text:
    Jack Goldberg, Appellant, v. Lumber Mutual Casualty Insurance Company of New York, Respondent.
    Argued November 14, 1947;
    decided January 15, 1948.

      Herbert E. Hoffman and Jacob D. Fuchsberg for appellant.
    I. The insurer’s obligation to defend is determined by the allegations of the complaint served upon the insured. (Summer & Co. v. Phœnix Indemnity Co., 177 Misc. 887; Grand Union Co. v. General Accident, Fire & Life Assur. Corp., 254 App. Div. 274, 279 N. Y. 638; Physical Culture Hotel, Inc., v. Travelers Ins. Co., 270 App. Div. 1070; Floralbell Amusement Corp. v. Standard Surety & Cas. Co. of N. Y., 170 Misc. 1003, 256 App. Div. 221; Longwell Lumber & Building Co. v. Maryland Casualty Co., 144 Misc. 595; Arc Electric Construction Co. v. Commercial Casualty Ins. Co., 247 App. Div. 721; Press Publishing Co. v. General Accident, Fire & Life Assur. Corp., 160 App. Div. 537, 217 N. Y. 648; West Philadelphia Stock Yard v. Maryland Casualty Co., 100 Pa. Super. Ct. 459; Bloom-Rosenblum-Kline Co. v. Union Indemnity Co., 121 Ohio St. 220.) II. Words in policies of insurance are to be construed in their ordinary sense and ambiguities are to be resolved in favor of the insured. (Floralbell Amusement Corp. v. Standard Surety & Cas. Co. of N. Y., 170 Misc. 1003, 256 App. Div. 221; Gerka v. Fidelity & Casualty Co., 251 N. Y. 51; Grand Union Co. v. General Accident, Fire & Life Assur. Corp., 163 Misc. 451, 254 App. Div. 274, 279 N. Y. 638; Preston v. Aetna Insurance Co., 193 N. Y. 142; Auerbach v. Maryland Casualty Co., 236 N. Y. 247.)

      Herbert A. McDevitt for respondent.
    I. Allegations of the complaint served upon the insured are not the sole deciding factors in determining whether the insurer should defend. The allegations in the complaint must be one of issue to be decided and a judgment against the insured must conclusively establish the issue of coverage. (Sacks v. Maryland Casualty Co., 170 App. Div. 494; Longwell Lumber & Bldg. Co. v. Maryland

      Casualty Co., 144 Misc. 595.) II. The policy does not cover accidents that occur after the completion of the actual course of operation performed at the place of the occurrence of the accident. (Hutchinson Gas Co. v. Phœnix Indemnity Co., 288 N. W. 847; Berger Bros. Elec. Motors v. New Amsterdam Cas. Co., 293 N. Y. 523.)
   Fuld, J.

In October, 1939, defendant insurance company issued a public liability policy insuring plaintiff’s business operations for one year, from October, 1939, to October, 1940. The policy dealt with the insurance company’s duty to pay all sums for which the insured might become liable as well as with its duty to defend suits brought against the insured. As to the first, the company agreed to discharge all obligations incurred by the insured, as damages, to third persons who sustained bodily injuries as the result of an accident “ caused by reason of the [insured’s] general business operations * * *

which shall have occurred before the completion of the actual course of the operations performed by the insured at the place of occurrence of such accident.” As to the duty to defend, the company agreed to * ‘ defend in the name of and on behalf of the insured any suit against the insured alleging such injury and seeking damages on account thereof, even if such suit is groundless, false or fraudulent ”.

Early in 1940, plaintiff entered into a contract to perform plumbing repair work at certain premises in Brooklyn; he completed most of the work in March of that year. Many months later, in December, 1940, a tenant brought suit against plaintiff, claiming that “on or about ” April 13, 1940, she had been caused “ to trip and fall over a dangerous accumulation of debris and plaster,” left on the stairway of the premises by plaintiff and his employees. The injuries were said to be serious, and damages of $25,000 were sought. It was explicitly asserted — on information and belief — that on the day of the accident, April 13, 1940, “ and prior thereto, the defendant [plaintiff herein], his agents, servants and employees were engaged in the performance of the aforementioned work ” at the premises in question and that such work “ was not completed ” until after April 13th.

Following service of the papers, plaintiff turned the summons and complaint over to defendant insurance company “ for a defense and for them to otherwise fulfill the obligations of their [sic] contract of insurance.” And, says plaintiff, he advised the insurance company then and later not only that'he knew nothing about the accident’s having been caused by his negligence but also that he had finished the job at least a week before the date specified in the complaint. Possessed of that information, the insurance company refused to defend the action unless plaintiff signed a non-waiver agreement, providing that such defense would not constitute a waiver by either party of any provision of the policy, nor foreclose the company from asserting any defense which it may choose to make ” under the policy. If the company was under a duty to defend, it was not, of course, privileged to insist on any such condition; plaintiff declined to sign the agreement and retained his own attorneys to defend him.

The negligence action went to trial, and terminated in favor of the present plaintiff. At that trial, plaintiff avers in his affidavit, “ one of the issues which was litigated was the fact as to when my employees and myself had completed the work in connection with the stairway upon which [the tenant] claimed that she fell.” Conflicting evidence was adduced, the tenant testifying that work had continued until April 12th, the present plaintiff, that the work had been completed “ a considerable time before that ”.

Shortly afterward, plaintiff brought this action for $3,000, the sum, he alleged, he “ was obliged to expend * * * for counsel fees, professional services and for disbursements in connection with the aforementioned [personal injury] action ”. Defendant’s answer was, in effect, a general denial.

By motion and cross motion, both parties asked for summary judgment under rule 113 of the Rules of Civil Practice.

In two orders, 'the court at Special Term denied plaintiff’s motion and granted defendant’s cross motion, dismissing the complaint and entering judgment for defendant. The Appellate Division, two justices dissenting, affirmed both orders.

, Ascribing to the terms of the policy, as we must, a natural and reasonable meaning (see, e. g., Burr v. Commercial Travelers Mutual Accident Assn., 295 N. Y. 294, 301; McGrail v. Equitable Life Assur. Soc., 292 N. Y. 419, 424; Lewis v. Ocean Accident & Guar. Corp., 224 N. Y. 18, 21), there can be no doubt that the insurance company undertook to defend such a suit as was brought against its insured. In the clearest of terms, the insurer obligated itself to handle the defense of actions against the insured whenever the complaint served upon him alleged a state of facts covered by the policy, regardless of whether such allegations squared with objective truth or were utterly false and groundless. As previously noted, the company’s obligation was to “defend in the name of and on behalf of the insured any suit against the insured alleging such injury and seeking damages on account thereof, even if such suit is groundless, false or fraudulent ”, (Emphasis supplied.)

The complaint in the negligence action contained the precise allegations necessary under the policy, to compel the insurer to defend; it asserted that the accident occurred on protected premises during the time when specifically covered operations of the insured were still in progress] The tenant had sought to hold the insured liable to her upon the theory that he was still at work on the job when she was injured — precisely the sort of liability covered by the policy. Whether or no the insurance company would have been under a duty to pay had the tenant prevailed in the negligence suit need not now concern us (see Bloom-Rosenblum-Kline Co. v. Union Indemnity Co., 121 Ohio St. 220, 222), for it is crystal clear that — irrespective of this duty — the company had obligated itself to defend if a suit were brought against its insured “alleging such injury and seeking damages on account thereof.” Similarly irrelevant is the question whether it was essential to the tenant’s case to have alleged that the injury occurred while the insured — the contractor — was still engaged in performing the work on the premises. (Cf. Campbell v. Sutliff, 193 Wis. 370, and Korzon v. McCabe, 114 Conn. 725, with Coleman v. Guidone & Son, Inc., 192 App. Div. 120, and Ford v. Sturgis, 14 F. 2d 253.) For, regardless of whether the assertion that the contractor was still engaged upon his job when the accident occurred was an operative allegation between pleader and insured in a negligence suit, it was explicitly rendered operative between insurer and insured by the policy of insurance.

In other words, the insurance company’s duty to defend came into being when it appeared from the allegations in the negligence action that the injury was within the coverage of the policy, and it persisted despite the advice — pointing a contrary conclusion — furnished by the insured to assist the company in defending the suit. To hold otherwise would penalize him for full and frank disclosure. Assuming that the information passed on by the insured might have some bearing on the company’s duty to pay (but see McGrail v. Equitable Life Assur. Soc., supra, 292 N. Y. 419, 426), it cannot affect its already established duty to defend. The courts have frequently remarked that the duty to defend is broader than the duty to pay. Indeed, even in cases where the policies do not render the allegations by the injured party controlling, it has been said: The distinction between liability and coverage must be kept in mind. So far as concerns the obligation of the insured to defend the question is not whether the injured party can maintain a cause of action against the insured, but whether he can state facts which bring the injury within the coverage. If he states such facts the policy requires the insurer to defend irrespective of the insured’s ultimate liability.” (See Grand Union Co. v. General Accident, Fire & Life Assur. Corp., 254 App. Div. 274, 280, affd. 279 N. Y. 638; see, also, Summer & Co. v. Phœnix Indemnity Co., 265 App. Div. 911, affg. 177 Misc. 887; Floralbell Amusement Corp. v. Standard Surety & Casualty Co., 256 App. Div. 221, same case 170 Misc. 1003; 8 Appleman, Insurance Law and Practice [1942], p. 4.)

In short, the policy protects the insured not only against injuries for which there is unquestioned liability, but also against law suits on their face within the compass of the risk against which insurance was taken, no matter how groundless, false or baseless those suits may be. It follows, therefore, that defendant’s refusal to defend the negligence suit was a breach of its covenant for which plaintiff may recover the expenses incurred by him in defending that action. (Grand Union Stores, Inc., v. General Accident, Fire & Life Assur. Corp., 251 App. Div. 810, affg. 163 Misc. 451; Physical Culture Hotel v. Travelers Ins. Co., 270 App. Div. 1070.)

' The courts below should have granted plaintiff’s motion for ¡summary judgment and denied defendant’s motion for that relief. Accordingly, the judgment of the Appellate Division and the orders of Special Term should be reversed, with costs in all courts, and plaintiff’s motion for summary judgment granted to the extent of ordering an assessment to determine the amount of plaintiff’s damages, in accordance with rule 113 of the Rules of Civil Practice.

Lottghran, Ch. J., Lewis, Conway, Desmond, Thacheb and Dye, JJ., concur.

Judgment accordingly.


source: Caselaw Access Project

author: Fuld, J.

license: Public Domain

text:
    In the Matter of Fifth Madison Corporation, Appellant. New York Telephone Company et al., Respondents, et al., Defendants.
    Argued November 18, 1947;
    decided January 15, 1948.

      Wilmurt B. Linker and Dorothy S. McCrea for appellant.
    I. A proper construction of the Business Rent Law requires the court to allow the amount of 'the annual depreciation of a building as an operating expense or otherwise to take it into consideration in determining the reasonable rents of spaces therein. A contrary construction renders the statute unconstitutional. (Schack v. Handel, 271 App. Div. 1; Twentieth Century Associates v. Waldman, 294 N. Y. 571; Hall Realty Co. v. Moos, 200 App. Div. 66; Alabama Holding Cory. v. Conrey, 201 App. Div. 565; Ward v. Stillwell, 118 Misc. 462, 204 App. Div. 875; Matter of Yonkers R. R. Co. v. Maltbie, 251 App. Div. 204; United States v. Ludey, 274 U. S. 295; Lindheimer v. Illinois Tel. Co., 292 U. S. 151; United Railways v. West, 280 U. S. 234; Clark’s Ferry Co. v. Commission, 291 U. S. 227; Matthews v. Matthews, 240 N. Y. 28; Bowles v. Willingham, 321 U. S. 503.) H. The words of the statute “ other lawful evidence of the fair value may be offered and received ” should not be construed to permit the property involved to be valued on the basis of evidence adduced in a certiorari proceeding for a prior year, the determination made in such a proceeding, and the value as at a prior date claimed in the landlord’s tax protest. (People ex rel. Hilton v. Fahrenkopf, 279 N. Y. 49; Matter of Roge v. Valentine, 280 N. Y. 268.) III. A proper construction of the statute requires the 2% amortization allowance to be based upon the full amount secured by the mortgages. IV. Under the Business Rent Law the landlord is entitled to rentals equivalent to the full amount of its allowable annual return, and a determination of gross rentals arrived at by deducting the amount of its income from other sources, from its allowable annual return, is improper. (Twentieth Century Associates v. Waldman, 294 N. Y. 571.) V. Special Term erred in failing to apportion among the several tenants of the building the gross rental to which it found appellant entitled. (Schack v. Handel, 271 App. Div. 1.) VI. The rents fixed by Special Term neither yield the landlord a reasonable return nor amount to the fair rental values of the several rental units involved. VII. The record does not sustain respondents’ contention that the trial court’s disallowance of the cost item of depreciation was in accordance with the evidence before it. (Hull v. Littauer, 162 N. Y. 569; United Railways v. West, 280 U. S. 234; Lindheimer v. Illinois Tel. Co., 292 U. S. 151; Knoxville v. Water Co., 212 U. S. 1; Nashville, Chattanooga & St. Louis Ry. v. Walter, 294 U. S. 405.) VI'II. The arguments of respondents in support of the court’s determination of $5,100,000 as the fair value of the property are based on evidence improperly admitted by the trial court. (Matter of Roge v. Valentine, 280 N. Y. 268.) IX. The debt for the amortization of which the Business Rent Law allows 2%, includes the debt which arose by reason of the nonpayment of “if earned ” interest on the second mortgage. X. Appellant’s income from other sources should not be included in the net annual return of 6% presumed to be a reasonable return to the landlord.

      Alexander Appel for John E. Cahill Company and others, respondents.
    I. The trial, court’s disallowance of the item of depreciation was in accordance with the evidence before it and the Business Rent Law. (Hall Realty Co. v. Moos, 200 App. Div. 66; Schack v. Handel, 271 App. Div. 1; Matter of 76 Crown Street Corp., 271 App. Div. 1030.) II. Evidence of a most substantial character supports the trial court’s determination of $5,100,000 as the fair value of the property. (Hall Realty Co. v. Moos, 200 App. Div. 66; Schack v. Handel, 271 Ápp. Div. 1; Matter of Pincus [Goldberg], 271 App. Div. 579.) III. The trial court properly excluded unpaid interest on the second mortgage in computing the amount of allowable amortization. IV. The landlord’s income from sources other than rents, being inseparable from the operation of the premises as an office building, was properly included with the landlord’s rental income from the building. V. If there can be complaint against a uniform increase, only the tenants may complain. VI. A landlord can have no complaint under the Business Rent Law unless the rents in excess of the emergency rents fail to yield him a reasonable return.

      John E. Donnelly and Joseph E. Kinsley, in person, for Joseph E. Kinsley and another, respondents.
    I. The findings of the trial court are supported by the evidence. Therefore, its determination should not be disturbed. (Tyng v. United States Submarine & Torpedo Boat Co., 60 N. Y. 644; Baird v. Mayor, 96 N. Y. 567; Sanger v. French, 157 N. Y. 213; Dennerlein v. Martin, 247 N. Y. 145; New York Mortgage Corp. v. Clotar Constr. Corp., 254 N. Y. 128; Donellan v. Ketchum, 78 App. Div. 144; Carr v. Morris, 191 App. Div. 671; Mansbacher v. Prudential Ins. Co., 273.N. Y. 140; Boyd v. Boyd, 252 N. Y. 422; Glaser v. Glaser, 276 N. Y. 296; People ex rel. Third Ave. R. R. Co. v. Tax Commissioners, 212 N. Y. 472; Cornish v. Farm Buildings Fire Ins. Co., 74 N. Y. 295.) II. “ Depreciation ” is not included in the words “ Cost of Maintenance and Operation ” in the Business Rent Law as an item which may be considered in fixing a presumptively reasonable return. (Colon v. Lisk, 153 N. Y. 188; Twentieth Century Associates v. Waldman, 294 N. Y. 571; Schack v. Handel, 271 App. Div. 1; Matter of 76 Crown Street Corp., 271 App. Div. 1030.) III. The trial court properly received in evidence the judicial determination of value in certiorari proceedings instituted by the petitioner. It also properly received in evidence a tax protest filed by the petitioner in which a lower valuation for the preceding year was claimed. (People ex rel. Hilton v. Fahrenkopf, 279 N. Y. 49; People ex rel. Warren v. Carter, 119 N. Y. 557; Schack v. Handel, 271 App. Div. 1; Ware v. Dos Passos, 162 N. Y. 281; McKinnon v. Bliss, 21 N. Y. 206; Redmond v. Industrial Benefit Association, 78 Hun 104; 150 N. Y. 167; Smith v. Dodge, 49 Hun 611; Hadley v. Jarvis, 20 N. Y. Super. Ct. 461; Walrod v. Ball, 9 Barb. 279.) IV. Petitioner is not entitled to a 2% amortization of the interest of its mortgage in addition to principal. V. Income received from other incidental sources should be included in gross annual rents. VI. Petitioner could not require the trial court to apportion the statutory increase granted by it among the various tenants.

      Samuel M. Sacher and Louis H. Levin, in person, for Louis H. Levin and another, respondents.
    I. The item of depreciation was properly disallowed and no legal or constitutional questions are involved. (Hall Realty Co. v. Moos, 200 App. Div. 66; Shack v. Handel, 271 App. Div. 1; Matter of 76 Crown Street Corp., 271 App. Div. 1030.) II. The fixing by the trial court of $5,100,000 as the fair value of the property is fully supported by the evidence. (Matter of Pincus [Goldberg], 271 App. Div. 579; People ex rel. American Mfg. Co. v. Brady, 104 Misc. 703, 184 App. Div. 901.) III. The court below properly disallowed the accrued and unpaid interest on the second mortgage. IV. Income from electricity and other sources was properly included in total income from the property, V. The granting of a uniform increase of 17%% in no way prejudiced the appellant. VL Appellant received a greater return on the fair value of the premises than it was entitled to.
   Fuld, J.

This appeal, involving the construction and application of the Business Bent Law (L. 1945, ch. 314), presents a question of considerable importance and interest to landlord and tenant of business and commercial space in the city of New York.

The current emergency rent legislation, it is common knowledge, was enacted to curb the existing and expected evils of exorbitant rents and widespread evictions while the wartime shortage of housing, business, and commercial space continued. At the same time, in order to afford landlords a reasonable return from leased property, the emergency laws provide a means to alleviate possible hardships visited on landlords as their costs rise and their rent returns dwindle. Thus, in the case of business and office space, the Business Bent Law allows the landlord a blanket “emergency” increase of 15% over the rents prevailing on June 1, 1944, without need to resort to court proceedings (§ 2, subd. [c]). If he seeks a greater return, he may apply to the Supreme Court for such further increase as is “ reasonable ” according to the general formula set out in section 4 of the Law to guide the court in fixing higher rent.

The key figure in this formula — and the figure which the court fixing rent must first compute — is the “fair value” of the property. Once such fair value is ascertained, section 4 recites, a “net annual return” equal to 6% of such value and an additional 2% of the principal of any mortgages on the property to allow their amortization “shall be presumed to be a reasonable return.” And, continues the statute, in detórmining reasonable rent, “ due consideration shall be given to the cost of maintenance and operation of the entire property (including land and building in which such business space is located) including amount paid for taxes assessed against such property, and to the kind, quality and quantity of services furnished, but excluding amortization or interest paid or accrued on any incumbrances ”. (Emphasis supplied.)

In this case, petitioner initiated a proceeding for determination of a reasonable rent for its twenty-one-story building, housing 180 tenants. The increase sought would have raised rents more than 50%. The court at Special Term entered an order allowing petitioner a uniform rent increase of 17%% as to all tenants. The Appellate Division unanimously affirmed and we granted leave to appeal. Petitioner complains, among other things, that the courts below erred in excluding an item of annual depreciation from its costs. A regard for both legislative history and purpose of the rent laws persuades us that that ruling was right.

The Legislature’s explicit inclusion of taxes as an item of cost, its express exclusion of continuing fixed charges — such as interest and amortization — suggest a restrictive content for the phrase, “ cost of maintenance and operation ”. Depreciation, not specifically included as such a cost, should not be so treated unless — having in mind the basic anti-inflationary aim. of the statute — a reasonable construction requires that result.

Property owners, it was foreseen, might suffer unfairly if rents were to be solidly frozen in a period when costs of goods and services were rising. Accordingly, provision was made for revising rents upward to meet those exigencies. But such increases were to be limited to compensating landlords “ for increased costs of operation resulting from war conditions.” (See Report of N. Y. State Joint Legislative Committee to Inquire Into and Study Commercial Rents in N. Y. City, N. Y. Legis. Doc., 1945, No. 2, p. 20.) With that in mind, the conclusion is clear that — however depreciation may be treated as an accounting item in other situations (1 Bonbright, Valuation of Property [1st ed.], pp. 179 et seq.; Finney, Principles of Accounting, p. 318; Kester, Advanced Accounting [3d Rev. ed.], p. 246) —it may not be considered a cost within the meaning of the Business Rent Law. The phrase “ cost of maintenance and operation ”, in that statute, is to be confined to sums actually paid out or incurred. (Cf. Schack v. Handel, 271 App. Div. 1, 7; Matter of 76 Crown St. Corp. [Carl & Sons, Inc.], 271 App. Div. 1030.)

Petitioner herein, choosing merely to rely upon a bookkeeping entry which charged an item of $54,310 to depreciation, offered no evidence that its property had actually depreciated in value. It is not hard to find the reason for the lack of proof of actual depreciation; it was not available. Quite apart from the fact that war-induced shortages in rental space arrested and reversed the normal downward trend of the value of a building as it ages, one of the petitioner’s own expert witnesses confirmed that there had been no depreciation in the value of this particular building since 1942. Under these circumstances, an allowance for theoretical depreciation would not be warranted — even in the view of those courts which had permitted such a deduction in cases decided under the emergency rent legislation (L. 1920, ohs. 136, 944, § 4) enacted during the First World War. (See Alabama Holding Corp. v. Conrey, 201 App. Div. 565, 568; Hall Realty Co. v. Moos, 200 App. Div. 66, 73.)

Nor do we find any merit in petitioner’s companion point — that the statute is unconstitutional if interpreted to exclude depreciation as a cost. In essence, petitioner argues that a statute is discriminatory and confiscatory, and, therefore, unconstitutional, if it fails to give the landlord the benefit of a sum for theoretical annual depreciation, even though there be no actual depreciation.

Failure to include depreciation as a cost, it is said, gave petitioner a return on his property of 5.23% instead of the 6% envisaged by the statute. Of course, since we conclude that depreciation is not to be treated as a cost, the determination does actually allow petitioner a return of 6%. In any event, though, neither State nor Federal Constitution commands that 6% is the lowest yield that may properly be allowed to landlords. We need not now decide at exactly what point a return which a statute makes presumptively reasonable becomes confiscatory. For present purposes, it is enough to say that, unless and until petitioner can show that 5.23% is so low a return as to be beyond the power of the Legislature to authorize, no constitutional problem arises.

The discriminatory feature of the legislation is said to arise from the fact that fully depreciated property derives its allowable return of 6% under the statute, while property not fully depreciated receives less since it is not allowed any item for depreciation. Petitioner would have us hold, in effect, that a landlord is entitled, as a' matter of constitutional law, to have an otherwise reasonable return from property augmented by an allowance for theoretical depreciation. If we assented, lessors of fully depreciated property could claim with equal force that they were being discriminated against because they, too, were not granted an allowance for theoretical depreciation. However, absent proof of actual depreciation, basis for urging a constitutional question just does not exist. We need go no further in this case.

We have considered the other points raised by petitioner and believe that they were properly decided.

The order of the Appellate Division should be affirmed, with costs.

Lotjghban, Oh. J., Lewis, Conway, Desmond, Thaoheb and Dye, JJ., concur.

Order affirmed.


author: Per Curiam.

text:
    The People of the State of New York, Respondent, v. William Hatzis, Appellant.
    Submitted January 5, 1948;
    decided January 15, 1948.

      Miles F. McDonald, District Attorney (David Diamond of counsel), for motion.
    No one opposed.
   Per Curiam.

Defendant has taken an appeal as of right from an order of the Appellate Division, Second Department, affirming an order of the Kings County Court which denied his motion — in the nature of coram nobis — to vacate a 1936 judgment convicting him of burglary in the second degree. The District Attorney has moved to dismiss the appeal; he claims that such an order is not appealable without a certification by a justice of the Appellate Division or a judge of the Court of Appeals, pursuant to subdivision 3 of section 520 of the Code of Criminal Procedure, that a question of law is involved which merits review.

Appeals .from orders determining coram nobis applications — previously unavailable (People v. Gersewitz, 294 N. Y. 163) — are now authorized (Code Crim. Pro., §§ 517-519; L. 1947, ch. 706). Whether such appeals lie to this court as of right turns on the interpretation of sections 519 and 520 of the Code.

The right of appeal in criminal cases generally is regulated by sections 517-520 of the Code. Three of those sections specify the types of determinations reviewable — at the instance of the defendant (§ 517) and of the People (§ 518), and, in the Court of Appeals, at the instance of either (§ 519). Whether such appeals may be taken as a matter of right or only by permission depends upon section 520. Prior to 1926, that section explicitly provided that all such appeals — including appeals to this court — could be taken as of right. (See People v. Miller, 169 N. Y. 339; People v. Drayton, 168 N. Y. 10; People v. Knapp, 206 N. Y. 373.) In 1926, it was amended to limit further appeal following one appeal to an intermediate appellate court (L. 1926, ch. 465).

While section 520, as amended, is somewhat ambiguous, and while its major portion refers, only to appeals from judgments of conviction, we read the broad language of subdivision 3 thereof as an inclusive limitation intended to govern all appeals to this court in criminal cases. Such a construction not only serves to harmonize the several .provisions of the section but also promotes the presumed purpose of the Legislature to maintain uniformity of procedure in criminal cases. (Cf. People ex rel. Onondaga County Savings Bank v. Butler, 147 N. Y. 164, 168; Gwynne v. Board of Education, Town of Huntington, 259 N. Y. 191, 197.)

So interpreted subdivision 3 of section 520 permits appeal, to this court in any criminal case only upon a certification by a justice of the Appellate Division or a judge of the Court of Appeals as therein provided. Since defendant has not obtained such a certification, his appeal taken as a matter of right must be dismissed..

Motion granted and appeal dismissed.


author: Fuld, J. Desmond, J.

text:
    J. Howard Johnson, as Receiver, et al., Respondents, v. John M. Smith, as Treasurer of the County of Albany, et al., Appellants.
    Argued October 15, 1947;
    decided January 16, 1948.

      Walter L. Gollins, County Attorney (Frank Pedlow of counsel), for John M. Smith, County Treasurer of Albany County, appellant.
    I. Collection of taxes being a prerogative of the sovereign, taxes are preferred over the rights of all others. (Levy v. Newman, 130 N. Y. 11; Matter of Atlas Television Co., 273 N. Y. 51; Security Building & Loan Assn. v. Carey, 259 App. Div. 42.) IT. If the position of respondents were to be upheld they would receive exemption from taxation in violation of law. (People ex rel. Brooklyn City R. R. Co. v. State Board of Tax Comrs., 174 N. Y. 417, 199 U. S. 1; People ex rel. Gould v. Barker, 150 N. Y. 52.) III. The general policy of law is to require all to bear in just proportion the burdens of government and to construe strictly statutes exempting property from taxation by denying exemptions which depend on doubtful implications. (People ex rel. Trustees Masonic Hall v. Miller, 253 App. Div. 672; County of Herkimer v. Village of Herkimer, 251 App. Div. 126; People ex rel. Andrews v. Cameron, 140 App. Div. 76, 200 N. Y. 585; People ex rel. N. Y. Lodge No. 1, B. P. O. E. v. Purdy, 179 App. Div. 805, 224 N. Y. 710; Matter of Francis, 121 App. Div. 129, 189 N. Y. 554.) IV. Respondent’s remedy was to pay taxes if they wished to preserve their interest in property free from tax liens. V. The complaint fails to state a cause of action. (Levy v. Newman, 130 N. Y. 11; Rinehart v. Hasco Building Co., 153 App. Div. 153; Weeks v. Weeks, 106 N. Y. 626; Flower v. Beasley, 52 La. Ann. 2054; Matter of Ueck, 286 N. Y. 1; Chautauque County Bank v. Risley, 19 N. Y. 369; Albany City Bank v. Schermerhorn, 9 Paige 372; Whitehead v. Farmers’ Loan & Trust Co., 98 F. 10; Mabie v. Fuller, 255 N. Y. 194; Blackstone v. State, 117 Md. 237; Weismer v. Village of Douglas, 64 N. Y. 91; People ex rel. Hatch v. Reardon, 184 N. Y. 431.) VI. Respondents’ theory as to custodia legis has been rejected where the question of tax sales has been involved. (Bonded Municipal Corp. v. Carodix Corp., 266 App. Div. 737, 291 N. Y. 733; County of Nassau v. Day, 266 App. Div. 738, 291 N. Y. 732.)

      Maurice Freedman for Yetta F. Sandler and others, appellants.
    I. The tax sales by the county treasurer to the county of Albany were made pursuant to the Tax Law and were not invalid for failure to obtain leave of court. The complaint is therefore insufficient in law. (N. Y. Const., art. XVI, § 2; Tax Law, art. I, § 3; People ex rel. Gould v. Barker, 150 N. Y. 52;
      County of Herkimer v. Village of Herkimer, 251 App. Div. 126; Pruyn v. McCreary, 105 App. Div. 302; LeFevre v. Matthews, 39 App; Div. 232; Di Chiara v. Sutherland, 62 Misc. 555; Chautauque County Bank v. Risley, 19 N. Y. 369; Moore v. Potter, 155 N. Y. 481; Corpus Juris, vol. 53, p. 338; United States v. Illinois Surety Co., 238 P. 840; McDonald v. Aetna Indemnity Co., 93 Conn. 165; Matter of Atlas Television Co., 273 N. Y. 51.) II. It was the mandatory duty of the county treasurer to comply with the provisions of the Tax Law with reference to tax sales and tax deeds. Decisions of the Court of Appeals that the doctrine of custodia legis has no application to the Treasurer of Nassau County are equally applicable to the Treasurer of Albany County. (County of Nassau v. Day, 291 N. Y. 732; Bonded Municipal Corp. v. Carodix Corp., 291 N. Y. 733; Matter of Bond & Mortgage Guarantee Co., 288 N. Y. 270.)

      Ellis J. Staley, Jr., for' J. Howard Johnson, respondent.
    I. The sale by the county treasurer of property which was in the custody of the receiver, without leave of court, was unlawful and void as an interference with the possession of the court. (Walling v. Miller, 108 N. Y. 173; Matter of Atlas Iron Construction Co., 19 App. Div. 415; Matter of Hall v. Wayburn Dancing School, 182 Misc. 614; Rosenzweig v. Zirkatsz Realty Corp., 145 Misc. 653; Matter of Bond & Mortgage Guarantee Co., 288 N. Y. 270; Dayton v. Pueblo County, 241 U. S. 588; French v. Pratt, 54 Hun 635, 55 Hun 609.) II. The doctrine of custodia legis in the case of taxes does not place an unjust burden on the county treasurer. (Central Trust Co. v. N. Y. C. & N. R. R. Co., 110 N. Y. 25.) III. The complaint sets forth facts sufficient to constitute a cause of action.

      Boland Ford and C. Baymond Burton for Wallace J. Alléndorf, respondent.
    I. Property in a receiver’s hands is not subject to seizure for taxes. It is in the custody of the court. The maintenance of the system of checks and balances characteristic of republican institutions requires that the judicial branch shall not be invaded or encroached upon. The court itself will enforce the lien of the tax. (Matter of Tyler, 149 U. S. 164; Worthington v. Scribner, 109 Mass. 48; Central Trust Co. v. N. Y. C. & N. R. R. Co., 110 N. Y. 250; Walling v. Miller, 108 N. Y. 173; Moore v. Potter, 155 N. Y. 481; Kilbourn v.
      Thompson, 103 U. S. 176; Pruyn v. McCreary, 105 App. Div. 302; Le Fevre v. Matthews, 39 App. Div. 232; Preston v. Loughran, 58 Hun 2l0; Wiswall v. Sampson, 14 How 52; Dayton v. Pueblo County, 241 U. S. 588; Marshall v. New York, 254 U. S. 380; Ex Parte Baldwin, 291 U. S. 610; Matter of Jensen Co., 128 N. Y. 550.) II. Where interference with a receiver is by a stranger to the suit in which the receiver is appointed, the proper method of procedure is by action. (Klasko Finance Corp. v. Belleaire Hotel Corp., 257 N. Y. 1.)

      John Francis Lucey, Jr., for J. F. Lueey, special guardian.
    I. The complaint must be construed most favorably to the plaintiffs. II. This action is not against public policy. I'll. The danger to the county treasurer of the application of the doctrine custodia legis is nebulous. (Matter of Empire Brick and Supply Corp., 52 N. Y. St. Dept. Rep. 28.)
   Fuld, J.

This is an action to set aside as invalid tax sales and subsequent conveyances of certain property located in Albany. In 1925, several of the tenants in common who then owned the property commenced a partition action in the Supreme Court, Albany County, which resulted in the entry of a judgment of partition and sale in 1927. In 1935, a receiver was designated and, in 1940, he was succeeded by the plaintiff Johnson who was £ £ appointed with the usual powers Receiver herein for the benefit of the Plaintiffs and Defendants in this action, of all the rents and profits now due and unpaid or to become due pending this action and issuing out of the premises ” in question. Though more than twenty years have passed, the partition action is still pending.

In 1938, the property was assessed at $51,000, and — the taxes not having been paid as required — the county treasurer in 1940 sold the property to the county of Albany for 1,000 years for $2,200. There was a default also in the 1939 taxes, and in 1941 again the county treasurer sold the property to the county for a like sum of $2,200. The county assigned its rights and conveyed the property to defendant Federal Investors, Inc.; the latter subsequently conveyed to defendant New York State Realty Liquidating Corporation, which, in turn, sold to defendant Sandler, and she is now collecting the rents.

In 1946, five years after the last tax sale, the receiver Johnson and one of the parties to the partition proceeding commenced this present action against (1) the county treasurer of Albany County, (2) the purchaser at each of the tax sales, and (3) the subsequent grantees of the property. By the action, plaintiffs seek to set aside as “ null, void and of no effect ” the tax sales and the conveyances subsequently made. It is acknowledged that the county treasurer complied faithfully and completely with all applicable provisions of law — of-city charter and tax-statutes — but it is contended that the property was in the custody of the court through its receiver and that its sale without court permission was void.

The defendants moved to dismiss the complaint, under rule 106 of the Buies of Civil Practice, upon the ground that it failed to state a cause of action. The justice at Special Term granted the motion; the Appellate Division, however, reversed and, in granting leave to appeal, certified the question, “ Does the complaint state a cause of action? It is our opinion that it does not.

In order to function, a government must collect taxes. To assure a part of them, Constitution and statute render taxable “ all real property within this State * * * unless exempt from taxation by law ” (Tax Law, art. I, § 3; N. Y. Const., art. XVI, §§ 1, 2). Equality and uniformity of taxation are the aim,, for, if one taxpayer escapes payment, the burden is placed — disproportionately and unfairly — on another. (See Matter of Atlas Television Co., 273 N. Y. 51; Mabie v. Fuller, 255 N. Y. 194, 201; People ex rel. Metropolitan Street Ry. Co. v. Tax Comrs., 199 U. S. 1, affg. 174 N. Y. 417; People ex rel. Gould v. Barker, 150 N. Y. 52; Security Building & Loan Assn. v. Carey, 259 App. Div. 42, 47; County of Herkimer v. Village of Herkimer, 251 App. Div. 126.)

It is section 150 of the Tax Law which imposed upon the county treasurer the duty to sell the property here involved; in mandatory terms, it directed the sale whenever “ any tax charged on real estate * * * is returned ” to him and remains unpaid for' a specified period. Plaintiffs- point to no statutory provision which exempts from taxation or from the operation of section 150, the property held by a receiver in partition, and there is none. Once a default occurs — and the other statutory conditions are met — the county treasurer must obey the law’s mandate and sell the property no matter by whom owned — whether by incompetent, infant or trustee or receiver. (See, e. g., Levy v. Newman, 130 N. Y. 11; County of Nassau v. Day, 266 App. Div. 738, affd. 291 N. Y. 732; Bonded Municipal Corp. v. Carodix Corp., 266 App. Div. 737, affd. 291 N. Y. 733.) In the two cases last cited, we rejected a contention that the failure of a county treasurer to obtain court leave and approval for a tax sale invalidated such a sale where the property was held by trustees appointed by the Supreme Court in reorganization proceedings brought pursuant to the Schackno and Mortgage Commission Acts (L. 1933, ch. 745, and L. 1935, ch. 19, respectively). Those decisions apply with equal force here; insofar as the problem before us is concerned, there is little to differentiate the receiver in a partition suit from a trustee in a Schackno or Mortgage Commission Act proceeding. (See Matter of Bond & Mortgage Guar. Co., 288 N. Y. 270, 277.) In the absence of specific statutory provision restraining tax collection agencies during the pendency of the action, or during the receivership, there is no basis for a claim that the county or its treasurer should have sought permission from the court before selling the property for unpaid taxes or delivering the tax deeds. And, in any event, it is highly questionable whether the Supreme Court would have had jurisdiction in the first instance to enjoin the county from selling or delivering the deeds.

Paramount and vital is the circumstance that, in selling the property, the county treasurer acted solely in accordance with the mandate of the statute. It may well be that court approval is required if in possession is a statutory receiver or trustee .or a receiver or trustee appointed by a court pursuant to a statute — such as the Federal Bankruptcy Act — granting extremely broad powers. Quite apart from any other consideration, under the Bankruptcy Act, title to the property vests in the trustee (Bankruptcy Act, § 70; U. S. Code, tit. 11, § 110). A receiver in partition, on the other hand, obtains no title to the property (Rinehart v. Hasco Building Co., 153 App. Div. 153, affd. 214 N. Y. 635); title remains vested in the owners who are the parties to the partition action. As is evident from the order of appointment, the receiver is given merely the right to manage the premises on behalf of those owners until the action has been concluded. The court, by appointing a receiver in a partition, undertakes, not. to preserve the rights of the parties in the property against the world, but simply to preserve their rights as against each other.

Even in eases involving private litigants — and not officials upon whom is imposed a duty of collecting taxes — it has been held that, while propriety may suggest an application to the court before selling property possessed by a receiver, the failure to obtain leave neither defeats the action brought (Pruyn v. McCreary, 105 App. Div. 302, 304; Le Fevre v. Matthews, 39 App. Div. 232) nor invalidates the sale effected. (See Chautauque County Bank v. Risley, 19 N. Y. 369, 376-377; see, also, Moore v. Potter, 155 N. Y. 481, 491; Beardslee v. Ingraham, 183 N. Y. 411,420; Matter of Loos, 50 Hun 67, 70-71.) Thus, this court wrote in the Chautauque County Bank case (pp. 376-377): “We have been referred to cases showing that any attempt, by a person having an outstanding right or title, to disturb the possession of a receiver, is a contempt of the Court of Chancery. * * * In all the discussion no doubt was suggested that a prior legal title would prevail against a receiver’s possession. The questions considered were, whether leave must be asked and whether, in that particular case, it should be granted. If not asked, it was considered that the party might be in contempt * * *. The sale itself is but the assertion of a legal right, and it cannot be illegal and void on the ground that the leave of an equitable tribunal is not first asked and obtained. ”

To hold, as the Appellate Division has, that the county treasurer must obtain permission from the court before selling for nonpayment of taxes so as to permit the court to “ determine whether the property should be sold or held for the benefit of parties interested and the municipality ” (272 App. Div., at p. 9), is to assume the existence of a power in the court to prevent the tax sale or postpone it indefinitely. The consequence of such a decision would be the creation of tax exemption by judicial fiat in favor of receiver-held property, perhaps as to amount, certainly as to time and method of payment — a result clearly contravening the constitutional provision that “ Exemptions from taxation may be granted only by general laws ” (1ST. Y. Const., art. XVI, § 1). On the other hand, if a court were under the necessity of granting leave to a county treasurer — because the statute directs him to sell — the application to the court would be but an empty and futile gesture, and it should not be required. Or if a regard for propriety does demand it — and I doubt that it does — failure to comply with such a formality should not result in voiding the sale.

The cases relied upon to support plaintiffs’ position are beside the point. (Wiswall v. Sampson, 14 How. [U. S.] 52; Matter of Tyler, 149 U. S. 164; Dayton v. Pueblo County, 241 U. S. 588; Walling v. Miller, 108 N. Y. 173; Central Trust Co. v. N. Y. C. & N. R. R. Co., 110 N. Y. 250.)

While the Wiswall case (supra) and the Walling case (supra) — and they did not involve a public official selling for nonpayment of taxes — indicated that a sale by a private litigant of property in the hands of a receiver would be void if sold without court permission, such is not the law in this State. Thus, in Chautauque County Bank v. Risley (supra), this court expressly declared it would not follow the Wiswall case, if it did lay down such a rule (p. 377). The Walling case was decided after the Chautauque County Bank case, but in the later case of Beardslee v. Ingraham, supra, pp. 421-422, this court again expressly disavowed the doctrine ascribed to the Wiswall case and explicitly reaffirmed our decision in the Chautauque County Bank case. (See, also, Moore v. Potter, supra, p. 490.)

No public policy is to be served by requiring the court — because of a supposed involvement of its dignity — to aid taxpayers in avoiding or delaying the payment of taxes owing by them and necessary for the carrying on of government. In the present case, the taxes were not paid, and the county treasurer, in selling the property under compulsion of the Tax Law, complied strictly with every applicable provision. The sales as well as the tax deeds and the subsequent conveyances, being valid and proper, are immune from attack. The owners of the property and the receiver were granted a privilege by statute to redeem; they chose not to avail themselves of it.

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

Desmond, J.

(concurring in result). I concur in the result on the ground that failure to get leave to foreclose is not jurisdictional (Chautauque County Bank v. Risley, 19 N. Y. 369, 376, 377) and so this suit does not lie. I cannot agree that, as to tax foreclosures, there is an exception, never before stated by' the courts of New York, to the ancient and settled rule that a court-appointed receiver may never be sued without leave of court. (High on Receivers [4th ed.], § 254; De Groot v. Jay, 30 Barb. 483.)

Loughran, Ch. J., Lewis, Conway, Thacher and Dye, JJ., concur with Fuld, J.; Desmond, J., concurs in result in memorandum.

Ordered accordingly. [See 297 N. Y. 880, 954.]


author: Thacher, J. Fuld, J.

text:
    Long Park, Inc., Suing for Itself and All Other Stockholders of Trenton-New Brunswick Theatres Company Similarly Situated, Appellant, v. Trenton-New Brunswick Theatres Company et al., Defendants, and B. F. Keith Corporation, Respondent.
    Argued November 10, 1947;
    decided January 16, 1948.

      John W. Davis, George A. Brownell, William H. Timbers and Solomon Goodman for appellant.
    I. The agreement is illegal because the powers and duties taken away from the board of directors are such as to prevent it from managing the business of the corporation. (McQuade v. Stoneham, 263 N. Y. 323; Jackson v. Hooper, 76 N. J. Eq. 592; Manson v. Curtis, 223 N. Y. 313; Fells v. Katz, 256 N. Y. 67; Benintendi v. Kenton Hotel, 294 N. Y. 112; Clifford v. Firemen’s Mutual Benevolent Assn., 232 App. Div. 260; Shaw v. Bankers National Life Ins. Co., 61 Ind. App. 346.) II. The agreement is illegal because the powers and duties taken away from the board of directors may be transferred to parties which the directors have no power to select or change. (Matter of Allied Fruit & Extract Co., 243 App. Div. 52; Olcott v. Tioga Railroad Co., 27 N. Y. 546; Klein v. Journal Square Bank Building Co., 110 N. J. Eq. 607; Caldwell v. Mutual Reserve Fund Life Assn., 53 App. Div. 245.) III. Special Term erred in refusing to grant a judgment declaring the agreement to be illegal, void and unenforcible. (Benintendi v. Kenton Hotel, 294 N. Y. 112; Lowe v. Lowe, 265 N. Y. 197.)

      Monroe Goldwater, Harry Rodwin and Bernard Katz for respondent.
    I. The agreement of September 1, 1942, does not divest the directors of Trenton of their duties and functions.
      (Benintendi v. Kenton Hotel, 294 N. Y. 112; Miller v. Vanderlip, 285 N. Y. 116; Clark v. Dodge, 269 N. Y. 410; Matter of American Fibre Chair Seat Corp., 265 N. Y. 416; Ripin v. U. S. Woven Label Co., 205 N. Y. 442; Lorillard v. Clyde, 86 N. Y. 384; Brightman v. Bates, 175 Mass. 105; Schneider v. Greater M. & S. Circuit, Inc., 144 Misc. 534.) II. The agreement does not take away any powers and duties f-rom the board which may be transferred to others over whom the board has no power of selection or change. (Klein v. Journal Square Bank Building Co., 110 N. J. Eq. 607; Caldwell v. Mutual Reserve Fund Life Assn., 53 App. Div. 245.) III. The arbitration clause is valid and does not render the agreement illegal. (Matter of Feuer Transportation, Inc. [Local No. 445], 295 N. Y. 87; Farulla v. Freundlich, Inc., 152 Misc. 761; Matter of Carl, 263 App. Div. 887.)
   Thacher, J.

The plaintiff, Long Park, Inc., a corporate stockholder of Trenton-New Brunswick Theatres Company (hereinafter referred to as Trenton), appeals from a judgment dismissing the complaint in an action brought in behalf of itself and of all other stockholders of Trenton for a declaratory judgment determining the validity or invalidity of an agreement to which all of the stockholders of Trenton and Trenton itself were parties. This agreement was held valid at Special Term and in the Appellate Division, and the single question presented here is whether the challenged portions of the agreement are invalid under the provisions of section 27 of the General Corporation Law of the State, which provides: The business of a corporation shall be managed by its board of directors ”. The same provision appears in the New Jersey statute (New Jersey Statutes, tit. 14, Corporations, General, § 14:7-1).

The principal defendant, B. F. Keith Corporation (hereinafter referred to as Keith), is a corporation organized and existing under the laws of the State of New York and, pursuant to the terms of the agreement in question, has for some time been acting as manager of all theatres leased and operated by Trenton. The plaintiff and all of the other corporate defendants are corporations organized and existing under the laws of the State of New Jersey. The appellant and the respondent have stipulated that for the purposes of this suit the agreement dated September 1, 1942, is in all respects a New York contract made and entered into in the State of New York and that it is to be construed according to the laws of the State of New York. The question presented by counsel both for the appellant and the respondent upon this appeal is whether the agreement of September 1, 1942, is valid and legal under the laws of this State. Under these circumstances we are not impelled to relinquish our discretionary jurisdiction.

The authorized capital stock of Trenton consists of 1,000 shares of the par value of $100 each, divided into four classes of 250 shares, designated as Class A-l, Class A-2, Class B and Class C. The Class A-l and Class A-2 shares are owned by defendant-respondent Keith, the Class B shares are owned by plaintiff-appellant, and the Class C stock is owned by Trenton Theatres Building Company.

The agreement is for a period of nineteen years from September 1,1942, to August 31,1961, with an option in Trenton to extend the term.

With reference to the powers of Keith as the owner of all the Class A-l and Class A-2 stocks and as the manager of the theatres, article XIV of the agreement provides:

“ Section 1. Management of Theatres: During the term of this agreement, unless the management of the theatres is changed as hereinafter provided, the holders from time to time of the Class A-l and A-2 stocks of the Tenant, agree to manage, or to cause RKO Service Corporation or any company affiliated with and designated by the holders of such Class A-l and A-2 stocks, to manage the Capitol, Palace, Trent, South Broad, Lincoln. State (during the term of the lease of said State Theatre or any extension or renewal thereof) and Brunswick Theatres, all in the City of Trenton, New Jersey, and the Albany, Rivoli and State Theatres in the City of New Brunswick, New Jersey, and any other theatres which may hereafter be leased or operated by the Tenant or any subsidiary thereof. The person managing such theatres (which shall be the holders of Class A-l and A-2 stocks unless and until the management is changed as hereinafter provided) from time to time during the term of this agreement, is herein sometimes referred to as the Manager. ’

The Manager is hereby given full authority and power to supervise and direct the operation and management of all suck theatres and in furtherance and not in limitation of the foregoing, it shall have power and authority to buy and book all features, short subjects, newsreels and other motion pictures, stage shows, personal appearances, television and other attractions and entertainment to be exhibited, played or performed in the theatres'; to designate and, from time to time, to change the entertainment policy and scale of admission prices; to select, engage, supervise and direct and discharge any and all necessary employees or personnel for each of said theatres; to maintain the theatres in good operating condition; to do any and all other acts and things which are customary in connection with the management of theatres; and to carry out such policies or projects as the Board ,of Directors of the Tenant or its subsidiaries may approve.”

These powers continue as stated “ unless and until the management is changed as hereinafter provided ”, and the provision for change is found in section 4 of article XI'V and reads as follows:

“ Section 4. Change of Management: Anything in this Article contained to the contrary notwithstanding, the holders of a majority of the B stock and a majority of the 0 stock jointly may, at any time and from time to time during the term of this agreement, submit to the American Arbitration Association the question as to whether or not the management of the Tenant and its subsidiaries should be changed from management by the holders of A-l and A-2 stock of the Tenant to management by the holders of B and C stock jointly.” Under provisions relating to the arbitration neither the holders of the B and G stock jointly nor the holders of the A-l and A-2 stock jointly have any right to submit to arbitration the question of a change of management for a period of one year after the effective date of the last change of management.

By virtue' of these provisions the management of all theatres leased or operated by Trenton or any subsidiary is vested in Keith, without approval of the directors, and this management may not be changed by the directors but only as provided in section 4 above quoted. The directors may neither select nor discharge the manager, to whom the supervision and direction of the management and operation of the theatres is delegated with full authority and power. Thus the powers of the directors over the management of its theatres, the principal business of the corporation, were completely sterilized. Such restrictions and limitations upon the powers of the directors are clearly in violation of section 27 of the General Corporation Law of this State and the New Jersey statute (Benintendi v. Kenton Hotel, 294 N. Y. 112; McQuade v. Stoneham, 263 N. Y. 323; Manson v. Curtis, 223 N. Y. 313).

We think these restrictions and limitations went far beyond the agreement in Clark v. Dodge (269 N. Y. 410). We are not confronted with a slight impingement or innocuous variance from the statutory norm, but rather with the deprivation of all the powers of the board insofar as the selection and supervision of the management of the corporation’s theatres, including the manner and policy of their operation, are concerned.

The judgments should be reversed, with costs in all courts, with directions to enter a judgment in favor of the appellant declaring the agreement of September 1, 1942, to be illegal, void and unenforcible.

Fuld, J.

(dissenting). I might, if we were dealing with a corporation organized and operating in this State, agree that the contract here involved was violative of section 27 of the General Corporation Law. In my view, however, that question is not before us. In a case such as this — where the corporation, the Trenton-New Brunswick Theatres Company, is one organized in the State of New Jersey, and, indeed, doing no business in New York, and where the agreement is one dealing with matters intimately affecting that foreign corporation’s internal affairs — the courts of this State should not entertain jurisdiction.

Pursuant to a plan evolved by the parties to this litigation, or their predecessors in interest, for the pooling of their respective holdings in moving picture theatres, defendant Trenton-New Brunswick Theatres Company — referred to as “ Trenton ” — was organized in New Jersey in 1922. Its sole business then was, and now is, the operation and management of theatres located in New Jersey. The agreement before us was entered into in 1942 by Trenton and its three stockholders; 'it followed an earlier one, substantially to the same end, which had been in force continuously for twenty years. The agreement created four classes of stock; in addition to other matters, some relating to the election of officers and directors, it provided that during its term the holders of the class A-l and A-2 stocks — at the time and at present, the B. F. Keith Corporation, referred to as “ Keith ” — were to have “ full authority and power to supervise and direct the operation and management ” of all Trenton’s theatres. Several years after execution of the agreement, in 1945, plaintiff apparently became dissatisfied with the arrangement and, through its representative on Trenton’s board of directors, asked that the management contract with Keith be terminated. Since two of the four members of the board were representatives of Keith, plaintiff’s motion failed. This action followed.

In its complaint plaintiff prayed for judgment (1) enjoining Keith from managing or interfering with the management of the business of Trenton, and (2) directing defendants to account for the results of past management. What induced plaintiff, itself a New Jersey corporation, to bring suit in this State, what induced defendant Trenton — not doing business here and not subject to process — to appear voluntarily, is nowhere accounted for. At the trial, the action was treated as one for a declaratory judgment. The courts below have held the 1942 agreement valid, and the majority of this court propose to declare it illegal as being violative of section 27 of the General Corporation Law of this State.

In my opinion, no declaration on the merits should issue — and for several reasons.

In the first place, I question whether the courts of this State have jurisdiction, in the strict sense of the term, to entertain this suit in view of section 225 of the General Corporation Law, which allows suits in this State between foreign corporations only in carefully specified cases — the present not being one of them. Defendant Keith, it is true, is a New York corporation, but basically the complaint is concerned with the conduct of the affairs of Trenton, and the effect of the agreement upon that corporation and its board of directors. For instance, it appears from the complaint that Trenton was a party to the agreement ; that Trentop’s stock has been reclassified pursuant to the agreement; that Trenton’s board of directors has been elected as provided in the agreement; and that Trenton has declined to disavow the agreement. In truth, according to the complaint, the sole challenge to the agreement is that Trenton may not function under it because it is contrary to the requirements of law prescribing how a corporation — Trenton ■— must be managed. If Trenton is privileged to continue the agreement, it would follow, of course, that Keith is bound to do so. The action is thus at least within the spirit of section 225.

In the second place — quite apart from section 225 — it is a general rule that the courts of one State will not accept jurisdiction of controversies affecting the internal affairs of a corporation organized under the laws of another State. We have held steadfastly to this view, at least in the absence of need for emergency action or of other extraordinary circumstances. (See Langfelder v. Universal Laboratories, 293 N. Y. 200, 204; Nothiger v. Corroon & Reynolds Corp., 293 N. Y. 682, affg. 266 App. Div. 299; Sternfeld v. Toxaway Tanning Co., 290 N. Y. 294, 297; Cohn v. Mishkoff Costello Co., 256 N. Y. 102, 105; Powell v. United Assn. of Plumbers, 240 N. Y. 616; Sauerbrunn v. Hartford Life Ins. Co., 220 N. Y. 363, 371-372; see, also, Kimball v. St. Louis & San Francisco Railway, 157 Mass. 7; 17 Fletcher’s Cyclopedia Corporations [Perm, ed.], §§ 8425-8429; Note, 46 Col. L. Rev. 414 et seq.) The rule has been applied even where the foreign corporation was doing business in this State and plaintiff was a resident. (See, e.g., Langfelder v. Universal Laboratories, supra; Sternfeld v. Toxaway Tanning Co., supra.)

No ground has been suggested for departing from that established and salutary principle. This is not a case in which the inquiry into foreign corporate concerns ‘ is merely preliminary or incidental to the inquiry whether a contract has been broken, a tort committed, a right of ownership infringed.” (Travis v. Knox Terpezone Co., 215 N. Y. 259, 265.) The declaration granted goes to the very heart of the corporation’s affairs. Therefore, decisions such as McQuade v. Stoneham (263 N. Y. 323) have no application.

In point of fact, there are weighty considerations why the rule should here be respected.

First, section 27 of the General Corporation Law, under which the agreement is being condemned, has no application to Trenton. It is plain from its context that that section is limited to domestic corporations, and it is difficult to see what interest the Legislature of this State could have in the method by which corporations neither organized nor doing business here are managed. Where the Legislature was concerned with the activities of foreign corporations, it was careful so to specify. (See, e.g., General Corporation Law, §§ 9, 9-a, 9-b, 12, 18, 222; cf. German-American Coffee Co. v. Diehl, 216 N. Y. 57, 61.) The manner in which the internal affairs of a foreign corporation, having no substantial contacts with the forum, are to be administered, is ordinarily a matter to be determined solely by reference to the law of the .place of incorporation. (Cf. Vanderpoel v. Gorman, 140 N. Y. 563; German-American Coffee Co. v. Diehl, supra, pp. 63, 64; Upson v. Otis, 155 F. 2d 606; Restatement,. Conflict of Laws, §§ 197, 183.) Therefore, the mere fact that the agreement was made in New York is of no moment. The stipulation of the parties that the agreement is to be construed according to the law of New York also affords no reason for disregarding the public policy of New Jersey, the State in which Trenton is incorporated. The majority of this court are treating that stipulation as tantamount to an agreement that the New Jersey corporation is to be considered as if it were a New York corporation and subject in its management to New York requirements, in disregard of the applicable laws and policy of New Jersey which, as interpreted by their courts, may be different from ours. The majority thereupon propose to invalidate the 1942 agreement as violative of the public policy of New York, yet paradoxically overlook the fact that the stipulation — on the strength of which they reach that result — itself may contravene the public policy of New Jersey. Under the guise of vindicating the public policy of New York, which is not in the slightest concerned with the conduct of Trenton, the majority are ignoring the public policy of New Jersey which is concerned with it. (Cf. Manhattan Storage & Warehouse Co. v. Movers Assn., 289 N. Y. 82, 89-90.)

Second, statutes of the character of section 27 of the General Corporation Law present difficult problems of interpretation. (See, e.g., Benintendi v. Kenton Hotel, 294 N. Y. 112.) A New Jersey court, familiar with, the legislative history and policy of that State, may construe its own statutory counterpart of section 27 differently — a matter of no concern to us as long as only a New Jersey corporation is involved. Or a New Jersey court, recognizing that the Legislature might itself have relaxed the statute, might conclude to leave the parties as it found them as long as no breach or other violation of private right is shown. In such circumstances, the New Jersey court might well decide that litigation like the present smacks of a suit in the nature of quo warranta and that only the public officials of that State should be heard in vindication of its public policy.

Furthermore, oúr inability to dispose of the controversy between the parties should militate against our dealing with it to the limited extent here involved. Plaintiff has itself abandoned any thought of injunctive relief, perhaps because that would demonstrate too obviously that the internal affairs of Trenton are involved. However, our declaration — even assuming that a New Jersey court will be bound to honor it — will not facilitate the ultimate disposition of the controversy. The declaration is not self-executing; further judicial action will obviously be required. The New Jersey court will have to determine the scope and the consequences of the declaration: it will have to decide, among other matters, whether the agreement with Keith may continue on a day-to-day basis or in some other modified form and whether the reclassification of Trenton stock — actually provided for by the agreement now declared illegal — is to stand. (See Kimball v. St. Louis & San Francisco Railway, supra, pp. 8-9.)

In Travis v. Knox Terpezone Co., supra, 215 N. Y. 259, 263, it was noted that the refusal to adjudicate controversies such as the one before us might be due either to the absence of jurisdiction in the strict sense, or to the inability to make a decree effective, or to considerations of policy and discretion ”. Atlhough we have oil occasion indicated that our decision might rest on lack of jurisdiction (see e.g., Langfelder v. Universal Laboratories, supra, p. 206; Cohn v. Mishkoff Costello Co., supra, p. 105; Sauerbrunn v. Hartford Life Ins. Co., supra), the better view perhaps is that the courts of this State should refrain from entertaining the litigation because of vital and all-important policy considerations. (See Sternfeld v. Toxaway Tanning Co., supra; Cohn v. Mishkoff Costello Co., supra; Kimball v. St. Louis & San Francisco Railway, supra, pp. 8-9; Thompson v. So. Connellsville Coke Co., 269 Pa. 500, 504; cf. Williams v. Green Bay & W. R. R. Co., 326 U. S. 549.) Those considerations are present here in full measure.

Nor are the provisions of the Civil Practice Act authorizing declaratory judgments intended to change the limitations appropriate to controversies of this character. In Westchester Mortgage Co. v. G. R. & I. R. R. Co. (246 N. Y. 194, 199) this court, reading section 473 “ in the light of established public policy ”, condemned such intrusion into the' policy of other States in this language (pp. 199-200, 202):

“ The courts of this State may command only in matters where this State is sovereign. The powers of our courts do not extend beyond the territorial limits of the State, and our courts proceed with circumspection when they are called upon to give command even to a party whose person is subject to our own jurisdiction, if such command might possibly conflict with the sovereign power of another State, [pp. 199-200.]

“ If the courts of one jurisdiction have the power to declare rights which can be made effective only by appeal to the courts of another sovereignty, it is a power which in the interests of ' comity must be sparingly exercised, [p. 202.] ”

The defendants have not raised the point or objected on these grounds. But since the question is one of fundamental policy affecting the exercise of jurisdiction by our courts — even if not jurisdictional in the strict sense — I conceive that it may be raised on the- court’s own motion. (See Weiss v. Routh, 149 F. 2d 193, 195; cf. Robinson v. Oceanic Steam Nav. Co., 112 N. Y. 315, 324; Massachusetts Nat. Bank v. Shinn, 163 N. Y. 360, 363.)

The judgment should be modified by directing judgment dismissing the complaint on the grounds stated herein.

Loughran, Ch. J., Lewis, Conway, Desmond and Dye, JJ., concur with Thacher, J.; Fuld, J., dissents in opinion.

Judgments reversed, etc.


author: Conway, J.

text:
    Chase National Bank of the City of New York, Appellant, v. Ezra R. Battat et al., Individually and as Copartners under the Firm Name of Arbeedee Trading Company, Respondents, et al., Defendants.
    Argued November 13, 1947;
    decided March 11, 1948.

      A. Donald MacKinnon and Eugene H. Nickerson for appellant.
    I. The complaint states facts sufficient to constitute a cause of action. If plaintiff discharged an obligation of Arbeedee to Caraeanda, plaintiff may recover from Arbeedee under settled principles of unjust enrichment. (Smith & McCrorken v. Chatham Phenix Nat. Bank & Trust Co., 239 App. Div. 318; Pittsburgh-Westmoreland Coal Co. v. Kerr, 220 N. Y. 137; Title Guarantee & Trust Co. v. Haven, 196 N. Y. 487; Grosch v. Kessler, 256 N. Y. 477; 3105 Grand Corp. v. City of New York, 288 N. Y. 178; Gaita v. Windsor Bank, 251 N. Y. 152; Gibraltar Realty Corp. v. Mt. Vernon Trust Co., 276 N. Y. 353; Fowler v. Bowery Savings Bank, 113 N. Y. 450; Schneider v. The Irving Bank, 1 Daly 500; Egerton v. Fulton Nat. Bank, 43 How. Prac. 216; Kelsey v. Ward, 38 N. Y. 83; Usher v. A. S. Tucker Co., 217 Mass. 441; K. & K. Silk Trimming Co. v. Garfield Nat. Bank, 127 Misc. 27; Bankers Trust Co. v. Wells,
      215 App. Div. 343; Union Trust Co. v. Willsea, 275 N. Y. 164.) II. Assuming, but not conceding, that ratification is an essential element of plaintiff’s case against Arbeedee, that element may be proved under the allegations of the complaint. (Walrath v. Hanover Fire Ins. Co., 216 N. Y. 220; Florsheim Shoe Store Co. v. Shoe Salesmen’s Union, 288 N. Y. 188; Cohen v. City Co. of New York, 283 N. Y. 112.)

      Leonard Q. Bisco and Henry Landau for Manufacturers Trust Co., amicus curios, in support of appellant’s position.
    I. To sustain a cause of action against the drawer of a check, a drawee, which has paid'a check through mistake, need only allege and prove that the drawer was unjustly enriched by its payment. (American Defense Soc. v. Sherman Nat. Bank, 225 N. Y. 506 ; K. & K. Silk Trimming Co. v. Garfield Nat. Bank, 127 Misc. 27; Fowler v. Bowery Sav. Bank, 113 N. Y. 450; Kasnowitz v. Manufacturers Trust Co., 172 Misc. 242; Pittsburgh-Westmoreland Coal Co. v. Kerr, 220 N. Y. 137; Metropolitan Life Ins. Co. v. Bank of United States, 259 N. Y. 365; Mt. Morris Bank v. Twenty-third Ward Bank, 172 N. Y. 244; The Irving Bank v. Wetherald, 36 N. Y. 335; Brooklyn Trust Co. v. Toler, 65 Hun 187, 138 N. Y. 675.)

      Chester Bohrlich and Stanley Goldstein for respondents.
    I. A bank which disregards a stop payment order and pays a check cannot charge the depositor therewith in the absence of ratification by the depositor. It necessarily follows that such defaulting bank cannot involve its depositor in litigation in an attempt to establish that the depositor owed the money to the payee. (American Defense Soc. v. Sherman Nat. Bank, 225 N. Y. 506; Citizens’ Nat. Bank v. Importers & Traders’ Bank, 119 N. Y. 195; Shipman v. Bank, 126 N. Y. 318; Baldwin’s Bank v. Smith, 215 N. Y. 76; Gaita v. Windsor Bank, 251 N. Y. 152; Pyramid Musical Corp. v. Floral Park Bank, 268 App. Div. 783; K. & K. Silk Trimming Co. v. Garfield Nat. Bank, 127 Misc. 27; Egerton v. Fulton Nat. Bank, 43 How Prac. 216; Pittsburgh-Westmoreland Coal Co. v. Kerr, 220 N. Y. 137.) H. Ratification cannot be proven under the allegations of the complaint. (Kasnowitz v. Manufacturers Trust Co., 171 Misc. 545, 172 Misc. 242; Best Foods, Inc., v. Mitsubishi Shoji Kaisha, 224 App. Div. 24.)
   Conway, J.

This is an action brought by the plaintiff bank against its depositor, herein called “ Arb.eedee ”, and Caracanda Bros. & Co., Ltd., herein called “ Caracanda ”, the payee of a check drawn by Arbeedee, to which reference will presently be made. Alternative relief is sought under section 213 of the Civil Practice Act. Section 213 reads as follows: “ § 213. Where doubt exists as to who is liable. Where the plaintiff is in doubt as to the person from whom he is entitled to redress, he may join.two or more defendants, to the intent that the question as to which, if any, of the defendants is liable, and to what extent, may be determined as between the parties. ’ ’

Arbeedee moved to dismiss the complaint for failure to state a cause of action against it. Caracanda was not a party to the motion and is not before us upon this appeal. The matter comes to us after a nonunanimous affirmance by the Appellate Division of an order and judgment dismissing the complaint as a result of the motion.

We had before us recently a question involving the construction of section 213 and other related sections of the Civil Practice Act and we indicated the liberality of construction which should be accorded those statutes so as to attain the proper purposes to be served by them. (Great Northern Tel. Co. v. Yokohama Specie Bank, 297 N. Y. 135.) The question presented now is whether in seeking redress against these defendants a cause of action has been stated against Arbeedee based upon facts alternatively alleged in accordance with section 241 of the Civil Practice Act, which requires “ a plain and concise statement of the material facts * * * on which the party pleading relies ”, (See Best Foods, Inc., v. Mitsubishi Shoji Kaisha Ltd., 224 App. Div. 24, 26.)

The complaint alleges in substance that defendant Arbeedee and defendant Caracanda entered into an agreement for the purchase of sugar which provided that Arbeedee should deliver a check for $25,000 to Caracanda to bind the transaction and that that amount would be returned upon receipt by Caracanda of a letter of credit to be obtained by Arbeedee. On August 9, 1946, Arbeedee drew such a check on its account in the plaintiff bank and delivered it to Caracanda. Thereafter Arbeedee requested plaintiff to stop payment on the check. On August 13, 1946, Caracanda presented the check for certification and it was certified by plaintiff through mistake. On the following day Caracanda presented it for payment and plaintiff paid it. When advised of the payment of the check Arbeedee insisted that plaintiff make no debit against its account asserting that Caracanda had no legal right to the money. Plaintiff thereupon demanded repayment of the $25,000 from Caracanda. That was refused. The complaint then alleges the following:

“ Eleventh : The $25,000 paid by plaintiff to defendant Caracanda was either owed by defendant Arbeedee to defendant Caracanda or defendant Caracanda had no right thereto.

Twelfth: If the money was due and owing by defendant Arbeedee to defendant Caracanda, defendant Arbeedee has been unjustly enriched at the expense of the plaintiff to the extent of $25,000. If the money was not due and owing from defendant Arbeedee to defendant Caracanda, then defendant Caracanda has been unjustly enriched at the expense of plaintiff to the extent of $25,000.” (Emphasis supplied.)

Finally, plaintiff alleges due demand upon both defendants and nonpayment and prays for judgment in the sum of $25,000 against Arbeedee and/or ” Caracanda.

It is quite clear that the complaint fails to- state a cause of action against Arbeedee since it fails to allege ratification by Arbeede'e after learning of the payment by plaintiff to Caracanda (American Defense Soc. v. Sherman Nat. Bank, 225 N. Y. 506) and there are no alternative allegations of fact upon which to rest such a cause of action. (Cf. Great Northern Tel. Co. v. Yokohama Specie Bank, supra.) It does not alter the situation that the plaintiff is suing here for unjust enrichment rather than defending an action for the breach of its contract with its depositor. Under our rule, unless Arbeedee “ had credited itself upon its books with payment or had in any way recognized his [Caracanda’s] receipt of the money from the bank as payment of its obligation ” (American Defense Soc. v. Sherman Nat. Bank, supra, p. 509), there was no unjust! enrichment.

A defendant may not be held liable nor may a plaintiff be entitled to redress under section 213 unless facts are alleged which constitute a cause of action. For all that appears here Arbeedee is entirely correct in the claim, as stated in the complaint, that “ defendant Caracanda had no legal right to the money.” Our courts have never permitted a hank in a commercial transaction such as this, after breaching its depositor’s instructions, to involve him against his will in litigation with a third party in order that the bank may recoup a potential loss resulting from its own error. The doctrine of subrogation or equitable assignment is not properly applicable under such circumstances. (Pittsburgh-Westmoreland- Coal Co. v. Kerr, 220 N. Y. 137.) We stated our State rule very clearly in the American Defense Society case (supra), saying, (p. 509): While there is proof that the checks were drawn to pay Baxter all or part of the amount due him, there is no evidence to show that after the bank’s mistake the depositor recognized or adopted the unauthorized payment in any way. In the absence of ratification the bank was liable to the depositor, as it could not justify paying out the depositor’s money without authority by showing that the recipient was justly entitled to it.” (Emphasis supplied.)

We had occasion long since to indicate that a bank may protect itself by contract with its depositor so as to limit liability on a stop payment order. (Gaita v. Windsor Bank, 251 N. Y. 152, 155.) When that has not been done, the common-law liability is absolute in the absence of ratification. (Gaita v. Windsor Bank, supra.)

The judgment should be affirmed, with costs.

Loughran, Oh. J., Lewis, Desmond, Thaoher, Dye and Fuld, JJ., concur.

Judgment affirmed.


text:
    In the Matter of the Application of Charles P. Sullivan, as District Attorney of Queens County, for the Transfer of Antoinette Alesi, a Dangerously Mentally Ill Inmate of Creedmoor State Hospital, to Matteawan State Hospital. Henderson Morrison, Jr., Attorney for Antoinette Alesi, et al., Respondents; Comptroller of the City of New York et al., Appellants.
    Argued January 6, 1948;
    decided March 11, 1948.

      Charles E. Murphy, Corporation Counsel (David M. Fuchs and Seymour B. Quel of counsel), for appellants.
    I. The comptroller and not the court has the power and duty to fix fees and costs which are paid by the City of New York for services rendered in a proceeding under section 85 of the Mental Hygiene Law. (Matter of Smedley v. Taylor, 245 App. Div. 763, 269 N. Y. 585; O’Neill v. State of New York, 223 N. Y. 40; New York Catholic Protectory v. Rockland County, 212 N. Y. 311; People ex rel. Rand v. Craig, 231 N. Y. 216; People ex rel. Grannis v. Roberts, 163 N. Y. 70; People ex rel. Myers v. Barnes, 114 N. Y. 317; People ex rel. Desiderio v. Conolly, 238 N. Y. 326.) II. There was no authority for the Supreme Court to appoint an attorney for an incompetent in a proceeding under section 85 of the Mental Hygiene Law and to order the City of New York to pay compensation to such attorney. (Persky v. Bank of America Nat. Assn., 261 N. Y. 212; Matter of Naylor, 284 N. Y. 188; People ex rel. Ransom v. Niagara County, 78 N. Y. 622; People ex rel. Whedon v. Board of Supervisors, 192 App. Div. 705; People v. Thompson, 205 App. Div. 581; Johnson v. Whiteside County, 110 Ill. 22.)

      Charles P. Sullivan, District Attorney (Henry W. Schober of counsel), for respondents.
    I. Subdivision 6 of section 85 of the Mental Hygiene Law authorized the order made at Special Term. (Matter of Smedley v. Taylor, 245 App. Div. 763, 269 N. Y. 585; Matter of Robertson v. Hoban, 248 App. Div. 262.) H. The assignment of counsel by Special Term is authorized. Proper provision was contained in the order for the payment of a reasonable sum for counsel fees. (People ex rel. Acritelli v. Grout, 87 App. Div. 193.)
   Conway, J.

In February, 1946, the representatives of the Creedmoor State Hospital, pursuant to subdivision 1 of section 85 of the Mental Hygiene Law, certified to the District Attorney of Queens County that one Antoinette Alesi had committed acts, which, if committed by a sane person, would constitute homicide or felonious assault and that her continued presence was a constant source of danger to other patients and to the personnel of the hospital. Thereupon, under subdivision 2 of section 85, the District Attorney made application to the Supreme Court in Queens County for the appointment of a commission to determine her “ dangerous mental illness ”. Three disinterested persons were appointed to examine the patient and report thereon. The court further, in the interests of the patient, assigned counsel to represent her. After a hearing and the taking of testimony, the commission recommended that Mrs. Alesi be transferred to Matteawan State Hospital and its report was duly confirmed. On the motion for confirmation the District Attorney requested the court to fix and allow the fees and other expenses of the commission. The court allowed a fee to each of the commissioners, a small sum as out-of-pocket disbursements, and a fee to the attorney assigned to represent the patient. It was further ordered that “ such fees, expenses and costs be audited and allowed by the Comptroller of the City of New York, and be paid by the City Treasurer of the said City, on warrant of the said Comptroller,” from the court fund and charged to the proper county within the said city.

It is that direction which poses the question presented for our consideration. It is whether the court or the comptroller shall fix and determine the costs of the proceeding within the meaning of subdivision 6 of section 85. That subdivision reads as follows: “ 6. The costs necessarily incurred, under this section, in determining the dangerous mental illness of such person, including fees of the commission, fees of the medical witnesses, and any other necessary expenses allowed by the judge or justice, shall be a charge upon the county from which such person was originally certified; but in the city of New York, the judge or justice, shall order such costs audited and allowed by the comptroller and paid by the chamberlain [now the City Treasurer] of said city on the warrant of the comptroller from the court fund, and charged to the proper county within the said city.” Concededly,' outside the city of New York the judge or1 justice allows the costs of the proceeding and they thereupon become a charge upon the county from which the patient was originally certified. It is urged by the comptroller that in the city of New York he has the sole power to fix such costs, and that the second portion of subdivision 6 of section 85 grants to him alone, in matters arising in the city of New York, the power granted to judges and justices in other parts of the State by the first portion of the subdivision. That would place upon judges and justices in the city of New York the responsibility for the appointment of the commission, to examine the patient and report to the court, together with the responsibility for confirming the report and acting upon it, but would confer the power to allow compensation for the work performed upon an official unconnected with the court. Certainly, the Legislature has not expressly so provided and there should be clear expression of legislative intent to warrant a holding that it was intended to withhold from courts in the city of New York only the power to allow the costs of a proceeding in which it is their duty to select competent disinterested persons to make a determination of dangerous mental illness. Such intent is not evident here.

The word “ audit ” may connote different processes depending upon the context of the statute, the charge involved and the purpose to be served. A good statement of the rule may be found in 7 Corpus Juris Secundum, pages 1274-1275, which is in part as follows: “It has been said that the true meaning of the word in a particular case is to be ascertained from the context, all surrounding facts, and the purpose to be accomplished, (hat sometimes it is restricted in meaning to a check-up of the correctness of the account or claim and excludes any element of discretion on the part of the auditor; that, at other times, it may embrace not only an examination of accounts and a comparison of charges with vouchers, but also an allowance or rejection of charges and a statement of balance for the purpose of determining .the amount, if any, to be paid thereon, involving an exercise of discretion by the auditing officer or board; * *

We think the duty of the comptroller under subdivision 6 of section 85 is to examine the liquidated charge to see that it is being paid to the proper person, that it was duly fixed and ordered to be paid and that it is entered and charged against the appropriate court fund of the proper county within the city of New York. We think it clear that when the Legislature withheld the right to fix and allow the costs of the proceeding from boards of supervisors in all the other counties of the State, it withheld it from the comptroller in the city of New York, which contains within its boundaries five counties. One of the duties of the comptroller is to act as bookkeeper for the people of those counties and that explains and gives full meaning to all the .wording of the latter portion of subdivision 6 of section 85.

This is not the type of case where the charge is mandatory but the amount is subject to review by county or other appropriate officials. (See People ex rel. Gardenier v. Board of Supervisors, 134 N. Y. 1, 10; People ex rel. Rand v. Craig, 231 N. Y. 216; People ex rel. Manley v. Craig, 231 N. Y. 574; People ex rel. Smyth v. Craig, 231 N. Y. 575.) Here the Legislature has specifically provided that a third party — the ‘ ‘ judge or justice ”— shall act in the premises before the matter reaches the county authorities or the comptroller. That divests such officials of their ordinary discretion and distinguishes the instant case from those just cited.

There remains the question whether the court had power to allow compensation to the attorney assigned by it to represent the patient. There are many instances in which courts exercise their inherent power to protect individual members of the community by assigning counsel for that purpose in criminal or quasi-criminal cases. Unless the Legislature has provided for compensation for such counsel, the court is without power to direct payment by the State or county for the services rendered. Thus, payment to counsel is permitted where the charge is murder in the first degree. (Code Crim. Pro., § 308.) There is no such provision when other crimes are charged. Moreover, under subdivision 6 of section 85, the Legislature made express provision for payment for two types of services — service as commissioner and service as a medical witness. If the Legislature had intended that payment should be made for the services of counsel we think such provision would have been made, for the Legislature had the appearance of counsel in mind when it provided that the patient might “be represented by counsel ”. (Mental Hygiene Law, § 85, subd. 3.) It must be remembered that before subdivision 6 was added to the section, even the commissioners were not entitled to compensation. (Matter of Smedley v. Taylor, 269 N. Y. 585; see, also, Matter of Naylor, 284 N. Y. 188.)

The orders should be modified by striking out the decretal paragraph providing for the payment to the counsel appointed by the court to represent the interests of Antoinette Alesi of a fee and allowance for services rendered, and as so modified affirmed, without costs.

Loughran, Ch. J., Lewis, Desmond, Thacher, Dye and Field, JJ., concur.

Ordered accordingly.


text:
    In the Matter of the Claim of Mildred Roder, Widow of Edward J. Roder, Deceased, Respondent, against Northern Maytag Co. et al., Appellants. Workmen’s Compensation Board, Respondent.
    Argued January 7, 1948;
    decided March 11, 1948.

      Charles W. Green and Ellsworth Van Graafeiland for Northern Maytag Co. and another, appellants.
    No award may he made against the employer and carrier. (Matter of Riddle v. General Ice Cream Corp., 262 App. Div. 353; Matter of Watkins v. Cornwall Press, 270 App. Div. 615; Matter of Larac v. Munson S. S. Lines, 264 App. Div. 923; Matter of Becker v. Marcy State Hospital, 264 App. Div. 643; Matter of Kiriloff v. A. G. W. Wet Wash Laundry, 293 N. Y. 222.)

      John M. Cullen for Special Fund for Reopened Cases, appellant.
    There is no inconsistency between the two sentences of section 123, nor with the provisions of section 25-a, of the Workmen’s Compensation Law, which provisions limit the jurisdiction of the compensation hoard. (People v. Ryan, 274 N. Y. 149; Matter of Post v. Burger & Gohlke, 216 N. Y. 544; Matter of Norcisco v. American Book Bindery, 268 App. Div. 837; Matter of Sager v. General Electric Co., 269 App. Div. 801.) .

      Leonard D. Marafioti and Henry Bedman Butcher for respondent.
    I. This case was restored to the calendar on an application, dated August 17, 1942, and is not therefore a case under section 25-a. (Matter of Whitmyre v. International Business Machines Corp., 274 N. Y. 61.) II. In any event, the Workmen’s Compensation Board has jurisdiction to hear this case against the Special Fund for Reopened Cases. The exception mentioned in the first sentence of section 123 of the Workmen’s •Compensation Law, applies to employers and carriers only. (Matter of Tipton v. Lang’s Bakery, Inc., 250 App. Div. 696; Matter of Watkins v. Cornwall Press, 270 App. Div. 615.) III. The Workmen’s Compensation Board has jurisdiction to hear this cáse by virtue of section 25-a. (Matter of Watkins v. Cornwall Press, 270 App. Div. 615.)
   Conway, J.

On August 24, 1935, the deceased slipped or fell from a ladder and strained himself ”. He continued working until August 29th, remained at home under a physician’s care until September 3d and then returned to work. He continued at work until September 12, 1935, when he sustained injury while lifting a refrigerator. On that same evening he suffered from pain in his head, collapsed and died from “ a ruptured cerebral aneurysm of the first middle cerebral artery

His widow filed a claim for death benefits on September 23, 1935, but, after a trial upon the merits, her claim was disallowed on October 13, 1936, upon the ground that she had failed to establish causal relation* between the death and the accidents.

On August 17, 1942, the widow made application to reopen the case and to have it placed on a referee’s calendar for the purpose of introducing expert or opinion medical proof on the question of the existence of causal relation between 'the injuries and death of her husband.

There is a finding by the board that the application to reopen was “ made and filed after a lapse of seven years from the dates of the aforesaid accidents or death (Emphasis supplied.) That finding is clearly erroneous as a matter of law since it is mathematically incorrect. Manifestly, the application was made within the seven-year period. Nevertheless, on November 16, 1942, it was denied. One week later on November 23, 1942 (a date which was more than seven years subsequent to the accidents and death) an application in the nature of a motion for reconsideration or reargument was made. In that application the attention of the board was called to the fact that, in connection with the denial of November 16th, the board member wrote that The mere fact that cumulative evidence has been found which might bear affirmatively upon a question of fact, already sufficiently provided is not sufficient in my opinion to grant a reopening of the record in order that such evidence might be submitted.” (Emphasis supplied.) It was pointed out by the claimant that the “ error of this statement is contained in the phrase# ‘ already sufficiently provided.’ At no time heretofore has any evidence been submitted by a brain specialist, and because only the evidence of causal relation was considered by the Board as its reason for refusing to make an award, it is the most important evidence that could be obtained.” Thereupon the board restored the case to the calendar under date of March 25, 1943, in a memorandum which read in part:

“ Saving again considered the application of claimant’s attorney, and his accompanying C-27 from Dr. Ward Williams, the Board is of the opinion that this matter should be restored to the calendar to afford the claimant’s attorney an opportunity to present his.evidence on the question of causal relationship.

“ Previous denial of the Board is hereby rescinded and the case is restored to a calendar in accordance with the above directions.” (Emphasis supplied.)

The application and the C-27 mediqal report accompanying it, mentioned in the quotation, obviously referred to the application papers of August 17,1942. We think, therefore, in view of the ground of the application for reconsideration of November 23, 1942, that the case was restored to a calendar so that the matters contained in the application of August 17th might have proper, consideration. It was the denial of November 16th which was promptly “ rescinded ” on the application of November 23d. It is urged by the appellants that if the board be permitted to employ a “ theory of recission ” so that it may reopen a claim “ at any time by merely rescinding a former decision ” there will be no effective limitation on the jurisdiction of the board despite the limitation thereon contained in the statute of its creation. We think in this instance there was merely a rescinding of a ruling, made a week, prior to the application for reconsideration, due to the fact that such application had called ■ attention to an incorrect assumption of fact. We pass upon no other questioñ.

In view of the foregoing it is clear that, since the application for reopening was made on August 17, 1942, which was within seven years of the date of accident or death, section 25-a of the Workmen’s Compensation Law is inapplicable.

The order should be affirmed, with costs. The first question certified should be answered in the affirmative and the second question certified not answered.

Lotjghran, Oh. J., Lewis, Desmond, Thacher, Dye and Fuld, JJ., concur.

Order affirmed, etc.