author: Crane, J.

text:
    Vasili D. Dumbadze, Appellant, v. Eugene E. Lignante, Respondent, Impleaded with Others.
    Limitation of actions — accounting — six-year Statute of Limitations applies to action for accounting where there is no claim of an express trust and either an arrangement to collect and hold money or fraud is alleged —■ demand in first and discovery in second case necessary to start running of statute — erroneous dismissal of complaint in action for accounting on ground cause of action was barred by six-year Statute of Limitations.
    1. Whether a complaint in an action for an accounting is considered as alleging an arrangement to collect and hold money for the plaintiff or as alleging fraud, the six-year Statute of Limitations applies, no claim being made of an express trust. In the former ease, however, a demand would be necessary to start the statute running (Civ. Pr. Act, § 15) and in the latter case the cause of action is not deemed to have accrued until a discovery by the plaintiff, or the person under whom he claims, of the facts constituting the fraud. (§ 48, subd. 5.)
    2. Where the complaint in such an action may be taken as stating that one of the defendants and later his assignee, the defendant, respondent, acting under agreement undertook as agent or attorney to collect money belonging to plaintiff and hold it for him, a demand would be necessary by plaintiff to start the statute running or a knowledge of facts entitling him to make a demand. On the other hand, if it states a cause of action in fraud, in that the action of the assignor in assigning the claim to defendant, respondent, and of the latter in taking and keeping the money were an attempt to cheat the plaintiff, then the right to sue would not accrue until the plaintiff knew or should have known the facts. ' In either event, the date of payment would not be the date from which the Statute of Limitations would run. It would be the time when the plaintiff could or should have made a demand, or the time when he knew or should have known of the fraud, and it was error to dismiss the complaint on the ground that the cause of action was barred by the six-year Statute of Limitations.

      Dumbadze v. Lignante, 216 App. Div. 554, reversed.
    (Submitted October 22, 1926;
    decided November 23, 1926.)
    Appeal from a judgment, entered May 4,1926, upon an order of the Appellate Division of the Supreme Court in the first judicial department, which reversed two orders of Special Term denying motions by defendant, respondent, for a dismissal of the complaint as to him and granted such a motion.
    Amos J. Peaslee and Emily Marx for appellant.
    The respondent was the assignee of the legal title to the fund. He took the title subject to all equities in favor of the plaintiff. The complaint seeks to enforce those equitable rights against the legal owner of the fund, and, hence, the cause of action alleged is essentially and exclusively of an equitable character which was intended to be governed by the ten-year Statute of Limitations. (Lobsitz v. Lissberger Co., 168 App. Div. 840; Selwyn & Co. v. Waller, 212 N. Y. 507; Tyndall v. Pinelawn Cemetery, 198 N. Y. 217; Schantz v. Oakman, 163 N. Y. 148; Marvin v. Brooks, 94 N. Y. 71; Trustees of Union College v. Wheeler, 61 N. Y. 88; Barnes v. Alexander, 232 U. S. 117; Hofferbergh v. Duckett, 175 App. Div. 480; Pratt v. Commercial Trust Company of New York, 105 Misc. Rep. 324; Powell v. Freeport Bank, 200 App. Div. 432.) The Statute of Limitations did not in any event commence to rim against the plaintiff until he learned of the collection of the fund by Dignante in the fall of the year 1923. (Taylor v. Benham, 5 How. Pr. 233; Lightfoot v. Davis,
      198 N. Y. 261; Newton v. Porter, 69 N. Y. 133; Wakulaw v. State Bank, 124 Misc. Rep. 172.)

      Joseph Fischer and Frederick Hemley for respondent.
    The action is barred by the six-year Statute of Limitations. (Keyes v. Leopold, 241 N. Y. 189; Minion v. Warner, 238 N. Y. 413; Mills v. Mills, 115 N. Y. 80; Hermes v. Westchester Racing Assn., 213 App. Div. 147; New York & Boston Despatch Express Co. v. Carroll, 170 App. Div. 197; Fuller v. Morian, 85 Misc. Rep. 529; Holt v. Hopkins, 63 Misc. Rep. 537; Brown v. Brown, 83 Hun, 160; 146 N. Y. 385; Matter of Waite, 43 App. Div. 296; Wood v. Young, 141 N. Y. 211.) The complaint does not state a cause of action in equity against respondent. (Model Building & Loan Association v. Reeves, 236 N. Y. 331; Wood v. Young, 141 N. Y. 211; Montgomery v. Shear, 182 App. Div. 238; Morrison v. Chapman, 63 Misc. Rep. 195; Marvin v. Brooks, 94 N. Y. 71, 80; Conger v. Judson, 69 App. Div. 121.)
   Crane, J.

The court below has determined that this action is barred by the six-year Statute of Limitations; and that is the point on this appeal. Judgment was granted on motion under rule 107, subdivision 6, and is reported below (216 App. Div. 554).

We must, therefore, analyze the complaint.

The defendants are Eugene E. Lignante, a citizen and resident of New York, Anton Antonovich Knaap, of Warsaw, Poland, and Vasili Davidovich Zimdin of Berlin, Germany.

A syndicate was formed, including the plaintiff, Knaap and Zimdin, which procured a contract at Petrograd, Russia, for two million shrapnel shells. These three entered into an agreement to share their profits equally. The contract was' assigned to the Canadian Car & Foundry Co., Ltd., under date of February 12, 1915. On February 15th of the same year an agreement in writing was made, of which the Canadian Car & Foundry Co. had notice, by which the plaintiff and the defendants Knaap and Zimdin should together receive seventy cents per shell, or $1,400,000.

On or about March 5,1915, the plaintiff and the defendants Knaap and Zimdin entered into an agreement with the Robert Dollar Co. whereby said company was constituted agent to collect the moneys due these three gentlemen from the foundry company.

On April 9, 1915, the defendant Knaap, purporting to act for the plaintiff and defendant Zimdin, directed the Robert Dollar Co. to make distribution, pursuant to a letter annexed as Exhibit 5. The complaint says that this was a fraud by Knaap and unauthorized. On May 8, 1915, the plaintiff and Zimdin notified the Robert Dollar Co. from Russia of the fraud. Knaap’s power-of-attorney to act for them was revoked.

On May 18, 1915, these three people entered into another agreement modifying their respective shares, and gave to one Howe, a representative of the Robert Dollar Co. at Petrograd, a letter containing new instructions for distribution of the profits. This is Exhibit 6. A later letter, October 8, 1915, Exhibit 7, showed the interests of the plaintiff and defendants Knaap and Zimdin in the funds. .

According to these agreements, the plaintiff was to receive the following amounts: (1) One-third interest in the sum of $102,500, to be held in escrow; (2) one-third interest in the sum of $44,642.83, to be paid to Knaap, as trustee for the other two; (3) a one-third interest in the sum of $5,357, the remainder of the money.

On February 27, 1916, the plaintiff was imprisoned in Petrograd, and Colonel Gerasim Ivanovich Setchinsky was appointed guardian of his property. This guardian gave to Knaap power-of-attorney, Exhibit 8, to collect the money due the plaintiff. This power-of-attorney, signed by Colonel Gerasim Ivanovich Setchinsky, reads as follows:

“ In the capacity of Attorney of the Guardianship over the property of Vasili Davidovich Dumbadze who has been deprived by law of all civil rights, and acting under power of attorney with the right of delegation issued to me by David Dumbadze, guardian over the property of Vasili Dumbadze, I authorize you by these presents to receive from the Robert Dollar Company in the United Statesj and from the Canadian Car & Foundry Company in Canada, moneys due to Vasili Dumbadze, for which purpose I empower you to confirm wheresoever and in a manner you may find necessary the former instructions of Vasili Dumbadze * * *. All that you may lawfully do under this power of attorney I shall accept as true and shall not dispute or gainsay.”

On February 27, 1917, Knaap, purporting to act for the plaintiff, transferred to the defendant Lignante the rights of the plaintiff “ pursuant to the said power of attorney from the said Colonel Setchinsky to a one-third interest in the said sums of $102,500, $44,642.83 and $5,357.”

The instrument of transfer, dated February 27, 1917, was signed by “Anton A. Knaap, W. D. Dumbadze, by Anton A. Knaap, Attorney in fact, acting under power from Colonel Setchinsky certified by the Notary Public at Petrograd August the 18th, 1915.” After the recitals, it reads:

“ Now, Therefore, in consideration of $102,500.00 received by the undersigned, A. A. Knaap and W. D. Dumbadze, the latter acting by and through the said A. A. Knaap, as attorney in fact, I do hereby agree to and do hereby assign, transfer and set over unto Eugene E. Lignante of the City of New York, the said 102,500/557,314 of each amount retained by the said Robert Dollar Company, which by the terms of said letter of Oct. 8 /21 /1915, the said Company was directed to hold in escrow to the credit of the parties hereto and W. D. Zimdin until a majority agreement had been reached by them as to its final disposal.”

The complaint states: The said Lignante accepted and received the said assignments with full knowledge and notice of the representative and fiduciary capacity in which the said Knaap was acting respecting the rights in the property of the plaintiff in the said sums of $102,500, $44,642.83 and $5,357.”

On or about March 6, 1917, the Canadian Car & Foundry Co. paid to the defendant Lignante oné-third interest of Knaap, acting as attorney and trustee for the property of plaintiff pursuant to said power of attorney from Colonel Setchinsky,” in the total sum of $50,833.28.

On October 13, 1917, plaintiff was restored to all his legal rights, and the guardianship was terminated, but he remained in ignorance of this payment to Lignante until the fall of 1923, although diligently endeavoring to ascertain the facts. Lignante appropriated the funds to his own use.

The plaintiff asks the defendant Lignante to account to him for the money so received. Lignante is the only defendant against whom judgment is asked.

This action was commenced June 9, 1925. Payment to Lignante was made on March 6, 1917. If the six-year Statute of Limitations applies, and runs from the day of payment, it expired March 6, 1923. The action was two years late.

That the six-year Statute of Limitations applies, no claim being made of an express trust, is settled by Keys v. Leopold (241 N. Y. 189) and Minion v. Warner (238 N. Y. 413, 418). The poiht which these cases did not determine, however, is when upon the facts ■ here the Statute of Limitations begins to run. It has been assumed that March 6, 1917, the date of payment of Lignante, started the statute running.

Whether we consider the complaint as alleging an arrangement to collect and hold the money for the plaintiff or as alleging fraud this conclusion is wrong.

In the former case a demand would be necessary to start the statute running according to section 15 of the Civil Practice Act, and in the latter case under section 48, subdivision 5, the cause of action is not deemed to have accrued until a discovery by the plaintiff or the person under whom he claims of the facts constituting the fraud. Section 15 of the Civil Practice Act reads:

Where a right exists, but a demand is necessary to entitle a person to maintain an action, the time within which the action must be commenced must be computed from the time when the right to make the demand is complete except in one of the following cases:

“1. Where the right grows out of the receipt or detention of money or property by an agent, trustee, attorney, or other person acting in a fiduciary capacity, the time must be computed from the time when the person having the right to make the demand has actual knowledge of the facts upon which that right depends.”

The complaint is not as definite and as certain as it might be. It may be taken as stating that Knaap and later his assignee, Lignante, acting under agreement, undertook as agent or attorney to collect the plaintiff's share of the money paid to the Robert Dollar Company and hold it for him.

All through the complaint it appears that Knaap, by a special written agreement, was a trustee for the plaintiff. The nature of the trust is not disclosed. We find Knaap referred to as acting as attorney and trustee for the property of plaintiff pursuant to the said power of attorney from Colonel Setchinsky.” It is stated that Lignante received these funds “ in a fiduciary capacity.” What was this trust or fiduciary capacity? Was it to hold the money until the plaintiff could receive it? Dumbadze was in jail and his property taken by the Russian government. Dumbadze’s property under the order of that government had passed to Colonel Setchinsky.

When we turn to the exhibits, we also find a peculiar set of facts. The power of attorney given by Setchinsky to Knaap was not to collect the money and pay it over to Setchinsky. Setchinsky was to have only $30,000 forwarded to him. The balance was to be held by Knaap. For what purpose? So also the formal power of attorney, or agreement between Knaap and Dumbadze, recites that this money coming from the Dollar Company was to “ remain in escrow ” until majority agreement is reached by Knaap, Dumbadze and Zimdin; that an agreement has been reached; that all the money “ shall be paid over to said Knaap and disposed of by him as his sole property; ” that Dignante has paid $102,500 as consideration for this agreement, and concludes: “We hereby authorize and direct the said Robert Dollar Company to pay the said moneys over to the said Dignante, his legal representatives and assigns as and when the same will be received by the said Robert Dollar Company.”

If Knaap was to hold these moneys until Dumbadze got out of prison and could receive them in America, keeping them from the Russian government, he was not obliged to pay them over immediately to Dumbadze in Russia. A demand by Dumbadze would, therefore, be necessary in order to start the statute running, or a knowledge of facts entitling Dumbadze to make a demand. If Knaap held the funds under such a trust, or as attorney for such a purpose, Dignante held them in the same way. (Newton v. Porter, 69 N. Y. 133.) Of course if Dignante was merely an agent to collect the money and pay it over at once or within a reasonable time to Dumbadze, then Wood v. Young (141 N. Y. 211) would apply. No demand would be necessary and the statute would run from the time of collection, whether Dumbadze knew of it or not. We think, however, that the complaint states more than the ordinary relationship of debtor and creditor.

On the other hand, the complaint may reasonably be construed as stating an action in fraud. If the action of Knaap in assigning the claim to Dignante and of Dignante in taking and keeping the money were an attempt to cheat the plaintiff out of his money then the right to sue would not accrue until the plaintiff knew or should have known of the facts.

Whichever view, however, we take of the complaint, the date of payment to Lignante, March 6, 1917, would not be the date from which the Statute of Limitations would run. It would be the time when the plaintiff could or should have made a demand, or the time when he knew or should have known of the fraud.

The complaint, therefore, should not have been dismissed. Upon a trial it may appear that the plaintiff either knew or should have known of the facts earlier than 1923 and that his claim may be barred. Upon the facts as pleaded, however, he is entitled to be heard.

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

His cock, Ch. J., Cabdozo, Pound, McLaughlin, Andbews and Lehman, JJ., concur.

Judgment accordingly.


source: Caselaw Access Project

license: Public Domain

text:
    The People of the State of New York, Appellant, v. 242-252 West 36th Street Corporation, Respondent.
    Real property — factories — Labor Law • — • owner of fireproof factory building properly convicted of violation of Labor Law where tenants erect wooden partitions in portions leased by them — duty of inspection and removal on owner — statutory provision that partitions must be of incombustible material applies to those within rented space.
    Where tenants of a thirteen-story factory building of fireproof construction, after occupancy, erect within the parts leased by them wooden partitions to separate their holdings into rooms for convenient use, the owner may properly be convicted of a violation of subdivision 6 of section 270 of the Labor Law providing “ all partitions in the interior of fireproof buildings shall be of incombustible material.” Upon the owner is placed the obligation of keeping his building free from wooden partitions, the law giving him an opportunity for inspection and removal (§ 316), and subdivision 6 should not be construed as applying only to partitions which separate the portions leased by the various tenants of the building.

      People v. West 36th Street Corporation, 217 App. Div. 791, reversed.
    (Submitted November 16, 1926;
    decided November 23, 1926.)
    Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered July 19, 1926, which reversed a judgment of the Court of Special Sessions of the city of New York, convicting the defendant of a violation of subdivision 6 of section 270 of the Labor Law and directed repayment of a fine paid on such conviction.

      George P. Nicholson, Corporation Counsel (John F. O’Brien and Martin H. Murphy of counsel), for appellant.
    Respondent, as owner of a tenant factory building, is responsible for the observance of the provisions of section 270 of the Labor Law. (Penal Law, § 1275; Labor Law, § 316, subd. 2; People ex rel. Williams v. Eno, 134 App. Div. 527; People v. Pease, 173 App. Div. 752; 219 N. Y. 627; People v. Schwitz, 177 App. Div. 565; People v. West, 106 N. Y. 293; People v. Kibler, 106 N. Y. 321; People v. Werner, 174 N. Y. 132; People v. Bowen, 182 N. Y. 1; People ex rel. Price v. Sheffield Farms Co., 225 N. Y. 25.) The constructions which separate the floor areá of a tenant into different rooms constitute “ partitions ” within the meaning of the statute. (Labor Law, §§ 260, 263, 264, 270.)

      Abraham J. Halprin for respondent.
    The People failed to prove the defendant guilty of the violation alleged in the information. (City of New York v. Stewart Realty Co., 109 App. Div. 702; Century Holding Co. v.
      Pathe Exchange, Inc., 200 App. Div. 62; Van Vleck v. White, 66 App. Div. 14; McCall v. Walter, 71 Ga. 287; Sawyer v. Long, 86 Me. 541.)
   Crane, J.

The defendant was convicted in the Court of Special Sessions in the city of New York for violation of section 270 of the Labor Law (Cons. Laws, chap. 31) and fined twenty dollars. The Appellate Division reversed the conviction and the People have appealed to this court.

The defendant owned a tenement factory building, a thirteen-story structure, located at Nos. 242-252 West Thirty-sixth street in the city of New York. The building was of fireproof construction. It was leased to different tenants. On the floors occupied by more than one tenant fireproof walls separated the leased parts. The defendant never erected any wooden structures in the building. -Tenants, however, after occupancy erected within those parts, respectively leased by them, frame divisions or partitions so as to separate their holdings into offices or rooms for convenient use. According to People’s Exhibit 6, referred to in the testimony as an illustration of the construction throughout the building, the tenant had built partitions of wood and glass running to the ceiling, also of wood and wire work which divided the floor space leased by him into a factory, stock and shipping room and different offices. The rooms were eleven feet high and some of these partitions extended to the ceiling securely fastened. Others did not go above six feet.

On these facts, which are not disputed, did the defendant violate the Labor Law?

Section 270 reads:

“ No factory shall be conducted in a building erected after October first, nineteen hundred and thirteen, which is more than one story in height unless such building shall conform to the following requirements:”
6. Partitions. All partitions in the interior of fireproof buildings shall be of incombustible material,”

Section 263 defines “ fireproof partition ” as being a partition built of brick, concrete, reinforced concrete or terra-cotta blocks with certain specified requirements. The interior partitions, referred to in section 270 are not the fireproof partitions as thus defined by section 263 for the reason that these interior partitions need not be of brick, concrete, etc., but may consist of any material so manufactured, prepared, or of such a nature as to be incombustible.

The reason for these requirements of the Labor Law is quite apparent. Factory buildings are no longer, in large cities, low structures. Manufacturing is carried on in buildings of great height. These buildings must be fireproof and their partition walls fireproof. Floors must be of certain non-inflammable material. The Labor Law provides that elevators and stairs shall be so constructed as to afford easy exits and prevent fires. Many operators are employed in these high factory buildings in manufacturing, as in this case, dresses and coats. Women and girls are employed. Wood that can easily be burned is to be eliminated from such structures and the interior of such. structures as far as possible and convenient. To what extent this shall be done is fixed by the Labor Law. Interior wood work of a substantial nature dividing off floor space into offices may be readily burned causing panic and injury on the particular floor or in a particular factory even though other parts of the building are not affected by reason of their fireproof construction. The Labor Law, therefore, says that the interior partitions shall be of incombustible material. It is agreed that the interior partitions in this building, dividing these floor spaces as constructed by the tenants, were not of incombustible material.

Upon the owner is placed the obligation of keeping his-building free from these wooden partitions erected by his tenants. The law affords him an opportunity for inspection and for removal. Whatever the nature of the lease he may enter to carry out the provisions of this Labor Law.

Section 316 reads:

“ Except as in this article otherwise provided, the person operating a factory, whether as owner or lessee of the whole or a part of the building in which the same is situated or otherwise, shall be responsible for the observance of the provisions of this article, anything in any lease or agreement to the contrary notwithstanding.”

This is made applicable to section 270. By subdivision 3 of this section the tenant in any part of the factory' building shall permit the owner to enter his premises to comply with the provisions of this law.

As these provisions of law were adopted to minimize as far as possible the risks of fire and prevent disaster to workers and operators, we can see no reason for construing' subdivision 6 of section 270 as applying only to partitions which separate the portions leased by the various tenants of a building. If the entire building were leased to one. tenant there would then under such construction be no requirement for non-combustible partitions and the risks from fire would be the same as they were before this law’ so far as partitions and room divisions were concerned. f

The judgment of the Appellate Division should be reversed and that of Special Sessions affirmed.

His cock, Ch. J., Caedozo, Pound, McLaughlin, Andeews and Lehman, JJ., concur.

Judgment accordingly.


author: Pound, J.

text:
    The Peoples Trust Company, Appellant, v. Schultz Novelty and Sporting Goods Company, Respondent.
    Contract — unfair competition — landlord and tenant • — ■ pleading — evidence — question of fact — liability for use and occupation not liability for rent under a lease — agreement to pay monthly sum in consideration of promise not to let adjoining premises for competing business during term of lease of promisor ends with termination of lease for violation of its terms — such a defense new matter and is not presented by mere denial in answer that agreement is in full force and effect — duty under agreement not fully discharged by inserting in sublease clause that subtenant should not sell similar merchandise — not chargeable with sale of overlapping goods without its knowledge — entitled to prove absence of consent — exclusion of evidence of absence of complaint as to sale by subtenant of similar goods, error — sale of same things in both stores not conclusive on question whether business is the same or similar — question whether sale of same articles was incidental or a distinct branch of the business for the jury.
    1. Liability for use and occupation is not liability for rent under a lease. The force of an agreement to pay a monthly sum to the plaintiff’s assignor, lessor of premises adjoining those occupied by defendant, in consideration of their promise not to let any.portion of their premises “ during the term of their lease to any person for the use of any business of the same or similar nature as that conducted ” by defendant, ends, therefore, when the lease terminates, and if the defendant, which, since the making of the agreement has acquired title to the premises leased by plaintiff’s assignor, has effectively terminated the lease for violation of its terms, a recovery may not be had by plaintiff on the agreement after that date. But a mere denial that the agreement is in full force and effect does not present the question although the defense rests on new matter outside the agreement sued on.
    2. A contention that a provision in a sublease of the premises that the subtenants should not “ sell or offer for sale any merchandise similar to that now sold or offered for sale ” by defendant, fully discharged the duty owing to defendant under the agreement, cannot be sustained, if it appears the lessor knowingly permitted violation of the condition. It should not, however, be charged with liability when the competing business covenanted against is carried on without its knowledge or approval. In support of plaintiff’s allegation of full performance it was entitled to prove the absence of such consent or acquiescence, and the exclusion of evidence that no complaint was made by defendant that the subtenant was engaged in the sale of similar goods was error. .
    3. On the question whether the business of the subtenants is the same or similar to that of defendant, the fact that the same things are sold in both stores to some extent is not conclusive. The purely incidental and occasional sale of such articles, in the absence of an express covenant against the sale thereof, would not be a breach of the agreement not to carry on a competing business. On the other hand, if the sale of such goods is a distinct branch of the competing business, the subtenants are to that extent carrying on the same business, whether on a large or small scale. The question of distinct branch or incidental sales was for the jury and it was error for the Appellate Division, having reversed on the facts, to direct a dismissal of the complaint.

      Peoples Trust Co. v. Schultz Novelty & Sporting Goods Co., 216 App. Div. 476, modified.
    (Argued October 22, 1926;
    decided November 23, 1926.)
    Appeal from a judgment, entered May 6,1926, upon an order of the Appellate Division of the Supreme Court in the second judicial department, reversing a judgment in favor of plaintiff entered upon a verdict and directing a dismissal of the complaint.

      Conrad Saxe Keyes for appellant.
    The agreement between Miller Bros, and the defendant did not require Miller Bros, to actually prevent violation of the rights of the Schultz Novelty and Sporting Goods Company, Inc., by its subtenant. (Ashby v. Wilson, L. R 1 Ch. Div. [1900] 66; Kemp v. Bird, 5 Ch. Div. 549; Staff v. Bemis Realty Co., 111 Misc. Rep. 635; Lawrence v. Fox, 20 N. Y. 268; Trustees of Columbia College v. Lynch, 70 N. Y. 440; Clark v. Devoe, 124 N. Y. 120; Norman v. Wells, 17 Wend. 136.) The business conducted by Silver & Herman did not violate the agreement of Miller Bros, that “ they will not let any portion of the premises No. 120 Nassau Street to any person whomsoever, for the use of any business of the same or similar nature as that conducted by the party of the second part.” (Greenfield v. Gilman, 140 N. Y. 168; Breck v. Ringler, 129 N. Y. 656; Broadbooks v. Tolles, 114 App. Div. 646; Goose v. Leonard, 14 Ky. L. R. 174; Waldorf Astoria Segar Co. v. Salomon, 109 App. Div. 65.) The defense as to the termination of the lease was properly overruled by the court. (Matter of Gutman, 197 Fed. Rep. 472; Gazlay v. Williams, 210 U. S. 41.)

      David Paine, Edward G. MacArthwr and Walter A. Mulvihill for respondent.
    There is a breach of the agreement sued on, as matter of law, in that the present occupants, Silver & Herman of 120 Nassau street, are selling the same and similar articles sold by the defendant. (Ludwig Bauman & Co. v. Manwit Corporation, 213 App. Div. 300; Waldorf Astoria Segar Co. v. Salomon, 109 App. Div. 65; Cohen v. Peterson, 211 N. Y. Supp. 499; University Club of Chicago v. Deakin, 265 Ill. 257.) The service of notice by the defendant on the lessee, Hirschberg, terminated the lease, and, therefore, plaintiff cannot recover on the agreement. (Miller v. Levi, 44 N. Y. 489 ; 507 Madison Ave. Realty Co., Inc., v. Martin, 200 App. Div. 146; Lonas v. Silver, 201 App. Div. 383; Childs Co. v. Burke, 110 Misc. Rep. 103; Matter of Sweeney, 94 Misc. Rep. 617; Niagara Falls H. P. & Mfg. Co. v. Schermerhorn, 60 Misc. Rep. 209; Martin v. Crossley, 46 Misc. Rep. 254; Ronginsky v. Grantz, 39 Misc. Rep. 347; Cottle v. Sullivan, 8 Misc. Rep. 184.) The construction of the agreement and the question whether or not Silver & Herman were engaging in a business similar to that conducted by the defendant were for the court. (Dwight v. Germania Life Ins. Co., 103 N. Y. 341; Brady v. Cassidy, 104 N. Y. 147.)
   Pound, J.

On November 12, 1921, a partnership known as Miller Bros, was the lessee of premises No. 120 Nassau street, borough of Manhattan, and defendant was the lessee of adjoining premises No. 122 Nassau street where it was engaged in the business of “ toys, sporting goods and kindred, articles.” The parties . entered into an agreement that Miller Bros. will not let any portion of the premises No. 120 Nassau street during the term of their lease to any person for the use of any business of the same or similar nature as that conducted by the defendant. In consideration thereof the defendant agreed to pay Miller Bros. $300 a month.

The plaintiff sues as assignee of the rights of Miller Bros, under this agreement alleging full performance of all the terms of the agreement to be performed by Miller Bros, and that the same is in full force and effect and a default on the part of defendant in payment of the $300 a month from September 1, 1922, to August 1, 1923, and demands payment accordingly. The answer denies performance of the agreement and that it is in full force and effect. The trial justice left to the jury the question whether ther.e had been a breach of the agreement against letting for a business of the same or similar nature. The jury found for the plaintiff. The Appellate Division held as matter of law that the agreement had been breached, reversed the judgment on "the law and the facts and dismissed the complaint.

We are asked to consider whether the agreement between Miller Bros, and defendant was in force for the period covered in the complaint. Defendant contends that the Miller lease was terminated thirty days after September 7, 1922, under the following circumstances: On August 18, 1922, one Hirschberg owned the Miller lease which by its terms expired in 1928. He sublet the premises to Silver & Herman, who are the tenants charged with improperly competing with defendant, for the balance of the term, without the landlord's consent, contrary to the express provisions of the original lease. Meanwhile defendant had become the landlord of the premises subject to the Miller lease. On September 7, 1922, it gave notice to Hirschberg that it elected to terminate the lease at the expiration of thirty days thereafter and then instituted dispossess proceedings against him. A jury trial was had in the Municipal Court and the jury disagreed., The proceedings were pending when this case was tried. Hirschberg and his subtenants were still in possession. The agreement in suit recites only that the lease continues to on or about 1928.” The provisions as to the term of the lease are not incorporated in the agreement except by this reference. The lease provided that it might be terminated on notice if the lessee defaulted in the performance of any of the agreements therein contained. If it was terminated on or about October 7, 1922, a recovery could not be had for the full amount sued for. If the lease was terminated as matter of law at the expiration of thirty days after the service of the notice (Miller v. Levi, 44 N. Y. 489) the agreement to pay $300 a month ceased when the lease expired. The duty of the subtenants to continue to pay for use and occupation of the premises until dispossessed impressed the courts below. They held that the lease continued in operation “ as a practical matter.” But liability for use and occupation is not liability for rent under the lease. The force of the agreement sued on ends when the lease terminates and if the defendant has effectively terminated the lease a recovery may not be had on the agreement after that date. But a mere denial that the agreement is in full force and effect does not present the question as the defense rests on new matter outside the agreement sued on.

The question arises as to the duty of the lessor to enforce the covenant. The lease to the subtenants provided that the premises should be used and occupied as a retail haberdashery, provided, however, that said tenants do not sell or offer for sale any merchandise similar to that now sold or offered for sale”- by the defendant. Plaintiff contends that Hirschberg discharged his duty to defendant when he made this covenant with Silver & Herman and that he was not required to do more; that the agreement in suit has not been broken because it was as to letting only and not as to use. Some support for this contention is found in the English case of Ashby v. Wilson (1900) (1 Ch. 66) but by way of dictum merely. The rule stated in University Club of Chicago v. Deakin (265 Ill. 257), which was an action on a lease, is relied on. The court said:

By the terms of its contract with plaintiff in error it agreed that no other portion of its premises should be leased to anyone engaged in the prohibited line of business, and if it failed to prevent any subsequent tenant from engaging in [such business] it did so at the risk of plaintiff in error terminating his lease.”

Properly construed, this is an authority for the plaintiff. A lessor in like case may not rest its duty on mere words and collect $300 a month for putting a clause in a lease when he knowingly permits the violation of the condition. But when the lessor imposed a proper restriction upon the business to be transacted by the subtenant he should not be charged with liability for the sale of overlapping goods without his knowledge or approval. A breach by the tenant irrespective of notice to the lessor was not such a breach as to discharge defendant. The court excluded evidence that no complaint was made by defendant that the subtenant was engaged in the sale of similar goods. The sale of competing articles was a matter for defendant to make a complaint about. Otherwise a secret sale of competing goods would defeat plaintiff’s rights. To permit or to fail to prevent the sale of competing goods obviously implies some affirmative act of acquiescence or consent on the part of the lessor either express or implied. (Lucente v. Davis, 101 Md. 526.) In support of plaintiff’s allegation of full performance it was entitled to prove the absence of such consent or acquiescence.

Defendant sells $170,000 of goods in a year. The value of the goods which compete with the sale of sporting goods by the subtenants is, however, less than ten per cent of their entire business. Silver & Herman have a business of about $125,000 a year. The competing articles amount to not more than five per cent of their sales. The question to be determined on this branch of the case is whether the agreement of Miller Bros, has been violated.

The language of the sublease indicates what was in the mind of the parties thereto. The subtenant was not to “ sell or offer for sale any merchandise similar to that now sold or offered for sale by the defendant.” The contract sued on, however, uses more general language and thereon the parties hereto must rest. Contrary to the English rule of remedial rights as stated in Ashby v. Wilson (supra) defendant presumably might bring an action under the doctrine of Lawrence v. Fox (20 N. Y. 268) to restrain the subtenants from selling bathing suits, etc., but that is not the question before us. The question is whether the business of the subtenants is the same or similar to that of defendant. The similarity is based on the fact that along with a general haberdashery business they sell bathing suits and belts, sweaters and- jock straps and other articles which come under the classification of “ sporting goods and kindred articles.” If it were not for the agreement Silver & Herman might sell what they pleased and call their store what they pleased and it appears that they have carried this kind of goods in other similar stores.

. The business of haberdashery and the business of selling toys, sporting goods and like articles are not similar although they may in some respects overlap. The same things might be sold in both stores to some extent. The purely incidental and occasional sale thereof would not be a breach of the agreement not to carry on a competing business. (Breck v. Ringler, 129 N. Y. 656; Greenfield v. Gilman, 140 N. Y. 168.) Names do not count. The substance 'must be considered. Who can delimit and classify the articles which belong exclusively ■to one business and may not be carried by another without destroying its character? Drug stores and candy stores both sell goda water and similar innocuous and, lawful drinks. They also sometimes sell fight lunches. The sales are of similar articles but are the businesses similar? Is a drug store or a candy store carrying on a business similar to a restaurant because they all serve and sell soft drinks and fight lunches? Possibly if the drug or candy business were a mere incident to the restaurant feature, but not necessarily. If the sale of sporting goods is a distinct branch of the competing business the subtenants are to that extent carrying on the same business whether on a large or small scale. (Waldorf-Astoria Segar Co. v. Salomon, 109 App. Div. 65; affd., 184 N. Y. 584; Fitz v. Iles, [1893] 1 Ch. 77.) That the subtenants carried a considerable fine of sporting goods is not denied. That they featured the sale of bathing suits appears. But the case as matter of law is unlike Fits v. lies (supra) which was one of construction and not of remedy. There defendants, dealers in tea, coffee and groceries, were bound by a covenant in the lease of their house not to use the same as a coffee house. They intended to sell fight refreshments to their customers. Bindley, L. J., said:

“We must use our common sense. I think this case is really one of degree, and the conclusion to which I have arrived is that in the fair meaning of this covenant the defendants are carrying on two businesses, one of which is a grocer’s business and the other of which is a coffeehouse business, though, perhaps, not a very extensive one. They do not sell everything which coffee-house keepers sell; a coffee-house keeper need not sell all sorts of meats and so forth. He may confine himself to fight refreshments such as these. * * * The covenant is applicable.”

Here we find no covenant in the agreement sued on against using the premises for the sale of sporting goods. The question is whether the business of the subtenants taken as a whole was of the same or similar nature a,s that conducted by the defendant. While the subtenants were carrying on what would be generally known as a haberdashery and were also selling sporting goods such sale of sporting goods did not as matter of law transform their business from that of a haberdashery to that of a house for the sale of sporting goods. To a certain extent the business overlapped but the haberdashery did not lose its characteristics as such because it also incidentally carried and sold some articles similar to some of those sold by the defendant.

The question of distinct branch or incidental sales was for the jury. The reversal herein was on the law and the facts.

The judgment of the Appellate Division should be modified so as to grant a new trial and as so modified affirmed, with costs to appellant.

Hiscock, Ch. J. Cabdozo, McLaughlin, Crane, Andrews and Lehman, JJ., concur.

Judgment accordingly.


text:
    Julius Forstmann et al., Respondents, v. Joray Holding Company, Inc., et al., Appellants.
    Appeal — real property —• covenants —■ equity — injunction — reversal of final judgment by Appellate Division and direction of judgment on new findings — Court of Appeals may review facts found by Appellate Division and their decision thereon — restrictive covenant in deed of land — equitable relief refused as matter of law where facts show that injunction would be unjust — injunction withheld where it appears that injury is not serious and to restrain acts complained of would subject defendant to great inconvenience and loss — equity will not order destruction of building, where it would neither add to value of plaintiff's property nor make it more desirable, and term of restrictive covenant is nearly ended.
    1. Where the Appellate Division reverses a final judgment, makes new findings and directs judgment thereon the Court of Appeals is no longer limited to a review of questions of law but must review the facts found by the Appellate Division and their decision thereon. (Civ. Pr. Act, § 589, subd. 2, amd. L. 1926, eh. 725.)
    2. In an action to obtain a mandatory injunction requiring the removal of a building, because of a restrictive covenant contained in a prior deed of the premises, equitable relief is not within theoabsolute discretion of the Supreme Court but must be refused as matter of law when the facts found compel the conclusion that an injunction would be unjust.
    3. The threat of restraint implied in restrictive covenants is not penal in its character. To violate them without harming any one in so doing gives rise to no cause of action. Equity takes jurisdiction in such cases to prevent irreparable injury to comfort and enjoyment although without damage but not to protect a mere preference. An injunction will, therefore, be withheld as oppressive when it appears that the injury is not serious or substantial and that to restrain the acts complained of would subject the other party to great inconvenience and loss.
    4. In an action to enforce a covenant restricting the erection of any building other than a one-family dwelling house on the premises in suit, where it appears that the life of the covenant has nearly expired and the enforcement of it cannot restore the neighborhood to its former condition by making it desirable for private residences; that the block has no special advantages for residence purposes; that the value of defendant’s property for residence purposes is relatively small and the destruction of its building will inflict a loss on defendants and neither add to the value of plaintiff’s property nor make it more desirable for residence purposes; and where it appears, from consideration of all the facts and circumstances, that the building has been erected not in defiance of plaintiff’s rights but with good reason to doubt that equity would enforce such rights, even though defendants might, in the exercise of discretion, properly have been enjoined from proceeding with a proposed building, equity will not order the destruction of the erected structure, especially when it may be lawfully restored in two years at expiration of the term of the covenant.

      Forstmann v. Joray Holding Co., 216 App. Div. 135, reversed.
    (Argued October 11, 1926;
    decided November 30, 1926.)
    Appeal from a judgment, entered April 9, 1926, upon an order of the Appellate Division of the Supreme Court in the first judicial department, reversing a judgment in favor of defendant entered upon a dismissal of the complaint on the merits by the court on trial at Special Term and directing judgment in favor of plaintiff upon new findings.

      Nathan L. Miller, John Burlinson Coleman, H. Bartow Farr, Abram J. Rose and William K. Hartpence for appellants.
    The Court of Appeals now has jurisdiction to review the new findings of fact made by the Appellate Division. (Const. N. Y. art. 6, § 7; Laws of 1926, ch. 725; Civ. Pr. Act, § 589, subd. 2.) In view-of the changed conditions, equity will not enforce by mandatory injunction the restrictive covenant limiting the use of the defendants’ property to a dwelling house for a single family, especially where the covenant has only two years to run. (Trustees of Columbia College v. Thacher, 87 N. Y. 311; McClure v. Leaycraft, 183 N. Y. 36; Batchelor v. Hinkle, 210 N. Y. 243; Schefer v. Ball, 53 Misc. Rep. 448; 120 App. Div. 880; 192 N. Y. 589; Bull v. Burton, 227 N. Y. 101; McCann v. Chasm Power Co., 211 N. Y. 301.)

      Julius Henry Cohen and Theodore B. Richter for respondents.
    The restriction is part of a general building plan. The courts uphold and enforce such restrictions in order to carry out the evident purpose of the parties. (Korn v. Campbell, 192 N. Y. 490; McDougall v. Schneider, 134 App. Div. 208; Silberman v. Uhrlaub, 116 App. Div. 869; Cromwell v. American Bible Society, 202 App. Div. 625.) The restricted area has been confined to residences in accordance with the restriction. The defendants will not be permitted to destroy the residential character of the block by business invasion. (Batchelor v. Hinkle, 210 N. Y. 243; Pagenstecher v. Carlson, 146 App, Div. 738; Rowland v. Miller, 139 N. Y. 93; Todd v. North Avenue Holding Corp., 121 Misc. Rep. 301; 208 App. Div. 854; Merrill v. Sutphen, 215 App. Div. 672; Campbell v. Seaman, 63 N. Y. 568.) The fact that the restriction expires in two years is no reason for refusing to enforce it. (Thompson v. Diller, 161 App. Div. 98.) The plaintiffs, having made timely protest, are entitled to a mandatory injunction directing the removal of the defendants’ building. (Finch v. Unity Fee Company, Inc., 211 App. Div. 430; 242 N. Y. 589; Smith v. Graham, 161 App. Div. 803; 217 N. Y. 655; Barnett v. Vaughan Institute, 119 N. Y. Supp. 45; 134 App. Div. 921; 197 N. Y. 541; Holt v. Fleischman, 75 App. Div. 593; McKenna v. Levy, 182 App. Div. 678; Pellegrino v. MacKenzie Street Construction Corporation, 120 Misc. Rep. 89; Ives v. Edison, 124 Mich. 402; Krehl v. Burrell, L. R. [7 Ch. Div.] 551; L. R. [11 Ch. Div.] 146; Daniel v. Ferguson, L. R. [2 Ch. Div.] 27.)
   Pound, J.

This action was brought to obtain a mandatory injunction requiring the defendants to remove a two-story business building erected by the defendant Joray Holding Company, Inc., on real property on the northwest corner of Madison avenue and Seventieth street in the borough of Manhattan, New York city, conveyed to the defendant Edward R. Finch by deed bearing date March 3, 1924. The building was erected after July 1, 1924, when the premises were leased by the defendant Finch to the defendant Holding Company, at a cost of between $43,000 and $44,000. The plaintiffs seek to compel the removal of the building under a restrictive covenant contained in a prior deed conveying the premises, subject to which the defendant Finch took title. The restriction expires on January 1, 1929. The deed under which the defendant Finch holds title to the property in question is subject to the following restriction:

The said party hereto of the second part, for him (her) self, his (her) heirs and assigns, hereby covenants and agrees to and with the said party of the first part, its successors or assigns, that neither he (she) nor his (her) heirs or assigns, shall or will at any time prior to the first day of January, Nineteen hundred and twenty-nine (1929) erect or permit upon the above granted premises, or any part thereof, any building, except a dwelling house for a single family, and further that neither he (she) nor his (her) heirs or assigns, shall or will at any time prior to the said first day of January, Nineteen hundred and twenty-nine (1929) erect or permit upon the above granted premises any such building, or any other structure, or any extension thereof, or projection therefrom (except partition walls or fences not exceeding twelve feet in height) within ten feet of a vertical plane passing through the center line of the block between Seventieth and Seventy-first Streets.

“ These covenants shall be deemed covenants running with the land and binding upon future owners thereof, but shall expire and terminate by limitation on the first day of January Nineteen hundred and twenty-nine (1929).

•“ And the said party of the first part, for itself, its successors and assigns, doth hereby covenant and agree to and with the said party of the second part, his (her) heirs or assigns, that neither it, the said party of the first part, nor its successors or assigns, owning any part of the land bounded by Seventieth Street, Madison Avenue, Seventy-first Street and a line parallel to Fifth Avenue and distant one hundred and seventy-five feet easterly therefrom shall or will, at any time, prior to the first day of January, Nineteen hundred and twenty-nine (1929) erect or permit upon any part of the land last above described, any building except dwelling houses each for a single family; and further, that neither the said party of the first part, nor its successors or assigns, shall or will, at any time prior to the first day of January, Nineteen hundred and twenty-nine (1929) erect or permit upon any part of the land last above described, any such building or any other structure, or any extension thereof, or projection therefrom (except partition walls or fences not exceeding twelve feet in height) within ten feet of a vertical plane passing through the center line of the block between Seventieth and Seventy-first Streets; and further, that the party of the first part and its successors and assigns shall and will insert in all deeds of any part of the said land bounded by Seventieth Street, Madison Avenue, Seventy-first Street and a line parallel to Fifth Avenue, and one hundred and seventy-five (175) feet distant easterly therefrom, covenants by the grantee in such deed or deeds similar to those hereinabove «made by the party hereto of the second part, and covenants by the grantor in such deed or deeds similar to those hereby made by the party hereto of the first part.

“ These covenants shall be deemed covenants running with the land last above described and binding on future owners thereof, but shall expire and terminate by limi'.tation above mentioned on the first day of January, Nineteen hundred and twenty-nine (1929).”

The lot has a frontage of twenty-one feet on Seventieth street and one hundred feet five inches on Madison avenue.

The lease is subject to the restrictive covenants above quoted. The tenant is bound to erect a business building, the owner to pay part'of the cost and to assume the defense of any action brought to enforce the restriction and to waive rent during the continuance of any injunction based thereon.

The block in question, bounded on the west by Fifth avenue; on the south by Seventieth street; on the east by Madison avenue and on the north by Seventy-first street, was for many years prior to 1907 owned by the New York Public Library. The Library first sold the westerly portion of the block lying along Fifth avenue and extending back 175 feet. This plot comprised a little less than half the entire block and was sold by the Public Library without restriction. It is occupied by what is known as the Frick Mansion. In 1907 a plan was formulated to restrict the easterly portion of the block, and thereafter, when the Library disposed of various portions of the property remaining, it did so by deeds containing or subject to the same restrictive covenant as that hereinabove mentioned. In 1916 the board of estimate and apportionment of the city of New York adopted a resolution known as the Building Zone Law, under the provisions of which both the east and west sides of Madison avenue for a distance of 100 feet from each side of the avenue from Fortieth street to One Hundred and Twentieth street were established as a business district, and from that time to the present, under such resolution this territory has been established as a business district. On May 5, 1922, the board of estimate and apportionment adopted a resolution providing for the widening of Madison avenue from Sixtieth to Seventy-second streets in order to provide for the increased business traffic on the avenue. In February, 1922, the plaintiffs purchased a plot within the restricted area on the south side of Seventy-first street, 45 feet in width and with a depth of 100 feet 5 inches. On this plot the plaintiffs erected a residence wherein they now reside. Later on the plaintiffs bought the building occupying the southwest corner of Madison avenue and Seventy-first street, which building was then and still is occupied by Dr. Tilney as a residence and doctor’s office but it is not by virtue of such ownership that this action is brought.

The trial court at Special Term sustained the defendants’ contentions (1) that the character of the neighborhood had in the period between the years 1907 and 1924 radically changed from a residence to a business district, and (2) that plaintiffs were permitting the use of their corner lot for business purposes, and dismissed the complaint. The Appellate Division, by a vote of three to one, reversed, made new findings and directed judgment for the plaintiffs. Under Civil Practice Act (§ 589, subd. 2) as amended in 1926 to conform to the amended judiciary article of the New York Constitution, this court is no longer limited to the review of questions of law in such cases but may review the facts found by the Appellate Division and their decision thereon. But even when it was limited to the review of questions of law it did not hesitate to hold that equitable relief in these cases was not within the absolute discretion of the Supreme Court, but must be refused as matter of law when the facts found compelled the conclusion that an injunction would be unjust. (McClure v. Leaycraft, 183 N. Y. 36, 41.)

Since 1907 Madison avenue in the immediate vicinity of the restricted district has changed from a private residential neighborhood to a business district. Although prior to 1907 buildings had been erected on Madison avenue between Fifty-ninth and Eighty-sixth streets for business purposes, the desirability of the block in question for residential purposes had not then been materially changed but when defendant Finch purchased the property practically the entire length of Madison avenue had been given over to business purposes and the property purchased by him as well as that owned by plaintiffs had been placed by the city authorities in “an 'established business district.” Doubtless one of the purposes of placing the original restrictions upon the property was to check the advance of business at the lines of the block. Doubtless the letter of such restriction has been violated by the defendants. But not every violation of a restrictive agreement entitles an aggrieved party to equitable relief. Each case depends on its own circumstances.

Viewing the facts in the aspect most favorable to the plaintiffs we come to the question whether the enforcement of the agreement would substantially harm the defendants without any substantial benefit to the plaintiffs. An injunction will be withheld as oppressive when it appears that the injury is not serious or substantial and that to restrain the acts complained of would subject the other party to great inconvenience and loss. (Starkie v. Richmond, 155 Mass. 188, 195; Trustees of Columbia College v. Thacher, 87 N. Y. 311; Rowland v. Miller, 139 N. Y. 93, 104; McClure v. Leaycraft, supra; Batchelor v. Hinkle, 210 N. Y. 243; Bull v. Burton, 227 N. Y. 101; McCann v. Chasm Power Co., 211 N. Y. 301, 306.)

Where the circumstances are not such that the public force should be brought to bear upon defendants through the courts equity will not act. The threat of restraint implied in restrictive covenants is not penal in its character. To violate them without harming any one in so doing gives rise to no cause of action. Equity takes jurisdiction in such cases to prevent irreparable injury to comfort and enjoyment although without damage but not to protect a mere preference.

What are the elements which should control the disposition of this case?

. 1. The life of the covenant has nearly expired and the enforcement of it cannot restore the neighborhood to its former condition by making it desirable for private residences. (McClure v. Leaycraft, supra.) Even the corner residence in the block, owned by plaintiffs, is being utilized for physicians’ offices. While physicians often have their offices in their residences such use is not wholly consistent with an exclusive residential use. If often-marks the first step in the decline of exclusiveness and the retreat of aristocracy.

2. The block has no. special advantages for residence purposes which would offset the encroachments of business thereon as in Pagenstecher v. Carlson (146 App. Div. 738) where the restricted block faced a park.

3. The value of defendants’ property for residence purposes is relatively small. It is in a business district and either it must be utilized for business purposes or it must remain idle until the expiration of the restrictive covenant.

4. The destruction of defendants’ building or the denial of their right to erect such a building would inflict a loss on defendants and would neither add to the value of plaintiffs’ property nor make their building more desirable for residence purposes. If the premises were adjacent to or opposite each other it might be said that plaintiffs’ view would be less pleasant than it would be if the lot were vacant, but here the defendants’ building might as well be in the next block. The use to which it is put is neither noisy nor offensive. The beauty and harmony of the immediate surroundings of the plaintiffs are not injuriously affected thereby. Only by putting themselves to some trouble can they see even a small portion of it from their residence. It seems to be conceded that plaintiffs are not damaged by the breach of the restrictive covenant, i. e., that the value of plaintiffs’ premises for residence purposes is not diminished. The question of damages is wholly immaterial. (Trustees v. Lynch, 70 N. Y. 440, 453.) But the fact that the remedy is exclusively in equity does not compel the court to do inequity. Equity does not aid doubtful rights.

The relief that plaintiffs seek in this case becomes less equitable because a building has been erected on the premises. Defendants in what appears to be at worst an honest mistake of law as to the effect of the restrictive covenant, have spent a large sum of money which the mandatory injunction would needlessly waste if it were to be enforced. This fact cannot be ignored. The owner of the lot at the time he conveyed to defendant Finch had certain rights under the decided cases. That he did not have the courage or the rashness or the desire to assert such rights does not affect the situation. Defendant Finch bought all his rights including the right to avoid the restrictive covenant if its force was spent. If defendant Finch was fast to build, plaintiffs were slow to invoke the process of the court to preserve the status quo. If defendants would disregard the restrictive agreement, plaintiffs are seeking the aid of the courts to enforce a barren right. Considering the equities — all the facts and circumstances which help to show what is. just and right between the parties — we find that although defendants proceeded with full knowledge of the facts and with notice of plaintiffs' claim, they had good reason to doubt whether, by reason of the change in the condition of the neighborhood and the short remaining life of the restrictive covenant, equity would enforce such rights as the plaintiffs claimed. They were not defiantly disregarding plaintiffs' rights, but were asserting their own conflicting rights. Under these conditions, even if defendants might in the exercise of discretion properly have been enjoined from proceeding with their proposed building, equity will not order them to pull down their structure when they might restore it after the lapse of two years. The rules under which mandatory injunctions have been issued for such a purpose have not been applied to a case like this. (Brande v. Grace, 154 Mass. 210; Lynch v. Union Inst, for Savings, 159 Mass. 306.)

We hold that on the law and the facts and in the exercise of a sound discretion it would be inequitable to grant the injunctive relief given below in this case for the reason that it would “ bear heavily on the defendants without benefiting the plaintiffs.''

The judgment of the Appellate Division should be reversed and that of the Special Term affirmed, without costs.

His cock, Ch. J., Cabdozo, McLaughlin, Cbane, Andeews and Lehman, JJ., concur.

Judgment accordingly.


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    The People of the State of New York, Respondent, v. The Federated Radio Corporation et al., Defendants, and George A. Carden et al., Individually and as Copartners under the Firm Name of Carden, Green & Co., Appellants.
    Stockbrokers — fraud — pleading — provision of General Business Law authorizing Attorney-General to bring action to enjoin fraudulent practices in respect to stocks and other securities — statute remedial in character — words “fraud” and “ fraudulent practice ” should be given wide meaning — sufficiency of complaint in action brought by Attorney-General under the statute — allegations that defendants are putting forth untrue and misleading advertisements with intent to sell securities and that sales of stock operate as fraud, sufficient — allegations of actual or legal fraud unnecessary — lack of scienter does not relieve defendants from liability — nor can they as matter of law be exempted from duty of investigation merely by printed statement that information is deemed by them reliable but not guaranteed.
    1. Article 23-A of the General Business Law (L. 1921, ch. 649, as amd.), providing for investigation by the Attorney-General of fraudulent practices in respect to sales of bonds, stocks, securities and commodities and authorizing him to bring suit for an injunction and appointment of a receiver, is remedial in its character and its purpose is to prevent all kinds of fraud in connection with such sales and to defeat all unsubstantial and visionary schemes in relation thereto whereby the public is fraudulently exploited. The words “ fraud ” and “ fraudulent practice ” in this connection should, therefore, be given a wide meaning so as to include all acts, although not originating in any actual evil design or contrivance to perpetrate fraud or injury upon others, which do by their tendency to deceive or mislead the purchasing public come within the purpose of the law.
    2. The Penal Law (§ 421) condemns as a fraudulent practice the flotation of worthless securities by untrue, deceptive or misleading advertising. A complaint, therefore, in an action brought by the Attorney-General for an injunction, which alleges that defendants are putting forth untrue and misleading advertisements with intent to sell securities, alleges a fraudulent practice and, where it charges specifically that the sale of the stock operates as a fraud on the public within the meaning and intent and in violation of the statute, states a cause of action within the meaning of the provisions thereof. Allegations of actual or intentional or legal fraud are unnecessary.
    3. Promoters are under a duty to make reasonable investigation before issuing a prospectus and to the extent that they fail in the performance of their duty, lack of scienter will not relieve them from liability in actions brought under the act. Nor can they exempt themselves, as matter of law, from that duty by inserting in printed matter, complained of as deceptive and misleading, the words “ information contained herein has been obtained from sources which we deem reliable but do not guarantee.”

      People v. Federated Radio Corporation, 216 App. Div. 250, affirmed.
    (Argued October 6, 1926;
    decided December 4, 1926.)
    Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the second judicial department, entered March 19, 1926, which affirmed an order of Special Term denying a motion by defendant for judgment on the pleadings.

      Albert Stickney, George Gordon Battle and Henry E. Kelley for appellants.
    The Martin Act, being of a penal nature, must be strictly construed. It does not define the “ fraud ” or the “ fraudulent practices ” which it purports to restrain. No enlargement of the meaning of the act by implication being permissible, it must be held to be applicable only to cases involving so-called legal fraud according to the hitherto accepted definition. (Gutterson v. Pearson, 152 Minn. 482; Kirk v. Farmers’ Grain Agency, 103 Oreg. 43; Somers v. Commercial Finance Corporation, 245 Mass. 286; United States v. Lacher, 134 U. S. 624; Huntington v. Attrill, 146 U. S. 657; Atchison, Topeka & Santa Fe Railway Co. v. Nichols, 264 U. S. 348; Reno v. Bull, 226 N. Y. 546; Kushes v. Ginsberg, 99 App. Div. 417; 188 N. Y. 630; Kranz v. Lewis, 115 App. Div. 106; 188 N. Y. 579; Ochs v. Woods, 221 N. Y. 335; Fidelity & C. Assn. v. Emerson, 318 Ill. 518.) The Martin Act violates the State Constitution, in that it deprives defendants of their property without due process of law. This is so because it vests in the Attorney-General discretionary powers which are in their nature judicial and authorizes the punishment of citizens who refuse to obey his mandates. (Ward Baking Co. v. Western Union Telegraph Co., 205 App. Div. 723; Matter of Union Bank, 204 N. Y. 313; People ex rel. MacDonald v. Leubischer, 34 App. Div. 577; Yick Wo v. Hopkins, 118 U. S. 356; Noble v. Douglas, 174 Fed. Rep. 672.) The contention necessarily advanced by the Attorney-General that the Martin Act applies to a case of constructive fraud, renders it unconstitutional as in violation of the Fourteenth Amendment of the Federal Constitution. (Standard C. & M. Corporation v. Waugh Chemical Corporation, 231 N. Y. 51; United States v. Cohen, 255 U. S. 81; Weeds v. United States, 255 U. S. 109; Small Co. v. American Sugar Refining Co., 267 U. S. 233; International Harvester Co. v. Kentucky, 234 U. S. 216; U. S. v. Brewer, 139 U. S. 278; People v. Briggs, 193 N. Y. 457.)

      Albert Ottinger, Attorney-General (William H. Milholland and Keyes Winter of counsel), for respondent.
    The Martin Act plainly defines the practices that may be enjoined in a suit in equity by the Attorney-General. (People v. Hegeman, 57 Misc. Rep. 295; Horman v. United States, 116 Fed. Rep. 350; The Ottumwa Belle, 78 Fed. Rep. 643; Hammond v. Pennock, 61 N. Y. 145; Allen v. Addington, 7 Wend. 1; Mudsill Min. Co. v. Watrous, 61 Fed. Rep. 163; Prout v. Chisholm, 21 App'. Div. 54; Hall v. Geiger-Jones Co., 242 U. S. 539; Merrick v. Halsey & Co., 242 U. S. 568; Caldwell v. Sioux Falls Stock Yards, 242 U. S. 559.) The Martin Act does not grant judicial power to the Attorney-General, and does not violate the Constitution of the State of New York or of the United States. (People ex rel. Armstrong v. Murphy, 65 App. Div. 126; Murray’s Lessee v. Hoboken Land Improvement Co., 59 U. S. [18 How.] 272; United

      States v. Ferrira, 54 U. S. [13 How.] 40; Matter of Hertle, 120 App. Div. 717; Matter of Hirshfield v. Cook, 227 N. Y. 297; Hirshfield v. Craig, 239 N. Y. 98; Union Bridge Company v. United States, 204 U. S. 364; Sears, Roebuck & Co. v. Federal Trade Commission, 258 Fed. Rep. 307; People ex rel. Bender v. Milliken, 185 N. Y. 35; Hirshfield v. Hanley, 228 N. Y. 346; People v. Ellenbogen, 114 App. Div. 182; Matter of McAneny, 215 App. Div. 797; Matter of Fenton, 58 Misc. Rep. 303.) The enactment of the Martin Act to prevent fraud is a proper exercise of the police power of the State. (Hall v. Geiger-Jones Co., 242 U. S. 539; People ex rel. Armstrong v. . Warden, etc., 183 N. Y. 223; People v. Luhrs, 195 N. Y. 377.) The Martin Act is a remedial statute and should be liberally construed to protect the public from fraud and imposition. (People v. Bartow, 6 Cow. 290; Ayres v. Laurence, 59 N. Y. 192; Tiller v. United States, 3 How. [U. S.] 197; Carey v. Giles, 9 Ga. 253.) The appellants and the public did not deal on equal terms and the appellants were bound to make full disclosure of the facts. (Brewster v. Hatch, 122 N. Y. 349; Churchill v. St. George Development Co., 160 N. Y. Supp. 357; Rothschild v. Mack, 115 N. Y. 1.) The jurisdiction of a court of equity is not ousted because the acts enjoined may also be a violation of the criminal law. (Matter of Debs, 158 U. S. 564; City of New York v. N. J. & S. I. Ferry Co., 159 N. Y. Supp. 434; N. Y. Central Iron Works Co. v. Brennan, 105 N. Y. Supp. 865; Davis v. Zimmerman, 36 N. Y. Supp. 303.)
   Pound, J.

On motion for judgment on the pleadings on the ground that the complaint does not state facts sufficient to constitute a cause of action against the appellants, the Special Term denied the motion and the Appellate Division affirmed and certified the following questions to this court:

“ (1) Does the definition of fraudulent practices contained in section 352 of article 23-A of the General Business Law of New York, known as the Martin Act, include the sale or sales of securities or commodities by means of concealment or misrepresentation of material facts, where such concealment or misrepresentation is not intentional, viz., in a case of implied fraud, as distinguished from a case of intentional fraud?

(2) Does the said Martin Act authorize suit by the Attorney-General for injunction against persons engaged in the sale of securities or commodities through concealment or misrepresentation of material facts, where such concealment or misrepresentation was not intentional, viz., in a case of implied fraud, as distinguished from a case of intentional fraud?

“ (3) If either question (1) or (2) be answered in the affirmative, do the provisions of the Martin Act deprive the defendants of their property without due process of law in violation of the Constitution of the State of New York?

(4) If either question (1) or (2) be answered in the affirmative, do the provisions of the Martin Act deprive the defendants of their property without due process of law in violation of the Constitution of the United States?

(5) Does the complaint state facts to constitute a cause of action against the defendants?”

The action is brought by the Attorney-General under article 23-a of the General Business Law (L. 1921, ch. 649, as amended), which is known as the Martin Act or the Blue Sky Law, to restrain the appellants, doing business under the firm name and style of Carden, Green & Co., from engaging in alleged fraudulent practices in violation of the act in relation to the sale of the stock of the defendant corporations and for a receiver.

The primary purpose of the law is remedial in its character. It provides (§ 352) for the investigation by the Attorney-General of the fraudulent practices therein enumerated in respect to the sale of bonds, stocks and other securities and commodities and authorizes him (§ 353) to bring suit to enjoin persons and corporations from engaging therein and (§ 353-a) to obtain the appointment of a receiver to take title to all property derived by defendants by means of such fraudulent practices and liquidate the same for the benefit of persons intervening in the action and establishing an interest in the property. The Attorney-General may also prosecute (§ 358) every person “ charged with the commission of an indictable offense in violation of the laws of this State, applicable to or in respect of the practices or transactions which in this article are referred to as fraudulent practices.”

Section 359-g of the act is penal in its character. It (Subd. 1) makes disobedience to any order or judgment granted pursuant to the provisions of the act a misdemeanor and it (Subd. 2) makes a violation of “ any of the provisions of this article ” a misdemeanor. But crimes are not created by implication and the act does not prohibit fraudulent practices. It merely provides a procedure to prevent them.

While certain practices are declared by the act to be fraudulent the definition of a fraudulent practice goes no further than to say that a fraud or a violation of law which would operate as a fraud is a fraudulent practice which may be enjoined, and we must gather from other sources the meaning of the word “ fraud.” In a broad sense the term includes all deceitful practices contrary to the plain rules of common honesty.

The purpose of the law is to prevent all kinds of fraud in connection with the sale of securities and commodities and to defeat all unsubstantial and visionary schemes in relation thereto whereby the public is fraudulently exploited. (Hall v. Geiger-Jones Co., 242 U. S. 539.) The words “ fraud ” and “ fraudulent practice ” in this connection should, therefore, be given a wide meaning so as to include all acts, although not originating in any actual evil design or contrivance to perpetrate fraud or injury upon others, which do by their tendency to deceive or mislead the purchasing public come within the purpose of the law.

Penal Law, section 421, provides as follows:

§ 421. Untrue and misleading advertisements. Any person, firm, corporation or association, or agent or employee thereof who, with intent to sell or in any wise dispose of merchandise, real estate, securities, service, or anything offered by such person, firm, corporation, or association, or agent or employee thereof, directly or indirectly, to the public for sale or distribution, or with intent to increase the consumption thereof, or to induce the public in any manner to enter into any obligation relating thereto, or to acquire title thereto, or an interest therein, makes, publishes, disseminates, circulates, or places before the public, or causes, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in this State, in a newspaper, magazine or other publication, or in the form of a book, notice, circular, pamphlet, letter, handbill, poster, bill, sign, placard, card, label, or tag, or in any other way, an advertisement, announcement or statement of any sort regarding merchandise, securities, service or anything so offered to the public which advertisement contains any assertion, representation or statement of fact which is untrue, deceptive or misleading shall be guilty of a misdemeanor.”

A complaint which alleges that defendants are putting forth untrue and misleading advertisements with intent to sell securities alleges a fraudulent practice, i. e., a violation of law which has operated or which would operate as a fraud upon the purchaser.” (§ 352.)

The complaint before us cannot be commended as a model of conciseness. Every pleading shall contain a plain and concise statement of the material facts, without unnecessary repetition, on which the party pleading relies, but not the evidence by which they are to be proved.” (Civ. Prac. Act, § 241.) The ultimate facts are not pleaded. The evidence by which they are to be proved is set forth in unnecessary detail, but the question before us is not whether the complaint is definite and certain, but whether it is sufficient as against a motion in the nature of a demurrer. The appellant states the question to be considered as follows:

The question immediately arises, in the absence of any clear definition in the statute itself, as to whether this statute is directed to the suppression of equitable fraud, which does not connote scienter, or whether being a penal statute, as we maintain, and subject to the rule of strict interpretation governing the construction of such statutes, its operation must not be held to be confined to cases of legal or intended fraud, as the term is generally understood.”

It is practically assumed both on the briefs and by the questions certified to this court that if the statute is directed against all kinds of fraud, facts are sufficiently set forth in the complaint to bring the case under the statute. The allegations are in effect that the advertising matter of the defendants, contained in a promoters’ prospectus, unduly inflates the value of the stock and conceals certain facts in regard to such values which should in good faith be revealed. The complaint charges specifically that the sale of the stock operates as a fraud on the public within the meaning and intent and in violation of the statute and is within the provisions of the statute. The Penal Law condemns as a fraudulent practice the flotation of worthless securities by untrue, deceptive or misleading advertising. If the intent of the defendants in engaging in the practices complained of is to sell securities which are in fact worthless or worth substantially less than the asking price, intentional misstatements, as in an action at law to recover damages for fraud and deceit (Reno v. Bull, 226 N. Y. 546), need not be alleged. Material misrepresentations intended to influence the bargain, on which an action might be maintained in equity to rescind a consummated transaction, are enough. (Bloomquist v. Farson, 222 N. Y. 375.) Promoters are under a duty to make reasonable investigation before issuing a prospectus and to the extent that they fail in the performance of their duty, lack of scienter will not reheve them from liability in actions brought under the Martin Act.

The printed matter complained of herein as deceptive and misleading contains the words: Price $21 per share. This issue is offered as a speculation. Information contained herein has been obtained from sources which we deem reliable, but do not guarantee.” If defendants, on the allegations of the complaint, could as matter of law exempt themselves from the duty of reasonable investigation by making this statement taken as a whole in connection with their offers to the public the law against fraudulent practices would be sadly impaired. It is unnecessary to consider whether a like duty attaches to persons not promoters. Perfectly honorable members of the business in question,” in the words of His cock, Ch. J., in Dunham v. Ottinger (243 N. Y. 423), are safeguarded by substantial provisions in the act and by the power of the courts, and the law is not aimed at them.

The complaint is, therefore, good as alleging a species of conduct commonly, although perhaps inaccurately, called equitable fraud although the facts alleged do not connote what is commonly known as actual or intentional or legal fraud, i. e., false representations knowingly made and acted on, resulting in damage.

The order should be affirmed, with costs, and questions one, two and five answered in the affirmative. The other questions are answered in the negative.

His cock, Ch. J., Cardozo, McLaughlin, Crane, Andrews and Lehman, JJ., concur.

Ordered accordingly.


author: Crane, J. McLaughlin, J.

text:
    In the Matter of the Application of Board of Foreign Missions of the Methodist Episcopal Church, Appellant, to The Board of Assessors of the City of Yonkers, Respondent. (Six Proceedings.)
    Tax — exemption — missionaries — real property owned by missionary board and used for its purposes exempt from taxation — exemption lost as to parcels used in part for hire — all of property not tainted by commercial use of part — separate parcel used in part to house help does not lose exemption because help waited upon paying guests in other buildings — vacant lots acquired for purposes of board and from which no income is derived'also exempt.
    1. Real property owned by relator, a church board of foreign missions, consisting of several contiguous parcels of land forming one large holding and used for the purpose of providing a home and resting place for returned missionaries and their families, as well as a place for conference and meetings in accordance with the purposes and objects of the board, is exempt from, taxation under the provisions of subdivision 7 of section 4 of the Tax Law (Cons. Laws, eh. 60), but where it appears that on some occasions relator hired out the advantages of certain parcels to persons in no way connected with its missionary undertakings and received an income which it applied to expenses, such user took from it the right of exemption as to the parcels so used.
    2. Where, however, for purposes of taxation and in these proceedings to review assessments, the several parcels of land were treated as separate and distinct, the use of each must be separately considered and use of some for purposes of hire does not taint all with the vice of commercialism and deprive them of exemption.
    3. A separate parcel and building thereon used exclusively to house missionaries, .their families and some of the help, did not lose its right to exemption because the help waited upon paying guests in other portions of the premises. And vacant lots, acquired by relator for the purpose of erecting thereon buildings for missionary purposes, which erection has been temporarily delayed but which is in good faith contemplated and from which no income has been derived by relator, are also exempt under the provisions of the statute.

      People ex rel. Bd. of Foreign Missions v. Bd. of Assessors, 207 App. Div. 161, modified.
    (Argued November 16, 1926;
    decided December 31, 1926.)

      Appeal in each, of the above-entitled proceedings from an order of the Appellate Division of the Supreme Court in the second judicial department, entered November 16, 1923, which reversed an order of Special Term adjudging property of the petitioner to be exempt from taxation and quashed a writ of certiorari to review an assessment thereon.

      William L. Ransom, William O. Gantz and Nathan Ottinger for appellant.
    The two parcels known as Nos. 102 and 168 Park Hill avenue are both vacant lots, purchased in good faith for missionaries’ bungalows, for which plans had been prepared and early construction projected. Owing to excessive post-war building costs, their erection had not been begun, but funds for one bungalow were in hand. Under the explicit provisions of the statute, these parcels are exempt. (Israel v. Manhattan R. R. Co., 158 N. Y. 624; Stokes v. Stokes, 198 N. Y. 307; Whalen v. Stuart, 194 N. Y. 502; Elterman v. Hyman, 192 N. Y. 117; Buffalo v. Delaware R. R. Co., 190 N. Y. 98; Paige v. Schenectady R. R. Co., 178 N. Y. 112; Parsons v. Parker, 159 N. Y. 17.) If any one or more lots are used exclusively for the specified purpose and any others are not, the former are entitled to exemption and the latter are not; and even on a single lot which is partly used for exempt purposes and partly not, the first part of such lot or building is entitled to exemption and the other is taxable. (People v. Barton, 71 N. Y. Supp. 933; People ex rel. Academy of the Sacred Heart v. Commissioners of Taxes, 6 Hun, 109; 64 N. Y. 656; People ex rel. Mt. Pleasant Academy v. Metzger, 98 App. Div. 237; People ex rel. Free Church of St. Mary the Virgin v. Feitner, 63 App. Div. 181; 168 N. Y. 494; Matter of Mary Immaculate School of Eagle Park, 188 App. Div. 5; Matter of Silver Bay Assn, for Christian Conferences and Training v. Braisted, 196 App. Div. 913; Matter of

      Syracuse University, 214 App. Div. 375; People ex rel. Missionary Sisters v. Reilly, 85 App. Div. 71; 178 N. Y. 609; People v. Lawler, 74 App. Div. 553; People ex rel. Blackburn v. Barton, 63 App. Div. 581; People ex rel. Seminary of Our Lady of Angels v. Barber, 42 Hun, 27; 106 N. Y. 669.)

      Arthur C. Hume, Corporation Counsel (Thomas F. Sullivan of counsel), for respondent.
    The property of the relator, appellant, is not entitled under subdivision 7 of section 4 of the Tax Law to exemption and, therefore, the assessments upon the same are valid and legal. (Manresa Institute v. Town of Norwalk, 61 Conn. 228; People ex rel. Delta Kappa Epsilon Society v. Lawler, 74 App. Div. 553.) Upon the facts of this case, the Tax Law does not grant the relator, appellant, an exemption upon any of the property involved in these proceedings. (People ex rel. Young Men’s Assn. v. Sayles, 32 App. Div. 197; 157 N. Y. 677; People ex rel. D. K. E. Society v. Lawler, 74 App. Div. 553; 179 N. Y. 535; People ex rel. Mizpah Lodge v. Burke, 228 N. Y. 247; People ex rel. Adelphi College v. Wells, 97 App. Div. 312; 180 N. Y. 534; Young Women’s Christian Assn. of the City of New York v. City of New York, 217 App. Div. 406.)
   Crane, J.

The Board of Foreign Missions of the Methodist Episcopal Church, owning property in the city of Yonkers, was assessed by the board of assessors of that city for the taxes of 1921. Being a corporation organized exclusively for religious, charitable, benevolent and missionary purposes, it would ordinarily be exempt •from taxation under subdivision 7 of section 4 of the Tax Law (Cons. Laws, ch. 60). The board of assessors ’taxed the relator for the reason that it had failed to use some or all of its property exclusively for the purposes of its incorporation. In other words, it had received an income by using a small part of the property for commercial purposes,

The property thus assessed and taxed consisted of six separate and distinct parcels which were taxed as such and treated both by the taxing authorities and in these proceedings to review the assessment, as separate and distinct parcels. This review is of six separate and distinct proceedings, combined in one appeal book and heard as one case merely for convenience. The parcels are known as 176 Park Hill avenue, 168 Park Hill avenue, 26 Lakeside drive, 198 Park Hill avenue, 102 Park Hill avenue and 253 Van Cortlandt Park avenue. There were separate findings and judgments in each proceeding, and separate and distinct orders of reversal in the Appellate Division. We are dealing, therefore, on this appeal with six tax proceedings relating to six distinct assessed parcels of property.

The parcels, although purchased at different times by the relator, were contiguous and formed one large holding or property, parts of which were used in such a way as to take from those parcels the exemption from taxation, as will hereafter appear.

The Board of Foreign Missions of the Methodist Episcopal Church maintains about 1,500 missionaries in the foreign field, arranging that each of them shall spend one year on furlough in the United States in every five years of service. During the time that they are in this country they are maintained at the expense of the Mission Board, attend conferences, and reside temporarily in a common center, available for instruction and consultation regarding the work in the foreign field. They are also furnished with wholesome relaxation and diversion, gaining aid and benefit from association with each other.

The property at Yonkers was.used for this purpose of providing a home and resting place for these returned missionaries and their families, as well as a place for conference and meetings, in accordance with the purposes and objects of the Board. If the relator had confined itself to this use, it would have been exempt from taxation under the provisions, above referred to, of the Tax Law, It went further, and permitted in rather a minor degree, to be sure, the use of a portion of its property by outsiders for hire. The main building, known as Wallace Lodge, 176 Park Hill avenue, is a substantial three and one-half story frame building containing about 100 guest rooms, several large parlors, and a public dining room. During the year 1920 the Lodge accommodated 3,575 persons all of whom were missionaries or religious workers except 317. These 317 were outside visitors paying for their meals and lodging. It also appears that upon one of the parcels there is a garage, and on another a building known as the Club House, containing an assembly" hall and bowling alleys with tennis courts adjoining. From these buildings and appurtenances, the relator had also received an income for their use and hire by outside parties in no way connected with its mission.

The courts below were, therefore, right in determining that as to these parcels known as 176 Park Hill avenue, 253 Van Cortlandt Park avenue, 26 Lakeside drive, the relator had made use of them for purposes other than those referred to in section 4 of the Tax Law, affording exemption. It had hired out on some occasions the advantages of these parcels to persons in no way connected with its missionary undertakings and had received an income which it applied to expenses. This user, however, took from it the right of exemption. (People ex rel. Adelphi College v. Wells, 97 App. Div. 312; affd., 180 N. Y. 534; People ex rel. Young Men’s Association v. Sayles, 32 App. Div. 197; affd., 157 N. Y. 677; People ex rel. Mizpah Lodge v. Burke, 228 N. Y. 245.)

As to these parcels, we affirm the orders of the Appellate Division. As to the other three parcels, we differ with them and must reverse the orders. Number 198 Park Hill avenue, known as the Annex, was purchased July 17, 1918. It consists of a plot of ground of two or three acres on which is a substantial house of 22 to 25 rooms. It was reserved entirely for missionary families with children. George M. Fowles testified: “We couldn’t take the children into the Lodge proper because of the annoyance they would cause other guests, and the Annex is reserved entirely for missionary families.

“ Q. And no one is admitted there except missionaries with their families including children? A. Yes, sir. Some of the help are housed there, but no other guests. * * * Some of them in the upper story.”

We think it is drawing the line too fine to hold that this parcel has lost its right to exemption because some of the help, in waiting on some of the outside guests of Wallace Lodge, were housed in the upper part of the Annex. No income whatever was derived from this parcel from outside sources. It was used exclusively by the missionaries and their families who had children. Some of the help worked in Wallace Lodge and slept in the Annex. While working in Wallace Lodge they may have waited upon some of the 317 out of the 3,575 guests. We do not think, however, that this would take from the Annex the exclusiveness of its user for the purposes of the missionaries and of the relator’s organization. When the Appellate Division reversed the findings 14, 15 and 16 of the trial court on the ground that there was no evidence to support them, we think that court was in error. These findings stated that the Annex was used exclusively for the missionaries’ families and their children, and the female employees of the corporation without cost to said missionaries; that no income whatsoever was dérived from said land or building, and the property was used exclusively for the purposes of the corporation. The evidence which we have above quoted shows that these findings of the trial judge were supported by the testimony. In fact what the Appellate Division had in mind was that the Annex as well as all the parcels was connected with Wallace Lodge; that the entertainment of the 317 guests in Wallace Lodge tainted all the parcels with the vice of commercialism and deprived them of exemption. Considering that these parcels have been treated as separate and distinct parcels, and these proceedings as six separate and distinct proceedings, together with the provisions of subdivision 7, reading: “ If a portion only of any lot or building of any such corporation * * * is used exclusively for carrying out thereupon one or more such purposes * * * ^en such [0t or building shall be so exempt only to the extent of the value of the portion so used,” we do not think that all of these six parcels should be treated as one lot, but that the use of each must be separately considered. We, therefore, conclude that the Annex, parcel number 198 Park Hill avenue, was exclusively used for the missionary purposes of the relator and was exempt.

Parcel 102 Park Hill avenue and parcel 168 Park Hill avenue were vacant lots as to which the findings of the trial judge, unreversed by the Appellate Division, are as follows. The finding as to both parcels are the same.

14. That the said plot was acquired by the relator corporation for the purpose of erecting thereon bungalows or cottages to be used as homes for missionaries temporarily residing in the United States on furlough, without cost to the missionary or profit to the relator corporation.

15. That plans for the said bungalows have been prepared; that sufficient money with which to build the first of said bungalows has been donated, and the corporation was ready to proceed with the construction of the same at the date of these hearings.

16. That the construction of said bungalows has been temporarily delayed on account of conditions and price levels following the war and consequent high building and labor costs.

17. That the construction of said ' bungalows or cottages is in good faith contemplated by the trustees of the relator corporation.

18. That no income whatsoever is now or ever has been derived by the relator corporation from the said parcel of land designated as No. 102 Park Hill Avenue.”

These findings, standing approved by the Appellate Division, would seem to bring these parcels within that portion of the Tax Law which reads

The real property of any such corporation * * * entitled to such exemption held by it exclusively for one or more of such purposes and from which no rents, profits or income are derived, shall be so exempt, though not in actual use therefor by reason of the absence of suitable buildings or improvements thereon, if the construction of such buildings or improvements is in progress, or is in good faith contemplated by such corporation.”

The orders of the Appellate Division, therefore, in the proceedings relating to parcels 176 Park Hill avenue, 253 Van Cortlandt Park avenue, and 26 Lakeside drive should be affirmed, with costs; the orders in the proceedings relating to No. 198 Park Hill avenue, 102 Park Hill avenue, 168 Park Hill avenue should be reversed, and the orders of the Special Term affirmed, with costs in this court and in the Appellate Division.

McLaughlin, J.

(dissenting). I dissent from so much of the opinion of Judge Crane as holds that parcels Nos. 198, 102 and 168 Park Hill avenue are not liable to assessment for the purposes of taxation.

The six parcels referred to in the prevailing opinion, though purchased at different times, nevertheless were purchased for the purpose of fprming one entire plant and were so intended. The superintendent of Wallace Lodge testified, and his testimony was not contradicted, that he considered the different parcels “all as one parcel,” and they obviously are when the object of the purchases and the purposes to which they were to be put are taken into consideration. The referee considered these six parcels as one, as did also the court at Special Term; the Appellate Division regarded them as one parcel. They, all taken together, are called Wallace Lodge Property.” They are just as much one parcel as is an ordinary summer hotel which is made up of different parcels.

No. 198 Park Hill avenue is the lot on which the Annex stands. It is used at times as an overflow for the Lodge though generally for the families of missionaries with children and for the housing of the servants of the Lodge. Nos. 102 and 168 are used by guests of the Lodge, including outsiders, as recreation grounds.

Either the entire six parcels are exempt from taxation or else none of them is. The fact that they were assessed as separate parcels does not make them so when taking into consideration the use to which they are put. Such division was for the convenience of the assessors only.

The fact that the Lodge contemplates building bungalows on one or both of parcels Nos. 102 and 168 does not change the character of the use to which they are now put. But bungalows, if built on these parcels, would not separate them from the Lodge any more.than cottages built upon summer hotel grounds are considered separate from the hotel proper. They are all considered as part of the parcel upon which the hotel stands.

I am of the opinion that the six parcels in question should be considered as one and that they are liable to assessment for the purposes of taxation. The use to which this property as a whole is put does not bring it within the provisions of the statute entitling the relator to an exemption. ,

Hiscock, Ch. J., and Lehman, J., concur with Crane, J.; Andrews, J., votes for reversal of order in each proceeding; McLaughlin, J., dissents in opinion, from so much of opinion of Crane, J., as directs a reversal of the order of the Appellate Division in the proceedings relating to property on Park Hill avenue, in which Cardozo and Pound, JJ., concur.

Ordered accordingly.