author: Conway, J.

text:
    Harry Germanow et al., Copartners under the Name of Germanow-Simon Machine Company, Appellants and Respondents, v. Standard Unbreakable Watch Crystals, Inc., Respondent and Appellant.

      Argued March 8, 1940;
    decided April 23, 1940.

      Byron A. Johnson for plaintiffs,
    appellants and respondents. The judgment properly restrained defendant’s simulation and use of plaintiffs’ number system. (Dennison Mfg. Co. v. Thomas Mfg. Co., 94 Fed. Rep. 651; Shaver v. Heller & Merz Co., 108 Fed. Rep. 821; Sarter v. Schaden, 125 Iowa, 696; Hanover Star Milling Co. v. Metcalf, 240 U. S. 403; Coleman v. Crump, 70 N. Y. 573; Fuller v. Huff, 104 Fed. Rep. 141; Gillott v. Esterbrook, 48 N. Y. 374; Collins v. Reynolds Card Co., 7 Abb. N. C. 17; India Rubber Co. v. Rubber Comb Jewelry Co., 13 J. & S. 258; Humphreys’ Specific Homeopathic Medicine Co. v. Wenz, 14 Fed. Rep. 250; Shaw Stocking Co. v. Mack, 12 Fed. Rep. 707.) The defendant’s use of plaintiffs’ number system is designed to facilitate the passing off of defendant’s crystals as those of the plaintiffs. (Vulcan v. Myers, 139 N. Y. 364; Warner & Co. v. Lilly & Co., 265 U. S. 526; Fairbank Co. v. Bell Mfg. Co., 77 Fed. Rep. 869.) The defendant has employed to dispose of its competing merchandise a system of service created and used by the plaintiffs to sell their own goods. (Searchlight Gas Co. v. Prest-O-Lite Co., 215 Fed. Rep. 692; Prest-O-Lite Co. v. Davis, 209 Fed. Rep. 917; Meccano v. Wagner, 234 Fed. Rep. 912; Meyer v. Hurwitz, 5 Fed. Rep. [2d] 370; Neva-Wet Corp. v. Never Wet Processing Corp., 277 N. Y. 163; Tiffany & Co. v. Tiffany Productions, 262 N. Y. 482; Wolfe v. Burke, 56 N. Y. 115; Prunier v. Prunier’s Restaurant & Cafe, 159 Misc. Rep. 551; International News

      Services. Associated Press, 248 U. S. 215; Schechter Corp. v. United States, 295 U. S. 495.) Defendant, by its use of plaintiffs’ unique gouge, is enabled to duplicate plaintiffs’ numbers for round crystals. (Menendez v. Holt, 128 U. S. 514; American Chain Co. v. Carr Chain Works, 141 Misc. Rep. 303; Fisher v. Star Co., 231 N. Y. 414; Gillott v. Esterbrook, 47 Barb. 465; Coats v. Merrick Thread Co., 149 U. S. 562.)

      Edward H. Cumpston for defendant,
    respondent and appellant. A series of letters, numbers or other ordinary symbols, installed in use by the dealers or public, solely to describe and distinguish the sizes, styles, grades, qualities or other physical characteristics of a series of articles of commerce, cannot be monopolized as a property right by the manufacturer of the articles. (Bristol v. E. L. A. Society, 132 N. Y. 264; Affiliated Enterprises v. Gruber, 86 Fed. Rep. [2d] 958; International News Service v. Associated Press, 248 U. S. 215; Holmes v. Hurst, 174 U. S. 82; Koehler v. Sanders, 122 N. Y. 65; Conover v. Coe, 99 Fed. Rep. [2d] 377; Singer Mfg. Co. v. June Mfg. Co., 163 U. S. 169; Kellogg Co. v. National Biscuit Co., 302 U. S. 654; Amoskeag Mfg. Co. v. Spear, 2 Sand. 599; Manufacturing Co. v. Trainer, 101 U. S. 51; Neva-Wet Corp. v. Never Wet Processing Corp., 277 N. Y. 163; Lawrence Mfg. Co. v. Tennessee Mfg. Co., 138 U. S. 537; Coats.v. Merrick Thread Co., 149 U. S. 562; Deering Harvester Co. v. Whitman & Barnes Mfg. Co., 91 Fed. Rep. 376; Stevens Linen Works v. Don & Co., 121 Fed. Rep. 171; 127 Fed. Rep. 950; Electric Auto-Lite Co. v. P. & D. Mfg. Co., 78 Fed. Rep. [2d] 700; Stransky Products Corp. v. Tate Co., 22 Fed. Rep. 759; 100 Fed. Rep. [2d] 1021; Dennison Mfg. Co. v. Scharf Tag, Label & Box Co., 135 Fed. Rep. 625; Dixie Vortex Co. v. Lily-Tulip Cup Corp., 19 Fed. Supp. 511; 95 Fed. Rep. [2d] 461; Keller, Inc., v. Chicago Pneumatic Tool Co., 298 Fed. Rep. 52; Autoline Oil Co. v. Indian Refining Co., 3 Fed. Rep. [2d] 457.) The tort of “ passing-off,” as a matter of law, cannot be predicated on defendant’s placing in the hands of its dealers articles bearing size numbers which are not adapted to be, nor actually displayed, nor even known to the public, so as to be capable of constituting a “ means of defrauding the public.” (DuPont Cellophane Co. v. Waxed Products Co., 85 Fed. Rep. [2d] 75; Stevens Linen Works v. Don, 121 Fed. Rep. 171; 127 Fed. Rep. 950; Standard Paint Co. v. Trinidad Asphalt Mfg. Co., 220 U. S. 446; Howe Scale Co. v. Wyckoff, Seamans & Benedict, 198 U. S. 118; Elgin Nat. Watch Co. v. Illinois Watch Case Co., 179 U. S. 665; Warner & Co. v. Lilly & Co., 265 U. S. 526; Charles Broadway Rouss, Inc., v. Winchester Co., 300 Fed. Rep. 706; Munro v. Tousey, 129 N. Y. 38; White Studio v. Dreyfoos, 221 N. Y. 46; Dixie Vortex Co. v. Lily-Tulip Cup Corp., 19 Fed. Supp. 511; 95 Fed. Rep. [2d] 461; Kaeser & Blair v. Merchants’ Assn., 64 Fed. Rep. [2d] 575; Downes v. Culbertson, 275 N. Y. Supp. 233.) Neither the size nor color of the crystal envelopes, nor the scales for measuring the same, are capable of being monopolized as any sort of property right, nor of being used to deceive. (Matter of Waterman, 34 App. D. C. 185; Diamond Match Co. v. Saginaw Match Co., 142 Fed. Rep. 727.)
   Conway, J.

These are cross-appeals in an action commenced in April, 1937, to restrain acts of unfair competition. The plaintiffs, copartners, are the largest manufacturers of their product in the world, employing approximately eighty people, and since 1916 have been engaged in the manufacture of unbreakable watch crystals, known as G-S ” crystals, made of celluloid or similar material. They have also developed and marketed a cabinet containing drawers to store the product. This cabinet is known in the jewelry trade as the G-S ” cabinet, and plaintiffs’ trade-mark “ G-S ” is affixed by label and stamped on the drawer handles. The plaintiffs have likewise perfected a numbering system for fancy crystals to facilitate the selection of the particular crystal sought. Such numbering system is used in connection with plaintiffs’ cabinet.

For an understanding of the issues involved and the facts out of which they arose, it is necessary to set forth an outline of the acts complained of, a description of the product manufactured by the plaintiffs and defendant, an explanation of the numbering system and a description of the cabinets used.

In 1916 plaintiffs designed a special gouge or ruler, made of metal, about four inches long, to measure the diameter of the round (as distinguished from fancy) crystals manufactured by them. This gouge had gradations of fortieths of an inch, beginning one-half inch from its end. The trial court found that the measurements obtained were used by plaintiffs as descriptive or size marks and not to indicate the source of manufacture and also found those measurements to be a “ stock-filling and numbering system,” i. e., the measurements by the gouge became the numbers of the round crystals. It is conceded that those numbers were not part of the “ numbering system ” of the plaintiffs, which applied to fancy crystals only.

The defendant, incorporated in 1927, is a competitor of the plaintiffs. Beginning in 1927, the defendant offered to the trade a gouge or ruler based upon the same arbitrary system of measurement as that developed by the plaintiffs to measure the round crystals manufactured by them. Defendant’s gouge differed in shape from that of plaintiffs and carried defendant’s trade-mark. Since 1927 defendant has advertised and sold round crystals in envelopes marked with numbers obtained by measuring ’ with such round crystals scale and the plaintiffs have known of that fact during that entire period.

In 1927 the plaintiffs began to sell their round crystals in blue envelopes, and, although defendant had previously used a brown envelope for such purposes, it, too, subsequent to 1927 began to use a blue envelope of almost identical size and shade.

The trial court also found that since 1927 at least four specifically named competitors of the plaintiffs and defendant employed small, rectangular, transparent paper envelopes in which round and unbreakable crystals were sold.

Plaintiffs, in 1931, commenced to place their fancy crystals in ribbed glossine envelopes and they were the first to use such envelopes for that purpose. Thereafter defendant made use of a similar glossine envelope.

Likewise, in 1931, plaintiffs were the first to use a blue insert envelope which was enclosed within the ribbed glossine envelope. In 1934 defendant adopted an almost identical insert envelope for the same purpose. In that year plaintiffs complained of defendant’s use of such insert envelope and as soon as its stock was exhausted the defendant changed the color of its inner envelope from blue to green and of its printing ink from blue to black.

In 1931-1932 plaintiffs issued a catalogue containing approximately one thousand illustrations of watch crystals of various sizes and shapes arbitrarily arranged to conform to their new numbering system. The letters preceding the numbers in plaintiffs’ numbering system were the letters previously used by a competitor which manufactured glass crystals. They indicated the shapes of the crystals. Defendant adopted a numbering system as follows: Each fancy crystal manufactured by it received a number exactly 200 lower than that given to a similar crystal manufactured by plaintiffs. The letters which preceded the numbers, with the exception of three, were different.

The defendant also began the practice of using envelopes on the front of which it printed its own number and also the number used by plaintiffs for the same crystal. The notation on defendant’s envelope read same size as G-S-.” After this action was commenced defendant omitted plaintiffs’ trade-mark but continued to print plaintiffs’ number on its envelopes as well as its own number.

The defendant printed its numbering system in its own catalogue and also, in 1934, issued to the jewelry trade a comparative list which contained each crystal number contained in the plaintiffs’ numbering system and opposite each such number the defendant’s own number for the same crystal.

Neither plaintiffs nor defendant sells to the public but only to jewelers or retailers or jobbers. The public sees neither the numbering system nor the envelope containers for the crystals.

The record is barren of any proof of any suggestion by defendant that there be a palming off or passing off of defendant’s goods as those of plaintiffs.

At the trial the plaintiff Germanow testified that the numbers used in the numbering system were arbitrary numbers and had no relation to the size or dimensions of the crystals illustrated in their catalogue or to the dimensions printed on the envelope containers.

To illustrate the envelope containers and the printing on them I shall take plaintiffs’ Exhibit 26, subdivisions 5, 6, 7 and 8. (See footnote.) The defendant’s containers are of light green color and the plaintiffs’ light blue. For the purpose of this illustration the color is of no consequence since the containers could not be mistaken for each other even if identical in color. Defendant has indicated in every possible way by print that the container and the crystal are not plaintiffs’.

What the defendant has done or attempted to do for its own benefit is to put on its envelope a number which will enable the jeweler or retailer to put its envelope containers into the same compartment and drawer of the plaintiffs’ cabinet with similar crystals of the plaintiffs. In fact, the case revolves about the desire of defendant to enable the jeweler or retailer to accomplish that result. We must determine whether that is unfair competitive practice "under the facts of this case, which is unusual in that the consumer purchases neither from plaintiffs nor defendant and does not see the product until it is in his watch. Plaintiffs’ theory is that it is defendant’s intention that a jeweler may palm off defendant’s crystals for plaintiffs’, if he wishes. However, there is no suggestion in the proof that any one ever asked for plaintiffs’ product and failed to receive it. Hence, in the absence of proof of a single instance of such conduct or of a single suggestion by defendant that that be done, we cannot presume dishonest conduct. Rather the facts indicate that it was defendant’s desire to distribute its wares and that necessitated enabling the jeweler to carry those wares. That brings us back to plaintiffs’ cabinet, a description and discussion of which appears infra.

The trial court decided that the development and use by defendant of a numbering system based upon that of the plaintiffs and having a uniform numerical difference for each crystal of exactly two hundred, and the use by defendant of a comparative list setting forth the various numbers contained in the plaintiffs’ numbering system and opposite each such number the defendant’s number for the same sized crystal, constituted unfair competition. The trial court also decided that the practice of defendant in placing upon certain of its envelopes containing watch crystals the plaintiffs’ numbers for the same sized crystals, thus, “ same size as G-S-was unfair competition and that this was so even if the trade-mark G-S ” were omitted therefrom, as it was after the commencement of this action. The trial court further decided that the use of the gouge or ruler, the use of glossine or transparent paper for crystal envelopes and the use of a mere color, as blue,” for the paper of an envelope container were not such as to constitute unfair competition.

Taking the matters so referred to in their inverse order: (1) The use of a mere color is not subject to appropriation as a trade-mark in the absence of a finding that it has acquired by use a secondary meaning. The trial court found that plaintiffs had not used the blue paper for crystal envelopes in such a manner or for such a period of exclusive use as to give it any secondary or trade-mark significance. (2) The use of glossine or transparent paper to display the contents of a package was a functional expedient not adapted to indicate the source of manufacture nor subject to exclusive appropriation as a trade-mark in the absence of a finding that it had acquired a secondary meaning. The trial court found that the glossine or transparent paper had not been used in such a manner nor for such a period of exclusive use as to-give it any secondary or trade-mark significance. (3) The gouge or ruler having gradations of fortieths of an inch was a mathematical scale and available to any one. The trial court found that it had not been used by the plaintiffs as a trade-mark and that the measurements of diameters of round crystals by such gouge or ruler had not been used by plaintiffs as trade-marks. They, therefore, had no exclusive right to its use. (4) The trial court found that plaintiffs, defendant and other competitors had for many years furnished jewelers and retailers with cabinets containing drawers divided into small compartments, each marked with the maker’s size mark for a particular shape and size of crystal. That is correct, but the language necessarily used by way of description makes the cabinets appear more important and substantial than they are. In the drawers of the cabinets of plaintiffs and defendant there are five rows of cards. The cards are such as are used in card index systems; they are 1-7/8 inches wide and 1-7 /8 inches high. The rows are made of pieces of unpainted white wood. The cards are held upright by their insertion in small grooves cut into the wood making the rows. As the cuts in the wood are a little more than one-quarter of an inch apart, that is the width of the compartment as it exists between the two upright cards. It can be made wider by putting the cards into grooves farther apart. The size mark is printed on the card but not on the wood or the drawer. The jeweler makes his own compartment and the card he uses as the rear wall of it has the size mark for that compartment printed on it. If the jeweler took all the cards out of the drawer there would be no compartments and no size marks on the wood making the rows for the cards nor on the drawers.

The trial court also found that plaintiffs had traded-in cabinets and stocks of crystals sold to retailers by the defendant, substituting, among the former customers of the defendant, the plaintiffs’ cabinets and crystals designated by the plaintiffs’ size marks. The following letter is somewhat illuminative of the existing relationship:

“ February 20, 1934.
“ Germanow-Simon Machine Co.,
408 St. Paul St.,
Rochester, N. Y.
Attention Mr. Germanow
“ Gentlemen: We acknowledge receipt of your letter which you wrote upon your arrival in Rochester.
To bring our relations to a satisfactory -understanding, we were ready to give you the privilege of replacing our envelopes with a different color of the same. This offer of changing the color of the envelopes, however, is not to be deemed a concession by us that we use the same color envelope as you do.
However, while you changed your mind about replacing our envelopes, as agreed, after we disclosed the amount of envelopes that we had on hand, we shall be glad to change the color of the ink on the unprinted envelopes as well as the color of the envelope as soon as our supply of them is exhausted.
“ We are living up to our promise as agreed and shall expect you to live up to yours by discontinuing the exchanging of our crystals and cabinets for yours.
Yours very truly,
“ STANDARD UNBREAKABLE WATCH CRYSTALS,
INC.”

We are thus concerned with two competitors in a limited business field. On the one hand are the plaintiffs, the largest manufacturers of unbreakable watch crystals in the world, doing a business of over fifty per cent of the replacement of watch crystals, glass or celluloid, and enjoying such a large proportion of the total volume of business as to tend to have a monopoly of it. Their annual gross sales total about $300,000. On the other hand, we have the defendant as plaintiffs’ largest competitor, although doing only a business which, in sales volume, represents less than one-tenth of that of plaintiffs. The plaintiffs charge an excess of fifty per cent over the prices charged by the defendant for corresponding crystals.

In determining what constitutes unfair competition we must attempt to balance the prevention of monopoly with the necessity of maintaining free competition. As herein-before stated, neither party sells its product to the consumer. All sales are made to the jeweler or retailer or jobber. The plaintiff Germanow testified that there were about 20,000 of the plaintiffs’ cabinets in the possession of jewelers or dealers, of which 10,000 were of the present type cabinet and the others of an older and different or obsolete type. The present type is a twelve-drawer metal cabinet. The older or 1930 type was a small wooden cabinet with two drawers. After the trade-ins of defendant’s cabinets and stocks of crystals and the substitution of plaintiffs’ cabinets and crystals with the designation in the cabinets of plaintiffs’ size marks, the difficulties for defendant in carrying on its business necessarily' increased. It was not found below how many cabinets of defendant were thus traded out, but plaintiff Germanow testified that it was about five hundred, and that, in order to induce s purchase by a jeweler of plaintiffs’ new cabinet of crystals, the jeweler was allowed the amount he had paid for the crystals he had on hand, whether G-S ” crystals or defendant’s. He claimed not to have traded out any but old cabinets and crystals and that he never agreed to discontinue the practice but defendant’s president testified that there were five thousand, constituting eighty per cent, of defendant’s cabinets traded out between 1931 and 1933 and that defendant’s business dropped to practically nothing following such action.

It is urged that defendant, in seeking to enable jewelers to carry in the cabinets of plaintiffs, crystals of defendant, has been unfair in its competition and that its conduct amounts to improper business practice. We must then ask ourselves this question: May plaintiffs, by selling their cabinets, prevent any other manufacturer from indicating on his crystal envelope containers or elsewhere the corresponding numbers used by the plaintiffs, so that the jeweler or retailer may not place both in the compartments, and thus practically exclude defendant and all other manufacturers from selling to jewelers who have purchased plaintiffs’ cabinets? That would be the practical effect of an injunction against defendant, for jewelers are averse to purchasing two cabinets, and if they cannot ascertain readily the compartment in plaintiffs’ cabinet into which a given crystal of a competing manufacturer may be placed so as to be had when needed, defendant and all other manufacturers will be unable to sell to those jewelers.

It is obvious that jewelers or retailers will not purchase two cabinets, a realization of which fact undoubtedly caused plaintiffs to trade out defendant’s cabinets. This thought was also in the mind of the trial court as is indicated in its opinion. Assuming, however, that the jeweler or retailer would purchase two cabinets, one of plaintiffs and one of defendant, would it not be equally indefensible under plaintiffs’ theory, for defendant to adopt a numbering system for its cabinet compartments to enable the purchaser of the cabinets to select either product at will? I shall treat of plaintiffs’ right to preempt a numbering system infra.

Among the exhibits is a catalogue of the Federal Watch Crystal Co., Inc., a glass crystal manufacturer, which contains a Comparative List of Federal with K.K. and B.B. Numbers.” (They were two competitors.) It seems from its length to be a complete comparison. Below the heading is the statement: The purpose of this comparative list, is for your convenience. Our numbers and shapes are the nearest equivalent in size to the other numbers shown and are adaptable for your cabinet.” (Italics added.)

Another exhibit is headed “ Comparative List of K.K. and B.B. Numbers.” Following the heading it reads: The following comparative list made for the convenience of the trade shows the nearest B.B. numbers to correspond with numbers of another brand of crystals.” This comparative list was put out by B.B. Crystal Co., Inc.

A further exhibit is a catalogue of V.T.F., glass crystal manufacturer. It has four comparative lists covering thirteen pages. The lists are headed as follows:

1. “ If your cabinet is arranged by B.B. numbers, the following table will show the nearest equivalent V.T.F. numbers corresponding to the B.B.”

2. This table will be found useful if your cabinet is arranged by B.B. numbers, and you want to know in which compartment the refills ordered by V.T.F. numbers are to be placed.”

3. If your cabinet is arranged by K.K. numbers, the following table will show the nearest equivalent V.T.F. numbers corresponding to the K.K.”

4. “ This table will be found useful if your cabinet is arranged by K.K. numbers, and you want to know in which compartment the refills ordered by V.T.F. numbers are to be placed.”

There are also two exhibits showing similar comparative lists issued by dealers or importers in the watch movement replacement business.

These are mentioned in view of the uncontradicted testimony of defendant’s president that it was the practice in the watch crystal trade for manufacturers and distributors of replacement crystals to supply the jewelers, dealers, jobbers and wholesalers with comparative lists showing the corresponding size numbers of crystals made or sold by other manufacturers or distributors.

Under such circumstances it is clearly apparent that the effect of an injunction here is to create or tend to create a practical monopoly. Consequently, this eventuality, in determining whether to issue an injunction, must be balanced against the right of free competition. Moreover, it must be borne in mind that in the instant case there is no “ passing off ” so far as the jeweler is concerned. He knows what he is purchasing, the consumer sees neither competitive product, and, as stated before, there is no testimony in the record to indicate that the defendant at any time suggested a “ passing off.” On the contrary, the defendant placed upon every envelope container its name and trade-mark and the printing thereon is different from that on plaintiffs’ containers.

When we consider the argument that defendant’s conduct has been competitively unfair and amounts to improper business practice, we must remember that the defendant is to be judged and its conduct examined in the light of the morals of the market place. Plaintiffs and defendant are business competitors in a small field where each is striving for business. The granting of an injunction here would give magic efficacy to the sale of a cabinet. No precedent exists in the recorded decisions on unfair competition where under similar facts an injunction has been granted. Such a step would extend the doctrine of unfair competition much too far.

It is conceded there is no question here involving violation of trade-mark rights. The cabinets are sold without any restriction upon their use. They can be used as the jeweler or retailer wishes. Indeed, it is argued by defendant that their sale otherwise would be violative of section 340 of the General Business Law (Cons. Laws, ch. 20) as being in restraint of competition. In view of the conclusion we have reached, that question need not be passed upon here. Since the jeweler or retailer is free to do as he wills with the cabinet purchased from plaintiffs, it is clear that he could have purchased crystals from plaintiffs’ competitors and renumbered the envelope containers so as to use them in the compartments of plaintiffs’ cabinets or could have put defendant’s numbers upon the cards which form the compartments, and not carried any of plaintiffs’ crystals in the cabinet at all. That being so, must we say that defendant may not put plaintiffs’ numbers as well as its own upon the envelope containers to facilitate the use of its product in the plaintiffs’ cabinet purchased by the jeweler and thus enable the jeweler to sell defendant’s wares if he so desires? I think not.

(5) Finally we come to the development and use by defendant of a numbering system based upon that of plaintiffs and having a uniform numerical difference for each crystal of exactly two hundred.

The plaintiff Germanow testified that the numbering system for fancy crystals was referred to in plaintiffs’ 1933-1934 catalogue as the new simplified stock filling and numbering system ” and that it was so also for the round crystals.

A series of letters or numbers used solely to describe and distinguish the sizes, styles, grades or qualities of articles in commerce, and not source of origin, may not be preempted by the manufacturer under the circumstances disclosed here. They constitute a system of doing business ” and not a property right. (Neva-Wet Corp. v. Never Wet Processing Corp., 277 N. Y. 163, 178; Dixie Vortex Co. v. Lily-Tulip Cup Corp., 19 Fed. Supp. 511; 95 Fed. Rep. [2d] 461; Stransky Products Corp. v. Tate Mop & Cordage Co., 22 Fed. Supp. 759; affd., 100 Fed. Rep. [2d] 1021; Stevens Linen Works v. Don & Co., 121 Fed. Rep. 171; Humphreys Homeopathic Medicine Co. v. Hilton, 60 Fed. Rep. 756; Keller, Inc., v. Chicago Pneumatic Tool Co., 298 Fed. Rep. 52; Dennison Mfg. Co. v. Scharf Tag, Label & Box Co., 135 Fed. Rep. 625; cert. denied, 201 U. S. 648; Dennison Mfg. Co. v. Denney Tag Co., 48 App. D. C. 213; Vacuum Oil Co. v. Climax Refining Co., 120 Fed. Rep. 254; Lawrence Mfg. Co. v. Tennessee Mfg. Co., 138 U. S. 537; Coats v. Merrick Thread Co., 149 U. S. 562; Deering Harvester Co. v. Whitman & Barnes Mfg. Co., 91 Fed. Rep. 376; Autoline Oil Co. v. Indian Refining Co., 3 Fed. Rep. [2d] 457; Electric Auto-Lite Co. v. P. & D. Mfg. Co., 78 Fed. Rep. [2d] 700; Candee, Swan & Co. v. Deere & Co., 54 Ill. 439, 465; Gillott v. Esterbrook, 48 N. Y. 374; Stokes v. Landgraff, 17 Barb. 608; Kellogg Co. v. National Biscuit Co., 305 U. S. 111; Amoskeag Mfg. Co. v. Spear & Ripley, 4 N. Y. Super. Ct. Rep. [2 Sand.] 599; Amoskeag Mfg. Co. v. Trainer, 101 U. S. 51.)

Here, there is no claim of violation of trade-mark as to the numbering system. Nevertheless, plaintiffs are claiming a perpetual right to the use of size numbers, which is far greater than any right obtainable under the laws relating to trade-marks. It is a claim both exclusive and perpetual in an idea or system of doing business. It is entirely at variance with accepted legal principles.

In Dixie Vortex Co. v. Lily-Tulip Cup Corp. (19 Fed. Supp. 511, 523), a case very similar to the instant case, the court said:

Each party sells its own dispensers. Plaintiff has its decoration following the festooned design of its design patent and the defendant’s dispenser has likewise its design. How confusion is likely to be caused in the trade by any such practice I cannot understand, nor is there any evidence of such confusion. That a dealer or customer should use a Gem cup in a Dixie dispenser, or vice versa, is no evidence of confusion, nor is there evidence that the decoration of the glass dome had anything to do with the transaction. It is probably all a matter of convenience. E a dealer has Gem cups on hand and no Gem dispenser available, I see no element of unfair competition in his use of a Dixie dispenser. The user of the cup is not in the slightest degree interested in the dispenser from which the cup is delivered.
That indeed is the plaintiff’s great difficulty in this whole matter of unfair competition. Nobody is deceived. Nobody is confused. There is no evidence that there is a palming off of the goods of one for the goods of the other manufacturer, and no evidence that there is any likelihood of a successful attempt to palm off defendant’s wares as and for the products of the plaintiff. I think the most that the defendant can be accused of is a flattering appreciation of plaintiff’s successful business practice, but, as I have indicated, such appreciation falls short of unfair competition.”

International News Service v. Associated Press (248 U. S. 215) is not determinative here. There both parties were competitors in the gathering and distribution of news and its publication for profit, the value of which depended upon the promptness with which it was transmitted to the public. As soon as the Associated Press gathered news through its extended service, the yearly cost of which approximated $3,500,000, International systematically misappropriated it from bulletin boards and early editions either bodily or in substance, and published and circulated such news to its customers as its own. The court held that while an individual purchaser of a newspaper could spread its contents gratuitously, such news, when acquired by the Associated Press at its own expense for distribution at a profit, became its stock in trade in which it had a property right against a competitor and was entitled to protection against piracy. H that were not so, a material portion of the profit to be made in publishing fresh news would be diverted from the one who earned it to one who had not. The sale of another’s goods as one’s own was considered to be a greater violation of fair competitive practice than a palming off of one’s own goods as those of another. That case is clearly distinguishable from the present one. Here the commodity sold was crystals and not numbers, and in connection with their sale the defendant had merely adopted a numbering system similar but not identical with the plaintiffs’ to facilitate its sales, whereas in International News Service v. Associated Press (supra) it was the product or commodity itself, i. e., news, which was misappropriated and sold by another as its own. In addition the element of fraud and misrepresentation was present.

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

Lehman, Ch. J., Loughran and Finch, JJ., concur; Rippey, J., not voting; Sears and Lewis, JJ., taking no part.

Judgments reversed, etc.

       Exhibit 26.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    Isaac S. Heller, Appellant, v. Louis Yaeger, Respondent.
    Argued March 11, 1940;
    decided April 23, 1940.

      Frederick Evan Crane and Christian S. Lorentzen for appellant.
    The complaint alleged the making and delivery of the note for $5,000 and that it was unpaid and due and owing with six per cent interest. These allegations were not denied by the answer and must be taken as true for the purposes of the action. Even if defendant did prove usury, as charged in the answer, it does not avoid the effect of the admission of the allegations of the complaint. (Civ. Prac. Act, § 243; Fleischmann v. Stern, 90 N. Y. 110; Dunham v. Cudlipp, 94 N. Y. 129; Horan v. Hastorf, 223 N. Y. 490; Thompson v. Postal Life Ins. Co., 226 N. Y. 363; Wood v. Glens Falls Automobile Co., 174 App. Div. 830.) The Appellate Division should not have reversed and made new findings of fact. (Boyd v. Boyd, 252 N. Y. 422; Vatner v. Mackey, 250 App. Div. 383; Peck Distributing Corp. v. Kellogg Sales Co., 250 App. Div. 738.) The transaction involved in giving the release and making the loan was open and above board and bears none of the earmarks of usury. The release was given voluntarily to close up prior transactions, without which the plaintiff refused to consider making the loan. The facts found do not sustain the judgment declaring the loan usurious. (Brooklyn Bank v. Waring, 2 Sand. F. Ch. 1; Thomas v. Murray, 32 N. Y. 605; Valentine v. Connor, 40 N. Y. 248; Clarke v. Sheehan, 47 N. Y. 188; Halsey v. Winant, 258 N. Y. 512; Rodgers v. Rodgers, 235 N. Y. 408; Seymour v. Minturn, 17 Johns. 169; Hartley v. Eagle Ins. Co., 222 N. Y. 178; Brown v. Robinson, 224 N. Y. 301.)

      William H. Yaeger for respondent.
    The judgment of the Appellate Division is amply supported by the evidence. (York Mortgage Corp. v. Clotar Construction Corp., 254 N. Y. 128.) The trial court’s decision resulted in a judgment on the merits. (Civ. Prac. Act, § 305; Berdell v. Berdell, 86 N. Y. 519; Schupp & Sons, Inc., v. Barnett, 210 App. Div. 546; Cudlip v. New York Evening Journal Pub. Co., 180 N. Y. 85; Bliven v. Robinson, 152 N. Y. 333; Oakes Mfg. Co. v. City of New York, 206 N. Y. 221; Deeley v. Heintz, 169 N. Y. 129.)
   Per Curiam.

Plaintiff sued upon a promissory note whose making was admitted by defendant. The latter pleaded usury as a defense and counterclaimed for an affirmative judgment decreeing the return of the collateral held by plaintiff to secure the note.

Plaintiff put the note in evidence and rested. Defendant introduced evidence tending to prove that in addition to the note, which bore six per cent interest, plaintiff insisted that, before making the loan and as part consideration for the loan, defendant execute a general release to cover an agreement between the parties whereby plaintiff was under an obligation to pay to defendant, who acted as an investment counsel, ten per cent of any profits realized under this agreement from the sale of certain stocks and bonds purchased upon the advice of defendant. In this connection the trial court found that the parties had entered into a profit-sharing agreement.

At the end of the defendant’s affirmative case counsel for defendant said: The defendant rests.”

Whereupon counsel for plaintiff said: “ I move to dismiss the counterclaim on the ground the defendant has failed to prove facts sufficient to constitute a counterclaim.”

“ The Court: I don’t see any evidence of any counterclaim.”

Counsel for the defendant then made an extended argument, at the conclusion of which he said: “ That is the basis of mv contention, and if your Honor considers that, I think your Honor will deny the motion at this time.

“ The Court: Motion to dismiss the counterclaim is granted; exception to the defendant.
“ Mr. Raphael [counsel for plaintiff]: I now move for judgment in favor of the plaintiff.
“ The Court: Is there any rebuttal testimony?
“ Mr. Raphael: I thought your Honor granted the motion.
“ The Court: I granted the motion'to dismiss the counterclaim. I am now asking you if there is any rebuttal testimony.
“ Mr. Raphael: No rebuttal testimony.
The Court: Then say so.
“ Mr. Raphael: The plaintiff rests.
The Court: Make your motion.
“ Mr. Raphael: I move for judgment in favor of the plaintiff for the relief demanded in the complaint.
“ The Court: Motion granted with an exception to the defendant. The Court finds that as a matter of law no usury under Section 370 of the General Business Law or as indicated in Section 371 of the same statute, has been established by creditable proof. * * * ”

This record, therefore, shows that the court, having dismissed the counterclaim at the close of the affirmative case, reiterated that dismissal not only by express language, but thereafter limited the plaintiff expressly to rebuttal testimony as distinguished from testimony which plaintiff might have tendered to the affirmative case of defendant upon the counterclaim.

The court thereafter signed findings submitted by plaintiff which permitted him to collect the loan and expressly dismissed the counterclaim on the merits. The Appellate Division reversed the judgment as against the weight of the evidence, reversed the findings of the trial court and, upon new findings, gave judgment to defendant upon his defense and counterclaim.

From the foregoing it is uncertain whether the trial court dismissed the counterclaim and directed judgment for the plaintiff on the complaint as a matter of law and intended his findings as a statement of the undisputed facts, or whether the plaintiff waivedjthe determination in his favor on the law and elected to treat the determination as one in his favor on the facts.

Upon this state of the record the Appellate Division should not have given judgment for the defendant, but should have ordered a new trial.

It follows that the judgments should be reversed and a new trial granted, with costs to the appellant to abide the event.

Finch, Rippey, Sears, Lewis and Conway, JJ., concur; Lehman, Ch. J., and Loughran, J., dissent and vote to reverse the judgment of the Appellate Division and to reinstate the judgment of the Special Term on the ground that as a matter of law there was no usury in this case.

Judgments reversed, etc.


author: Lewis, J.

text:
    In the Matter of New York Water Service Corporation, Respondent, against Water Power and Control Commission of the State of New York, Appellant. (Application No. 1286.)

      Argued March 13, 1940;
    decided April 23, 1940.

      John J. Bennett, Jr., Attorney-General (Timothy F. Cohan, Henry Epstein and Jack Goodman of counsel), for appellant.
    There are sufficient findings of fact in the record to sustain the determination of the Commission. (Matter of Elite Dairy Products, Inc., v. Ten Eyck, 271 N. Y. 488.) The determination of the Commission is supported by sufficient competent proof. (Niagara Falls Power Co. v. Water Power & Control Comm., 267 N. Y. 265;. People ex rel. N. Y. & Queens Gas Co. v. McCall, 219 N. Y. 84.)

      George R. Fearon and M. Harold Dwyer for respondent.
    The first question certified, viz., “ Are there sufficient findings of fact to sustain the determination?” should be answered in the negative. (People ex rel. Long v. Whitney, 143 App. Div. 17; Interstate Circuit v. United States, 304 U. S. 55; United States v. B. & O. R. R. Co., 293 U. S. 454; Florida v. United States, 282 U. S. 194; Sanders Bros. Radio Station v. Fed. Communications Comm., 106 Fed. Rep. [2d] 321; Saginaw Broadcasting Co. v. Grass, 96 Fed. Rep. [2d] 748; 305 U. S. 613; Atchison, T. & S. F. Ry. Co. v. United States, 295 U. S. 193; Ostrander v. State, 192 N. Y. 415; Matter of Elite Dairy Products, Inc., v. Ten Eyck, 271 N. Y. 488; Matter of Beyerdale Dairy, Inc., v. Ten Eyck, 249 App. Div. 904; Matter of Daley v. Byrne, 250 App. Div. 666; Matter of Highland Farms v. Ten Eyck, 250 App. Div. 793; Matter of Goldman v. Pink, 253 App. Div. 862; Matter of Gazdun v. Bruckman, 256 App. Div. 882.)

      James L. Dowsey, County Attorney (Marcus G. Christ of counsel), for County of Nassau, amicus curise.

    The findings are sufficient. (Matter of Elite Dairy Products, Inc., v. Ten Eyck, 271 N. Y. 488.)

      Edgar F. Hazleton, County Attorney (Guy O. Walser of counsel), for County of Suffolk, amicus curiæ.

    The application was properly denied by the Commission as a matter of fact, and such denial was improperly reversed by the Appellate Division as a matter of law. (People ex rel. New York & Queens Counties Ry. Co. v. Public Service Comm., 173 App. Div. 826; People ex rel. New York Central R. R. Co. v. Public Service Comm., 193 App. Div. 322; Board of Supervisors v. Water Power & Control Comm., 227 App. Div. 345; N. L. R. B. v. Thompson Products, Inc., 97 Fed. Rep. [2d] 13; Matter of Elite Dairy Products, Inc., v. Ten Eyck, 271 N. Y. 488; United States v. Baltimore & Ohio R. R. Co., 293 U. S. 454; United States v. Louisana, 290 U. S. 70; Illinois Commerce Comm. v. United States, 292 U. S. 474; State of Montana v. United States, 2 Fed. Supp. 448; 290 U. S. 593; Panama Refining Co. v. Ryan, 293 U. S. 388; Dougherty v. Lion Fire Ins. Co., 183 N. Y. 302; Matter of Carroll v. Knickerbocker Ice Co., 218 N. Y. 435; Interstate Commerce Comm. v. Louisville & Nashville R. R. Co., 227 U. S. 88; Consolidated Edison Co. v. National Labor Relations Board, 305 U. S. 197; Matter of New Rochelle Water Co. v. Maltbie, 248 App. Div. 66; United States v. Morgan, 307 U. S. 183.)
   Lewis, J.

This is a proceeding under article 78 of the Civil Practice Act to review a determination by the Water Power and Control Commission of the Department of Conservation which denied the respondent’s application for authorization temporarily to use underground water in the Flatbush area of the borough of Brooklyn for domestic, industrial and fire hydrant purposes.

Upon the petition filed by the respondent for an order to review such determination answers were interposed by the county of Nassau and by the Water Power and Control Commission. Thereupon Special Term by order transferred the proceeding to the Appellate Division, third department, which annulled the determination and remitted the proceeding to the Commission with directions to prepare findings of fact and proceed in accordance with the decision. Leave to appeal to this court was granted by the Appellate Division upon certified questions.

The record before us discloses that the respondent is a private water company which operates a number of water supply plants in the State, one of which is in the area in Kings county which was formerly the town of Flatbush and now constitutes the twenty-ninth ward of the borough of Brooklyn. Within the Flatbush area — extending three miles from east to west and two miles from north to south — the respondent supplies water service to a population of 350,000. In addition its service supplies water for twenty-one hundred fire hydrants and numerous industrial plants. None of the respondent’s customers has an available source of water supply other than the respondent’s wells, located in the Flatbush area. It also appears that, under conditions presently existing, the city of New York is unable to supply water needed by this aiea.

The daily safe yield of potable water from the respondent’s wells is about twenty-nine million gallons of which the average daily consumption is slightly more than twenty-seven million gallons. Since 1932 there has been a loss of nearly fourteen million gallons in the available daily supply, due to the intrusion of chlorine in the wells, the abandonment of one well because of screen stoppage and a reduction in pumpage to prevent excess sands from passing through the screens. Meantime the respondent has made every reasonable effort to keep its wells in repair and, in an endeavor to maintain its supply, it has employed inspectors to trace down leaks. These efforts, however, have been offset to an extent by a gradual increase in population within the area served.

Since 1932 the peak of daily consumption has gone as high as thirty-three million gallons — five million gallons above the daily average — and on such occasions has necessitated the use of a reserve supply. It thus appears that the supply of water in the respondent’s wells presently available for the Flatbush area has an insufficient factor of safety and affords no margin to meet the demands of those occasions when existing wells may be shut down for repairs.

It was in such circumstances that the respondent in 1937 applied to the Water Power and Control Commission, pursuant to applicable provisions of the Conservation Law (Cons. Laws, ch. 65), for the approval of its proposed construction and the temporary operation of four graveled wells of shallow depth, each of which is designed to have a capacity for the daily production of two million gallons. The proposed location of the new wells is in the northerly part of the Flatbush area, removed from locations where existing wells have shown a tendency to salinity.

It should be said at this point that prior to the present application (known as No. 1286) the respondent had made a prior application in 1935 (known as No. 1009). By the 1935 application the respondent, as in the present proceeding, proposed to sink four new graveled wells each of which was to have a daily capacity of two million gallons. Such new construction was not to increase the authorized capacity of respondent’s Flatbush plant but was to replace well capacity which had been lost through the encroachment of salt in existing wells and the diminution of capacity of its plant through long use. The 1935 application (No. 1009) was denied by the Commission, which denial was confirmed by the Appellate Division (256 App. Div. 883). The only difference between the present application (No. 1286) and the 1935 application (No. 1009) is that the former sought the Commission’s approval for the perpetual operation of four replacement wells whereas the present application (No. 1286) seeks permission to operate temporarily four new replacement wells under conditions to be prescribed by the Commission and only until some new source of municipal water supply is made available to the Flatbush area from the New York City-Delaware River project or elsewhere. It is estimated that such new municipal supply will be available in 1947. In the course of the trial of the present proceeding it was agreed that the record on appeal in the former application No. 1009 should be a part of the record in application No. 1286 and should be considered as before the court on any appeal.

From this statement of facts, as to which the parties are in practical accord, and the procedural steps which have led up to this appeal, we pass to a consideration of the questions certified by the Appellate Division:

“ (1) Are there sufficient findings of fact to sustain the determination?
(2) Was there competent proof of all the facts necessary to be proved in order to authorize the Water Power and Control Commission to deny the application of the New York Water Service Corporation?
“ (3) If there was such competent proof, was there, upon all the evidence, such a preponderance of proof against the existence of any of those facts that the verdict of a jury affirming the existence thereof, rendered in an action in the Supreme Court triable by a jury, would be set aside by the court as against the weight of evidence?”

The decisions by the appellant Commission, both upon the respondent’s present application (No. 1286) and upon its prior application (No. 1009), are in similar language, as follows:

The Water Power and Control Commission, having given due consideration to the said petition and its exhibits, the proofs and arguments submitted at the hearing and the reports of its engineers thereon, determines and decides as follows:
First. That the plans proposed are not justified by public necessity.
Second. That said plans are neither just nor equitable to the other municipalities or civil divisions of the State affected thereby and to the inhabitants thereof, particular consideration being given to their present and future necessities for sources of water supply.
“ Third. That further determination hereon is unnecessary.
Wherefore, the Water Power and Control Commission does hereby reject the said application, maps and plans of New York Water Service Corporation.”

In the absence of separate findings of fact, the conclusions last above quoted, although cast in language suggested by the statute (Conservation Law, § 523), cannot be regarded as sufficient to support the Commission's determination. We have seen that the respondent's application (No. 1286) is prompted by a lack of water available from its present facilities to supply the Flatbush area and to give assurance of a margin of safety adequate for emergencies until a ^municipal source of supply shall furnish the service. The respondent is entitled to challenge the determination by which its application is denied. A failure on its part in times of normal demand or in emergencies to furnish an adequate supply of potable water within its franchise area may involve serious consequences to its own rights and property and to the customers which it serves. It is entitled to findings by which it may know upon what factual basis rests the Commission's determination. (Matter of Elite Dairy Products, Inc., v. Ten Eyck, 271 N. Y. 488, 498.)

Findings of fact in support of decisions by courts and administrative boards alike serve to give assurance to parties concerned that the decisions are based upon evidence of record and were not reached arbitrarily or influenced by extra-legal considerations. Where, as in this instance, a statutory review of the decision may be had (Conservation Law, § 523) findings of fact in some form are essential to enable the parties and any appellate court intelligently to determine whether the decision follows as a matter of law from the facts stated as its basis and whether the findings of fact have any substantial support in the evidence.

But we are told that findings of fact sufficient to support the Commission's determination upon respondent’s application (No. 1286) are to be found in a memorandum which was filed by the Commission and is of record before us. We have examined the memorandum in which appears the following statement which is the only one bearing the semblance of a finding of fact and which, standing alone or in its context, we regard as inadequate: “ * * * that increasing knowledge of ground water conditions on Long Island has shown those conditions to be worse than was known at the time of the earlier application and to be moving rapidly towards the destruction of the usefulness of the water-bearing beds under western Long Island by reason of increasing salinity of the water.”

In connection with the statement last quoted above the record before us shows that it was taken verbatim from the report made to the Commission by its executive engineer who conducted the hearing in this proceeding on behalf of the Commission. The statement, instead of being one strictly of fact, embodies the conclusion of an engineer upon ground water conditions over a large area of Long Island, which area, it is said, would be adversely affected in the event the present application by the respondent is approved. The Commission may with entire propriety give heed to the views which its executive engineer may express as to the merits of the respondent’s present application. In this instance, however, without supporting findings of fact, the Commission has adopted, as decisive of respondent’s application (No. 1286), the views of its executive engineer without affording the respondent an opportunity either to test by cross-examination the basis of the executive engineer’s conclusions or to offer evidence material to those conclusions. In justice to the rights of the respondent upon its present application we believe it should be accorded such an opportunity. In Matter of New York Title and Mortgage Co. (277 N. Y. 66), which was a liquidation proceeding conducted by the Superintendent of Insurance, this court had occasion to consider the Superintendent’s practice in arriving at the appraised valuation of mortgages and other types of property as bearing upon the allowance of certain claims. It was there said (p. 81): “ * * * we think it appropriate to suggest not only that the Superintendent should disclose in the first instance the fundamentals of the theory of his future action in fixing the losses of claimants, but that fair play requires also that an opportunity should be afforded to test by cross-examination the validity of any appraisal entering into the allowance of a claim.” (Cf. United States v. Baltimore & Ohio Southwestern R. R. Co., 226 U. S. 14, 20; Morgan v. United States, 304 U. S. 1, 16-22.)

In our further search for findings of fact to support the determination in the respondent’s application (No. 1286) and upon the suggestion of the Commission, we have examined the memorandum filed with the decision upon the respondent’s former application (No. 1009). Most of the statements of fact to be found therein are based upon historical data and information gathered from sources outside the record. Of the remaining statements of fact the few which are material are general in character and do not give adequate support to the determination of the precise issues involved in the respondent’s application (No. 1286) with which this proceeding is concerned. We may not, with proper regard for the rights of the respondent, give to such general statements of fact a meaning sufficiently definite and certain to constitute them findings of fact and thus to afford a valid factual basis for the determination involved herein. (Cf. Atchison, Topeka & Santa Fe Ry. Co. v. United States, 295 U. S. 193, 201.)

The order of the Appellate Division should be modified by remitting the proceeding to the Water Power and Control Commission with instructions to.make findings of fact in support of whatever determination it may reach upon the evidence received in connection with the respondent’s application (No. 1286), with leave to any party appearing upon said application to introduce further evidence in connection therewith, if so advised, and, as so modified, the order should be affirmed, with costs to the respondent. Certified question No. 1 is answered in the negative. Certified questions Nos. 2 and 3 are not answered.

Lehman, Ch. J., Lotjghran, Finch, Bippey, Sears and Conway, JJ., concur.

Ordered accordingly.


text:
    Metropolitan Life Insurance Company, Appellant, v. Union Trust Company of Rochester, Defendant, and Abstract Title and Mortgage Corporation, Respondent.
    Argued February 27, 1940;
    decided April 23, 1940.

      Eugene Van Voorhis, Frank Ewing, Francis J. Wier and Robert F. MacCameron for appellant.
    The delivery of the assessment roll to the town clerk after the cost of the particular improvement had been apportioned against the properties within the assessed area, and after notice to property owners and hearing of objections to the assessment, and the assessment finally apportioned and confirmed, estabhshed a lien upon each of the properties assessed for the amount of the assessment apportioned against each of them, which the property owners then had the option of paying in full within a period of fifteen days or paying in annual installments if they so preferred, the debt meanwhile being carried by bond issue of the town. There was no power in the town board or board of supervisors to alter the assessment after it was finally confirmed. It thereupon became a lien against the real estate. (Rundell v. Lakey, 40 N. Y. 513; Matter of Detmold, 115 N. Y. 450; Lewis v. Petersen, 241 N. Y. 268; People ex rel. Luther v. McDermott, 265 N. Y. 47; Getman v. Niferopulos, 276 N. Y. 161; Burr v. Palmer, 53 App. Div. 358; People ex rel. Griffin v. Mayor, 4 N. Y. 419.) The word “ charges ” is a very broad term. It includes the liability to pay for the unpaid street improvements the amount of which had been determined and the assessments finally confirmed and the payments postponed for the convenience of the property owners. (Darling v. Rogers, 23 Wend. 490; Bleecker v. Ballou, 3 Wend. 263; Merchants Exchange Nat. Bank v. Commercial Warehouse Co., 49 N. Y. 635; New York v. Cushman, 10 Johns. 97; Griggs v. Banks, 59 Ala. 311; Holden v. Risom, 77 Ala. 515; DePeyster v. Murphy, 66 N. Y. 622; Lathers v. Keogh, 109 N. Y. 583; McLaughlin v. Miller, 124 N. Y. 510; Lewis v. Petersen, 241 N. Y. 268; Getman v. Niferopulos, 276 N. Y. 161; Eiseman v. Josephthal, 71 Misc. Rep. 288; Perkins v.
      Smith, 116 N. Y. 441.) The word “ incumbrances ” used in both forms of policy includes the assessments for street improvements in these properties. (Huyck v. Andrews, 113 N. Y. 81; Kleinberg v. Ratett, 225 App. Div. 208; Cream City Mirror Plate Co. v. Swedish Bldg. & Loan Assn., 74 Ill. App. 362; Fuller v. Wright, 35 Mass. 403; Mitchell v. Warner, 5 Conn. 497; Gilham v. Real Estate Title Ins. & Trust Co., 203 Penn. St. 24; Friendly v. Ruff, 61 Ore. 42; Graybill v. Ruhl, 225 Penn. St. 417; Garber v. Stern, 100 N. J. Eq. 470; Glenmary Land Co. v. Stewart, 217 Ky. 635; Condorodis v. Kling, 33 Ohio App. 452; Coble v. Dick, 1 N. C. 732.)

      Kenneth B. Keating, Howard M. Woods and Keith D. Poland for respondent.
    No lien is created until the annual levy is made as provided in section 11 of chapter 549 of the Laws of 1926 and similar statutes, which in this case was subsequent to the policy date in each instance. (Getman v. Niferopulos, 276 N. Y. 161; People ex rel. Oswego Falls Corp. v. Foster, 251 App. Div. 65; 278 N. Y. 494; Barlow v. St. Nicholas Nat. Bank, 63 N. Y. 399; United States v. City of Buffalo, 54 Fed. Rep. [2d] 471; Mayers v. Van Schaick, 268 N. Y. 320; Trenton Potteries Co. v. Title Guarantee & Trust Co., 176 N. Y. 65; Doonan v. Killilea, 222 N. Y. 399; Empire Dev. Co. v. Title Guarantee & Trust Co., 225 N. Y. 53.) The word “ charge,” as used in certain policies, is synonymous with “ lien ” and “ incumbrance,” and a local assessment does not become an “ incumbrance ” before it becomes a “ lien.” (Moller v. Peoples Nat. Bank, 258 N. Y. 373; Getman v. Niferopulos, 276 N. Y. 161; Empire Dev. Co. v. Title Guarantee & Trust Co., 225 N. Y. 53; Trenton Potteries Co. v. Title Guarantee & Trust Co., 176 N. Y. 65; Doonan v. Killilea, 222 N. Y. 399; Harper v. Dowdney, 113 N. Y. 644; McLaughlin v. Miller, 124 N. Y. 510; Real Estate Corp. v. Harper, 174 N. Y. 123; Lewis v. Petersen, 241 N. Y. 268.) Title insurance is prospective in its operation and is intended to protect the insured against liens or incumbrances which became such prior to the date of the policy. (Mayers v. Van Schaick, 268 N. Y. 320.)
   Conway, J.

Plaintiff sues for a breach of provision in each of a number of pohcies of title insurance issued in September, 1929. After service of answer, defendant title company had summary judgment dismissing the complaint under rule 113 of the Rules of Civil Practice.

Taking the text of the pohcies in provision most favorable to plaintiff, they insured against “ defects in, incumbrances upon or hens or charges against the title of the mortgagors or grantors to premises described in the mortgage or trust deed ” existing at or prior to the date of the pohcy “ and not excepted under Schedule ‘ B.’ ” This form of pohcy was suggested by plaintiff and the assessments hereafter referred to were not excepted. It is not claimed that these assessments were statutory hens at the time of the issuance of the pohcies but it is contended that they were charges and incumbrances within the meaning of those terms as used in the pohcies. The typical complaint alleges in paragraph Twelfth that the certificate and pohcy of insurance of defendant title company “ did not state or mention that future assessments would be made against the said real estate on account of improvements already made which when made would become prior hens ” to the mortgage purchased by plaintiff and that it was defendant’s duty under its contract to do so.

The assessments came into being because of local improvements such as sewers, pavements and sidewalks, which had been constructed, under apphcable statutes, in suburban property in certain towns in Monroe county outside the city of Rochester. The improvements had been completed one or two years prior to the issuance of the pohcies and paid for through bond issues of the several towns. The bonds were to be paid by annual assessments to be levied upon the individual properties benefited. The parties in their briefs have selected chapter 549 of the Laws of 1926 as the statute principally involved. The other statutes are substantially similar.

Taking as an example the town of Brighton, the minutes of the Town Board showed that on June 9, 1928, there was considered the question of the apportionment of the cost of certain street, improvements which had theretofore been made; that a proposed assessment roll, apportioning the expenses of the improvements upon the property benefited, having been prepared and submitted, was approved, and a date for the hearing of objections to the said roll was set and the Town Clerk ordered to give the notices required by law; that on June 25,1928, the Board met for the purpose of hearing objections to said roll, and none having been made the roll and the apportionment therein made on the several lots was finally approved and adopted and the tax therein provided assessed.

Under chapter 549 of the Laws of 1926 the only power to levy assessments is found in section 11. It reads: “ The town board shall thereafter in each year, and before the annual meeting for that year of the board of supervisors of the county in which such town is situated, report to said board of supervisors, the amount of such bonds, which will mature within the ensuing year; and the amount of interest payable within said ensuing year; and a statement of the lots or parcels of land liable to pay the same, and the amount chargeable to each. The board of supervisors shall levy-such amounts against the property liable, and shall state the amount of the assessment in a separate column, in the annual tax roll, under the name street improvement;’ and such assessment when collected shall be paid to the supervisor, and be by him applied in payment of the principal and interest of said bonds. The amount annually apportioned by the town board, as provided in this section, on any lot or parcel, and included in the annual tax roll by said board of supervisors, shall be a lien prior and superior to any lien or claim except the hen of an existing tax or local assessment.”

The power of apportionment and assessment was conferred on the Town Board by section 9 of chapter 549 and permission granted a property owner to pay in full based upon such assessment, but there could be no levy and no lien until there was annual report by the Town Board of the amount of bonds maturing during the ensuing year, with the amount of interest payable for the same period, followed by annual apportionment by the Town Board upon the lots and parcels liable therefor and inclusion in the annual tax roll by the Board of Supervisors of the county.

It is clear that there was no lien at the time of the issuance of the policies. The question remains, was there a charge or incumbrance? If we consider the insurance contract as analogous to a covenant against incumbrances, it is evident that in this State the word charges is used synonymously with liens and incumbrances. It has no larger meaning. In the Real Property Law (Cons. Laws, ch. 50, § 253) it is provided:

3. Freedom from incumbrances. A covenant ‘ that the said premises are free from incumbrances/ must be construed as meaning that such premises are free, clear, discharged and unincumbered of and from all former and other gifts, grants, titles, charges, estates, judgments, taxes, assessments, hens and incumbrances, of what nature or kind soever.”

In Doonan v. Killilea (222 N. Y. 399, 401) it was said that section 253 of the Real Property Law had reference not to inchoate assessments or other charges, but to legal hens fully matured. The covenant against incumbrances operates in prcesenti and is broken the instant it is made if an incumbrance exists, but unless the assessment is then an actual hen, the covenant is not broken.”

The case of Mayers v. Van Schaick (268 N. Y. 320) is controlling here. It is stronger against plaintiff than is the instant case, since the word used there was “ requirements.” There Judge Loughran said: Title insurance operates to protect a purchaser or a mortgagee against defects in or incumbrances on a title existing at the date of such insurance. It is not prospective in its operation and has no relation to hens or requirements arising thereafter. (Trenton Potteries Co. v. Title Guarantee & Trust Co., (176 N. Y. 65, 72.) * * * It follows, we think, that Lawyers Title and Guarantee Company no more agreed with plaintiff to protect him against liability for the unpaid assessment in question than it undertook to indemnify bim for taxes to be levied against the premises after delivery of its certificate of title insurance ” (pp. 323, 324.)

Plaintiff relies in good part in support of its contention on DePeyster v. Murphy (66 N. Y. 622). In view of the decisions in Real Estate Corp. v. Harper (174 N. Y. 123, 130); Doonan v. Killilea (supra), and Mayers v. Van Schaick (supra) it must be considered that DePeyster v. Murphy (supra) has been overruled.

The case of Getman v. Niferopulos (276 N. Y. 161) is not in conflict with the decision here. There the city of Johns-town was granted the power to impose and levy taxes by its charter. Here the power to levy taxes and assessments was not granted to the town but to the board of supervisors of the county. (Laws of 1926, ch. 549, § 11. See, also, generally, Town Law [Cons. Laws, ch. 62], § 116.)

The judgment should be affirmed, with costs.

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

Judgment affirmed.


text:
    Richard A. Clinchy, Respondent, v. Grandview Dairy, Inc., Defendant, and Fidelity and Casualty Company of New York, Appellant.

      Argued March 7, 1940;
    decided April 23, 1940.

      Raymond D. O’Connell for appellant.
    No cause of action was established against the fidelity company. (Morris v. Home Ins. Co., 78 Misc. Rep. 303; Northrup v. Piza, 43 App. Div. 284; 167 N. Y. 578; Marine Nat. Bank v. National City Bank, 59 N. Y. 67; Rosenstein v. McCutcheon, 155 App. Div. 278; Hart v. Cort, 83 Misc. Rep. 44.) The courts below erred in testing plaintiff’s right to recover against the fidelity company by the “ procuring cause ” rule. (Sibbald v. Bethlehem Iron Co., 83 N. Y. 378; Duckworth v. Rogers, 109 App. Div. 168; Crasto v. White, 52 Hun, 473; Eichenbaum v. Taxicab Independent Owners

      Auto Mutual Casualty Co., 136 Misc. Rep. 58; Ashfield v. Case, 93 App. Div. 452.) Plaintiff, as a matter of law, was not the procuring cause of the acceptance of the policies, and the complaint should have been dismissed as against the fidelity company. (Erlen v. National Union Fire Ins. Co., 18 Pac. Rep. [2d] 660; Degnan v. General Accident F. & L. Assur. Corp., 161 App. Div. 439; Sampson v. Ottinger, 93 App. Div. 226; Witherbee v. Walker, 93 Pac. Rep. 1118.)

      Fred Flatow, Henry H. Abramowitz and Hyman I. Kones for respondent.
    Plaintiff established a prima fade case. (Arndt v. Miller, 95 N. Y. Supp. 604; Northrup v. Piza, 43 App. Div. 284; 167 N. Y. 578.) Plaintiff was the procuring cause of the issuance of the policies by the appellant. (Goodman v. Marcol, Inc., 261 N. Y. 188; Iselin & Co. v. Jaretzki, 230 App. Div. 102; Kassiel v. New York Dock Facilities Corp., 246 App. Div. 844; Holmes v. Erickson, 55 App. Div. 623; McLaughlin v. Southern Hotel Co., 188 App. Div. 679; Southwich v. Swavienski, 114 App. Div. 681; Sheldon v. Mitchell, 173 App. Div. 882; Mackay v. Tidewater Oil Co., 186 App. Div. 1; Myers v. Batcheller, 177 App. Div. 47; Dreyer v. Rauch, 42 How. Pr. 22; Bickart v. Hoffman, 19 N. Y. Supp. 472.)
   Conway, J.

The plaintiff is a licensed insurance broker who was engaged by the defendant, Grandview Dairy, Inc., hereinafter referred to as dairy company, to obtain insurance for it. The insurance was to be of two kinds, public liability and property damage insurance and workmen’s compensation insurance. Similar previous insurance in a company other than the defendant Fidelity and Casualty Company of New York, hereinafter referred to as insurance company, had been canceled for non-payment of premiums. 0

Plaintiff brought about a conference at which there were present the plaintiff and representatives of the dairy company and of the insurance company. The meeting occurred on November 19, 1937 and at its conclusion the risks were bound by telephone, the public liability and property damage insurance as of four p. m. on that day and the workmen’s compensation insurance as of November 22, 1937. Later, written binders were prepared by the insurance company and received by plaintiff in the mail on the following morning, November 20th. On that morning the dairy company’s representative telephoned the insurance company. He stated that his company was willing to take the insurance only upon condition that one Herman Ringe was the broker. Plaintiff, having been advised of the conversation by insurance company, visited the dairy company’s representative and was told that Ringe was being substituted in place of plaintiff for political reasons. On the following Tuesday, November 23rd, plaintiff returned to insurance company the two binders without having delivered them to the dairy company. No policies were ever issued in connection with those binders. Each provided that it was subject to the conditions of the Company’s policy of the kind specified ” and such policies, as later issued to dairy company superseding similar binders, provided that insured could cancel them at any time.

On or about November 22, 1937, insurance company issued two new binders upon which the name of Ringe appeared as broker and those binders were superseded by insurance policies, the one for public liability and property damage having an effective date of November 19th and the workmen’s compensation policy an effective date of November 22nd. Premiums were paid on those policies until their later cancellation and the commissions on the premiums so collected were paid to Ringe. Plaintiff sued insurance company for commissions on the theory that the insurance company had agreed to issue, and the dairy company to take, policies of insurance for one year.

There is no question presented on this appeal as to the right of the plaintiff to proceed against the dairy company nor as to the good faith of the insurer in connection with the change of brokers by the dairy company.

Plaintiff was the agent of the dairy company and not of the insurance company although the latter paid his commission. (Northrup v. Piza, 43 App. Div. 284; affd., 167 N. Y. 578.) Plaintiff realized that, as he pleaded that he was employed by dairy company and admitted that it was not important to him which company wrote the insurance, so long as it was a sound one.

An insurance company must deal with the broker selected by the insured, if it wish to write the insurance. The insured may change his broker whenever he wishes and for such reasons as appear sufficient to him, or for no reason at all, as far as the insurance company is concerned. Dairy company discharged plaintiff as broker and so advised insurance company. The latter was not then obligated to conduct an inquiry as to whether the insured acted in good faith. Its duty was to accede to the wishes of its insured or to refuse to write the insurance.

In Sampson v. Ottinger (93 App. Div. 226) plaintiff was a real estate broker. He had a conversation with defendants with reference to the real property involved. Defendants told him that if he produced a purchaser and terms were mutually agreed upon, they would pay him a commission. Plaintiff thereupon informed them that his prospective purchaser was Houpt & Son. Houpt & Son, however, refused to have anything to do with the purchase if plaintiff were to be the broker. It was held that under those circumstances defendants were at liberty to sell the property to Houpt & Son without liability to plaintiff as broker. To the same effect see Witherbee v. Walker (42 Col. 1).

A somewhat similar situation was involved in Degnan v. General Acc. F. & L. Assur. Corp. (161 App. Div. 439; affd., 221 N. Y. 484). There defendant was notified by the insured to cancel its policy and to issue another policy in its place through a different broker. This the insurer did, paying the plaintiff, the first broker, commissions only up to the time of cancellation. It was held that plaintiff was not entitled to recover from the insurer commissions after the effective date of the cancellation in the absence of bad faith on the part of the insurer.

The facts in the case at bar are practically the same as in Erlin v. National Union Fire Ins. Co. (217 Cal. 374). There an insurance broker learned that a finance company was about to change its insurer. The finance company gave plaintiff its consent to go into the insurance market and obtain an offer of insurance for it. This plaintiff did. The finance company then became dissatisfied with plaintiff’s conduct and notified the insurer that it would not place any insurance if plaintiff were to receive any commission thereon. The insurer issued the policies through another broker who had been designated by the finance company. The Supreme Court of California held that the broker had no cause of action against the insurer, saying, Assuming that the conduct of the finance company amounted to bad faith, such bad faith on its part alone would not justify a judgment against this defendant on that ground.”

The judgments should be reversed, with costs in all courts to the appellant, and the complaint as against The Fidelity and Casualty Company of New York, dismissed.

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

Judgments reversed, etc.


text:
    In the Matter of the Probate of the Will of John E. Matheson, Deceased. Angus G. Matheson et al., Appellants; Samuel J. Meyler, Respondent.

      Argued April 8, 1940;
    decided April 23, 1940.

      William A. Smith and Ernest V. Frerichs for appellants.
    The testimony of an attorney who did not prepare the will of a testator, who did not attend at the execution thereof, and who was not a subscribing witness thereto is inadmissible where the testimony is with respect to confidential communications between the attorney, in his professional capacity, and the deceased testator. (Matter of Coleman, 111 N. Y. 220; Loder v. Whelpley, 111 N. Y. 239; Matter of Cunnion, 201 N. Y. 123; Matter of McCulloch, 263 N. Y. 408.)

      Robert R. Bauman, John R. Daly and Lloyd R. Christopher for respondent.
    The testimony of the attorney was competent and the Surrogate gave it proper consideration. (Baumann v. Steingester, 213 N. Y. 328; People v. Buchanan, 145 N. Y. 1; Matter of Cunnion, 201 N. Y. 123; Loder v. Whelpley, 111 N. Y. 239; Matter of Eno, 196 App. Div. 131; Matter of Coleman, 111 N. Y. 220; Matter of Casper, 161 Misc. Rep. 199; Matter of Tinker, 157 Misc. Rep. 200; People ex rel. Cohen v. Butler, 125 App. Div. 384; Matter of Putnam, 257 N. Y. 140.)
   Per Curiam.

On the trial before the Surrogate of the issues relating to testamentary capacity and undue influence in this proceeding to probate a will, the proponent produced as a witness an attorney who neither directly nor indirectly took part in the preparation or execution of the instrument offered for probate. Nevertheless, he was permitted, over objection, to give testimony on the part of the proponent as to a conversation relating to deceased’s testamentary intentions which he had held privately with the deceased in a professional capacity three days previous to the time the instrument, offered for probate, was signed.

This was a privileged communication under section 353 of the Civil Practice Act, and the witness clearly was not one to whom the exception provided in section 354 of the Civil Practice Act applies. Error in receiving this proof was material. Even though the deceased had expressed the same testamentary intention in the presence of the same witness and others just previous to the private interview, the very fact that he repeated it in the more intimate private conference with his attorney had an important bearing on the sharply-contested issues, particularly that of undue influence. It is on this error that our reversal rests.

The order of the Appellate Division and the decree of the Surrogate’s Court should be reversed and a new trial granted, with costs in all courts to the appellants to abide the event.

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

Ordered accordingly.


text:
    In the Matter of the Assignment for the Benefit of Creditors of Wright Metal, Inc. Samuel J. Lasser, as Assignee, Appellant; G. O. Sandberg et al., Respondents.
    Argued February 26, 1940;
    decided April 23, 1940.

      Louis A. Tepper and Joseph Lotterman for appellant.
    The surcharge was erroneous in so far as the claim of the general manager and factory superintendent was concerned. (Cons. Laws, ch. 31, § 2, subd. 5; Matter of Stryker, 158 N. Y. 526; Austin v. City of New York, 258 N. Y. 113; Matter of American Lace Works, 30 App. Div. 321.)

      Ross L. Weeks and Emmet H. Ross for respondents.
   Per Curiam.

Except in the situations provided for in the “ New York State Labor Relations Act ” contained in article 20 of the Labor Law (Cons. Laws, ch. 31), an “employee” in the sense of the statute “ means a mechanic, workingman or laborer working for another for hire” (§ 2, subd. 5). Emil N. Johnson, superintendent of the factory of the assignor-corporation, was not such an employee and was not entitled to be paid wages in accordance with section 196 of the statute. Hence, it was error to surcharge the appellant with the amount of Johnson’s claim ($1,531).

The orders should be modified in accordance with this opinion and, as so modified, affirmed, without costs.

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

Ordered accordingly.


author: Loughran, J.

text:
    In the Matter of Interborough News Company, Respondent, against Joseph D. McGoldrick, as Comptroller of the City of New York, et al., Appellants.

      Argued March 14, 1940;
    decided April 26, 1940.

      William C. Chanler, Corporation Counsel (Sol Charles Levine, Arthur A. Segall and Milton Sandberg of counsel), for appellants.
    The use of petitioner’s gross receipts as the measure of its tax liability was proper as was the Comptroller’s determination that petitioner buys and sells magazines on its own account and has neither received nor exercised authority to contract, sell or collect for the account of the publishers or other persons who supplied it with magazines. (Pictorial Review Co. v. Curtis Publishing Co., 255 Fed. Rep. 206; People ex rel. Kohlman & Co. v. Law, 239 N. Y. 346; Matter of McNeel Marble Co. v. Graves, 247 App. Div. 242; 275 N. Y. 601; Gindre v. Kean, 7 Misc. Rep. 582; American Seeding Machine Co. v. Stearns, 109 App. Div. 192; Bessing v. Prince, 52 Cal. App. 190; Commercial Credit Co. v. Girard Nat. Bank, 246 Penn. St. 88; Stratton & Terstegge Co. v. Stiglitz Furnace Co., 258 Ky. 678; Wheatman v. Hoe & Co., 158 Wash. 232; Clarke v. Havard, 11 Ga. 242; Bell v. Riggs, 34 Okla. 834; Champion Spark Plug Co. v. Automobile Sundries Co., 273 Fed. Rep. 74; Willcox & Gibbs Co. v. Ewing, 141 U. S. 627; Rawleigh Medical Co. v. Holcomb, 126 Ark. 597.)

      Archie O. Dawson and John D. Mooney for respondent.
    The contracts between the taxpayer and the publishers created a principal-agency relationship and not a vendorvendee relationship. (Curtis Pub. Co. v. Federal Trade Comm., 270 Fed. Rep. 881; 260 U. S. 568; Collins v. American News Co., 34 Misc. Rep. 260; 68 App. Div. 639; Meyer v. Price, 250 N. Y. 370; Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373; Straus v. Am. Publishers’ Assn., 231 U. S. 222; Boston Store v. American Graphophone Co., 246 U. S. 8; United States v. General Electric Co., 272 U. S. 476.) The regular course of business conduct between the taxpayer and the publishers shows that the relationship between them is that of principal and agent and not that of vendor and vendee. (United States v. General Electric Co., 272 U. S. 476.)
   Loughran, J.

This controversy is one respecting the liability of Interborough News Company for a deficiency gross receipts tax with penalties assessed against it by the Comptroller of the City of New York for the years 1933-1936, inclusive.

The assessment was made under Local Laws Nos. 9 and 17 (published as No. 18) of 1934, No. 32 of 1935, and No. 29 of 1936. Each of these laws exacted an annual excise equal to a stated per centum upon the gross receipts in excess of $15,000 derived during the preceding calendar year from any profession, vocation, trade, business or commercial activity (other than a financial business) exercised or carried on in the city of New York.

The taxpayer sets forth its business activities as follows: 1. It is the distributor in New York City and adjacent territory of magazines for a number of publishers, receiving the magazines in its warehouse, separating them into small lots for distribution to the newsdealers, delivering them to the thousands of newsdealers in this territory, collecting from the newsdealers the payments for the magazines and also the unsold copies, and remitting these payments and the unsold copies to the publishers, less its compensation for acting as distributor. 2. The taxpayer also operates as a separate department of its business the retail newsstands on the city-owned ‘ Independent Subway System' in New York City, at which the taxpayer sells candy, newspapers, periodicals, maps, etc., exactly as a retail newsdealer would.”

The taxpayer’s sales department is an ordinary retail business and the tax imposed by the local laws upon the gross receipts therefrom for the period in question has been paid. This controversy has relation only to the so-called distribution department of the business of the taxpayer. The publishers hereinafter referred to include all publishers whose magazines were handled by the taxpayer save one (Macfadden Publications, Inc.).

At the Appellate Division it was held that all operations of the taxpayer in its distribution department were prosecuted by it as a mere agent of the publishers of those magazines which the taxpayer through that department had transmitted to local dealers. In that view, a tax was payable under the local laws upon so much only of the receipts of the distribution business as the taxpayer did not remit to the publishers but withheld as its compensation. So the court ruled. We now review its order on this appeal therefrom by the Comptroller and the Treasurer of the city.

A single separate written contract regulated the entire relationship of the taxpayer to each of the publishers. The gist of the decision below is that the whole effect of each of these agreements was that thereby the taxpayer for all purposes was made the publisher’s agent and nothing more. We do not agree that these contracts in themselves constituted proof that the receipts of the transactions that were carried on by the taxpayer through its distribution department were taken in by it for the publishers and not for its own account.

It was under the same contracts that the taxpayer obtained the magazines that were disposed of through the sales department of its business. As its counsel say, that sales department “ is not a distribution agency but is an actual retail business.” It is thus conceded that magazines which the taxpayer dealt out through its sales department were owned by it as vendee under its contracts with the publishers. This salient fact deadens the taxpayer’s contention that under the same contracts it was a mere agent of the publishers when it was paid by local dealers for the magazines it had delivered to them through its distribution department. Not a word of any of these contracts gives a hint that the parties had in mind a pmpose of the taxpayer so to act in a dual character. These considerations persuade us that the conventional phrases of the contracts had little or no significance in respect of the proposition here in issue.

We turn, therefore, to the evidence of conduct of the taxpayer in its handling of the magazines which it transmitted to local dealers through its distribution department. What follows has reference only to that branch of the taxpayer’s business.

Stress was laid by the taxpayer on these facts: (a) The publishers fixed the prices for which their respective magazines were to be delivered by the taxpayer to local dealers and also the number of magazines to be delivered and the times of delivery; (b) employees of the publishers stationed in the offices of the taxpayer had access to the taxpayer’s files of orders of local dealers and watched over the employees of the taxpayer; (c) the magazines were not carried as an asset in the taxpayer’s books but were entered in its stock record and no account was set up in the books to represent any payment due therefor.

On the other side, the Comptroller put the emphasis on these circumstances: (a) All agreements with local dealers were negotiated by the taxpayer in its own name; (b) all deliveries were made from its own warehouses on its own trucks by its own employees; (c) all payments were made to it and were acknowledged by it in its own name and were deposited in its own general bank account.

This conflict of evidence was to be composed by the Comptroller. We think it may not be said that the evidence preponderates against his conclusion that the taxpayer received the fund not as agent but for its own account. (See People ex rel. Consolidated Water Co. v. Maltbie, 275 N. Y. 357. Cf. People ex rel. Jamaica Water Supply Co. v. Tax Commissioners, 196 N. Y. 39.) More than that, each of the local laws here applicable says: “ For the purpose of the proper administration of this local law and to prevent evasion of the tax hereby imposed, it shall be presumed that all receipts are subject to the tax until the contrary is established, and the burden of proving that any payment or consideration received by any person subject to the tax hereby imposed was not received in, or by reason of a sale made or service rendered or transaction had in the city of New York shall be upon the person who received it.” (§ 3.) Clearly the Comptroller was warranted in his conclusion that this taxpayer did not meet the burden so cast upon it.

The order of the Appellate Division should be reversed and the determination of the Comptroller reinstated, with costs in this court and in the Appellate Division.

Lehman, Ch. J., Finch, Bippey, Seabs, Lewis and Conway, JJ., concur.

Ordered accordingly.