inherent in the contract and not constituting a breach, but because the client, falsely denying the existence of the contract, repudiated it and assumed that position by reason of the wrongful instigation of these defendants. That a cause of action exists against those who unlawfully induced the breach of this contract is settled in this State. (Posner Co. v. Jackson, 223 N. Y. 325; Lamb v. Cheney & Son, 227 N. Y. 418; Hornstein v. Podwitz, 254 N. Y. 443.)

The theory of the measure of damages alleged in the complaint is incorrect and the courts below were right in relegating plaintiff to a recovery on the basis of quantum meruit. The contract between plaintiff and his client provided for payment to the attorney of twenty-five per cent of the amount of a settlement. The client received the sum of $25,000 by way of settlement and the relief demanded in the complaint is $25,000, the damages alleged to have been suffered by plaintiff. On no conceivable theory is he entitled to that sum. The court charged that he is entitled to recover from defendants only such amount as he would be entitled to recover from his client and that is the reasonable value of his services. That is the correct rule. (Matter of Tillman, supra.) The mere fact that the attorney has a cause of action against his client does not exonerate the parties who wrongfully induced the breach of contract. (Hornstein v. Podwitz, supra.) The verdict was for $6,250; which is twenty-five per cent of the amount of the settlement made by the casualty company with Tryhubets and was rendered in disregard of the court’s instructions. By consent of plaintiff the trial justice reduced the verdict to $2,500 as reasonable value of plaintiff’s services and the judgment has been unanimously affirmed. The complaint does not proceed upon a definite, clear and certain theory in respect to damages and plaintiff is not restricted to proof on a theory which cannot be sustained. He alleged and proved damages. That plaintiff mistook the true rule of damages is not material. There is no requirement that the measure of damages shall be stated in the complaint when facts are alleged from which damages can properly be inferred. (Colrick v. Swinburne, 105 N. Y. 503; Winter v. American Aniline Products, Inc., 236 N. Y. 199, 204.)

The judgment should be affirmed, with costs.

Crane, Ch. J., Lehman, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Judgment affirmed. •


text:
    In the Matter of the Estate of Leon Cohen, Deceased. State Tax Commission, Appellant. Lewis T. Cohen et al., as Executors of Leon Cohen, Deceased, Respondents.
    (Argued March 4, 1936;
    decided April 14, 1936.)

      Seth T. Cole, Mortimer M. Kassell and Harry M. Peyser for appellant.
    The bequest to the cemetery association is not exempt from the transfer tax by virtue of anything contained in section 221 of the Tax Law (Cons. Laws, ch. 60). (Matter of Beekman, 232 N. Y. 365; Matter of Francis, 121 App. Div. 129; 189 N. Y. 554; Matter of Saunders, 77 Misc. Rep. 54; Matter of Davis,
      149 N. Y. 539; Matter of Kane, 246 N. Y. 498; Matter of Manning, 169 N. Y. 449; Matter of Fletcher, 219 App. Div. 5; Matter of Weil, 228 App. Div. 522; Matter of Fancher, 139 Misc. Rep. 239; Matter of Stone, 56 Misc. Rep. 247; Matter of Harkness, 134 Misc. Rep. 203.) The transfer to the cemetery association was by will, and, for that reason, is subject to the transfer tax. (Cons. Laws, ch. 60, § 220; Matter of Enston, 113 N. Y. 174; Matter of Fayerweather, 143 N. Y. 114; Matter of Harbeck, 161 N. Y. 211; Matter of Mergentime, 129 App. Div. 367; 195 N. Y. 572; Matter of Gould, 156 N. Y. 423; Matter of Howell, 255 N. Y. 211; Matter of Kidd, 188 N. Y. 274.)

      Edward S. Frith for respondents:
    Bequests of personal property in trust for the purpose of perpetual care, maintenance, improvement or embellishment of private burial plots in or outside of cemeteries are for charitable and benevolent uses. (Matter of Meek, 113 Misc. Rep. 301; Matter of Beck, 130 Misc. Rep. 765; Matter of Delafield, 142 Misc. Rep. 536; Matter of Burnham, 112 Misc. Rep. 560; 196 App. Div. 948; 232 N. Y. 506; Matter of Guiteras, 113 Misc. Rep. 196; 205 App. Div. 886; Matter of Braasch, 206 App. Div. 96; Matter of Kiernan, 134 Misc. Rep. 868; 227 App. Div. 782; Matter of Thompson, 57 App. Div. 317.) The payments directed to be made to the cemetery association are exempt as a part of the decedent’s funeral expenses. (Matter of Brundage, 101 Misc. Rep. 528; Matter of Farmers Loan & Trust Co., 186 App. Div. 722; 226 N. Y. 691; Matter of Maverick, 135 App. Div. 44; 198 N. Y. 618; Matter of Vinot, 7 N. Y. Supp. 517; Matter of Edgerton, 35 App. Div. 125; 158 N. Y. 671.)
   Finch, J.

The decedent left a will disposing of an estate of approximately $30,000. One clause of the will directs the payment of all just debts and funeral expenses and the erection of a gravestone or marker at an expense not to exceed $250. Several other bequests were made and the residuary estate was placed in trust for the lives of the wife and son of the decedent. The will provides that if the wife predeceases the son, the trustees are to pay $1,000 out of the principal of the trust to the Macphaela Cemetery Association and at the time of the son’s death an additional $3,000 is to be paid to said cemetery association. If the son predeceases the wife of the decedent, the trustees are to pay $4,000 to the cemetery association at the time of her death. The cemetery association is to hold this money in trust and apply the net income thereof to the perpetual care and embellishment of the decedent’s burial plot and the graves and monuments therein. The tax appraisers, in fixing the transfer tax, included as taxable the $4,000 which is to go to the cemetery association.

Upon appeal to the Surrogate the $4,000 was held not taxable on the ground that it constituted a gift to a corporation not operating for profit and organized solely for benevolent and charitable purposes. Upon reargument the Surrogate, while conceding that cemetery corporations were not included as charitable corporations as that term is used in the Tax Law (Cons. Laws, ch. 60, § 221), affirmed upon the ground that the bequest constituted a reasonable funeral expense. The Appellate Division affirmed and granted permission to appeal to this court.

The transfer of the $4,000 bequest to the Macphaela Cemetery Association was by will. Section 220 of the Tax Law, which had not then been superseded by article 10-C, applies. Subject to certain exemptions and limitations not here applicable, as later we shall point out, this section (220) makes taxable every transfer by will of “ * * * any property real or personal, or of any interest therein or income therefrom in trust or otherwise, * * When there is no bequest by will the transfer tax law is silent with respect to the property of a decedent which is applied to the payment of his debts and funeral expenses. In this connection the courts have established the principle that only transfers which come within the express provisions of the statute are subject to the tax. Hence if a tax is to be imposed there must appear a clear expression of legislative intention. (Matter of Enston, 113 N. Y. 174; Matter of Harbeck, 161 N. Y. 211.) In consequence debts and funeral expenses not bequeathed but paid by an executor or administrator are not taxable since there is no transfer by will or intestacy but only the payment of obligations. Bequests by will, however, even in payment of debts, have been held to be subject to tax. (Matter of Gould, 156 N. Y. 423; Matter of Howell, 255 N. Y. 211.) The principle is equally applicable to reasonable funeral expenses. Even though we assume that the $4,000 bequest to the cemetery association herein is a reasonable funeral expense, still the transfer being by will must be held taxable. (See Matter of Howell, supra.) We may assume that if there had been a renunciation of the bequest and immediate reasonable expenditures for the care and upkeep of the cemetery plot they would not be taxable but treated as funeral expenses. The executors, however, did not so proceed. Like the son in Matter of Gould (supra), they relied on the bequest as such and hence must pay the tax. Presumably what they desired was the trust feature of the bequest which could only be retained by acting pursuant to the will.

The case of Matter of Maverick (135 App. Div. 44; affd., 198 N. Y. 618) has not been overlooked. Since that case was decided, the principle has been clarified and firmly established that where a transfer is by will it is subject to tax.

Turning now to the broad exemptions for charitable corporations provided in the Tax Law (§ 221), we find that they do not apply to cemetery corporations or associations. The second sentence of that section of the Tax Law specifically lists cemetery corporations or associations including them with other corporations which are only entitled to exemptions for bequests of personal property other than money or securities. This specific reference to cemetery corporations precludes any interpretation which might bring them within the general exemption provision. (Matter of Francis, 121 App. Div. 129; affd. on opinion below, 189 N. Y. 554; Matter of Beekman, 232 N. Y. 365.)

The orders should be reversed and the tax reinstated, without costs.

Crane, Ch. J., Lehman, O’Brien, Hubbs, Crouch and Loughran, JJ., concur.

Orders reversed, etc.