author: Finch, J. Lehman, J.

text:
    In the Matter of the Accounting of John S. Sickels et al., as Executors of Amelia E. Cameron, Deceased, Respondents. Lillian M. Gordon, as Legatee and Trustee under the Will of Amelia E. Cameron, Deceased, Appellant; St. Luke’s Home for Aged Women et al., Respondents.
    Argued June 2, 1938;
    decided July 7, 1938.

      ■ Samuel Edelstein for appellant.
    It is required that the plain words and intent of the testatrix be effected. (Matter of Merrill, 208 App. Div. 649.) The trust principal having been preferred by the decree for the benefit of the life beneficiaries, it inures to the benefit of the remainderman. (Matter of Reynolds, 242 N. Y. 389.) The trust remainder passes to appellant either as a specific or demonstrative legacy and, therefore, does not abate with general legacies. (Crawford v. McCarthy, 159 N. Y. 514.) The remainder legacy should be preferred on account of services performed and to be performed in overseeing the maintenance of the beneficiaries. (Matter of Lloyd, 166 App. Div. 1; Matter of Dougherty, 64 Misc. Rep. 230; Sherman v. Baker, 20 R. I. 613; First Nat. Bank v. Hessong, 83 Ind. App. 531; Owens v. Citizens Bank, 177 Ga. 289; Matter of McKay, 5 Misc. Rep. 123; Matter of Day, 150 Misc. Rep. 691; Borden v. Jenks, 140 Mass. 562; McLean v. Robertson, 126 Mass. 537.) A trust remainder is a separate estate and devolves in the exact manner stated in the trust article. (Matter of Brundage, 101 Misc. Rep. 528; 186 App. Div. 722; 226 N. Y. 691; Matter of Smallman, 138 Misc. Rep. 889; Matter of Baker, 157 Misc. Rep. 904; Matter of Rothman, 140 Misc. Rep. 597.)

      Thomas A. Ryan and William Parsons for Institute for Crippled and Disabled et al., respondents.
    The remainder of the trust legacy should not be preferred because the life interest in the trust legacy is entitled to a preference. (Lewin v. Lewin, 2 Vesey’s Rep. 414; Blower v. Morret, 2 Vesey’s Rep. 419; Bliven v. Seymour, 88 N. Y. 469; Matter of Neil, 238 N. Y. 138; Scofield v. Adams, 12 Hun, 366; Matter of Morris, 6 Dem. 304; Matter of Doblin, 138 Misc. Rep. 876; Matter of Ward, 165 Misc. Rep. 165; Matter of Brundage, 163 Misc. Rep. 1; Towle v. Swasey, 106 Mass. 100; Matter of Bixenstein, 6 Penn. Dist. Rep. 19; 19 Penn. Co. Ct. Rep. 152; Chester County Hospital v. Hayden, 83 Md. 104; Matter of Title G. & T. Co., 195 N. Y. 339.) The trust remainder does not pass to appellant either as a specific or demonstrative legacy. (Crawford v. McCarthy, 159 N. Y. 514; Matter of Wenner, 125 App. Div. 358; Matter of Ward, 165 Misc. Rep. 165.) To prefer a legacy on the ground that it was given for a consideration, that fact must be expressly stated in the will and the consideration must have existed at the death of the decedent or the legatee must prove the existence of a contract between him and the decedent by the terms of which the legacy given to him was to have received a priority over the other general legacies. (Simpson v. Nicol, 157 Va. 434; Cole v. Niles, 3 Hun, 326; 62 N. Y. 636; Matter of Dougherty, 64 Misc. Rep. 230; Matthews v. Targarona, 104 Md. 442; Reynolds v. Reynolds, 27 R. I. 520; First Nat. Bank v. Hessong, 83 Ind. App. 531; Matter of Smallman, 139 Misc. Rep. 501; Clayton v. Aikin, 38 Ga. 320; Heron v. Heron, 2 Atkyn’s Rep. 171; Matter of Clarke, 158 Misc. Rep. 830; Matter of. Woodbury, 40 Misc. Rep. 143; Wood v. Vandenburgh, 6 Paige Ch. 277; Duncan v. Inhabitants of Township of Franklin, 43 N. J. Eq. 143; Davies v. Bush, 1 Younge’s Rep. 341.)

      Leland B. Duer and John de R. Storey for New York League for the Hard of Hearing et al., respondents.
    Legacies are subject to pro rata abatement, in case of insufficiency of the estate, unless the will clearly discloses other intention on the part of the testatrix, or the legacies are of such a character as to come within one of the few exceptions to the regular rule. (Matter of Neil, 238 N. Y. 138; Scofield v. Adams, 12 Hun, 366; Matter of Ward, 165 Misc. Rep. 165; Matter of Fenton, 250 App. Div. 771; Matter of Parker, 151 Misc. Rep. 394.) The remainder of the trust created by paragraph first of the codicil abates proportionately with the other general legacies. (Scofield v. Adams, 12 Hun, 366; Matter of Morris, 6 Dem. 304; Matter of Ward, 165 Misc. Rep. 165; Matter of Doblin, 138 Misc. Rep. 876; Matter of Brundage, 163 Misc. Rep. 1.) This trust remainder is not a specific legacy, but a general legacy and must abate, with the other general legacies. (Matter of Crouse, 244 N. Y. 400; Matter of Security Trust Co., 221 N. Y. 213; Matter of Hebbard, 142 Misc. Rep. 41; Matter of Delaney, 133 App. Div. 409; 196 N. Y. 530; Morris v. Sickly, 133 N. Y. 456; Tifft v. Porter, 8 N. Y. 516; Matter of Bouk, 80 Misc. Rep. 196; Matter of Malone, 143 Misc. Rep. 657; Matter of Dewint, 161 Misc. Rep. 398; Matter of Freeman, 139 Misc. Rep. 301; Matter of Brundage, 163 Misc. Rep. 1; Scofield v. Adams, 12 Hun, 366.) The appellant’s bequest was not to compensate her for services rendered or to be rendered. (Matter of Smallman, 139 Misc. Rep. 501; McNulty v. Hurd, 86 N. Y. 547; Mayer v. Monzo, 221 N. Y. 442; Matter of Hyde, 218 N. Y. 55; Matter of Brigg, 39 App. Div. 485; 165 N. Y. 673.)

      Nelson P. Bonney for Samuel D. Chapin, respondent.
    The remainder interests in the legacy to appellant should abate proportionately with the other general legacies. (Matter of Neil, 238 N. Y. 138; Matter of Hinman, 32 Misc. Rep. 536; Bliven v. Seymour, 88 N. Y. 469; Matter of Dougherty, 64 Misc. Rep. 230; Morris v. Sickly, 133 N. Y. 456; Matter of Porter, 151 Misc. Rep. 179; Matter of Schaaf, 120 Misc. Rep. 292; Matter of Wait, 148 Misc. Rep. 920; Matter of Wenner, 125 App. Div. 358; Matter of Williams, 27 Misc. Rep. 716; Matter of Collins, 3 Dem. 374; Matter of Williams, 1 Redfield Surr. Prac. 228.)

      Edward W. Stitt, Jr., Charles F. Krause, Jr., and Robert P. Levis for Helen P. Schwarzwaelder et al., respondents.
    The remainder of the trust created by-article first of the codicil is a general legacy and abates pro rata with other general legacies after the death of the income beneficiaries thereof. (Matter of Smallman, 139 Misc. Rep. 501.) The fact that the life interest in the trust has been preferred does not ipso facto prefer the remainder. (Matter of Wenner, 125 App. Div. 358 [dis. op.].)

      George B. Brooks for St. Luke’s Home for Aged Women, respondent.
    There is neither an express nor an implied intention to prefer the appellant’s legacy. (Reynolds v. Robinson, 82 N. Y. 103; Matter of Neil, 238 N. Y. 138.) The gift was neither a specific nor a demonstrative legacy. (Matter of Smallman, 138 Misc. Rep. 889.) The gift cannot be considered as preferred because of services performed or to be performed. (Reynolds v. Robinson, 82 N. Y. 103; Matter of Smallman, 139 Misc. Rep. 501.) The fact that appellant is entitled to the remainder of a trust set up in full for preferred life beneficiaries does not prevent abatement upon their death. (Scofield v. Adams, 12 Hun, 366; Matter of Brundage, 163 Misc. Rep. 1; Matter of Doblin, 138 Misc. Rep. 876; Towle v. Swasey, 106 Mass. 100.)
   Finch, J.

Amelia E. Cameron, the decedent herein, died on October 6, 1931, leaving a last will and testament and a codicil thereto. Article first of the codicil provided as follows:

“ First. I revoke article ‘ Seventh ’ of my said will and in lieu thereof I give and bequeath the sum of Twenty five thousand ($25,000) Dollars to my cousin Lillian Gordon in Trust to invest and keep the same invested and to pay and apply the net income therefrom to and for the support and maintenance of Ellen Cameron and John Cameron during their lives and on the death of both of them I give and bequeath the principal of said trust to Lillian Gordon absolutely.”

The decedent in addition to this legacy gave other general legacies totaling approximately $220,000. The respondents, Institute for Crippled and Disabled,, New York Protestant Episcopal Mission Society, and Belief of the Destitute Blind, are general legatees. The net assets of the estate of the decedent consisted of approximately $45,000 in personalty and unliquidated real estate valued at $140,000. Therefore, the assets of the estate were not sufficient to satisfy all of the general legacies.

On the executors' accounting in the Surrogate's Court it was conceded by the parties that the life interest in the $25,000 legacy for the support and maintenance of Ellen Cameron (John Cameron having predeceased the testatrix) should receive a preference since Ellen Cameron was a first cousin of the decedent and the legacy was expressly given for her support and maintenance. Lillian M. Gordon, the appellant herein, maintained on the accounting that her remainder interest in the trust should also receive a preference.

The Surrogate held that the claim of preference made by the appellant was without merit, and provided in the decree on the accounting that the remainder of this legacy should abate proportionately with the other general legacies. The Appellate Division unanimously affirmed, and the case is here by permission of this court.

The primary question to be determined is whether, since it is not questioned that the life beneficiaries are to be preferred a like preference enures to the benefit of the remainderman. In Matter of Reynolds (242 N. Y. 389) we held that both the life interests and the remainders were to be preferred. That decision, however, was based on the conclusion that the language of the will specifically provided for both preferences.

A fundamental rule in the construction of wills requires that when the assets of the estate are insufficient to pay-all general legacies in full, in the absence of a contrary intent shown by the will, all legacies abate proportionately. (Matter of Neil, 238 N. Y. 138.) Equality is the rule and preference the exception. Three exceptions have grown up to the application of this principle. The first originated through a holding that where the legacy was for the maintenance of the children of the decedent, from this fact an intent could be found to create a preference. (Lewin v. Lewin, 2 Ves. Sr. 415.) This exception has grown to include a gift for the support and maintenance or education of other near relatives otherwise unprovided for. The second exception originated in a holding by Lord Hardwicks, the same jurist as in the case of Lewin v. Lewin (supra), that a legacy to a widow, which was given in lieu of dower, should receive a preference on the ground that such a legatee took as a purchaser. (Blower v. Morret, 2 Ves. Sr. 420.) The third exception is really an outgrowth of the second, holding that a legacy should be preferred which is given for a valid consideration, the legatee thereby likewise becoming a purchaser. Within this class is said to be a preference granted because the legatee is able to show the existence of a contract between him and the testator, by the terms of which the legacy is to receive a preference. (Simpson v. Nicol, 157 Va. 434.) These three exceptions to the fundamental rule of abatement as applied to general legacies have been recognized by the courts of New York. (Bliven v. Seymour, 88 N. Y. 469.)

The appellant does not come within any of these exceptions, since she was only a second cousin of the testatrix and, in any event, the remainder was not given for support and maintenance.

The question presented upon this appeal is whether we should add to the above exceptions, by a holding that where a trust is directed to be set up and the income for the life beneficiaries has been held to be preferred, that the gift of the corpus of this trust fund to the trustee, after the termination of the life estate also is to be preferred. There is no direct authority in this court. The Surrogates have adopted conflicting views. The question apparently arose first in this State in the case of Scofield v. Adams (12 Hun, 366) where it was decided that the gift of such a remainder was general in character and subject to abatement in common with the other general legacies. In other jurisdictions where the question has arisen, the courts seem to be in accord with this view (Towle v. Swasey, 106 Mass. 100; Bixenstein’s Estate, 6 Penn. Dist. Rep. 19. Of. Chester County Hospital v. Hayden, 83 Md. 104.) In Matter of Brundage (101 Misc. Rep. 528) the affirmance by the Appellate Division and the modification by the Court of Appeals (186 App. Div. 722; 226 N. Y. 691) did not pass on this question, since no appeal was taken from a grant of preference to a remainderman.

Starting with the settled principle that all general legacies abate pro rata, except in so far as there is found in the will sufficient intent to provide a preference, upon what grounds may the remainder in this will be preferred? Here we have two gifts, one of income and one of remainder. If there is a gift of income, and a preference thereof is not questioned, does this compel the same holding of a preference with respect to the corpus of the trust from which the income is derived? The argument that a preference should be granted to the remainder on the ground that there is here a specific or demonstrative legacy, cannot be sustained. A specific legacy is a bequest of a definite part of the personal estate of a testator as distinguished from other property of the same kind. A demonstrative legacy is a bequest of a specific sum of money, stock or something similar, payable out of a particular fund or security. (Crawford v. McCarthy, 159 N. Y. 514.) The gift of this remainder was neither. It was not a gift of an earmarked fund, certainly not until the trust was set up. Nor could it be reasonably claimed that if the beneficiaries had predeceased the testatrix the remainderman could have successfully claimed a preference. If the language creating this remainder would not be sufficient to establish a preference in the remainderman, if the life tenants had predeceased the testatrix, then no specific or demonstrative legacy has been established, since as to specific gifts it is well established that a will speaks as of the time of its execution, and the will is not ambulatory as to the meaning of the language used. (Morris v. Sickly, 133 N. Y. 456, 459, 460.) Moreover, in answer to the contention that the remainder was earmarked because of a setting up of the trust, this setting up was only occasioned because the gift of income was preferred. By the terms of the will the testatrix did not make the corpus of the trust a specific legacy, nor did she charge it upon any particular fund, as would have been the case if it had been a demonstrative legacy. This legacy of the remainder, therefore, not being a specific bequest or charged upon any specific fund, does not come within the classification of a specific or demonstrative legacy.

May a preference be granted on the ground that the service performed and to be performed in overseeing the maintenance of the beneficiaries gives a preference to this legacy upon the ground of a valid consideration? In order to prefer a legacy upon this ground, it is well established that it must be expressly stated in the will that the legacy was given for a consideration. To constitute a legatee a purchaser, such legatee must have had a subsisting right at the death of the decedent, or must have given up some right actually in existence as a legal claim at the time the will took effect, or there must appear from the face of the will facts from which a promissory estoppel may arise. If all these are lacking, the legatee may still have a preference if he can show the existence of a contract between him and the decedent by the terms of which the legacy was to receive a preference. (Simpson v. Nicol, 157 Va. 434.) In the case at bar it is true that the appellant apparently rendered services after the death of the testatrix. The claim made by the appellant, however, is a claim under the will, and is not a claim as a creditor against the estate of the decedent. This legatee is claiming the remainder of the trust as given to her in consideration of past services rendered and in consideration of her care of the life beneficiary of the trust and its administration. There is nothing, however, in the language of the will making the gift of the remainder at all dependent upon the rendition of these services. Services so rendered cannot be held otherwise than voluntary, and obviously cannot be a basis for claiming that the testatrix intended as a return therefor to grant the appellant a preference. Nor is there any evidence of a contractual relation between the testatrix and the appellant. So far as appears from the terms of this will, there have been required of this trustee only the ordinary trust duties, and no more. In this will there is nothing to show any intent to prefer this remainderman, except the mere fact that a trust was created the income of which was preferred. Were we to hold that in such a case a gift of the corpus must be preferred as a matter of law, we would not only be disregarding the equitable principle that where the estate is insufficient all general legacies must abate proportionately, but we would be writing a new will and substituting an arbitrary intent where none appears in the instrument.

It follows that neither the terms of the will nor any rule of presumed intention or of law permits this remainder to be preferred over the other general legacies.

The order should be affirmed, with costs.

Lehman, J.

(dissenting). The testatrix bequeathed to Ellen Cameron and John Cameron the net income of a trust fund of $25,000 during their lives, and the principal of said trust to Lillian Gordon. The decree of the Surrogate adjudges that it was the intention of the testatrix that the “ trust legacy, given by article ‘ First ’ of her codicil, for the support of Ellen Cameron and John Cameron during their lives, receive preferential payment over the general legacies * * * and that * * * the life beneficiaries of said trust legacy are entitled to have applied for their support and maintenance a sum equal to interest on said trust legacy computed at the rate of six (6%) per centum per annum from October 6th, 1932, a date one year after the death of the testatrix, until said trustlegacy is paid in full * * *; but that it was not the intention of said testatrix that the remainder interest given by said article ‘ First ’ of said codicil be preferred over other general legacies, and accordingly on the falling in of said trust life estate, the said legacy in remainder shall abate proportionately with the other general legacies in the event that the estate of the decedent shall be insufficient to pay all of said general legacies, in full, with interest.”

The testatrix did not bequeath to the life beneficiaries an annuity of $1,500 per annum, or six per cent on $25,000, but only the income of a trust fund of $25,000. To carry out the provisions of the will, a trust fund of $25,000 must be set aside, and the life beneficiaries are entitled to the income of that fund, not more nor less. If part of the trust fund is lost, then the life beneficiaries would under the will receive only the income of what remained. So the testatrix provided in her will, and the courts may not make a different will for her.

Because of probable deficiency in the assets of the estate, it may prove impossible to carry out in full all the provisions of her will. The courts in that event may give effect to the putative intention of the testatrix to give preference to the provision she made in her will for the support of the life beneficiaries. That can be done only by setting up a trust fund of $25,000 and paying the income of that fund to the life beneficiaries. The executors of the estate would not be authorized by the will to pay to the beneficiaries an annuity of six per cent on $25,000. Their duty under the will is to pay over the $25,000 to the trustee if the assets of the estate are sufficient for that, and the courts may not direct them to do more.

What is to become of the principal of the trust estate after the death of the life beneficiaries? The testatrix provided in her will that it should go to the appellant. The will may not show any intent to prefer the remainder-man over other beneficiaries, but it was the clearly expressed intention of the testatrix that the remainder of the trust fund should go to her. If the trust fund increased in value she alone would benefit by the increase. If loss occurred, she alone would bear the loss. So the testatrix has provided, but the courts now assume to decree otherwise. They say that upon the death of the life beneficiaries the trust fund shall revert to the estate, though the testatrix has provided that it shall belong to the appellant, and that, subject to abatement proportionately with the other legacies, she shall receive a general legacy of $25,000 in place of the remainder in the trust fund bequeathed to her by the will. The appellant is entitled to the remainder of the trust fund of $25,000 after the death of the life beneficiaries. If by reason of deficiency of assets in the estate, there had been an abatement in the amount of the trust fund, or loss occurring after the trust fund is established, her remainder would of course be limited to the diminished fund, but whether the fund be large or small, the appellant is entitled to receive that fund after the death of the life beneficiaries.

The order of the Appellate Division should be modified accordingly.

O’Brien, Herbs, Loughran and Rippey, JJ., concur with Finch, J.; Lehman, J., dissents in opinion; Crane, Ch. J., taking no part.

Order affirmed.


source: Caselaw Access Project

author: Lehman, J.

license: Public Domain

text:
    John J. Roe, Respondent, v. Muir C. Smyth et al., Appellants.
    Submitted April 12, 1938;
    decided July 7, 1938.

      Douglas E. Brown for appellants.
    An endorser may not recover from his prior endorser more than he has actually paid for the note. (Fall River Nat. Bank v. Buffington, 97 Mass. 498; Ingalls v. Lee, 9 Barb. 647; Cram v. Hendricks, 7 Wend. 569; Munn v. Commission Co., 15 Johns. 44; Braman v. Hess, 13 Johns. 52; Brown v. Mott, 7 Johns. 361; Livingston v. Hastie, 2 Caine, 246; Blanchard v. Blanchard, 61 Misc. Rep. 497; 133 App. Div. 937; 201 N. Y. 134; Dykman v. Northbridge, 80 Him, 258; Kelly v. Burroughs, 102 N. Y. 93; Butler v. Wright, 20 Johns. 369; 6 Wend. 284; City Sav. Bank v. Kensington Land Co., 37 S. W. Rep. 1037; National Park Bank v. Koehler, 204 N. Y. 174.) The clause providing for payment of attorney’s fees does not bind the endorsers and in any event runs only in favor of the holder at maturity. (City Sav. Bank v. Kensington Land Co., 37 S. W. Rep. 1037; Robinson v. Aird, 43 Fla. 30; Short & Co. v. Coffeen, 76 Ill. 245; Shaeffer v. Hodges, 54 Ill. 337.) The note has been discharged by payment and no further recovery may be had thereon. (Spies v. National City Bank, 174 N. Y. 222; Dillenbeck v. Dygert, 97 N. Y. 303; Silberstein v. Begun, 232 N. Y. 319; Waxman v. Williamson, 256 N. Y. 117; Madison Square Bank v. Pierce, 137 N. Y. 444.)

      George H. Carleton, John R. Vunk and Harold Ashare for respondent.
    Plaintiff, the last endorser of the note and the accommodation endorser, may maintain the action. (Waxman v. Williamson, 256 N. Y. 117; Winn Parish Bank v. White Sulphur Co., 133 La. 282; University of Richmond v. Stone, 148 Va. 686; Townsend v.
      Alewel, 202 S. W. Rep. 447; Farmers State Bank v. Haun, 30 Wyo. 322; Taylor v. Continental Supply Co., 16 Fed. Rep. [2d] 578; Cox v. Hagan, 155 Va. 656; Pease v. Syler, 78 Wash. 24; Bank v. Ellis, 2 Fed, Rep. 44; Hubbard v. Harrison, 38 Ind. 323; Merrimon v. Pakey, 136 Tenn. 645; Franklin v. The Duncan, 133 Tenn. 472; Thompson v. Taylor, 72 N. Y. 32.)
   Lehman, J.

The complaint alleges that The Bellport Corporation made and delivered to The Patchogue Citizens Bank & Trust Company a promissory note payable one month after date for the sum of $3,000. The note contains a provision that The drawers and endorsers severally waive presentation for payment, protest and notice of protest for non-payment oí this Note. I, we or either of us hereby further agree that, if this Note is not paid at maturity and said Note be collected by an attorney, that I, we or either of us will pay all costs of collection including a reasonable attorney’s fee.” The note was indorsed before delivery by the defendants and by the plaintiff. The plaintiff is the last indorser. The note, when due, was presented for payment, payment was refused and timely notice of such refusal given to the indorsers. Then the plaintiff paid the amount due with interest to The Patchogue Citizens Bank & Trust Company, the holder of the note. The note was transferred to the plaintiff. The complaint further alleges: That thereafter plaintiff by his attorneys did institute and successfully terminate an action in the Supreme Court of Suffolk County for the collection of said note and did collect the same.” He now seeks to recover from the prior indorsers the costs of collection including a reasonable counsel fee. The defendants, by motion to dismiss the complaint made in accordance with rule 106 of the Rules of Civil Practice, have challenged the sufficiency of the facts alleged to constitute a cause of action.

An instrument to be negotiable must contain an unconditional promise or order to pay a sum certain in money.” (Neg. Inst. Law [Cons. Laws, ch. 38], § 20, subd. 2.) But “ the sum payable is a sum certain * * * although it is to be paid * * * with costs of collection for an attorney’s fee, in case payment shall not be made at maturity.” (§ 21.) “ Every indorser who indorses without qualification * * * engages that on due presentment, it [the negotiable instrument] shall be * * * paid, * * * and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it.” (§ 116.) There may be doubt and diversity of opinion upon the question whether an indorsement, without additional words, placed upon an instrument for the payment of a sum certain together with costs of collection for an attorney’s fee, in case payment shall not be made at maturity,” imports an engagement by the indorser, as broad as the engagement of the maker, that if the instrument is not paid at maturity he will pay to the holder, not only the amount thereof but, in addition, the costs of collection. That question is not here. In this case the indorsers have agreed in express terms that in a specified contingency, they will pay all costs of collection. In effect, they have added to their assurance that the note would be paid upon presentment an express promise of indemnity from the cost of collection where, because of the makers’ failure to pay on presentment, collection is made by an attorney. The language of the instrument admits of no other construction, and we may assume that the agreement the parties have made may be enforced according to its tenor by any person who was intended to be included within its scope as a beneficiary of the promise. (Taylor v. Continental Supply Co., 16 Fed. Rep. [2d] 578.)

Doubtless, then, the holder of the instrument, when it was dishonored at maturity, could have maintained an action against the indorsers, as well as the drawers, for the sum named in the note with costs of collection. If the plaintiff, as indorser, had been compelled to pay to the bank, as holder of the note at its maturity, not only the amount due thereon but also an attorney’s fee and other costs incurred for its collection, argument might be made that he in turn should have a cause of action to recover from prior parties the full amount which he was compelled to pay to the holder. Such a cause of action would be based upon the promise which all the indorsers had made and which was enforced against him as indorsee by a holder. Again, that case is not here, and we do not consider whether such an action by an indorser against prior indorsers would he. In this case the plaintiff paid to the holder only the amount due upon the note. He in turn brought an action and recovered from prior parties the amount which he was compelled to pay. Now he asserts the right to bring a second action against the prior parties to recover the cost, including a reasonable attorney’s fee, which he incurred in collecting from prior indorsers the amount which he was compelled to pay.

He can recover only if each indorser, in addition to his engagement as indorser as defined by the Negotiable Instruments Law, made a separate promise to pay to each subsequent party the costs of collection, including a reasonable counsel fee, to which such party might be put if the note was not paid at maturity and an attorney was retained to collect it. The defendants have made no such separate promise. Their promise was to pay to the holder the amount due upon the note with costs of collection, including a reasonable counsel fee. The promise to pay the amount of the note and the promise to pay the costs of collection constituted a single obligation, embodied in the negotiable instrument. (See First State Bank v. Utman, 136 Minn. 103; Schillinger v. Leary, 201 Ala. 256; Merrimon v. Parkey, 136 Tenn. 645; Sands v. Roller, 118 Va. 191; Shugart & Lininger v. Pattee, 37 Iowa, 422. Contra, Easter v. Boyd, 79 Ill. 325.) We have held recently that in an action brought by the holder to recover the principal obligation to pay the amount due on the note, recovery may also be had upon the subsidiary promise to pay costs of collection including a reasonable counsel fee. (Waxman v. Williamson, 256 N. Y. 117.) Since the indorsers’ obligation, though consisting of two promises, is a single obligation which may be enforced in a single suit, the plaintiff was bound to assert his full claim in the earlier action upon the note. He cannot split his cause of action.

Even were that not true, it would be difficult to find any basis for the assertion of a cause of action by an indorser against prior indorsers for costs of collection which the plaintiff has not been compelled to pay to the holder of the note who transferred it to the plaintiff. All the indorsers, plaintiff and defendants alike, made the same promises to pay all costs of collection including a reasonable attorney’s fee.” Transfer of the note transfers from one person to another the right to enforce the promise; but the obligation assumed by the promisor remains the same. A holder who collects the amount due on the note may recover a reasonable attorney’s fee from the drawer or any indorser of the note, for the drawer and indorsers have promised to pay such a fee. They have not made an additional promise, to each subsequent indorser, that if the note is not paid at maturity and the subsequent indorser is compelled to pay it, they will pay to him not only the amount which he has been compelled to pay, including perhaps a reasonable counsel fee as part of the cost of collection of the original holder, but also the additional costs of collection, including an additional counsel fee, incurred by each succeeding indorser. A person to whom a negotiable promise has been transferred can recover no more than was promised to the person making the transfer, i. e., the amount of the note, with the holder’s cost of collection.

The order of the Appellate Division should be reversed and the judgment of the Special Term affirmed, with costs in this court and in the Appellate Division. The question certified is answered in the affirmative.

Crane, Ch. J., O’Brien, Loughran and Finch, JJ., concur; Hubbs, J., concurs in result; Rippey, J., dissents.

Ordered accordingly.


text:
    Scarborough Properties Corporation, Respondent, v. Village of Briarcliff Manor, Appellant.

      Argued April 18, 1938;
    decided July 7, 1938.

      Herbert C. Gerlach and Joseph Beeback for appellant.
    The failure of defendant’s boards and officials to observe essential statutory requirements rendered their actions in connection with plaintiff’s offer ultra vires and void. (Matter of City of New York [E. 177th St.], 239 N. Y. 119; Mark v. Village of West Troy, 76 Hun, 162; Allen v. Smith, 76 Misc. Rep. 40; 151 App. Div. 920; Lyddy v. Long Island City, 104 N. Y. 218; Matter of Social I. E. Assn. v. Taylor, 268 N. Y. 233; Gwynne v. Board of Education, 259 N. Y. 191; Manhattan Co. v. Kaldenberg, 165 N. Y. 1; Ansonia B. & C. Co. v. New Lamp-chimney Co., 53 N. Y. 123; Donovan v. City of New York, 33 N. Y. 291; People ex rel. Tupper Lake W. Co. v. Sisson, 75 App. Div. 138; 173 N. Y. 606; Matter of Niland v. Bowron, 113 App. Div. 661; 193 N. Y. 180; Kramrath v. City, 127 N. Y. 575.) No contractual liability can be founded on plaintiff’s offer, since it is uncertain as to time of payment and attempts to bind in advance the legislative action of future boards. (Varney v. Ditmars, 217 N. Y. 223; Wells v. Village of East Aurora, 236 App. Div. 474.) The evidence does not as a matter of law warrant the conclusion that plaintiff’s offer was accepted by the village. (Lord & Burnham Co. v. City of New York, 251 N. Y. 198; N. Y. C. Employees’ Retirement System v. Eliot, 267 N. Y. 193; People ex rel. Sweet v. Board of Supervisors, 101 App. Div. 327; Mayor v. N. Y. C. & H. R. R. R. Co., 69 Hun, 324; Miller v. Mayor, 3 Hun, 35; Poel v. Brunswick-Balke-Collender Co., 216 N. Y. 310; Cameron v. Wright, 21 App. Div. 395; 163 N. Y. 586.)

      Joseph F. Curren for respondent.
    The village board of trustees had ample power under the Village Law (Cons. Laws, ch. 64) to acquire plaintiff’s lands and sewer and water improvements for municipal purposes. The acquisition thereof is not ultra vires. (Port Jervis Water Co. v. Village of Port Jervis, 151 N. Y. 11; Beckrich v. City of North Tonawanda, 171 N. Y. 292; Hatch v. Village of Monticello, 184 App. Div. 450; 227 N. Y. 644; Mead v. Turner, 134 App. Div. 691.) The village has accepted the plaintiff’s deed and has ratified the conveyance of plaintiff’s lands and improvements. (Moore v. City of Albany, 98 N. Y. 396; Vermeule v. City of

      Corning, 186 App. Div. 206; 230 N. Y. 585; Beckrich v. City of North Tonawanda, 171 N. Y. 292.) The village may not take and keep plaintiff’s property and improvements without just compensation. (McKechnie Brewing Co. v. Trustees of Village of Canandaigua, 15 App. Div. 139; 162 N. Y. 631; Port Jervis Water Co. v. Village of Port Jervis, 151 N. Y. 111; Nelson v. Mayor, 63 N. Y. 535.)
   Lehman, J.

The defendant is a village of the third class, organized under the Village Law (Cons. Laws, ch. 64) of the State of New York. In November, 1926, the plaintiff, which owned a parcel of land in the village, executed and delivered to the clerk of the village a deed conveying to the defendant the fee of three roads which the plaintiff had constructed upon its land, together with a sewer system, water pipes and fire hydrants which the plaintiff had installed in the street. The plaintiff, claiming that the conveyance was made pursuant to an offer to dedicate the roads and the improvements therein, upon the understanding or condition that the defendant would reimburse the plaintiff for the cost of said improvements, and that the defendant accepted the offer and agreed that the fair cost of replacement and the fair valuation of the improvements was the sum of $50,438.33, has brought this action to recover the said purchase price, conditioned upon which the said conveyance was made and delivered.” A judgment in favor of the plaintiff has been unanimously affirmed by the Appellate Division.

The evidence establishes, and the referee found, that the plaintiff, Scarborough Properties Corporation, prior to 1926 constructed upon a parcel of land in the village of Briarcliff Manor, which it owned and developed, three private roads known as River Road,” Woodlea Lane,” and “ Creighton Lane.” In the bed of the roads the plaintiff constructed and laid a drainage system, water mains, fire hydrants and sewer lines. In April, 1926, the plaintiff sent to the Trustees of the village the following letter:

“ Apn7 7, 1926. Trustees of the Village of Briarcliff Manor, Briarcliff Manor, N. Y.
“ Dear Sirs : The undersigned hereby offers to dedicate to the Village of Briarcliff Manor the road now known as the River Road, the Woodlea Lane and the Creighton Lane, all owned by the undersigned. In addition to the road and lanes themselves, we hereby offer to dedicate also the sewer system, water pipes and fire hydrants, now installed in the said road and lanes, with the understanding that we are to be reimbursed for the cost of the same, as follows: Sewer and drainage system complete.........$54,967 61 Water Pipes, 18 Fire Hydrants............. 33,965 77 less a depreciation of two per cent, as soon as the Village of Briarcliff Manor can arrange to make payment of said amount. Yours very truly,
“ SCARBOROUGH PROPERTIES CORPORATION, “ By H. E. Benedict, Vice-President.”

The minutes of the Board of Trustees, held on April 13, 1926, state that this letter was read at that meeting and “ subject to the checking of the figures with regard to the cost, and the approval of the Municipal Board, the President was empowered to proceed with the matter.”

The minutes of the meeting of December 14, 1926, contain an entry: “ Scarborough Properties Cornoration: It was reported that deed had been received from them as per previous conferences covering River Road, Woodlea Lane and Bishop Creighton Lane, which it was decided to hold in abeyance until such time as Mr. Valentine and Mr. Manaban had checked the cost of the water and sewer lines to be taken over with this property.”

The deed was recorded in November, 1927. Prior thereto Mr. Valentine, the defendant’s engineer, and Mr. Manaban, its Superintendent of Water and Sewers, had investigated the cost of the sewer drainage system, water pipes, hydrants, etc., and had reported that the sum of $50,438.33 represented their fair and reasonable cost. The minutes of a meeting held in January, 1928, of the Municipal Board of the defendant village established pursuant to section 63 of the Village Law, contain the following entry: Scarborough Properties Corporation. The Secretary reported with reference to the conference with Mr. Slaker and Mr. Chapin in relation to the cost of the water and sewer lines in their property which they had requested the Village to take over and stated that they had agreed upon the following figures namely cost of sewer lines $20,815.40, water lines $29,622.93 or a total of $50,438.33, which upon motion duly seconded the Board agreed to accept and to take them over in turn with other lines less a depreciation of 2% per annum.”

In February, 1928, the Clerk of the village notified the plaintiff in writing of the action taken at the meeting of the Municipal Board, and requested the plaintiff to confirm the amount fixed as the cost of the improvements. The plaintiff did so promptly thereafter. Since that time the village has taken possession of the roads and has collected the charges which have accrued from the use thereof by owners of property abutting thereon.

The defendant village has only those powers which the Legislature has conferred upon villages of the third class, and the powers so conferred upon the village may be exercised only in the manner provided by the Village Law, and through the officers authorized by the statute to act for the village. The power of a village to enter into contracts and to incur financial obligations is subject to statutory conditions and restrictions intended to protect the inhabitants and taxpayers against ill-considered or extravagant action. Though the conveyance of plaintiff’s property was made upon the understanding that payment for the cost of improvements as agreed upon should be made within a reasonable time thereafter and though the defendant has no right, either legal or moral, to enjoy the property without paying for it in accordance with the understanding or condition upon which the conveyance was made, yet the plaintiff is not entitled to recover the agreed price unless the deed was accepted and the obligation to pay incurred in the manner provided by the statute and by the officers of the village authorized to bind the village. If the acts of the village officers exceeded the powers of those officers, the plaintiff may resume possession of its property. It cannot compel the defendant to abide by an agreement made through agents without power to bind the village.

The Village Law, article 6, regulates the exercise of the powers of villages and their officers in regard to “ Streets, sidewalks and public grounds.” Section 144 provides that: “ An owner of land in a village who has laid out a street thereon may dedicate such street, or any part thereof, or an easement therein, to the village for a public street, or an owner may dedicate for such purpose land not laid out as a street. Upon an offer in writing by the owner to make such a dedication, the board of trustees shall meet to consider the matter; and it may, by resolution, determine to accept a dedication of the whole or any part of the land described in such offer or the whole or any part of such street, to be described in such resolution. Upon the adoption of such a resolution the owner may execute and deliver to the village clerk a proper conveyance of the land to be dedicated. The board of trustees, may by resolution, accept the conveyance, and the conveyance, shall thereupon be recorded in the office of the county clerk. Upon the acceptance of the conveyance the land described therein shall become and be a public street of the village. No street less than two rods in width shall be accepted by dedication, unless the resolution adopting same is passed by unanimous vote of the board of trustees. All offers of dedication must be entered at length in the minutes of the board of trustees.”

The land for a street improvement can be acquired only by purchase or condemnation unless the owner of the land chooses to dedicate it to the village for a public street. Where land is acquired by purchase or condemnation the statute provides a method of procedure calculated to prevent ill-considered or extravagant action by the public authorities. In this case, concededly, there was no compliance with these provisions and there was no valid contract made for the purchase of the plaintiff’s property. Unless section 144 of the Village Law gives to the village authority the power to bind the village to pay a stipulated sum of money by accepting a dedication made upon the understanding or agreement that the village will pay such sum, the plaintiff has no cause of action.

“ Dedication is essentially of the nature of a gift. There can be no gift without a surrender of the subject by the one and acceptance of it by the other.” (Flack v. Village of Green Island, 122 N. Y. 107, at p. 113.) The conveyance of land to a village upon the agreement of the village to pay for it constitutes a sale of land, not a gift. True, the motive that induces an owner of land to dedicate it for a public use is not always a desire to confer a benefit upon the public. An owner who dedicates part of his land for use as a public street may expect to derive advantage or profit from the public user. The court does not inquire into the motives that led an owner to surrender or - convey his property. The test of the validity of a dedication, like the test of the validity of other gift or transfer, is, primarily, whether there has been complete relinquishment on the one side and acceptance on the other. If the act was voluntary title passes even though the owner was induced to act by hope of indirect benefit or even by receipt of money. (Rees v. City of Chicago, 38 Ill. 322. Cf. H. W. Chaplin, " The Law of Dedication in its Relation to Trust Legislation,” 16 Harvard Law Review, 329, at p. 335.) Where, however, a person conveying land for a public purpose seeks to compel payment of the price of such conveyance, he must prove a valid agreement to pay such price. An obligation to pay does not arise merely from acceptance of a voluntary dedication.

It is said, however, that section 1-a of the Village Law confers upon every village power to take by gift, grant, bequest and devise and hold real and personal estate absolutely or in trust for any public use * * * upon such terms or conditions as may be prescribed by the grantor or donor and accepted by said corporation ” and that, in the exercise of that power, the village authorities could place upon the village an obligation to pay for the property conveyed by accepting a deed of conveyance which the plaintiff had offered to give only upon condition that payment of a stipulated price be made for it. The power conferred upon a village to hold property upon such terms and conditions as may be prescribed by the grantor does not imply a power in a village board to accept an offer to dedicate land absolutely to a public use upon the promise of the village that it will pay for such dedication. A grantor may prescribe the terms and conditions upon which the village shall hold property, and breach of terms and conditions prescribed by a grantor of land and accepted by the grantee may give rise to a right of re-entry by the grantor or his heirs. Acceptance of an offer to convey, upon the understanding that payment will be made, gives rise to a contract of purchase and sale, but such a contract, binding upon a village, can be made only by officers clothed with the power to make contracts of purchase and subject to the safeguards and restrictions with which the exercise of such power is hedged by statute. The plaintiff cannot recover the stipulated purchase price of the property without proving a valid agreement to make payment. The rights of the parties are not affected by the circumstance that the plaintiff chose to call its offer an offer to dedicate instead of an offer to convey. The power to accept a dedication made under section 144 of the Village Law does not include a power to agree to pay for what we have said “ is essentially of the nature of a gift.”

By chapter 708 of the Laws of 1934 the Legislature has added an additional subdivision, 61-a, to section 89, which defines the general powers of boards of trustees. The new subdivision confers, in express terms, upon the board of trustees of a village power to accept the dedication of lands in the village for a public street or streets in the village on condition or agreement that the village will reimburse the owners of the street or streets so dedicated as public streets, for sewers, water mains and fire hydrants, or any of such improvements, constructed in such dedicated lands at private expense.” Though at the time when the Board of Trustees attempted to make the contract upon which the plaintiff’s cause of action is based it was without power to bind the village, the amended statute in express terms authorizes the Board of Trustees now to ratify such dedication and agreement to make such reimbursement. The power which the Legislature has now conferred upon the Board of Trustees to make or ratify such an agreement is, however, not absolute. It is subject to a permissive referendum. The village is not bound to make payment for the land conveyed unless a contract is made as provided in the statute.

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

O’Brien, Hubbs, Loughran, Finch and Rippey, JJ., concur; Crane, Ch. J., dissents.

Judgments reversed, etc.


text:
    Manufacturers Trust Company, as Substituted Committee of the Estate of Martha G. Gray, an Incompetent Person, Appellant and Respondent, v. Robert L. Gray, Respondent and Appellant.

      Argued May 27, 1938;
    decided July 7, 1938.

      Alexander U. Zinke and Charles W. Silver for plaintiff, appellant and respondent.
    There was no evidence in law to sustain a finding of waiver in view of the wife’s mental and physical incapacity, intentionally and knowingly to waive her rights. (Wachtel v. Equitable Life

      Assur. Soc., 266 N. Y. 345; Walrath v. Hanover Fire Ins. Co., 216 N. Y. 220; Douglass v. Wolcott Storage & Ice Co., 251 App. Div. 79: Ramme v. Long Island R. R. Co., 226 N. Y. 327; Linton v. U. F. Co., 124 N. Y. 533; Post v. Manhattan Ry. Co., 125 N. Y. 697; S. & E. Motor Hire Corp. v. N. Y. Indemnity Co., 255 N. Y. 69; Newburger v. Lubell, 257 N. Y. 383; Ansorge v. Belfer, 248 N. Y. 145; Matter of City of Rochester, 208 N. Y. 188; Redfield v. Critchley, 252 App. Div. 568; 277 N. Y. 336; Lord Constr. Co. v. Edison P. C. Co., 234 N. Y. 411; Soma v. Handrulis, 277 N. Y. 223; Hamlin v. Sears, 82 N. Y. 327; Rothschild v. Title Guarantee & Trust Co., 204 N. Y. 458; More v. N. Y. B. F. Ins. Co., 130 N. Y. 537.) The burden was upon the defendant to establish that his wife abandoned him. Defendant not only utterly failed to do so, but on the contrary, his own letter and the evidence in the case overwhelmingly established his abandonment of his incompetent wife. (Goodale v. Lawrence, 88 N. Y. 513; Laudo v. Laudo, 188 App. Div. 699; Romm v. Romm, 227 App. Div. 756; DeBrauwere v. DeBrauwere, 203 N. Y. 460; Laumeier v. Laumeier, 237 N. Y. 357; Brown v. Brown, 266 N. Y. 532; Landes v. Landes, 182 App. Div. 233; Williams v. Williams, 130 N. Y. 193; Silberstein v. Silberstein, 218 N. Y. 525.) An incompetent wife, both prior and subsequent to judicial incompetency, is incapable of forming an intent to abandon her husband or waive any rights. (Goodale v. Lawrence, 88 N. Y. 513; Gordon v. Gordon, 88 N. J. Eq. 436; Jones v. Newton, (1920) 3 K. B. 381; Wurster v. Armfield, 175 N. Y. 256; Riggs v. American Tract Society, 84 N. Y. 330; Van Deusen v. Sweet, 51 N. Y. 378.) Neither the wife’s insanity nor the existence of her separate estate, relieved the husband of the obligation of support. The action is maintainable by the incompetent wife’s committee to recover moneys expended for her support out of her separate estate. (De Brauwere v. De Brauwere, 203 N. Y. 460; Laumeier v. Laumeier, 237 N. Y. 357; Brown v. Brown, 266 N. Y. 532; Matter of

      Fox, 275 N. Y. 604; Kaplan v. Kaplan, 231 App. Div. 114; 256 N. Y. 366; Matter of Marsh, 242 App. Div. 290; Matter of Bennitt, 153 Misc. Rep. 713.) Plaintiff being entitled to recover on ;he law, judgment may be directed by the Court of Appv tis in its favor on the first cause of action with interest and for interest on the amount awarded by the Appeiate Division on the second cause of action from the date the sums were advanced. (Bank of United States v. Manheim, 264 N. Y. 45; Kerner v. Epstein, 269 N. Y. 443; Williamsburgh Sav. Bank v. State, 243 N. Y. 231; Britton v. Scognamillo, 238 N. Y. 375; Gillet v. Van Rensselaer, 15 N. Y. 397; Woerz v. Schumacher, 37 App. Div. 374; 161 N. Y. 530; Foley v. Foley, 15 App. Div. 276; Miller v. Schloss, 218 N. Y. 400; People ex rel. Dusenbury v. Spier, 77 N. Y. 144; Preston Co. v. Funkhouser, 261 N. Y. 140; Sciaky v. Rodgers & Hagerty, Inc., 277 N. Y. 483; Blackwell v. Finlay, 233 N. Y. 361.)

      Harold M. Kennedy for defendant, respondent and appellant.
    The Court of Appeals is bound by the jury’s finding that the probable desires of the incompetent were against the enforcement of the claim. (Empire Trust Co. v. Fell, 271 N. Y. 72; Matter of Nutrizio, 145 Misc. Rep. 626; Krotosky v. Krotosky, 169 App. Div. 850.) The action is equitable in character. There was never any demand by the plaintiff or by her committee prior to the institution of the action. The form of the complaint did not indicate what the precise demand of the plaintiff was in this respect. Under such circumstances, the trier of the facts had the right to determine whether interest should run from the first expenditure, from the commencement of the action, or from the date of its verdict (Klausner v. Queens Fur Dressing Co., 130 Misc. Rep. 579.)
   Lehman, J.

The defendant is the husband of Martha Gomer Gray, who was adjudicated an incompetent person in September, 1927. Her husband, the defendant, left her in February, 1924, and since that time has failed to make any provision for her support. Until the date when the wife was declared incompetent, the wife paid for her own support. Since that time the committee of her estate has paid out of her estate the expense of her maintenance at Central Islip State Hospital. The committee now seeks to compel the defendant to repay the amounts expended by the wife and by her committee for her support.

The complaint contains two causes of action. The first cause of action is for the recovery of moneys spent by the wife before she was declared incompetent; the second cause of action is for money expended by her committee. The trial judge submitted to the jury the questions of fact upon which, in his opinion, liability of the defendant would depend. The jury’s verdict was in favor of the defendant on both causes of action. The Appellate Division has held that a verdict should have been directed in favor of the plaintiff upon the second cause of action for the amount which the committee was compelled to pay for the incompetent’s support, with interest from the date of the judgment, and modified the judgment accordingly.

There has been no decree of separation or of divorce adjudicating that, because of the misconduct of the wife, the husband is absolved of his obligation to provide for her support. Prior to the separation of the parties they lived at a hotel in Brooklyn. When the defendant left his wife he wrote to her that he had become convinced that it is best for both of us that I step out of the picture now.” In the same letter he said: “ I have not consulted a lawyer about this step that I am taking, and will not unless you make it necessary.” The defendant attempted to show that he left the wife because he could not afford to support her at the hotel where they were living and that she refused to move from the hotel, and thus in a legal sense abandoned him. The evidence is patently insufficient to show misconduct on her part which would justify the husband in leaving bis wife and in refusing to support her thereafter. The statute (Civ. Prac. Act, § 347) seals the lips of the defendant in regard to personal transactions between himself and his incompetent wife, except in so far as the committee has itself removed the seal. We do not know what occurred between the parties before or after the separation. We cannot apportion fault between the parties. Perhaps, indeed, the wife as well as the husband may have been convinced that it was best that the husband should step out of the picture.” Enforcement of rights and obligations of the parties depends upon the matters revealed at the trial, not upon matters left to conjecture because proof is impossible.

In the absence of proof that his wife abandoned him, or, by other misconduct, relieved the defendant of his obligation to support her, that obligation still continues and may be enforced by appropriate application to the court. That obligation continues even though the wife has means sufficient to pay for her own support. The problem here presented is whether the marital obligation of the husband to support his wife creates a liability to reimburse the estate of a wife for moneys expended for her support after the parties have separated, where it appears that the wife has means sufficient to pay for her support, and it does not appear that the wife objected to the separation or desired her husband to continue to support her.

We have held that where an abandoned wife, left by her husband without support for herself and her children, uses her own money, chiefly the proceeds of her own earnings as a seamstress and janitress, to provide necessaries for herself and her children, she may recover the amount so expended. (De Brauwere v. De Brauwere, 203 N. Y. 460.) In that case the wife unsuccessfully attempted to compel the husband to perform his obligation. She used the proceeds of her labor to provide necessaries solely because the husband failed to do his duty to support Ms family. The court by analogy placed her in the same position as a stranger who supplies necessaries to abandoned children, and said that for necessaries so furnished “ ‘ the law raises an implied promise to pay on the part of the parent.’ (Van Valkinburgh v. Watson, 13 Johns. 480.) ” (p. 462.) The basis' for the implication of the promise to pay is that necessaries have been furmshed or money has been applied by a wife or third person for the purpose of an obligation resting primarily upon her husband * * * in discharge of his obligation.” In the case which we are now reviewing, it is said that the evidence fully justifies a finding by the jury that the wife by her conduct has waived any claim to reimbursement.

We have said that though an agreement by a wife to exonerate her husband from Ms obligation to support her may be void in the sense that so long as it remained executory it could not be enforced against her,” yet the wife has the right to perform it and having done so cannot undo what has been done by recalling what she had paid or requirmg the husband to reimburse her. (Third Nat. Bank v. Guenther, 123 N. Y. 568, 576; Pierce v. Pierce, 9 Hun, 50.) So a wife who uses her own money to pay household expenses or, while living apart from her husband, to pay for her own support, may seek reimbursement from the husband only where he has promised such reimbursement either expressly or by implication of fact or of law. Here there has been, of course, no proof of an express promise; and in the absence of proof that the wife used her own money for her support with reasonable expectation that her husband would repay it or that she was compelled to discharge his obligation to support her, because otherwise she would be without support, no finding of a promise implied in fact or in law would be justified. There is no showing of any protest against the defendant’s expressed intention to live apart from Ms wife or of any refusal by the husband to provide such support as might be witMn Ms means. For all that appears, the wife may have preferred to use her own money to provide for her support rather than to be dependent upon him or to live in the manner which the husband would be willing and able to pay for. Perhaps the term waiver ” is an inaccurate description of the wife’s conduct which prevents recovery of moneys which she may have voluntarily expended for her support before the adjudication of incompetency, but we agree with the courts below that there was at least a question of fact as to whether there was any obligation upon the defendant to repay moneys paid by the wife before she became incompetent.

Though it appears that before she was adjudicated an incompetent and almost from the date of the separation, the wife was a patient in hospitals for those suffering from mental or nervous disturbance, yet there is no evidence that she was actually incompetent until the date when incompetency was adjudicated. Until that time she was free to use her own money for her support, if she so chose, rather than to look to her husband for support. After a committee of her estate was appointed, she was no longer free to exercise such choice. The primary obligation to pay for her support rested upon the defendant, her husband. The committee was bound to see that the incompetent received support. It might use the moneys in the incompetent’s estate to pay for the incompetent’s expenses in the State hospital in accordance with the directions of the court, if the husband, primarily hable, failed to provide support; but it had no right to use the money of the incompetent to relieve the defendant from bis obligation. The law implies a promise by the defendant to repay the amount which the committee was compelled to pay because the defendant failed to meet his obligation. The action is brought upon that implied promise, and the plaintiff was entitled to recover interest upon the amount recovered, at least from the date of the service of the summons and complaint. That is true even though the defendant’s implied contract was to pay an amount measured by his pecuniary ability and which was fixed only at the trial. (Civ. Prac. Act, § 480.)

The action is an action at law even though an equitable defense might be interposed. (Empire Trust Co. v. Fell, 271 N. Y. 72.) The defendant has failed to plead and prove facts which in that case we held would constitute an equitable defense.

The judgment of the Appellate Division should be modified to the extent that interest upon the sum recovered is allowed from the beginning of the action, and as so modified affirmed, without costs.

O’Brien, Hubbs, Loughran, Finch and Rippey, JJ., concur; Crane, Ch. J., taking no part.

Judgment accordingly.


text:
    Anna Stark, as Administratrix of the Estate of Noah Stark, Deceased, Respondent, v. National City Bank of New York et al., Appellants, and Anna Stark, Individually, Respondent, Impleaded with Others.

      Argued May 23, 1938;
    decided July 7, 1938.

      Carl A. Mead and Lester Kissel for National City Bank of New York, appellant.
    Since investment by a trustee in non-legal investments is not tortious, the defendant bank would not be liable if it had assisted the administratrix in making such an investment.(Steele v. Leopold, 135 App. Div. 247; 201 N. Y. 518; Hoyt v. Dollar Sav. Bank, 187 App. Div. 243; 231 N. Y. 583; Delafield v. Barrett, 245 App. Div. 33; 270 N. Y. 43.) The exchange of Bancitaly and Bank of Italy stock for Transamerica stock was not wrongful. (Brown v. Campbell, Hopk. Ch. 233; Hogan v. DePeyster, 20 Barb. 100; Matter of McCafferty, 147 Misc. Rep. 179; Collinson v. Lister, 20 Beav. 356.) Where an innocent third party deals with a trustee or fiduciary, with knowledge of the trust, and the act of the fiduciary may be either perfectly proper or a breach of trust, the third party is not liable to the beneficiary, unless he had actual knowledge of the fiduciary’s breach of trust and consciously participated or aided therein. (Bischoff v. Yorkville Bank, 218 N. Y. 106; Fidelity & Deposit Co. v. Queens Co. Trust Co., 226 N. Y. 225; Manufacturers Trust Co. v. United States Mortgage & Trust Co., 122 Misc. Rep. 726; 213 App. Div. 345; 244 N. Y. 550; Clarke v. Public Nat. Bank & Trust Co., 259 N. Y. 285; Havana Central R. R. Co. v. Central Trust Co., 204 Fed. Rep. 546.) The bank as a corporation, did not participate in the transaction. (Higgins v. Western Union Tel. Co., 156 N. Y. 75; Hartell v. Simonson & Son Co., 218 N. Y. 345; Linstead v. Chesapeake & Ohio Ry. Co., 276 U. S. 28; Denton v. Yazoo & M. V. R. R. Co., 284 U. S. 305; Mayor v. Tenth Nat. Bank, 111 N. Y. 446; Bienenstok v. Ammidown, 155 N. Y. 47; First Nat. Bank v. Ocean Nat. Bank, 60 N. Y. 278; Gause v. Commonwealth Trust Co., 196 N. Y. 134; Camacho v. Hamilton Bank Note & Eng. Co., 2 App. Div. 369; Carney v. New York Life Ins. Co., 19 App. Div. 160; Caldwell v. Mutual Reserve Fund Life Assn., 53 App. Div. 245; Chard v. Ryan-Parker Construction Co., 182 App. Div. 455.) Even if the exchange had been tortious, the bank would not be liable to the plaintiff, unless it knew that the act was tortious and guiltily profited therefrom. (Hoyt v. Dollar Sav. Bank, 187 App. Div. 243; 231 N. Y. 583.)

      William D. Whitney, Richard A. Rosan and Samuel B. Stewart, Jr., for Transamerica Corporation, appellant.
    Section 111 of the Decedent Estate Law (Cons. Laws, ch. 13) does not impose fiabifity upon a corporation for issuing to a fiduciary its securities which are not within the classification of the section. (Delafield v. Barret, 270 N. Y. 43; Matter of Adriance, 145 Misc. Rep. 345; Matter of McCafferty, 147 Misc. Rep. 179; Matter of Cady, 211 App. Div. 373; Matter of Dalsimer, 251 App. Div. 385.) An exchange of securities not within the section’s classification imposes no fiabifity, unless such exchange is the proximate cause of the loss. (Boronkay v. Robinson & Carpenter, 247 N. Y. 365; Laidlaw v. Sage, 158 N. Y. 73; Koch v. Fox, 71 App. Div. 288; Matter of Adriance, 145 Misc. Rep. 345.)

      Saul J. Lance and George H. Schwartz for respondent.
    The defendants-appellants having participated in a transaction whereby assets of a decedent estate were disposed of to acquire securities not authorized by section 111 of the Decedent Estate Law are liable to the estate for the value of the property so disposed of. (King v. Talbot, 40 N. Y. 76; Matter of Robbins, 135 Misc. Rep. 220; Matter of Myers, 131 N. Y. 409; Matter of Leonard 118 Misc. Rep. 598; Steele v. Leopold, 135 App. Div. 247; 201 N. Y. 518; Deobold v. Oppermann, 111 N. Y. 531; Zimmerman v. Kinkle, 108 N. Y. 282; Wetmore v. Porter, 92 N. Y. 76; Moss v. Cohen, 158 N. Y. 240; Warren v. Union Bank, 157 N. Y. 259; Broderick v.
      Aaron, 151 Misc. Rep. 516; National Surety Co. v. Manhattan Mortgage Co., 185 App. Div. 733; 230 N. Y. 545; Squire v. Ordemann, 194 N. Y. 394; Clarkson Home v. Missouri K. & T. Ry Co., 182 N. Y. 47; First National Bank v. National Broadway Bank, 156 N. Y. 459; Matter of Stupack, 274 N. Y. 198.) The defendant Transamerica Corporation is liable upon the further ground that it sold to the estate an unauthorized and improper investment and is, therefore, liable to the estate for the money and property belonging to the estate which it received. (National Surety Co. v. Manhattan Mortgage Co. 230 N. Y. 545; Empire State Surety Co. v. Cohen, 93 Misc. Rep. 299; Wormely v. Wormely, 8 Wheat [U. S.] 421; Mechanics Bank v. Seton, 1 Peters [U. S.], 299; Hill v. McIntyre, 39 N. H. 410; Boisseau v. Boisseau, 79 Va. 73; Asberry v. Asberry, 33 Gratt [Va.] 463; Matter of Title & Mortgage Guarantee Co., 246 App. Div. 436; 270 N. Y. 629; Pink v. Title Guaranty and Trust Co., 298 N. Y. Supp. 544; Bonham v. Coe, 249 App. Div. 428.) The stock of Transamerica Corporation was an unauthorized investment for the funds and property of an estate whether such investment was made by purchase and payment of cash or by purchase and payment of other stock in exchange. (Cons. Laws, ch. 13, § 111; Cons. Laws, ch. 41, § 21; National Surety Co. v. Manhattan Mortgage Co., 185 App. Div. 733; 230 N. Y. 545; Matter of McCafferty, 147 Misc. Rep. 179; Broderick v. Aaron, 151 Misc. Rep. 516; Matter of Rolston, 162 Misc. Rep. 194.)
   Lehman, J.

Noah Stark died in June, 1928. His widow was appointed administratrix of his estate. Among the assets of the estate were twenty-four shares of Bancitaly Corporation and thirty shares of Bank of Italy. In October, 1928, notice was sent to the stockholders of these corporations that Transamerica Corporation had been formed for the purpose of acquiring control of Bancitaly Corporation and of the Bank of Italy and that one share of Bancitaly stock might be exchanged for one share of Transamerica stock and one share of Bank of Italy stock for one and three-quarters shares of Transamerica stock. The notice stated that the stock might be delivered for exchange to James F. Cavagnaro, Vice-President, Bank of America, 680 Broadway, New York City.” In September, 1929, an attorney representing the estate of Noah Stark went to the Bank of America at 680 Broadway and received there the information that the Bancitaly and Bank of Italy stock belonging to the estate might be exchanged for 192 shares of Transamerica stock upon payment of $2,137 exacted to adjust rights or equities which had arisen since the original offer. Upon those terms the exchange was consummated. Five years later when the market value of Transamerica stock was only a fraction of its value at the time the exchange was made, the administratrix brought this action to recover the value of the securities belonging to the estate and also the money delivered by the plaintiff as administratrix to obtain the Transamerica stock.

An administratrix is under a duty to distribute the assets of the estate or their proceeds after payment of taxes, administration expenses and debts. The plaintiff, as administratrix of the estate, might hold the assets of the estate for the time reasonably required for administration of the estate. Pending such administration she might, we assume, invest moneys in the estate in the “ kind of securities ” in which fiduciaries are authorized to invest trust funds. (Decedent Estate Law [Cons. Laws, ch. 13], § 111.) If an administratrix invests the assets of the estate in other “ kind of securities ” she may be held to account for the consequent loss to the estate. The stocks of the Bank of Italy and of the Bancitaly Corporation which belonged to the estate, like the stock of Transamerica Corporation received in return for that stock and an additional payment in cash, are not the kind of securities in which trust funds may be invested. The plaintiff, as representative of the estate, now asserts that through that transaction she wasted the assets of the estate and that the defendants National City Bank, as successor in interest of Bank of America, and the Transamerica Corporation wrongfully aided and abetted her in such waste and that they and the agents, through whom they acted, are liable to her, as the representative of the estate, for the consequent loss.

The trial court has granted judgment in favor of the plaintiff against the corporate defendants, who are required to take back the Transamerica stock transferred to the estate and to pay to the plaintiff the value of the stock which they received from the estate in the exchange. The court did not require the defendant to return to the plaintiff, in addition, the moneys paid to the corporations as part of the consideration for the exchange. These moneys did not belong to the estate, but were borrowed by the administratrix. The court held that the administratrix cannot be allowed on her accounting any credit for moneys borrowed by her for investment or other unauthorized purpose and that, therefore, the waste of these moneys would cause no loss to the estate. The court dismissed the complaint against the individual defendants who acted as agents of the corporate defendants. It also dismissed various cross-claims for indemnity which the defendants made against each other and against Anna Stark individually. The Appellate Division affirmed the judgment with the modification, only, that the dismissal of the cross-claim of the defendant National City Bank against Anna Stark individually should be without prejudice ” instead of upon the merits.”

Since no appeal was taken by the plaintiff, the dismissal of the complaint against the individual defendants is not subject to review now; nor is the refusal of the trial court to include in the judgment a provision for the return of the money paid as part consideration for the stock of Transamerica Corporation. The question is, however, properly raised by the defendant corporations whether a judgment on the merits in favor of the officers or agents through whom the corporate defendants acted does not destroy the foundation of the claim of liability asserted against them for loss resulting from these acts. (Cf. Pangburn v. Buick Motor Co., 211 N. Y. 228; Schubert v. Schubert Wagon Co., 249 N. Y. 253.) Questions of who may be held responsible for wrong committed and the extent of the responsibility are, of course, subordinate to the question of whether there has been any wrong. If upon the undisputed evidence it appears as matter of law that these defendants did not participate in any wrong to the estate, no other question need be decided. We pass first upon the fundamental problem presented by the appeal.

Liability, if any, must rest upon proof, first, that the administratrix wasted the assets of the estate by investment in common stocks, and, second, that the corporate defendants wrongfully participated in such waste. We have said recently that though investment of trust funds in a kind of securities not authorized by the statute is not forbidden by statute and is not tortious at common law, yet public policy requires * * * that where other than permitted investments are made, the estates shall be reimbursed in the event of loss.” (Delafield v. Barret, 270 N. Y. 43, 49.) Those who knowingly assist a trustee in making such investments may subject themselves to similar liability. (National Surety Co. v. Manhattan Mortgage Co., 185 App. Div. 733; affd., 230 N. Y. 545.) - In those cases the fiduciary was under a duty to invest the trust fund prudently and in suitable securities, in order that the beneficiary might enjoy the income, but the fiduciary caused a loss to the trust fund by investments in securities which were not of the kind ” in which, by statute, the fiduciary was expressly permitted to invest trust funds. In the instant case securities belonging to the estate, which were not “ permitted investments ” and which it was the duty of the administratrix to sell within a reasonable time, were converted into securities which, like the original securities, were not permitted investments ” and which again it was the duty of the fiduciary to sell.

Did that transaction constitute an investment within the meaning of the statute and the cases where liability for loss sustained was imposed upon a fiduciary? The plaintiff in her complaint described the transaction as an exchange or conversion ” of shares of stock of Bancitaly Corporation and of Bank of Italy into shares of stock of defendant Transamerica Corporation. The trial court has found that the transaction was a purchase or investment. Description of the transaction by the plaintiff or by the court does not change its character or give rise to rights and liabilities. There is no substantial dispute between the parties as to what the plaintiff and the defendants did. The court must determine whether there is any evidence which shows that what they did constitutes a wrong or neglect of duty owed to the estate. Without wrong or neglect there can be no liability.

The complaint alleges, and the defendants have by stipulation admitted, that at the time of the delivery to the defendants of the stock of the Bancitaly Corporation and the stock of Bank of Italy which belonged to the estate, the Bancitaly stock had “ a market value of One Hundred and Sixty-four Dollars per share ” and the Bank of Italy stock “ a market value of Two Hundred and Eighteen and 50/100 Dollars per share.” It was the duty of the plaintiff as administratrix to sell or dispose of that stock within a reasonable time and at the best price she could obtain by the exercise of reasonable diligence. Within those limits the time and manner of such sale rested within the discretion of the administratrix. If the administratrix, disregarding her duty, made no effort to sell the stock but chose to hold it for years in the hope of gaining profit or other advantage, she would doubtless be chargeable with the resultant loss if the stock declined in value. She would have no greater right to hold the Transamerica stock which she received in exchange for the original stock than to hold the original stock. We assume, then, that the plaintiff might be charged by the estate with the loss resulting from her failure to sell, within a reasonable time, the stock belonging to the estate or the stock for which that stock was exchanged, regardless of whether or not the exchange itself was wrongful.

The defendants, however, are not responsible for the injury resulting to the estate from the failure of the plaintiff to sell the stock within a reasonable time. They had no share in the plaintiff’s fault there. They are chargeable, if at all, only with loss resulting from the conversion of the stock of the estate into Transamerica stock. It does not appear that the stock of Transamerica could not have been sold as readily as the stock for which it was exchanged or for as much money as would have been obtained from the sale or other disposition of the original stock. Though the parties have stipulated that the stock of Bank of Italy and of Bancitaly Corporation had a market value, it appears from uncontradicted testimony that there were very few sales of those stocks but that the market for the stock of Transamerica was active. We quote verbatim the testimony elicited on cross-examination from a witness produced by the plaintiff: “ Q. Can you state whether in September, 1929, there was an active market in New York City in Bank of Italy stock? A. I don’t believe there was an active market in the stock in September, 1929. Q. It wasn’t listed anywhere in New York? A. It wasn’t listed, no. Q. It was dealt in in California if anywhere? A. Yes. An odd lot every once in a while would appear over the counter in New York; that is about all. Q. The same is true of Bancitaly, isn’t it? A. In September, 1929? Well, Bancitaly was practically retired at that time. Q. Practically all of it had gone into Transamerica before then? A. Yes. Q. There practically wasn’t any market in New York or anywhere for Bancitaly? A. That is right. Q. It was, however, exchangeable for Transamerica? A. Yes, sir. Q. And Transamerica Was listed on the Curb in New York, wasn’t it? A. Yes, sir. Q. And actively dealt in? A. Yes, sir.”

It is against the background of that situation that we must appraise the acts of the parties. An administratrix under a duty to dispose of stock for which there is practically ” no market but which is exchangeable ” for stock for which there is an active market, might be subject to a charge of lack of prudence if she did not make that exchange. Where one stock is freely interchangeable for another stock, it is rare indeed that the ratio of market values of the stocks is not fixed by the ratio upon which the exchange may be made — and as we have said, there is no contention here that the stock received by the estate in exchange for the stock owned by the estate did not have a market value as great as the market value of the stock which the estate owned.

We have, like the plaintiff, called the transaction an exchange — we do not mean that the transaction may not in some respects have been analogous to a new investment. (Cf. Mertz v. Guaranty Trust Co., 247 N. Y. 137; Matter of Anson, [1907] 2 Ch. 424.) Regardless of the label we may attach to the transaction, we cannot ignore the fact that it is a step in the administration of the estate which a prudent administratrix might take for the proper protection of the estate, unless the law refuses to countenance or approve such action. The result of the transaction was that the estate acquired stock which could be more readily sold than the stock which the estate previously held and at a price no less than the price which could be obtained for the original stock. To charge the administratrix with liability for the loss accruing from holding an unpermitted investment ” accords with the public policy of the State as formulated in Delafield v. Barret (supra). To charge the administratrix and those aiding her with liability for taking part in a transaction which a prudent person might take for the purpose of liquidating the assets of the estate, would only tend to hamper the administration of estates and be contrary to a sound public policy. It would prevent an administratrix from availing herself of an offer which might benefit the estate and which would not subject the estate to any substantial new risk.

In the cases where the courts have imposed liability upon those who aided a fiduciary in waste of the assets by unpermitted investments,” the third parties knew, or should have known, that the fiduciary was using the assets of a trust estate in breach of his trust or in violation of the duty of the fiduciary to conserve those assets prudently and honestly. (See American Law Institute, Restatement of the Law of Trusts, § 326.) For the most part they are cases where a broker knowingly participated in the use of moneys held in trust for the pinchase of speculative securities (Cf. Delafield v. Barret, supra, and cases there cited), or where a person aided a trustee in the conversion of trust property with knowledge or notice of the limitation of the trustee’s authority. (Cf. Deobold v. Oppermann, 111 N. Y. 531; Zimmerman v. Kinkle, 108 N. Y. 282; Squire v. Ordemann, 194 N. Y. 394; Wetmore v. Porter, 92 N. Y. 76; First Nat. Bank v. National Broadway Bank, 156 N. Y. 459.) In all these cases the transaction in which third parties participated was either tortious or placed upon the trust estate a risk which the fiduciary was under a duty to avoid. They do not support a rule of liability where no such factors are present.

Upon what basis then can the defendants in this case be charged with wrong? A public offer to exchange Transamerica stock for other stock had been made by Transamerica Corporation and had been accepted by a large majority of interested stockholders. The plaintiff, represented by an attorney, asked that the estate be accorded the benefit of the privilege or right which the other stockholders had obtained. To deny to an estate a privilege accorded to others would be unfair unless it appeared that injury might result to the estate. We have shown that the transaction could not possibly cause injury to the estate if it constituted a step in the administration of the estate. There is nothing in the record which shows that injury would result to the estate by the exchange itself even if the administratrix did not intend to dispose of the assets of the estate within a reasonable time but sought to obtain and hold Transamerica stock as an “ unpermitted investment.” The administratrix, might, so far as appears, have held, with equal readiness, the stock which originally belonged to the estate, if the defendants had refused to accord to the estate the privilege of exchanging it; or the plaintiff, if she had chosen, could have sold the original stock and, with the proceeds, could have bought the Transamerica stock.

The defendants have dealt with a fiduciary in the same manner as they dealt with other stockholders. They were strangers to the estate. The only duty they owed to it was to refrain from interference with its assets in manner which they knew or should have known might cause injury to the estate. Conflicting considerations of public policy enter into the rule or measure of responsibility which the courts impose upon third parties who deal with a faithless or even imprudent fiduciary. In all jurisdictions third parties are held responsible for loss caused to an estate by transactions with a fiduciary in which they participated with actual knowledge that the fidupiary was committing a breach of trust. In England the courts have hesitated to impose liability upon third parties dealing with a fiduciary in the absence of such actual knowledge of the breach of trust or conduct amounting to bad faith. (Cf. Barnes v. Addy, 9 Ch. [App. Cas.] 244; Matter of Barney, [1892] 2 Ch. 265. See Scott, Participation in a Breach of Trust, 34 Harv. L. R. 454, 464, 465.) The courts there have recognized and have given weight to the fact that a rule of responsibility based on notice or even constructive knowledge would to some degree hamper ordinary commercial transactions and delay the legitimate transfer of securities by fiduciaries.

In this country, in most jurisdictions, third parties who knowingly deal with a fiduciary may at times be held liable for loss caused to the estate where there is notice that the fiduciary may be committing a breach of trust. (Cf. American Law Institute, Restatement of the Law of Trusts, § 325; Loring v. Salisbury Mills, 125 Mass. 138; Baker v. Atlantic Coast Line R. R. Co., 173 N. C. 365.)

In those jurisdictions of this country which have adopted the Uniform Fiduciaries Act, the measure of responsibility, at least in cases which come within the purview of that act, is restricted as in England. By chapter 344 of the Laws of 1937 the Legislature added article 23-B to the General Business Law (Cons. Laws, ch. 20). The note of the Law Revision Commission states that the purpose of the article is to expedite the transfer of securities by fiduciaries with title, relieving trust estates from delay resulting from the rule imposing a stringent duty of investigation upon corporations registering transfers.” Section 359-j of that article is identical with section 3 of the Uniform Fiduciaries Act. (9 Uniform Laws, Annotated, p. 149.) It provides: with actual knowledge that the fiduciary is committing a breach of his or its obligation as fiduciary in making the transfer, or with knowledge of such facts that the action in registering the transfer amounts to bad faith.”

“ § 359-j. Registration of transfer of securities held by fiduciaries. If a fiduciary in whose name are registered any shares of stock, bonds or other securities of any corporation, public or private, or company or other association, or of any trust, transfers the same, such corporation or company or other association, or any of the managers of the trust, or its or their transfer agent, is not bound to inquire whether the fiduciary is committing a breach of bis or its obligation as fiduciary in making the transfer, or to see to the performance of the fiduciary obligation, and is liable for registering such transfer only when registration of the transfer is made

The statute, though not retroactive, is a legislative declaration of a public policy. We need not, however, resort to it in this case. Here there is not only absence of actual knowledge by the defendants that the fiduciary contemplated a wrong to the estate but also absence of notice or of constructive knowledge of any wrong. The administratrix in the proper exercise of her functions in the course of the administration of the estate was justified, if not, indeed, required, by ordinary prudence to avail herself of the offer of the defendants, to convert stock in two corporations, for which there was no active market, into stock in a company which controlled these corporations and for which there was an active market. The defendants committed no wrong by joining in making a transfer to the administratrix which the administratrix properly requested. In the absence of bad faith on their part they are not responsible for loss caused to the estate by misuse of the stock thereafter by the administratrix.

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

O’Brien, Hubbs, Loughran, Finch and Rippey, JJ., concur; Crane, Ch. J., taking no part.

Judgments reversed, etc.


author:
      Per Curiam.
     Finch, J.

text:
    In the Matter of the Claim of Delia Lanphier, Respondent, against Air Preheater Corporation et al., Appellants. State Industrial Board, Respondent.
    Argued May 18, 1938;
    decided July 7, 1938.

      Raymond F. Nichols for appellants.
    The death of the employee was not caused by an accidental injury within the provisions of the Workmen’s Compensation Law. (Cons. Laws, ch. 60.) (Matter of Lerner v. Rump Bros.,
      241 N. Y. 153; Matter of Jeffreyes v. Sager Co., 198 App. Div. 446; 233 N. Y. 535; Matter of Doulin v. City of Saratoga Springs, 236 App. Div. 749; 261 N. Y. 558; Matter of Connelly v. Hunt Furniture Co., 240 N. Y. 83; D’Oliveri v. Austin, Nichols & Co., 211 App. Div. 295.)

      John J. Bennett, Jr., Attorney-General (Leon Freedman of counsel), for State, Industrial Board, respondent.
    The injuries sustained by the deceased and which resulted in his death were accidental injuries arising out of and in the course of his employment. (Matter of Connelly v. Hunt Furniture Co., 240 N. Y. 83; Christian v. State Conservation Comm., 191 App. Div. 635; Matter of Rist v. Larkin & Sangster, 171 App. Div. 71; D’Oliveri v. Austin, Nichols &,Co., 211 App. Div. 295; Matter of Lerner v. Rump Bros., 241 N. Y. 153; Campbell v. Clausen-Flanagan Brewery, 183 App. Div. 499; Matter of Murray v. Cummings Const. Co., 197 App. Div. 903; 232 N. Y. 507; Hernon v. Holahan, 182 App. Div. 126; Days v. Trimmer & Sons, Inc., 176 App. Div. 124; Quick v. Illston Ice Co., 195 App. Div. 676; Matter of Kern v. Premier Coal Saving Device Corp., 246 App. Div. 661; Matter of Hocke v. Emdee Management Corp., 245 App. Div. 882; 269 N. Y. 592.)

      Noel S. Symons for claimant, respondent.
    Deceased’s death was caused by an accident within the purview of the Workmen’s Compensation Law. (Cole v. Watson [1915], App. Cas. 1; Rist v. Larkin & Sangster, 171 App. Div. 71; Cook v. International Paper Co., 244 App. Div. 849; Hocke v. Emdee Management Corp., 269 N. Y. 592; Matter of Connelly v. Hunt Furniture Co., 240 N. Y. 83; Matter of Katz v. Kadans & Co., 232 N. Y. 420; Matter of Madura v. City of New York, 238 N. Y. 214; Matter of Lurye v. Stern Brothers Dept. Store, 275 N. Y. 182; Baltimore & Ohio Ry. Co. v. Clark, 59 Fed. Rep. [2d] 595; Ismay, Imre Co. v. Williamson [1908], A. C. 437; Walsh v. River Spinning Co., 41 R. I. 490; Zacharie v.
      Interborough R. T. Co., 211 App. Div. 828; Matter of Hughes v. St. Patrick’s Cathedral, 245 N. Y. 201; Ford Motor Co. v. Hunter, 199 N. E. Rep. 85.)
   Per Curiam.

The State Industrial Board has found that on December 24, 1934, while W. J. Lanphier “ was engaged in the regular course of his employment and while working for his employer, repairing and installing a preheater at Belle, West Virginia, he was required to work in a closed preheater, which subjected him to an abnormal temperature of about 150° F. and as a result of which exposure he became drenched with perspiration and sustained a chill, which resulted in lobar pneumonia, causing his death on January 1, 1935. The death of the said W. J. Lanphier was the natural and unavoidable result of the accidental injuries sustained by him on December 24,1934, and their resultant effects.”

Pneumonia is a disease for which, under the Workmen’s Compensation Law (Cons. Laws, ch. 67), compensation may be awarded only when it is the result of an accidental injury. The inception of the disease must be assignable to something “ catastrophic or extraordinary.” A chill resulting from exposure to conditions which are normal in the conduct of the business in which the workman is employed, though followed by pneumonia, is not an accidental injury. (Matter of Lerner v. Rump Bros., 241 N. Y. 153.)

The job on which the deceased was working was what is known as a reconditioning job.” On a construction iob ” the temperatures are not very high. On a reconditioning job ” the workmen are frequently exposed to great heat and perspire profusely. The deceased knew that while working in a closed preheater the heat was great. He had previously told his wife that the temperature at the plant where he was working was at times between 130° and 150°. The heat on the day when the deceased suffered the chill was perhaps a little greater than usual, but there is nothing in the evidence which suggests that the difference was significant. The need for repairing the preheater may have arisen from an accidental happening, but the work in which the deceased was employed included repairing or reconditioning preheaters. He was exposed to this great heat because he accepted employment which would normally include repair jobs where the heat would be great. That circumstance distinguishes this case from the case of Matter of Hocke v. Emdee Management Corp. (245 App. Div. 882; affd., 269 N. Y. 592), where through an unexpected accident a superintendent of an apartment house was compelled to enter a room filled with steam from a valve which had accidentally become defective. Exposure of a superintendent of an apartment house to such conditions created by accident is extraordinary and may be regarded as an accident. Exposure of a workman to such conditions, though created by accident, cannot be regarded as accidental where the workman is employed to work under similar conditions, however arising. (Cf. Matter of Doulin v. City of Saratoga Springs, 236 App. Div. 749; affd., 261 N. Y. 558.)

The order of the Appellate Division and the award of the State Industrial Board should be reversed and the matter remitted to the State Industrial Board for a new hearing, without costs.

Finch, J.

(dissenting). In view of the finding of the State Industrial Board that the death of the husband of claimant resulted from an accidental injury in the course of his employment, based upon the evidence and the reasonable inferences therefrom, the award should be affirmed.

It is true that decedent had been working on a reconditioning job; but the evidence is that all these preheaters had been reconditioned, and all the fires started, when a breakdown occurred in the fire box of the boiler in the nature of an explosion or bursting of a tube, which threw the fan of one of the preheaters out of alignment, causing an almost immediate heating of the bearings and considerable vibration. Under the circumstances, decedent could not wait for the machine to cool off. While the exposure and excessive heat were exceptional, and prevented workmen from remaining for more than a few minutes, it is a fair inference that decedent was compelled to stay longer, since he did not stop until nearly the end of the day. An erecting engineer, employed on the same work, testified that it was unusual to have to go into a machine under such an extreme temperature as this one. In addition, the boiler settings leaked, causing soot to be blown into the room instead of up the stacks. As a direct result of this occurrence, the decedent contracted lobar pneumonia, which resulted in his death in a few days. There is evidence that when the decedent emerged from the machine, his face was very red and he at once complained of illness. The State- Industrial Board granted an award to the widow, and the Appellate Division has affirmed.

There can be no doubt that the illness arose out of and in the course of the employment of decedent. Was it an accidental injury?

It is true that this workman performed repair jobs as part of his accustomed work, but the evidence here shows that the conditions under which he was compelled to perform this repair work were not due to normal conditions even in repair work but to the happening of an accident. Thus in Matter of Hocke v. Emdee Management Corp. (245 App. Div. 882; affd., 269 N. Y. 592), where through an accident the superintendent of an apartment house was compelled to enter a room filled with steam escaping from a valve which had accidentally become defective, an award was sustained. The exposure of the superintendent of this apartment house to such conditions created by an accident was no more extraordinary than the exposure of this decedent because of an accidental happening. In Matter of Robbins v. Enterprise Oil Co. (252 App. Div. 904; affd., 278 N. Y. 611) the decedent contracted pneumonia as the result of being exposed to a draft while lying on the cement floor of a garage where he was employed, in the course of repairing an automobile. The occurrence of drafts in this garage was not unusual, and it would seem that the circumstances diverged from the normal less than those in the case at bar.

Thus we have in the case at bar evidence to support the finding that the contracting of the disease was due to a cause catastrophic and sudden, and assignable to a determinate act identifiable in space and time, and that it arose from conditions other than normal, even in repair work.

The order of the Appellate Division and the award of the State Industrial Board should be affirmed.

Crane, Ch. J., Lehman, O’Brien, Hubbs and Loughran, JJ., concur in per curiam opinion; Finch, J., dissents in opinion in which Rippey, J., concurs.

Ordered accordingly.


author: Per Curiam.

text:
    The People of the State of New York, Appellant, v. David Berman, Respondent.
    Submitted June 3, 1938;
    decided July 7, 1938.

      Edward L. Schwartz for respondent.
    Complainant was neither defrauded nor injured as required by law. (People v. Kaminsky, 245 App. Div. 768; People v. Goldberg, 146 App. Div. 950.) No delivery was proved. (State v. Grant Co., 158 Minn. 334; Gross v. Ajello, 132 App. Div. 25; Stanley v. Dryer, 70 Misc. Rep. 561; People v. Kaminsky, 245 App. Div. 768; People v. Goldberg, 146 App. Div. 950.)

      Thomas E. Dewey, District Attorney (Ezekiel G. Stoddard of counsel), for appellant.
    There was a delivery.
      (People v. Visconti, 234 N. Y. 165; People v. Goldberg, 146 App. Div. 950.)
   Per Curiam.

A person does not commit the offense defined in section 2411 of the Penal Law unless he injures or defrauds ” another by one of the corrupt acts specified in the statute. A person does not “ injure or defraud ” another by delivery of less of a commodity than he represents unless that other suffers a detriment; but the detriment may be suffered through acceptance of the commodity with a promise, express or implied, to pay for such commodity as well as by immediate payment on delivery. (People v. Visconti, 234 N. Y. 165.)

The defendant in this case has not been charged with a violation of section 2411 of the Penal Law hut with violation of section 188 of the Agriculture and Markets Law (Cons. Laws, ch. 69). A person who “ with knowledge that the same is false, shall use a false weight, measure, or other apparatus, for determining the quantity of any commodity or article of merchandise, or knowingly deliver less of any such commodity or article of merchandise than the quantity he represents ” commits the offense defined in that section. The Legislature has provided a penalty for the corrupt acts specified. Upon the trial of a charge that a person “ has knowingly delivered less of a commodity or article of merchandise than he represented,” the People must of course prove a delivery by a dealer to a customer of an article of merchandise. The People are not under the burden of proving that by such delivery the defendant succeeded in injuring or defrauding.

A physical tender of possession by one person to another who accepts such possession is ordinarily sufficient to constitute a delivery. Delivery under a contract of sale does not, it is true, pass title where it is conditional upon payment of the purchase price. Perhaps without unconditional delivery sufficient to pass title, the proof that a person is injured or defrauded is incomplete under a charge of violation of section 2411 of the Penal Law. Even a conditional delivery by a dealer to a customer may be sufficient to constitute a violation of section 188 of the Agriculture and Markets Law. In this case, however, there is no proof of delivery, even conditional, by a dealer to a customer. Before the defendant tendered possession the complaining witness seized the article on sale. We agree with the Appellate Division that the charge was consequently not proven.

The judgment should be affirmed.

Lehman, O’Brien, Hubbs, Loughran, Finch and Rippey, JJ., concur; Crane, Ch. J., taking no part.

Judgment affirmed.