text:
    Swift and Company, Appellant, v. Bankers Trust Company, Appellant and Respondent, and I-C Bank and Trust Company et al., Impleaded Defendants, Respondents.

      Argued January 3, 1939;
    decided February 28, 1939.

      Thomas H. Long, Franklin Malone, E. B. Kixmiller and Lewis A. Ackley for plaintiff, appellant.
    Under the New York law plaintiff is entitled to recover. (Shipman v. Bank of State of New York, 126 N. Y. 318; National Surety Co.
      v. National City Bank, 184 App. Div. 771; City of New York v. Bronx County Trust Co., 261 N. Y. 64; Cohen v. Lincoln Sav. Bank, 275 N. Y. 399; Conner’s Car Co. v. Manufacturers & Traders Nat. Bank, 124 Misc. Rep. 584.) The nature, validity, interpretation and effect of the checks are governed by the place of performance, which is New York, the place of payment. (Hibernia Nat. Bank v. Lacombe, 84 N. Y. 367; Amsinck v. Rogers, 189 N. Y. 252; Beadall v. Moore, 199. App. Div. 531.)

      Chester Bordeau for defendant, Bankers Trust Company, respondent and appellant.
    The transfer of the checks was made in Illinois and the validity thereof must be determined by its laws. (United States v. Guaranty Trust Co., 293 U. S. 340; Chemical Nat. Bank v. Kellogg, 183 N. Y. 92.) Whether or not the checks were payable to bearer is a question of interpretation of a contract which was made in Illinois, and the interpretation thereof should be made in accordance with the laws of that State. (Heidelburger v. Heidelberger, 171 App. Div. 106; Robinson v. Stratman, 141 Misc. Rep. 393; Union Nat. Bank v. Chapman, 169 N. Y. 538; Amsinck v. Rogers, 189 N. Y. 252; Hennenlotter v. De Orvananos, 114 Misc. Rep. 333.) Under the laws of Illinois, the indorsing of the checks did not constitute a forgery, for the reason that each of said checks was payable to bearer and an indorsement thereof by the bearer was operative. (Illinois Rev. Stat. [1931], ch. 98, § 29 ; Houghton Mifflin Co. v. Continental Illinois Nat. Bank & Trust Co., 293 Ill. App. 423.)

      Charles B. McGroddy, Jr., for Central Hanover Bank and Trust Company, respondent.
    A proper construction of section 29 of chapter 98 of the Illinois Revised Statutes (1931) demands the holding that the checks were “ bearer paper.” (Houghton Mifflin Co. v. Continental Illinois Nat. Bank & Trust Co., 293 Ill. App. 423.)

      John A. Garrity for I-C Bank and Trust Company, respondent.
    Whether a check is a “ bearer ” or “ order ” instrument is determined by the law of the place of contracting. (Union Nat. Bank v. Chapman, 169 N. Y. 538; Chemical Nat. Bank v. Kellogg, 183 N. Y. 92; Ulin v. Walowitz, 147 Misc. Rep. 724; United States v. Guaranty Trust Co., 293 U. S. 340.) Under the laws of Illinois the checks are “ bearer ” instruments. (Houghton Mifflin Co. v. Continental Illinois Nat. Bank & Trust Co., 293 Ill. App. 423.)
   Lehman, J.

The plaintiff, an Illinois corporation, maintains a deposit account in the defendant bank and in other banks in the city of New York. The defendant bank paid three checks drawn upon the plaintiff’s deposit account to the order of John R. Turley.” Duly authorized officers of the plaintiff corporation were induced to sign the checks, so drawn, by a clerk in the “ Voucher Department ” at the plaintiff’s Chicago office. It was the duty of this clerk to approve vouchers or requests for checks received from other departments and to send such vouchers or requests, when properly initialed and approved, to the plaintiff’s banking department which would then issue checks in accordance with such approved vouchers or requests. By fraud and trickery this clerk altered some used vouchers by inserting the name “ John R. Turley ” in place of the payee originally named and procured checks issued in accordance with the altered vouchers. He indorsed these checks in the name of the payee John R. Turley,” deposited them in a deposit account, which he controlled, in a bank in Chicago, and collected the proceeds. The plaintiff, claiming that the defendant bank paid the checks upon forged indorsements and wrongfully debited its account with the amounts so paid, has brought this action against the bank.

The facts are undisputed, and both sides moved for summary judgment. The motion of the defendant was granted and the complaint dismissed. The defendant was authorized to disburse moneys standing to the plaintiff’s credit only upon the order and direction of the plaintiff. (Shipman v. Bank of State of New York, 126 N. Y. 318.) The plaintiff’s direction to the defendant was to pay the amount of the checks only upon the order of John R. Turley. The plaintiff was induced to believe that an actual person named John R. Turley was in existence and, acting under that belief, it named him as payee. It had no intention to vest title to the checks in any person other than the payee so named or to authorize any other person to indorse or collect the checks. Intending to name an existing payee, the plaintiff failed in its intention. The defendant bank, believing that it was paying the checks in accordance with the plaintiff’s authorization, upon the order or indorsement of the payee named by the plaintiff, has in fact paid the checks upon the order of a person not named as payee. The defendant, challenged by the plaintiff to show its authority to make such payments and to charge the payments against the moneys in plaintiff’s deposit account, can justify the charge only if the checks drawn by the plaintiff to a named payee may, contrary to their terms and contrary to the intention of the drawer, be treated as if drawn payable to bearer, because the payee named is a mythical, non-existent person.

This court has said that “ the maker’s intention is the controlling consideration which determines the character of such paper. It cannot be treated as payable to bearer unless the maker knows the payee to be fictitious and actually intends to make the paper payable to a fictitious person.” (Shipman v. Bank of State of New York, 126 N. Y. 318, 330.) The Negotiable Instruments Law (Cons. Laws, ch. 38) has, in this respect, codified the common law rule: “ The instrument is payable to bearer * * * 3. When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable.” (§ 28.) In Illinois where the instrument was executed, the same rule was applied until 1931. (Cf. U. S. Cold Storage Co. v. Central Mfg. Dist. Bank, 343 Ill. 503.) After that decision was rendered, the Negotiable Instruments Law of Illinois was amended so that it now provides that an instrument is payable to bearer when it is payable to the order of a fictitious or non-existent or living person not intended to have any interest in it, and such fact was known to the person making it so payable, or known to his employee or other agent who supplies the name of such payee.” (Illinois Revised Statutes [1931], ch. 98, § 29.) The checks executed in Illinois were, under the law of that State, payable to bearer, could be transferred without indorsement, and constitute authorization to a bank to pay the checks to their bearer without indorsement by the non-existent payee named therein. If the rights and obligations of the parties to the instruments are regulated by the law of the State of New York, where the checks were payable, the instruments were not payable to bearer and payment without indorsement of the person named as payee was unauthorized by the drawer. The problem presented upon this appeal is whether the rights and obligations of the drawer and the bank are to be measured by the law of the State where the instruments were drawn or by the law of the State where they were made payable.

This court has said: Authorities are not needed to show that in general every contract is to be expounded and enforced by the law of the place where it is made * * * But this general rule admits of an exception, as where the parties at the time of making the contract had a view to a different kingdom.” (Hibernia Nat. Bank v. Lacombe, 84 N. Y. 367, 376.) Thus where the contract is to be performed in a foreign State or country the parties are deemed to have intended that performance should be rendered in accordance with the law of the country where the contract is to be performed.

Parties to a contract may, subject to limitations not important here, agree that the extent of their obligations are to be measured and the sufficiency ,of performance determined by the law of either jurisdiction. Where the parties have not in terms provided what law should be applied, the courts have attempted to formulate general rules defining the separate fields governed by the law of the place where a contract is made or by the law of the place where the contract is to be performed. In Union Bank v. Chapman (169 N. Y. 538, 543) this court stated “ some general principles, which appear to be settled beyond controversy * * * (1) All matters bearing upon the execution, the interpretation and the validity of contracts, including the capacity of the parties to contract, are determined by the law of the place where the contract is made. (2) All matters connected with its performance, including presentation, notice, demand, etc., are regulated by the law of the place where the contract, by its terms, is to be performed.” More recently we have said that “ as a general rule, the validity of a contract is determined by the law of the jurisdiction where made, and if legal there is generally enforcible anywhere.” (Straus & Co. v. Canadian Pacific Ry. Co., 254 N. Y. 407, 414.) That law governs, we have also said, in matters bearing upon the capacity of the parties to contract and upon the execution, the interpretation and ' the validity thereof.” (United States Mortgage & Trust Co. v. Ruggles, 258 N. Y. 32, 38. Cf. American Law Institute, Restatement of the Law of Conflict of Laws, §§ 332 and 358.)

The formulation of these general principles has not removed uncertainty and doubt in their application. Interpretation ” of a contract and its manner of performance are so intertwined that the courts often determine pragmatically the question whether the law of the place where the contract was made or the law of the place where the contract by its terms is to be performed regulates particular matters which bearing upon the interpretation ” of a contract are at the same time connected with its performance.” Perhaps pragmatic determination may in such cases be indicated by the nature of the problem, and the test whether one rule or the other produces the best practical result may be the safest guide in the search for the intention, actual or assumed, of the parties.

At times, too, there may be doubt and uncertainty as to the place where a contract is to be performed. Especially in connection with negotiable instruments and more specifically in connection with checks or drafts, has such doubt and uncertainty been manifest in decisions of the courts of this State. The obligation of parties to such instruments, though contractual, is often not expressed in words but rests upon mercantile custom and is now defined by statute. Thus a bill of exchange has been defined by this court as “an order drawn by one person on another to pay a third a certain sum of money, absolutely and at all events.” (Munger v. Shannon, 61 N. Y. 251, 255.) The judicial definition has been amplified and superseded but not changed in effect by the statutory definition in section 210 of the Negotiable Instruments Law. Ordinarily the drawer of the instrument merely signs the order and does not in terms promise anything, yet he “ engages that on due presentment the instrument will be accepted and paid, or both, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it.” (Negotiable Instruments Law, § 111.) Regardless of where the instrument may have been executed or transferred, the parties undoubtedly intend that an order for payment shall be presented and paid according to its tenor at the place therein specified or at the usual place of business or residence of the drawee. Matters connected with presentment, acceptance and payment are to be regulated by the law of that place. That seems clear. Uncertainty enters when we deal with matters connected = with performance by the drawer of his engagement as defined by the statute. His engagement that on due presentment the instrument will be accepted and paid contemplates performance at the place of presentment. His engagement to pay if the instrument is dishonored contemplates performance at his residence or place of business. Is the liability of the drawer in a particular case to be determined, then, by the place where the drawer has engaged that it shall be accepted according to its terms and paid, the place where the drawer must pay it if dishonored, or the place where the instrument was executed?

In Hibernia Nat. Bank v. Lacombe (supra) this court held that the rights and obligations of the holder of a dishonored check and the drawer of the check are to be determined by the law of the place where the check is by its terms payable. In Amsinck v. Rogers (189 N. Y. 252, 257) the court limited closely its earlier decision and said that the contract of the drawer of a bill of exchange is regarded as made at the place where the bill is drawn, and as to its form and nature and the obligation and effect thereof is governed by the law of that place in regard to the payee and any subsequent holder. (Story on Bills of Exchange, §§ 131, 154.) While as to certain details, such as the days of grace, the manner of making the protest and the person 4 by whom protest shall be made, the law or custom of the place where it is payable will govern, the necessity of making a demand and protest and the circumstances under which the same may be required or dispensed with, are incidents of the original contract which are governed by the law of the place where the bill is drawn rather than of the place where it is payable.” The court distinguishes its earlier decision in Hibernia Nat. Bank v. Lacombe (supra), by stating: “ The case was disposed of upon the theory that the instrument was a check, which of course was the fact, and the obligations of the drawer of a check, as stated in the opinion, are entirely different from those of the drawer of a bill of exchange. * * * The drawer of a check contracts to pay at the place where the check is payable, instead'of, as the drawer of a bill of exchange does, at the place where the instrument is drawn. It is not, therefore, in conflict with our views to hold that the rights of the parties in the case of such a check should be determined ' by the laws of the place of payment; in other words, the place of performance by the drawer ” (p. 263).

The distinction there drawn between checks and bills of exchange is founded upon mercantile custom. The foundation of the distinction has been destroyed by the Negotiable Instruments Law. “A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this chapter applicable to a bill of exchange payable on demand apply to a check.” (§ 321.) The definition of the obligation and liability of the drawer of an instrument contained in section 111 of the statute, quoted above, is general and.applies to a drawer of a check as well as a drawer of another form of instrument. Precedents are without force when based upon differences and distinctions which have been destroyed by later judicial decision or by statute. Under the statute of New York there can be but one rule applicable alike to the obligation of drawers of checks and of drawers of other bills of exchange payable on demand, and the court must now determine what that rule shall be.

State lines are not barriers in mercantile transactions. Instruments drawn in one State and payable in another State are a common incident in business. The need for uniformity and certainty in the law governing the obligav tians of the parties to such instruments becomes increasingly urgent. Where there is conflict of law in different jurisdictions, the parties to the instrument should know, at least, which law will govern. The rule as formulated in the Restatement of the Law of Conflict of Laws is that. the law of the place of contracting determines whether a mercantile instrument is negotiable, whether it is duly executed and delivered, whether it is valid Without consideration, and if not, whether consideration has been given ” (§ 336). The restatement has been criticised by distinguished scholars. The rule is not in complete accord with decisions in many jurisdictions. (See article on Bills and Notes, §§ 167, 168 and 169, 8 Corpus Juris, pp. 97 and 98, and cases there cited.) It finds support, however, in Howenstein v. Barnes & Haynes (5 Dill. 482; Fed. Cases No. 6786, C. C. D. Kan. 1879); Navajo County Bank v. Dolson (163 Cal. 485), and perhaps in other cases. Our decision in Amsinck v. Rogers (supra, p. 257) is in accord with the rule, at least to the extent that “ the rights and obligations of the drawer of a bill of exchange are determined and fixed by the law of the place where he draws it.” The courts below have applied the rule here. It was so applied also in Hennenlotter v. De Orvananos (114 Misc. Rep. 333).

Both upon authority and upon principle we readopt the rule as formulated in Amsinck v. Rogers and extend it to checks. Validity of the check depends upon its construction. If construed in accordance with the law of Illinois where it was drawn, the check constituted an order upon a New York bank to pay a specified sum to bearer. So construed, the instrument is valid and the New York bank was authorized to pay it upon presentment. If construed in accordance with the law of New York where it was made payable, it constituted an order to pay to a non-existent person; in other words, it was a check without a payee to whom it could be delivered, who could transfer it or who could demand or receive payment. Such a check is a mere scrap of paper creating neither right nor obligation, for rights and obligations can exist only in relation to persons to whom the obligations are due and who may enjoy the rights. The validity of an instrument is always determined by the law V of the place where the instrument was executed. Upon that point, at least, all the authorities are in agreement, nor is there room for doubt that the extent of the drawer’s obligation is defined by the instrument and fixed at the*/ time the instrument is executed in accordance with the law of the place where executed. Details of performance by the bank upon which the check is drawn may be determined by the law of the place where performance is to be made. The validity of the check, the scope of the order to pay and the person authorized by the drawer to receive payment are fixed at the inception of the instrument and by the law of the place where the instrument has inception. We decide nothing else at present. Further demarcation of the line between matters relating to interpretation of an instrument and matters relating to performance must be postponed until such problem is directly present.

The judgment should be affirmed, with costs to the Bankers Trust Company against the plaintiff and with costs to the impleaded defendants, I-C Bank & Trust Company and Central Hanover Bank & Trust Company, against the Bankers Trust Company.

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

Judgment affirmed.


source: Caselaw Access Project

author: Lehman, J.

license: Public Domain

text:
    William U. Becker, as Executor of Martha W. Becker, Deceased, Appellant, v. John W. N. Faber et al., Defendants, and Clara K. Intemann et al., as Executors of John A. Kolle, Deceased, Respondents.
    Argued January 11, 1939;
    decided February 28, 1939.

      Joseph H. Sand for appellant.
    Plaintiff’s offer to grant a temporary reduction of the accruing interest rate, long after the mortgage was due and payable, conditioned upon payment of arrears in taxes, did not discharge the guarantor. (Coe v. Cassidy, 72 N. Y. 133; Union Trust Co. v. Kaplan, 249 App. Div. 280.) The guarantor was not discharged by reason of plaintiff’s conditional agreement to accept interest at a lesser rate. (Olmstead v. Latimer, 158 N. Y. 313; National Citizens Bank v. Toplitz, 178 N. Y. 464; American Bonding Co. v. Kelly, 172 App. Div. 437; Westchester Mortgage Co. v. McIntire, Inc., 174 App. Div. 525; Ullmann Realty Co. v. Hollander, 66 Misc. Rep. 348.)

      William D. Sullivan for respondents.
    The guarantor or surety is bound by the strict letter or precise terms of the contract of the principal and is discharged when the agreement upon which the guaranty is based is modified without consent. (Duecker v. Rapp, 67 N. Y. 464; Page v. Krekey, 137 N. Y. 307; Antisdel v. Williamson, 165 N. Y. 372; Katz v. Leblang, 243 App. Div. 421; Franklin Title & Mortgage Guar. Co. v. Shernov, 250 App. Div. 267.)
   Lehman, J.

The plaintiff has brought this action to foreclose a mortgage upon real property in Nassau county. Payment of the principal and interest of the bond, secured by the mortgage, was guaranteed in October, 1923, by John A. Kolle. Asking a deficiency judgment against the executors of the last will and testament of John A. Kolle, deceased, the plaintiff made them parties to the foreclosure action. The complaint against them has been dismissed on the ground that the mortgagor and mortgagee modified the terms of the mortgage agreement without the knowledge or consent of the guarantor, and by force of such modification the guarantor was released.

The bond and mortgage were executed on or about June 1, 1923. The mortgagor bound himself to pay the sum of $10,000 on or before June 1, 1926, with interest thereon to be computed from the 1st day of June, 1923, at the rate of six per cent per annum and to be paid on the first day of December next ensuing the date thereof, and semi-annually thereafter. The bond was not paid at maturity. No agreement to extend the time of payment was made. Interest was paid, as stipulated in the bond, every six months until December, 1932. In January, 1933, the mortgagee agreed that the mortgagor would be permitted to meet the installment of interest which had become due on December 1, 1932, by monthly payments of $50 each and that similar monthly payments might be made upon subsequent installments after they became due semi-annually. In 1935 the mortgagee informed the mortgagor that when past due interest was paid up to June 1, 1934, she is willing to charge you and accept 4%, but only on condition that you clean up the back taxes, and that interest rate to be effective for only one year, namely June, 1935.” Though the mortgagor did not comply with the stipulated condition, the mortgagee accepted, for more than two years, monthly checks for interest at the rate of four per cent. It is said that through the leniency thus shown to the mortgagor, the mortgagee has released the surety.

A contractual obligation may not be altered without the consent of the person who has assumed the obligation The obligation of a surety or guarantor of due performance of a contract cannot be extended, without the surety’s consent, to cover performance of a different contract. Alteration of the contractual obligation of the principal releases the surety, for the principal is no longer bound to perform the obligation guaranteed by the surety and the surety cannot be held responsible for the failure of the principal to perform any other obligation. The rule is based upon fundamental principles of contract which have not been seriously challenged in any jurisdiction, though there is difference of opinion in regard to the proper application of the rule. In this State the rule has been applied stringently. This court has said that the “ defendant’s [surety’s] obligation is stridissimi juris, and he is discharged by any alteration of the contract, to which his guaranty applied, whether material or not, and the courts will not inquire whether it is or is not to his injury.” (Page v. Krekey, 137 N. Y. 307, 314; Paine v. Jones, 76 N. Y. 274, 278; Antisdel v. Williamson, 165 N. Y. 372.) The rule when strictly applied at times produces results which do not accord with our sense of what is fair or desirable and which are, perhaps, not consistent with the realities of business experience. When so applied, the rule has been subjected to searching and severe criticism. We have been urged to confine its application to cases where alterations in the obligation of the surety may increase the burden of the surety. Where the court can say with reasonable certainty that a surety gains benefit through an alteration, we are told it is unsound to hold that the surety is discharged. Before we consider whether we should abandon old precedents, reconsider an old-established rule or even redefine the field of its proper application, we should first determine whether a result which is challenged as unfair and unreasonable may not be due to an undiscriminating extension of established principles or old precedents rather than to infirmity in the principles or precedents.

By “ alteration ” in the obligation of the principal, the principal is discharged from performance of the obligation in its original form and, in effect, a new obligation is substituted for the old. In those cases where we have held that alteration of any kind in the obligation of the principal discharges the surety, there has been a change in the nature of the obligation which might be required of the principal; performance of the old obligation might be more onerous but relief from the burden of the old was accompanied by the creation of rights and duties different from those which arose out of the original agreement. We have in such cases refused to balance the advantage of relief from the old burden against possible disadvantage imposed by the new. We have held that the surety is discharged by any modification of the contract of the principal which requires of him performance in any respect different from the performance guaranteed by the surety. We have not held that an act of leniency towards the principal by the assured through remission of a part of an obligation or waiver of full performance constitutes an alteration of the obligation of the principal which will discharge the surety completely. Reduction in the rate of interest is a remission of part of the obligation. Remission or waiver of part of the performance which might be exacted by the assured from the principal does not release the principal from performance of the part of the original obligation which remains unchanged and in full force; and if the principal fails in such performance the surety may be held for the default in accordance with the surety’s agreement. Neither principal nor surety is held in such case for a new or altered obligation; both are held to performance of an obligation assumed in the original agreement.

Nothing said or decided by this court conflicts with the general rule that “ A surety is none the less discharged by a change in the terms of the principal’s contract, for the performance of which the surety has bound himself, when the change might not be thought disadvantageous to him. But an agreement merely to remit part of the performance due from the principal without changing its character, as by lessening the amount of rent to be paid under a guaranteed lease, or by providing for a lower rate of interest on a debt than the contract provides for, or by waiving a portion of the performance of a contract, will not discharge the surety.” (4 Williston on The Law of Contracts [Rev. ed.], § 1240.) It follows that remission of a part of the interest even if such remission had been made by valid contract would not discharge the surety. (Cambridge Sav. Bank v. Hyde, 131 Mass. 77.)

The effect of the agreement to accept, in monthly installments, interest which under the terms of the bond was payable every six months, presents a similar question though in different form. It is said that such agreement followed by acceptance of monthly check extended the time for the payment of the principal sum. The doctrine that extension of time for payment of the principal debt even for a few days discharges the surety, has been established by a long line of decisions. (National Park Bank v. Koehler, 204 N. Y. 174; 4 Williston on The Law of Contracts, § 1222.) Leniency shown to a debtor in default, delay permitted by the creditor without change in the time when payment of the debt might be demanded, does not, however, constitute an extension of the time for payment. That requires a binding contract which precludes the creditor from enforcing payment- according to the terms of the original contract and confers upon the debtor the right to withhold payment after the original debt has become due. In this case it is said that such a binding agreement arises from the receipt of checks for $50 intended as monthly payments of interest on the principal debt.

This court in New York Life Ins. Co. v. Casey (178 N. Y. 381) cited with approval the applicable rule as stated in Brandt on Suretyship (p. 352): “ The general rule is that the reception of interest in advance upon a note is prima facie evidence of a binding contract to forbear and delay the time of payment, and no suit can be maintained against the maker during the period for which the interest has been paid, unless the right to sue is reserved by the agreement of the parties. The payment of interest in advance is not of itself a contract to delay, but is evidence of such contract, and while this evidence may be rebutted, yet in the absence of any rebutting evidence it becomes conclusive.” (Italics are new.) (Cf. Kings County Trust Co. v. Giovinco, 266 N. Y. 137.) In this case there has been no “ period for which the interest has been paid ” in advance. In January, 1933, the mortgagee agreed to accept in monthly installments interest which had become due and payable earlier. The principal of the mortgage debt was long since due. The mortgagee might have demanded at any time, payment both of principal and past due interest. There was no contract, express or implied, which would have given the principal debtor the right to refuse payment of principal and past due interest and there never was an instant of time when some interest was not past due. Even a binding agreement to accept payment of past due interest in monthly installments — and we do not intimate that here the mortgagee’s agreement constituted more than a proffered favor without binding effect — would not have discharged the surety. (Coe v. Cassidy, 72 N. Y. 133.)

In this case the surety claims that unqualified benefit bestowed upon the principal debtor and leniency and consideration shown to the principal debtor discharges the surety. That is not the law of this State. The surety guaranteed the performance of the obligation of the principal debtor. The creditor’s agreement to forego part of his rights does not discharge the surety from responsibility for failure of performance by the principal debtor of that part of the original obligation which still remains and which remains untouched and unaffected by the creditor’s remission of the remainder of the obligation. The surety is held to no obligation which he did not assume and if the surety meets that obligation he will be subrogated to the creditor’s cause of action against the principal debtor, in accordance with the terms of the original contract.

The judgments should be reversed and judgment granted for the plaintiff, with costs in all courts.

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

Judgment accordingly.


author: Per Curiam.

text:
    Jack Pedone, Respondent, v. Title Guarantee and Trust Company, Appellant.
    Argued January 17, 1939;
    decided February 28, 1939.

      Flynn L. Andrew, Eugene Z. DuBose and John M. Friedman for appellant.
    There was no misrepresentation of any material fact nor was there any breach of warranty sufficient to justify the attempted rescission on the part of plaintiff. (Matter of Berry v. Brearton, 263 N. Y. 274; Hendrickson v. Hodkin, 276 N. Y. 252; Canadian Agency, Ltd., v. Assets Realization Co., 165 App. Div. 96; Occhiuto v. Title Guarantee & Trust Co., 270 N. Y. 577; Rector v. Title Guarantee & Trust Co., 246 App. Div. 251; 272 N. Y. 568; Mills v. Bluestein, 250 App. Div. 440; 275 N. Y. 317; Crabb v. Young, 92 N. Y. 56; La Bar v. Lindstrom, 197 N. W. Rep. 756; Oppenheimer v. Title Guarantee & Trust Co., 253 App. Div. 356; Rosenwasser v. Blyn Shoes, Inc., 246 N. Y. 340; Buffalo Builders Supply Co. v. Reéb, 247 N. Y. 170; Matter of Waterson, Berlin & Snyder Co. v. Irving Trust Co., 48 Fed. Rep. [2d] 704.)

      Sol A. Klein and Walter R. Hart for respondent.
    Since it is undisputed that the taxes for the second half of 1932 had become a lien on the premises on November 1, 1932, which was two months and four days prior to the sale of the certificate, the representation could be nothing but a misrepresentation. (Rector v. Title Guarantee & Trust Co., 246 App. Div. 251; 272 N. Y. 568; Fealey v. Bull, 163 N. Y. 397; Seneca Wire & Mfg. Co. v. Leach & Co., 247 N. Y. 1.)
   Per Curiam.

Upon this record it does not appear as matter of law that the defendant made any representation which was false in a material and substantial respect.

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

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

Judgment accordingly.


author: Rippey, J.

text:
    In the Matter of the Accounting of First Trust and Deposit Company, as Trustee under the Will of J. Arthur Clark, Deceased. First Trust and Deposit Company, as Trustee, et al., Appellants; Alpha A. Adsit et al., Respondents.

      Argued January 18, 1939;
    decided March 7, 1939.

      George W. Lee and Henry H. Bruce for First Trust and Deposit Company, as trustee, appellant.
    The trustee acted in good faith in making the principal advances and there is no evidence that it has been careless or negligent in its administration of the trust. (Matter of Wentworth, 230 N. Y. 176; Matter of Wilkin, 183 N. Y. 104; Ireland v. Ireland, 84 N. Y. 321; Matter of Cowen, 148 Misc. Rep. 35; Carrier v. Carrier, 226 N. Y. 114; Cushman v. Cushman, 116 App. Div. 763; 191 N. Y. 505; Matter of Hilton, 174 App. Div. 193; Matter of Palestine, 151 Misc. Rep. 100; Rezzemini v. Brooks, 236 N. Y. 184; Holden v. Strong, 116 N. Y. 471; Matter of Martin, 269 N. Y. 305; Matter of Osborn, 252 App. Div. 438.)

      John F. Nash, for Anna C. Clark, appellant.
    The payments out of principal were properly made. (Matter of Gatehouse, 149 Misc. Rep. 648; Holden v. Strong, 116 N. Y. 471; Rezzemini v. Brooks, 236 N. Y. 184; Forman v. Whitney, 2 Abb. Dec. 163; Matter of Reed, 22 App. Div. 328.)

      William G. Easton for respondents.
    The trustee has administered the trust in a careless and negligent manner and did not use sound judgment and discretion in paying over $1,900 of the corpus. (Hirshfeld v. Fitzgerald, 157 N. Y. 166; Union Trust Co. v. Oliver, 214 N. Y. 517; Holden v. Strong, 116 N. Y. 471; Matter of Wentworth, 230 N. Y. 176; Matter of Flood, 127 Misc. Rep. 797; 243 N. Y. 598; Matter of Shea, 234 App. Div. 176; City Bank Farmers Trust

      Co. v. Smith, 263 N. Y. 292; Matter of Osborn, 252 App. Piv, 438; Matter of Martin, 269 N. Y. 305; Matter of Hartley, 90 Misc. Rep. 534; Matter of Fisk, 45 Misc. Rep. 298; Rezzemini v. Brooks, 236 N. Y. 184.) The beneficiary’s personal income should be considered by the trustee in determining whether invasion of the corpus of the trust should be made, (Matter of Hogebom, 219 App. Div. 131; Matter of Martin, 269 N. Y. 305; Matter of Kelly, 166 Misc. Rep. 774.) The court will interpose when a trustee instead of exercising its judgment, delegates the matter to the judgment of others. (American Law Institute, Restatement of the Law of Trusts, § 187; City Bank Farmers Trust Co. v. Smith, 263 N. Y. 292; Matter of Osborn, 252 App. Div. 438.)
   Rippey, J.

J. Arthur Clark, of Baldwinsville, New York, died January 27, 1931, leaving a last will and testament which was duly probated and under which the First Trust and Peposit Company of Syracuse was appointed and thereafter duly qualified and has been acting as executor and trustee.

In his will the testator first directed the payment of his debts and funeral expenses. In the second paragraph he mad Pi a specific bequest to his niece, Alpha A. Adsit, In the third paragraph he gave to his wife such sums as might be necessary to satisfy any mortgage or liens upon property owned by himself and wife jointly or as tenants by the entirety, together with other specifically named property. In the fourth paragraph he directed that all of the residue of his estate should be held by his executor in trust and that the income thereof should be paid to his wife during her life in quarterly installments. In the fifth paragraph of his will he provided specifically for the distribution upon the death of his wife of the corpus of the trust. Among the provisions therein contained he disposed specifically of three hundred shares of the capital stock of the American Telephone and Telegraph Company. In the sixth paragraph he said: “ In the event that the income provided for my said wife under paragraph ‘ Fourth ’ above shall, in the judgment of my trustee, be insufficient for her every comfort and support, I authorize my said trustee to pay to her, in addition to income, such portion of the principal of the said trust as it shall from time to time deem necessary.” Later on in the same paragraph the testator says: “ I further direct my said trustee to retain as a part of my estate the said stock in the American Telephone and Telegraph Company.”

On July 5,1934, a decree was entered settling the accounts of the executor and directing the executor, among other things, to transfer and deliver to itself, as trustee, the balance of the assets on hand. On October 13, 1937, a petition was filed by the trustee asking for a judicial settlement of its account as such and for a decree determining the true construction and effect of the will of the deceased which involved the scope of the authority of the trustee to invade the principal of the trust for the benefit of the widow of the deceased. In its account the trustee disclosed that, after making distribution as required by the provisions of the decree of July 5, 1934, and payment of its commissions and expenses, there remained in the corpus of the trust a small amount of cash and 310 shares of the capital stock of the American Telephone and Telegraph Company and a note asserted to be of no value. The account disclosed that the trustee had disbursed to the widow from the trust out of income from April 17, 1934, to August 11, 1937, the sum of $11,074.24 and, from the corpus of the trust, the sum of $1,900. In addition thereto she has not only been required to use all of her personal income, amounting to about $720 per year, but has also incurred unpaid obligations for her maintenance and care.

Certain of the remaindermen filed objections to the account and particularly to the propriety of the trustee paying over the $1,900 item out of the corpus of the estate for the benefit of the beneficiary. The learned Surrogate held that the testator provided for the payment to his widow of the entire income from the trust and so much of the corpus as the trustee should, in its sole judgment, determine necessary for her every comfort and support and overruled the objections to the account. The Appellate Division reversed the Surrogate, sustained the objections to the expenditure from the principal .of the trust, and directed that the item of $1,900 advanced by the trustee from the principal of the trust and the commissions deducted or allowed thereon be disallowed and that the trustee forthwith reimburse the principal of the trust estate by that amount with interest from the dates of withdrawal.” It found that the trustee paid out the item of principal without having made adequate investigation as to the necessity for an invasion of the principal ” (254 App. Div. 932) and that it was careless and negligent in its administration of the trust by turning over the income and the principal (in part) to a niece of the beneficiary to disburse without adequate supervision on its part of the use thereof or security on the part of the niece. Except as to the item disallowed, it affirmed the decree of the Surrogate in allowing the account of the trustee. We cannot agree with the findings made or conclusions reached by the Appellate Division upon which it modified the Surrogate’s decree.

The provisions of the will are not ambiguous, the intent of the testator is clear from the face of the instrument, and we may determine for ourselves what the instrument itself contains. Ascertainment of the intent of the testator as shown by his will, taken as a whole, is our primary purpose, and, when ascertained, is to prevail over all other canons of construction (Matter of James, 146 N. Y. 78, 100; Matter of Buechner, 226 N. Y. 440). The will clearly provides for payment by the trustee in quarterly installments of the entire income from the trust and of so much of the principal in addition thereto as, in the sole judgment of the trustee, shall by it be deemed necessary for every comfort and support of the widow. Her every care, comfort and support in the condition in life in which she was accustomed to live was obviously the testator’s primary concern and gifts to others were clearly secondary. If by inapt or inaccurate modes of expression or an expression, such as directs the trustee that it may keep the stock in the American Telegraph and Telephone Company intact as a part of his estate, other gifts are given preference, such expressions must be subordinated to the plain .and definite purpose of the testator as he has expressed it in his will (Phillips v. Davies, 92 N. Y. 199). In conformity to that purpose and intent, the trustee is required to furnish every comfort and support for the widow which it may deem in a sound discretion necessary out of income and, if required, out of the corpus, even to the extent of exhausting the entire corpus of the trust, without taking into consideration or account the personal income of the beneficiary from any other source (Holden v. Strong, 116 N. Y. 471; Rezzemini v. Brooks, 236 N. Y. 184). What is necessary for that purpose is limited only by the amount of the income and the corpus of the trust. Whatever income the beneficiary may have from sources other than the trust is of no concern to the trustee in forming its judgment as to the amount necessary for her every comfort and support. The testator did not contemplate that his widow should be required to use her own personal income or to incur individual obligations for her comfort and support as long as there was anything in the trust that might, in the sound discretion of the trustee, be used for that purpose. In forming its judgment, the trustee must take into consideration the conditions under which she has been accustomed to live, her health and her every comfort and support, with a view of carrying out her husband’s solicitude for her welfare and happiness after he had passed away. Exercise of ordinary care and a sound discretion in making its determination is all that is required of the trustee.

The widow of the testator is now seventy-eight years of age. For many years during the lifetime of the deceased he and his wife traveled extensively. Immediately upon his death Mrs. Clark became ill and she and her niece, Mrs. Marjorie Wells, went to California. Owing to the condition of her health, Mrs. Clark found it impracticable to return to her home in Baldwinsville until July 21, 1934. During the period that she was in California she had medical attention and nursing and the constant care and attendance of her niece. Shortly after her return to Baldwinsville she became unable to manage herself or her affairs and has since been under the care of a physician and of nurses. Mrs. Wells, at her request, has lived with her and has had exclusive charge of the running of her home in which she lived and of the management of all of her business affairs. The brother of Mrs. Wells has also been with the widow at her special request and has acted as general caretaker around the large house which had been maintained by her husband in his lifetime. We may infer that this home was in the name of the husband and wife as tenants by the entirety. The brother took the place of a chauffeur who had been maintained as part of the establishment of the deceased. Additionally there was a woman employed three days per week at one dollar per day to assist in the heavy work. Mrs. Clark’s condition became such that constant nursing attention day and night has been required. Mrs. Wells has received no pay for her services; the others were paid for their services and all received board and lodging. The estimate of the trust officer in charge of the trust as to the needs of the beneficiary was at least four thousand dollars per year. There is no evidence in the case to indicate that the expenditures which have been made for the beneficiary were either improvident or contrary to the provisions of the will.

Under the terms of the will the trustee could not delegate the duty of exercising its own judgment as to the amount to be expended for the every comfort and support of the widow (Matter of Wilkin, 183 N. Y. 104; City Bank Farmers Trust Co. v. Smith, 263 N. Y. 292, 295; Matter of Osborn, 252 App. Div. 438; American Law Institute, Restatement of the Law of Trusts, § 187). The trustee exercised its own judgment as to the propriety of the expenditures made on the basis of representations by Mrs. Wells and of others and upon the knowledge of some of its officers of the condition of the beneficiary and of the general requirements for her maintenance under the conditions existing and in the condition of life in which she had been accustomed to live. It did not personally examine into and personally and separately make each item of expenditure. Checks to the order of Mrs. Clark were made by the trustee and sent to Mrs. Wells, who deposited them in the Baldwinsville bank in the account of Mrs. Clark and the moneys so deposited were thereafter withdrawn from time to time by Mrs. Wells under power of attorney from the beneficiary made in 1934. The trustee did not in advance require an itemized statement of the requirements of the household of the beneficiary or make pre-audit of each expenditure, but did require statements from Mrs. Wells generally itemizing expenditures for various purposes. The items contained in these statements, upon examination by the trustee, were judged by it to be necessary for the comfort and support of the beneficiary and were by it approved. The record establishes without any reasonable inference open to the contrary that the duty of the trustee was reasonably performed with ordinary care and with sufficient knowledge of all the facts to enable it to exercise its own judgment as to the proper expenditures to be made or obligations to be incurred for the benefit of Mrs. Clark. In that connection it prudently exercised its own judgment. It was not bound personally to scrutinize and pass upon every small item of expenditure before it was made under the facts appearing in this case. Coupled with its own general knowledge of the situation and the needs of the beneficiary it was entitled to rely upon the representations of Mrs. Wells as to the details of the expenditures required. We find no abuse of discretion and no evidence of bad faith or that the trustee administered the trust in a careless or negligent manner. It appears that no committee has been appointed of either the person or estate of Mrs. Clark, but that fact has no bearing upon any issue involved in this case.

The Surrogate authorized the trustee to sell the American Telephone and Telegraph stock. We understand that that provision of the decree means that it shall be sold only as the trustee may deem such sales necessary from time to time to meet its obligations under the provisions of the will for the benefit of the widow.

The order of the Appellate Division should be modified in accordance with this opinion, and, as so modified, affirmed, with costs in this court and in the Appellate Division to all parties separately appearing and filing briefs, payable out of the estate.

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

Ordered accordingly.


author: Crane, Ch. J.

text:
    Schafran & Finkel, Inc., Appellant, v. M. Lowenstein & Sons, Inc., Respondent.

      Submitted January 4, 1939;
    decided March 7, 1939.

      Morton Milman and Charles Eno for appellant.
    In the absence of a contract expressing a consent to arbitrate, the arbitration award is an act of usurpation and an utter nullity. (National City Bank v. Waggoner, 230 App. Div. 88; 255 N. Y. 527; Finsilver, Still & Moss v. Goldberg M. & Co., 253 N. Y. 382; Matter of Fang, 227 App. Div. 766.) Section 1458 of the Civil Practice Act does not prescribe the sole and exclusive remedy of a party who claims never to have made a contract; but on the contrary, the right to institute an independent action in equity is expressly preserved in section 1469. (Jenkins v. Putnam, 106 N. Y. 272; Talmadge v. Third Nat. Bank, 91 N. Y. 531; Finsilver, Still & Moss v. Goldberg M. & Co., 253 N. Y. 382: O’Connell v. Gallagher, 104 App. Div. 492; Julian v. Woolsey, 87 Hun, 326; 147 N. Y. 722.) Defendant’s purported notice of intention to arbitrate, allegedly served upon plaintiff, is jurisdictionally inadequate to satisfy the constitutional requirements of due process. (Truax v. Corrigan, 257 U. S. 312; Clarksburg-Columbus Short Route Bridge Co. v. Woodring, 89 Fed. Rep. [2d] 788; Boynton v. Moffat Tunnel Imp. Dist., 57 Fed. Rep. [2d] 772; Lacher v. Venus, 177 Wis. 588; Ekern v. McGovern, 154 Wis. 157.) The court has jurisdiction to grant the injunctive and declaratory relief prayed for in the complaint. (Colson v. Pelgram, 259 N. Y. 370; Matter of Fenster, 234 App. Div. 868; Kanter v. Bloom Co., 144 Misc. Rep. 602; Burnside v. Whitney, 21 N. Y. 148; Bissell v. Morgan, 56 Barb. 369; La Hay, Inc., v. Pathe Exchange, Inc., 237 App. Div. 468; 262 N. Y. 483.)

      Irving D. Lipkowitz and William Hughes Lewis for respondent.
    Under the circumstances an independent action in equity does not lie to try questions relating to the making of the agreement or the arbitrators’ award. (Kanter v. Bloom Co., 144 Misc. Rep. 602; Savage v Allen, 54 N. Y. 458; Wallack v. Society for Reformation, 67 N. Y. 23; Colson v. Pelgram, 259 N. Y. 370; Rosenberg v. Mt. Carmel Cemetery Assn., 244 N. Y. 573; Boston & Maine R. R. v. Delaware & Hudson Co., 268 N. Y. 382.) The provisions of section 1458 of the Civil Practice Act are mandatory and not permissive. Plaintiff’s failure to avail itself of the remedies there provided affords no basis for equitable relief. (People v. Norwegian Underwriters, 139 Misc. Rep. 70; 103 Park Ave. Co. v. Exchange Buffet Corp., 242 N. Y. 366; Archer v. Equitable Life Assur. Society, 218 N. Y. 18; Matter of Bowne v. Bowne Co., 221 N. Y. 28; Drew v. Village of White Plains, 157 App. Div. 394; Matter of Dwyer, 192 App. Div. 72; Schroeppell v. Shaw, 3 N. Y. 446; Colombe v. City of Niagara Falls, 162 Misc. Rep. 592; Akin v. Kellogg, 119 N. Y. 441.) Section 1458 of the Civil Practice Act is constitutional. (Bellingham Bay & B. C. R. R. Co. v. New Whatcom, 172 U. S. 314.) The notice prescribed by section 1458, personally served upon plaintiff, satisfies the constitutional requirements of due process. (Bellingham Bay & B. C. R. R. Co. v. New What-com, 172 U. S. 314; Akin v. Kellogg, 119 N. Y. 441.)

      John S. Harrison, Osmond K. Fraenkel, John K. Watson, Julius Henry Cohen and Robert R. Bruce for American Arbitration Association et al., amici curiæ.

    The case presents no ground for equitable relief. (Akin v. Kellogg, 119 N. Y. 441; Schroeppell v. Shaw, 3 N. Y. 446; Hahl v. Sugo, 169 N. Y. 109; Colson v. Pelgram, 259 N. Y. 370; Kanter v. Bloom Co., 144 Misc. Rep. 602.) Section 1458 of the Civil Practice Act is constitutional. (Louisville & Nashville R. R. Co. v. Schmidt, 177 U. S. 230; Simon v. Craft, 182 U. S. 427; Holmes v. Conway, 241 U. S. 624; Bellingham Bay & B. C. R. R. Co. v. New Whatcom, 172 U. S. 314; People ex rel. Simpson v. Wells, 181 N. Y. 252; York v. Texas, 137 U. S. 15; People ex rel. Witherbee v. Supervisors, 70 N. Y. 228.)
   Crane, Ch. J.

This appeal presents a drastic rule, if it be legal, relating to arbitration. One who has never made a contract to arbitrate, upon receiving an informal letter directing him to arbitrate a purchase of goods which he never made, may be mulcted in damages by an award unless, within ten days after receiving such notice, he applies to the court for an injunction or a stay. Should the notice have been misunderstood or too vague and indefinite or, if through a mistake or unavoidable lapse of time, a party cannot or does not reach a judge within the ten days, there is absolutely no relief, not even in a court of equity.

The facts, briefly, are these, taking, as we must, the allegations of the complaint at their face value. The plaintiff, on October 29, 1937, received from the defendant an invoice for goods alleged to have been sold to Schafran & Finkel. On November 1, 1937, the plaintiff notified the defendant that it had never ordered any merchandise nor received any merchandise, and was returning the invoice. On December 8, 1937, there was delivered at the office of Schafran & Finkel, Inc., the following letter:

Dear Sirs: Please be advised that the undersigned, M. Lowenstein & Sons, Inc., of Nos. 37-45 Leonard Street, New York City, hereby demands, pursuant to the orovisions of the written agreement between said M. Lowenstein & Sons, Inc. and yourselves, dated June 29, 1937, that you submit to arbitration before the General Arbitration Council of the Textile Industry of No. 320 Broadway, New York City, the controversy arising out of your failure and refusal to accept the goods called for by said agreement.
Upon said arbitration M. Lowenstein & Sons, Inc., will request that you be directed to pay to it the sum of $1,500 with interest thereon, representing the difference between the contract price and the market price of said goods at the time of your refusal to accept the same.
“ You are hereby notified that it is the intention of M. Lowenstein & Sons, Inc. to conduct such arbitration pursuant to the provisions of the said agreement dated June 29, 1937. To that end a copy of said agreement and this notice and demand will be filed with the General Arbitration Council of the Textile Industry, with the request that it proceed to put its rules into effect.
“ Very truly yours,
“ M. LOWENSTEIN & SONS, INC.
“ By Ikying D. Lipkowitz (Sgd)
“ Attorney

Apparently no attention was paid to it. The plaintiff did not buy goods of the defendant; it did not agree to any submission to arbitration; it signed no contract to arbitrate; in fact, the alleged agreement of arbitration contained in the record is a paper relating to the sale of merchandise signed solely by M. Lowenstein & Sons, Inc. Later, in January of 1938, the plaintiff was notified that an award had been made against it of $1,500, and that a motion would be made at Special Term of the Supreme Court on the 28th day of January, 1938, to confirm the award and directing entry of judgment for the amount.

The plaintiff finds itself in this position: under the arbitration law, as it stands, it has no relief whatever, for, on the motion to confirm, it cannot plead or show lack of jurisdiction, or that no contract was entered into, or any equities requiring relief. The plaintiff is also barred by the decisions below from maintaining any action in equity to meet the situation. In other words, the plaintiff lost all rights of a litigant, either at law or in equity, or in the arbitration proceeding, when it failed to meet the lawyer’s letter or notice to apply to the Supreme Court for a stay or injunction. We doubt very much whether article 84 of the Civil Practice Act, relating to arbitration, intended to go as far as this, or whether it would be constitutional, to deprive one of property upon such informal notice as the lawyer’s letter in this case.

The plaintiff, faced with this situation, brought an action in equity to restrain the entry of any judgment upon the alleged award, for the reasons here stated; the defendant countermoved by asking that the complaint be dismissed as not stating a cause of action. The complaint has been dismissed on the ground that no remedy whatever existed, except that provided by the arbitration law. This, we think, is error.

The arbitration law, as it exists today, says this: “ Two or more persons * * * may contract to settle by arbitration a controversy thereafter arising between them and such submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (Civ. Prac. Act, § 1448.)

Now we turn to section 1458, added by the Laws of 1937, chapter 341, in effect September first of that year.

“ An award shall be valid and enforceable * * * without previous adjudication of the existence of a submission or contract to arbitrate, subject, nevertheless, to the provisions of this section:

2. A party who has not participated in the selection of the arbitrators * * * and who has not made or been served with an application to compel arbitration under section fourteen hundred fifty may also put in issue the making of the contract * * * either by a motion for a stay. of the arbitration or in opposition to the confirmation of the award. If a notice shall have been personally served upon such party of an intention to conduct the arbitration pursuant to the provisions of a contract or submission specified in such notice, then the issues specified in this subdivision may be raised only by a motion for a stay of the arbitration, notice of which motion must be served within ten days after the service of the notice of intention to arbitrate.”

By section 1462 of the Civil Practice Act a motion to vacate an award may be made:

“ 5. If there was no valid submission or contract, and the objection has been raised under the conditions set forth in section fourteen hundred fifty-eight.”

There is a saving clause, however, to this arbitration article, found in section 1469, which reads:

This article does not affect any right of action in affirmance, disaffirmance, or for the modification of a submission or contract, made either as prescribed in this article or otherwise, or upon an instrument collateral thereto, or upon an award made or purporting to be made in pursuance thereof. And, except as otherwise expressly prescribed therein, this article does not affect a submission or contract, made otherwise than as prescribed therein, or any proceedings taken pursuant to such a submission or contract, or any instrument collateral thereto.”

These are the pertinent provisions of this arbitration article, and may be summarized as follows: A party who has not been served with an application to compel arbitration may put in issue the making of the contract in opposition to the confirmation of the award, but a person who has been personally served with a notice of an intention to conduct arbitration, pursuant to the provisions of a contract, can only put in issue the making of the contract by a motion for a stay, notice of which must be served within ten days after the service of the notice of intention to arbitrate. Unless this notice is served within ten days, then, according to section 1462, the award may not be set 'aside on the ground that there was no valid contract. Thus, the one and only move that may be made by a person who signed no contract, is to apply to the court for a stay and, if he fails to move within the ten days, he is thereafter prevented from bringing any action or any proceeding in equity to be relieved of his default, or question the validity of the contract.

If the plaintiff made no contract to submit, or signed and executed no submission to arbitrate, how, by any possibility, can it be bound by an award of arbitrators who had no jurisdiction? (Finsilver, Still & Moss v. Goldberg, Maas & Co., 253 N. Y. 382.) The answer, as given by the respondent in the court below, is, “ The Lipkowitz letter.” It was personally served; the plaintiff failed to go to court for a stay within ten days, and, therefore, is barred from ever raising the question of jurisdiction of the arbitrators or the lack of any contract to arbitrate. If this be the meaning of the law, it fails, for lack of due process. Other statutes which provide that a money judgment may be taken against a man unless he makes a move require far more specific notice. Title II of the New York City Municipal Court Code (Laws of 1915, ch. 279) furnishes a good example. There it is provided that a summons may be served stating the amount for which demand is made, and that in default of an answer judgment will be taken. (See, also, Rules Civ. Prac., rule 46.) The form of the summons is given and the notice is specific as to what the defendant must do. The clerk of the court issues the summons, which is uniform in all cases, except as to the amount and the nature of the transaction. Here is a process of the court, notifying that a judgment results in case of default; here is an opportunity to answer and be heard, after due notice. This constitutes due process of law.

What have we in the arbitration case? Section 1458 of the Civil Practice Act simply says a notice shall be personally served of an intention to conduct an arbitration, pursuant to the" provisions of a contract. It does not give the form of notice nor require time and place and consequences of a default to be stated, nor that the notice should tell what should or must be done. A mere letter from a lawyer saying he demands arbitration of a contract before some board seems to be sufficient — nothing more. And the consequence ? If the party does not proceed to get a stay within ten days no court of equity nor any other court can afford him any relief; and all this in face of the fact that he never made any contract to arbitrate. This is going too far, in my estimation.

For instance, in this case the plaintiff writes that it never ordered any such goods as it had been billed for. A lawyer thereupon writes a letter demanding that the plaintiff submit to arbitration before the General Arbitration Council of the Textile Industry, at 320 Broadway, of the controversy arising out of a failure to accept goods. He further says in his letter that $1,500 is demanded. This is the extent of the notice. This is no way to conduct a proceeding resulting in a money judgment. The notice should state where and at what time the party is to proceed and the consequences of his failure to act as the law specifies. We do not say that all these things are necessary, but we do say that the proceedings for arbitration cannot be left so vague and uncertain that people may be mulcted in judgment without being sufficiently warned of their rights. The notice here was insufficient, and the plaintiff cannot be deprived of an opportunity to show that it never entered into any contract at all to arbitrate. Awards cannot stand upon such flimsy procedure. Under these circumstances the plaintiff’s cause of action t'a set this award aside or to restrain further proceedings should not have been dismissed. Equity can afford relief if that under the arbitration law has failed. We review upon this appeal only the judgment of dismissal. The court at Special Term must determine whether the plaintiff has shown facts sufficient to entitle him to an injunction either permanent or temporary.

For these reasons the judgments should be reversed, with costs in all courts, and the motion of the defendant to dismiss the complaint denied. (See 280 N. Y. 687.)

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

Judgments reversed, etc.


author: Hubbs, J.

text:
    In the Matter of the Claim of Harry Sihler against Lincoln-Alliance Bank and Trust Company et al., Respondents. State Industrial Board, Appellant.
    Argued February 24, 1939;
    decided March 7, 1939.

      John J. Bennett, Jr., Attorney-General (Leon Freedman of counsel), for appellant.
    The injuries sustained by the claimant were accidental injuries arising out of and in the course of his employment. (Matter of Frank v. Economy Sales Co., 249 App. Div. 885; 274 N. Y. 515.)

      F. A. W. Ireland for respondents.
    The transportation of the employee to his house had been completed and the accident did not arise out of and in the course of the employment. (Matter of Kostyum v. Sheldon Slate Co., 234 App. Div. 643; 259 N. Y. 515.)
   Hubbs, J.

Claimant was employed as a painter in finishing a suite of offices in a building owned by the employer. He usually worked eight hours a day. On the day of the accident he was requested by the foreman, an employee of the same employer, to stay overtime until twelve midnight to finish the office upon which he was working. He consented to stay until after the last bus upon which he could reach his home that night had left, upon condition that the foreman would take him home. The foreman said he would see that I got home safe.” Claimant worked until midnight and the foreman then took him in an automobile owned by the employer to a point on the opposite side of the street in front of claimant’s home. Upon arriving at that point the claimant got out of the automobile, and talked a moment with the foreman. The foreman drove on, and, while crossing the street, claimant was struck by another automobile. That there was no delay between the time the foreman started on and the time when claimant was struck by the other automobile is shown by the fact that the foreman became aware of the accident, returned, and took the claimant to the hospital.

The Industrial Board made an award of compensation, finding that the claimant was injured in the regular course of his employment and while working for his employer, and while crossing the street to enter his home after descending from an automobile driven by his immediate superior.” The Appellate Division reversed.

The appellant, The State Industrial Board, relies on the decision of this court in Matter of Frank v. Economy Sales Co. (249 App. Div. 885; 274 N. Y. 515), in which the claimant was injured while in the employer’s automobile. The record on appeal in that case shows that the claimant was injured while in the employer’s automobile on her way home. The case has no greater analogy to the case at bar than other cases where the contract of employment included transportation. In those cases it has been held that an employee injured while being transported by the employer may recover. There seems to be no particular analogy between the Frank case and the one at bar, because there the employee had not left the employer’s automobile.

The respondent employer relies on Matter of Kostyum v. Sheldon Slate Co. (234 App. Div. 643; 259 N. Y. 515). In that case the employee had descended from a truck regularly used in transporting employees to and from work. The truck stopped opposite claimant’s home and claimant was injured after leaving the truck and while crossing the street to his home. No recovery was allowed. The only distinction between that case and the case at bar is to be found in the fact that in that case the truck was regularly used to transport employees to and from their work, while in the case at bar there was a specific agreement to take the employee to his home if he would continue to work until midnight. In the Kostyum case the record discloses that the employer furnished a truck to carry the employees to and from work; that it passed over a fixed route, picking up the men at stated places, and when it passed the home of an employee on the route it let the employee off near his home. The distinction between the two cases is narrow, but in view of the liberal interpretation given to the Workmen’s Compensation Law (Cons. Laws, ch. 67) in favor of an employee it seems to us that this court is not precluded by its decision in the Kostyum case from reversing the determination of the Appellate Division in the case before us and reinstating the award. In the instant case the agreement of the employer to transport the claimant to his home was unfulfilled by the employer when the claimant was required to alight from the automobile at a point in the highway on the opposite side of the street from his home, from which point he was required to cross the street in order to reach his home. The special agreement existing in this ease distinguishes the decision in the Kostyum case and it is not controlling for the reason that in that case there was no agreement which provided for transportation of the employee to his home, a point other than that at which the employee was obliged to alight from the automobile.

The order of the Appellate Division should be reversed and the award of the State Industrial Board reinstated, with costs in this court and in the Appellate Division.

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

Ordered accordingly.


text:
    Industrial Bayon Corporation, Respondent, v. Tubize Chatillon Corporation, Appellant.
    Argued December 7, 1938;
    decided March 7, 1939.

      William H. Davis for appellant.
    In no event should plaintiff be given the privilege of paying royalty according to the royalty schedule of the other license after January 1, 1936, the date upon which the other licensee’s enjoyment of that schedulé ceased. (Santovincenza v. Egan, 284 U. S. 30; Dammert v. Osborn, 140 N. Y. 30.)

      Theodore Kiendl, Leslie Nichols and Porter R. Chandler for respondent.
   Per Curiam.

The judgment entered upon the order of the Appellate Division and the decree of the Special Term are modified by striking all of the provisions of paragraph “ 1 ” from the decree except the direction for specific performance of the covenants contained in paragraph “ 14 ” of the license agreement dated December 15,1933, by limiting recovery to overpayment by plaintiff of royalties to the period commencing January 1, 1934, and expiring December 31, 1935, under paragraph 2 ” of the decree, by making corresponding adjustments in paragraph “ 3 ” of the decree as to the amount to be credited under paragraph “ 1 ” of the supplemental agreement of December 15, 1933, as necessary, and by hmiting the injunction provided for in paragraph “ 4 ” of the decree so as to enjoin the right of defendant to cancel the contract because of any alleged failure of plaintiff to perform the provisions thereof on its part to be performed to the period expiring December 31, 1935, and the case is remitted to Special Term to enter a decree accordingly. Except as so modified the judgment appealed from is affirmed, with costs to the appellant.

The period during which plaintiff was entitled to enjoy the terms of the contract between defendant and the Delaware Rayon Company, which have been adjudged to be more favorable than the terms accorded to the plaintiff by defendant in the contract of December 15, 1933, expired on January 1, 1936.

The judgments should be modified in accordance with this opinion and as so modified affirmed, with costs to appellant in this court and in the Appellate Division.

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

Judgment accordingly.


text:
    The People of the State of New York ex rel. Fred Romano, Appellant, against Joseph H. Brophy, as Warden of Auburn State Prison, Respondent.
    Submitted March 3, 1939;
    decided April 11, 1939.

      Harry A. Wertlieb for appellant.
    By imposing upon appellant a separate sentence for allegedly being armed the court exceeded its authority. The separate term, having been inflicted without indictment, cannot stand. (Penal Law, § 41; Code Crim. Proc. §§ 4, 39, subd. 1.) The appellant could be sentenced for no crime except the one with which he was charged. (State v. Watson, 41 La. Ann. 598; State v. Walker, 22 La. Ann. 425; Grossman, v. Oakland, 30 Ore. 478: Fletcher v. State, 12 Ark. 169; Crow v. State, 6 Tex. 334; State v. Levy, 119 Mo. 434; Arbintrode v. State, 67 Ind. 267; People v. Fuchs, 71 Misc. Rep. 69; People ex rel. Schneider v. Hayes, 108 App. Div. 6; People v. Krennen, 264 N. Y. 108; People v. Caruso, 249 N. Y. 302.)

      John J. Bennett, Jr., Attorney-General (Patrick H. Clune and Edward T. Boyle of counsel), for respondent.
    The sentence to additional punishment under section 1944 of the Penal Law was a lawful sentence. (People v. Paradiso, 248 N. Y. 123.) The relator is confined by virtue of a final judgment of a court of competent jurisdiction both of the crime and of the person. (People ex rel. Schoen v. Murphy, 243 App. Div. 216.)
   Crane, Ch. J.

Appellant was convicted of the crime of assault in the second degree and was sentenced to a term of from two and one-half to five years for this offense and to a further term of from five to ten years for a violation of section 1944 of the Penal Law. This application for a writ of habeas corpus was made after petitioner had served his sentence for the assault offense, the term for which terminated November 18, 1937, and at the commencement of the term he is serving by reason of his sentence for the violation of section 1944 of the Penal Law.

An examination of the record fails to disclose what proceedings took place in the Richmond County Court as a basis for convicting and sentencing the petitioner for a violation of section 1944 of the Penal Law. From the face of the indictment it would appear that the prisoner pleaded guilty to second degree assault, but it does not recite that he is charged with the offense of carrying firearms at the time of the commission of the crime. The notation that the prisoner was sentenced for a violation of section 1944 of the Penal Law must necessarily have been written on the indictment after the petitioner had been sentenced, and could not, therefore, have constituted advance notice to him that he was charged with the commission of this offense as distinguished from that of second degree assault to which he pleaded guilty.

There is nothing in the record to indicate whether or not an investigation was undertaken by the court to determine that the defendant was armed at the time of the assault, nor is there any testimony to attest to the propriety of the court’s finding in this respect. The rights of defendants to -review by an appellate court are frustrated if there be no accurate record upon which the court on appeal can predicate its decision. Uncertain inferences to be drawn from conflicting affidavits do not satisfy this requirement. In People v. Caruso (249 N. Y. 302) this court said, at page 306: Of course, before a court can impose the additional sentence under section 1944, it must have before it on the record facts to sustain such action. There must be a record made .which can be reviewed. If the case has been tried out the facts no doubt will appear upon which the jury find the verdict of guilt. Where a plea has been taken the fact that the prisoner was armed may not so clearly appear or may be denied. The judge should then conduct an inquiry and take testimony, if necessary.” (See, also, People v. Krennen, 264 N. Y. 108.)

The orders should be reversed, the writ sustained, and the relator discharged from custody. (See 280 N. Y. 707.)

Lehman, O’Beien, Hubbs, Lottghban, Finch and Rippey, JJ., concur.

Ordered accordingly.


author: Loughran, J.

text:
    The People of the State of New York ex rel. Jessie C. Hagy, Individually and as Executrix of Robert M. Chalmers, Deceased, Respondent, against Richard J. Lewis, as Commissioner of Assessments of the City of Albany, et al., Appellants.
    Argued February 23, 1939;
    decided April 11, 1939.

      Joseph J. Casey, Corporation Counsel, for appellants.
    The two types of inequality testimony should be considered together. (New York Railways Co. v. City of New York, 218 N. Y. 483; People ex rel. Standard Oil Co. v. Saxe, 179 App. Div. 721; 222 N. Y. 545; Freeman v. Freeman, 126 App. Div. 601; Matter of Emerson v. Buck, 230 N. Y. 380.)

      Ernest B. Morris and William E. Woollard for respondent.
    To determine fairly the percentage of inequality, total assessments should be compared with total market values. (People ex rel. Warren v. Carker, 109 N. Y. 576; People ex rel. Stuart v. Feitner, 53 Misc. Rep. 334.) The courts below properly disregarded the list of conveyances in ascertaining the extent of inequality. (People ex rel. Mayor v. McCarthy, 102 N. Y. 630.)
   Loughran, J.

This is a certiorari proceeding brought under article 13 of the Tax Law (Cons. Laws, ch. 60) to review the assessment of 37 North Pearl street in the city of Albany for the purposes of taxation for the year 1937. The premises were assessed at $312,000.

It was alleged by the relator that the assessment was both erroneous by reason of overvaluation and unequal in that it had been made at a higher proportionate valuation than the assessment of other property on the same roll by the same officers. (See Tax Law, § 290.) The issue as to overvaluation has been settled by the finding of the courts below that the premises had a full value of $160,000. Our jurisdiction is invoked only in respect of the issue of inequality.

Section 293 of the Tax Law empowers the court to correct an unequal assessment so as to “ make it conform to the valuations and assessmenüs of other property upon the same roll and secure equality of assessment.” It also provides: “ Upon the hearing the parties to the proceeding may mutually agree on parcels of real estate to be valued * * *. But in case the parties fail to agree on a selection of parcels to be valued * * * then upon application of either party the court or referee shall * * * select the parcels that shall be valued without reference to their assessed values, and both parties shall be limited in their proof on the trial to * * * the parcels so selected, except that evidence as to actual sales of real property within the tax district that occurred during the year in which the assessment under review was made may be given by either party.”

Conformably to this provision, the relator and the city each submitted a list of parcels for valuation, and the referee picked out six parcels from either list. The assessed valuation and the found full value of each of these twelve parcels were as follows:

Assessment Full Value 341 South Pearl street.... $2,000 $3,000 00 600 South Pearl street.... 2,000 6,000 00 120 Hudson avenue....... 20,000 35,000 00 218 Western avenue...... 26,000 60,000 00 178 Morton avenue....... 6,500 9,000 00 210 Loudonville road...... 10,000 25,000 00 41 Catherine street....... 2,500 2,769 30 453 Myrtle avenue....... 10,100 8,790 00 9 Lawnridge avenue...... 10,000 9,000 00 83 Columbia street....... 8,000 6,988 00 485 Myrtle avenue........ 10,000 8,980 00 30 Market street......... 8,500 8,122 80 $115,600 $182,649 50

This total of assessed valuations ($115,600) was divided by the total of these full valuations ($182,649.80), and the result (63.2 per cent, or, for easy figuring, 64 per cent), was adopted by the courts below as the percentage of full value at which real property in the city was assessed in general. The assessment under review was accordingly put at $102,400, or 64 per cent of the found full value of $160,000. The same arithmetical process had been employed in an unreported case decided by Mr. Justice Bebgan on which the relator relied.

In another unreported case, Mr. Justice Fosteb had held this procedure to be erroneous. He said: “ The average rate of assessment, using a given number of parcels, cannot be properly determined in this manner, because by adding large value parcels to one side and small value parcels to the other, the apparent rate can be made smaller and smaller, even though the actual rate percentage remains the same. Thus if we take two parcels, one worth $2,000 and assessed at $1,000, the other worth $40,000 and assessed at $10,000, the first ratio is 50 per cent, and the second 25 per cent. The average is 37| per cent. But if we divide the total valuations the percentage is only slightly in excess of 26 per cent.” This viewpoint is adopted by the city. As appellant here, it contends that the assessed valuation of the relator’s property should have been measured by an average rate of assessment arrived at by finding the ratio of assessed valuation to full value of each parcel and dividing the sum of such percentages by the number of parcels. Had this been done the ratio of the assessed valuation of the relator’s property to its found full value would have come to 80 per cent instead of 64 per cent, with the result that the assessment in question would have been made $128,960 instead of $102,400 — a difference of $25,600, or 16 per cent.

We think all this presents no question of law.

The equalizing method used by the courts below may perchance give effect to lopsidedness of the sort pointed out by Mr. Justice Fosteb. But this possibility seems to us to be so remote as to be negligible in the ordinary cáse. The statute does not constrain either litigant to accept a selection of parcels loaded against his interests. When the parties agree on the parcels to be valued it is to be presumed that inordinate diversities have been excluded. In the absence of such agreement the selection is made by the court or by the referee, and then (unless the contrary be shown) it is to be presumed that judicial fairness is a guaranty that the parcels chosen also fairly exhibit a cross-section of the situation that exists throughout a tax district. Thus the idea of the statute appears to be that a sufficiently approximate arithmetical mean can be established by pooling a number of parcels (so selected) and comparing the aggregate of their assessed valuations with the aggregate of their full values. Apparently this was the view of the courts below. We cannot say that such a process is inadequate for practical attainment of the rough equality which is all that has heretofore been possible under any system of taxation. Nor is the claimed superiority of the city’s average-rate-of-assessment formula necessarily proved by mere multiple comparison of single parcels with other single parcels. As we all know, there are in almost every community peculiar standards of value indigenous to particular location^.

A remaining question may be more shortly disposed of. The referee declined to consider records offered by the city to show actual sales of real property in the tax district during the year 1937. This data was fragmentary and in a number of instances lacked positive authentication. That it was not so proximately relevant as to be persuasive was decided by an exercise of discretion which we cannot canvass.

The order should be affirmed, with costs

Crane, Ch. J., Lehman, O’Brien, Hubbs and Finch, JJ., concur; Rippey, J., dissents on the ground that as a matter of law the selection and method of comparison adopted were arbitrary and unreasonable and failed to reflect the situation throughout the tax district.

Order affirmed.


text:
    Milton Feist et al., Respondents, v. Fifth Avenue Bank of New York, as Trustee, Appellant, Impleaded with Another.
    Argued February 27, 1939;
    decided April 11, 1939.

      Albert Stickney, Hersey Egginton, Frank C. Wachsmuth and Leon Schaefler for appellant.
    The submission did not lose the character of a justiciable controversy because facts are included which may fall within the category of evidentiary as distinguished from ultimate. (Title Guarantee & Trust Co. v. Mortgage Comm., 271 N. Y. 302; 273 N. Y. 415; Rhine v. New York Life Ins. Co., 248 App. Div. 120; 273 N. Y. 1; Whittemore v. Equitable Trust Co., 250 N. Y. 298; Matter of Clark, 257 N. Y. 132.) In respect to each of the two questions which the Appellate Division was asked to decide, the ultimate facts were fully presented to the court, and the only conclusions necessary to be drawn from those conceded facts were the questions of law, first, whether the investment made by the trustee was within the authorization of the deed of trust, and second, whether the action of the trustee was a prudent one. (Schoellkopf v. Marine Trust Co., 267 N. Y. 358; Hoffman Bros., Inc., v. Commercial Union Assurance Co., 221 App. Div. 167; 248 N. Y. 578.)

      Edwin W. Cooney and Edward L. Hunt, Jr., for New York State Bankers Association, amicus curiæ.

      A. S. Gilbert and Godfrey Cohen for respondents.
   Loughran, J.

This case having been submitted on agreed facts pursuant to sections 546-548 of the Civil Practice Act, the Appellate Division was without power to draw inferences of fact. The question presented is whether the judgment correctly defines the effect of the stated facts as matter of law, not whether there was any evidence upon which supporting findings could have been made. (Lafrinz v. Whitney, 233 N. Y. 107, 110; Title Guarantee & Trust Co. v. Mortgage Commission, 271 N. Y. 302.)

The appellant bank is the trustee under an agreement of trust made with it by Leo Feist on October 4, 1924. This agreement authorized investment of the trust principal in bonds of the United States, State of New York, City of New York, or guaranteed mortgages on improved real estate in the City of New York.” On June 3, 1931, the bank acquired for the trust a $60,000 participation in a $90,000 guaranteed mortgage on 319-21-23 East Forty-fifth street, Manhattan, city of New York.

When the validity of that transaction was challenged by the parties beneficially interested in the trust this controversy was framed as a medium for the settlement of two questions, viz.: “ (a) Whether premises 319-21-23 East. 45th Street covered by the mortgage was improved real estate as required by the trust agreement, and (b) Whether the investment by the Trustee on June 3, 1931, in the participation in the mortgage on 319-21-23 East 45th Street was a prudent investment.” Both questions have been answered in the negative by the judgment below.

(1) The extrinsic facts bearing on the first question are stated in the submission as follows: The premises 319-21-23 East 45th Street consisted of three parcels totaling seventy-five feet in width, front and rear, by one hundred feet in depth on each side, situated on the north side of 45th Street, commencing three hundred feet west of the northwest corner of First Avenue and 45th Street. * * * There were erected on this land * * * three tenement houses * * * built prior to 1902, since which date the construction of tenements of this character has been prohibited by the Tenement House Law. The tenements were of the type known as cold water flats.’ They had no heat or central hot water. There were five floors in each building. Each floor was divided into two apartments of six rooms each, making ten apartments in each building, and a total of thirty apartments in all. In the hall of each floor was a toilet for the use of the two families occupying each floor. The flats were occupied by poor people. The rents ranged from $20 to $25 a month for each apartment of six rooms. * * * The buildings were in fair-to-good shape for buildings of that type and age. The apartments were of the railroad type, with three interior bedrooms, each having a window on a small light court approximately five feet wide by ten feet long, which also served as an air shaft. * * * The three buildings on the premises * * * were not adequate improvements for the land. * * * The net income from these three buildings in February, 1931, and to and including June, 1931, was at the rate of $1,400 per annum, after payment of taxes and all other carrying charges, but before allowing for the payment of interest on the $90,000 mortgage, which amounted to $5,400 per annum, making an annual deficit of $4,000 * * *. The total assessed valuation of the premises for 1931 was $112,500, of which the land was valued at $88,500 and the buildings at $24,000.”

We think the phrase “ improved real estate ” must here be taken in the sense in which the words are usually employed in respect of similar investment situations, i. e., land which at the given time is substantially enhanced in value by some probably durable structural improvement. In this aspect of the matter the foregoing recital of agreed facts is uncertain and incomplete. Market values of the land — with the buildings and without them — are not stated. To say of buildings that they were in relatively fair-to-good shape — or that they were not adequate improvements — is not to state any ultimate conception. The facts as stated are merely evidentiary and lead to no clear, undeniable deduction respecting the status of the mortgaged premises as improved real estate. This issue, therefore, should not have been determined in the present controversy. (Cf. Marx v. Brogan, 188 N. Y. 431.)

(2) Nor .did the submission supply a sufficient basis for a direct conclusion of law as to whether or no the investment in question was a prudent one.

In 1931 the premises were appraised by a large real estate concern at $150,000, of which $135,000 was allocated to the land and $15,000 to the buildings. This concern considered the basic value of the property to he in its availability for high class improvements such as apartment houses and large store and loft buildings which had been erected in the vicinity. The appraisers assigned a value of $15,000 to the buildings only because they believed that, pending the development of the property, these structures would produce some net income, which to the extent thereof would reduce the cost of carrying the property. Other factors entering into this appraisal were that the property was strategically located in the heart of the business activity of the city of New York, and that the locality was unrestricted and the plot large enough to carry a building of almost any height. This appraisal used a rate less than the rate at which sales and investments were being made in the immediate neighborhood.

Titles to a number of other properties in the neighborhood were either in the corporate mortgagor or in its principal stockholders, who were reputed to be financially responsible. The obligor bond of the corporate mortgagor was guaranteed by a collateral bond of these stockholders. The insurance company which guaranteed the mortgage was reputed to be well managed, conservative and sound.

All these additional agreed facts are purely evidentiary. So, too, is the stipulation that, “ save in cases where the will or trust agreement provided otherwise, land value was at the time of the mortgage investment, a paramount factor in determining the desirability of a particular mortgage investment by many savings banks and fiduciaries in and about New York city.” (See 1 Wigmore on Evidence [2d ed.], § 461.)

The' first recital of the trust agreement declares the desire of the grantor “ to make suitable provision for the maintenance and comfort of his invalid son Milton Feist,” the life beneficiary. Another agreed fact is that Milton Feist has continued to be an invalid to the knowledge of the trustee bank.

Talcing the submission as a whole, we have again on this branch of the case only a debatable question of ultimate fact, that is to say, the question whether this investment (when judged by the applicable legal standards) was in fact a prudent one under all the circumstances. (See King v. Talbot, 40 N. Y. 76; Thayer, Preliminary Treatise on Evidence, p. 250.) This question should not have been here composed as matter of law.

The judgment should be reversed, without costs, and the submission dismissed without prejudice to a new submission or a new action.

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

Judgment accordingly.