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    In the Matter of the Application of The People of the State of New York, by George S. Van Schaick, as Superintendent of Insurance, Respondent, for an Order to Take Possession of the Property of the Title and Mortgage Guarantee Company of Buffalo. Marine Trust Company of Buffalo et al., Appellants. (Three Proceedings.)

      (Argued February 26, 1934;
    decided March 20, 1934.)

      Fritz Fernow, Thomas R. Wheeler and Charlton G. Blair for appellants.
    Chapter 745 of the Laws of 1933 is unconstitutional and violates the provisions of the State and Federal Constitutions. (Hollister v. Stewart, 111 N. Y. 644; Gilfillan v. Union Canal Co., 109 U. S. 401; Canada Southern Ry. Co. v. Gebhard, 109 U. S. 527.) The order of the Special Term in the second proceeding was improper. It was based upon an unconstitutional act and must necessarily fall. (Mechanics Bank v. Bank of Niagara, 9 Wend. 410; Fullerton v. National Burglar & Theft Ins. Co., 100 N. Y. 76; Payne v. Wilson, 74 N. Y. 348; Matter of Ries, 182 App. Div. 296; Pennoyer v. Neff, 95 U. S. 714; Barnard v. Kobbe, 54 N. Y. 516; Roberts v. Stuyvesant Safe Deposit Co., 123 N. Y. 57.)

      Thurman W. Stoner and Henry E. Warner for Kate E. Warner, amicus curiӕ.

    Ownership of the bonds, mortgages and other property in investments of the guarantee company is vested in the certificate holders of such company. (Jackson v. Blodgett, 5 Cow. 202; Green v. Hart, 1 Johns. 580; Merritt v. Bartholick, 36 N. Y. 44; Matter of Ries, 182 App. Div. 296; Matter of Wilbur v. Warren, 104 N. Y. 192; Langdon v. Buell, 9 Wend. 80; Kortright v. Cady, 21 N. Y. 343; Payne v. Wilson, 74 N. Y. 348; Mechanics Bank v. Bank of Niagara, 9 Wend. 410.) Each certificate holder owns an undivided part of the mortgage debts, and is entitled to the proceeds of such share. (Patterson v. Hull, 9 Cow. 747; Craig v. Wells, 11 N. Y. 315; Hinckel v. Stevens, 165 N. Y. 171; Tuscarora Club v. Brown, 215 N. Y. 543; Matter of John Street, 19 Wend. 676; Taylor v. Porter, 4 Hill, 147.) If the Insurance Law (Cons. Laws, ch. 28) applies to the certificate holders, then it is unconstitutional in impairing the obligations of contracts. (U. S. Const, art. 1, § 10, subd. 1.) If article XI of the Insurance Law is valid and affects the certificate holders, then the same, and the order of the court based thereon, will result in depriving the certificate holders of their rights and property without due process of law in violation of another constitutional prohibition. (N. Y. Oswego M. R. R. Co. v. Van Horn, 57 N. Y. 473; Stuart v. Palmer, 74 N. Y. 183; Weismer v. Village of Douglas, 64 N. Y. 91; Embury v. Conner, 3 N. Y. 515; City of Buffalo v. Neubeck, 209 App. Div. 386.) The transfer of the title, interest and property of the certificate holders to the Superintendent of Insurance is in violation of the provision of the State Constitution that property shall not be taken except by the law of the land. (Const, of N. Y. art. 1, § 1; Matter of John Street, 19 Wend. 676; Taylor v. Porter, 4 Hill, 147.) Article XI of the Insurance Law is not an emergency measure. (Sliosberg v. N. Y. Life Ins. Co., 244 N. Y. 482.)

      Alexander Rubin for Sarah R. Heilbroner, amicus curiӕ.

    The certificate holders are tenants in common, and legislation permitting an alteration of their property rights without their unanimous consent is unconstitutional. (Matter of Albrecht, 136 N. Y. 91; Crippen v. Morss, 49 N. Y. 63; Valentine v. Healey, 158 N. Y. 369; Abbot v. American Hard Rubber Co., 33 Barb. 578; Canada Southern Ry. Co. v. Gebhard, 109 U. S. 527; Gilfillan v. Union Canal Co., 109 U. S. 401; Clearwater v. Meredith, 1 Wall. [U. S.] 25; Geddes v. Anaconda Mining Co., 254 U. S. 590; Mason v. Pewabic Mining Co., 133 U. S. 50; Matter of Cantor, 261 N. Y. 6: Colby v. Equitable Trust Co., 124 App. Div. 262.) Chapter 745 of the Laws of 1933 violates the due process provisions of the Federal and State Constitutions. (United States Trust Co. v. United States Fire Ins. Co., 18 N. Y. 199; Pennoyer v. Neff, 95 U. S. 714; Block v. Hirsh, 256 U. S. 135; Pana v. Bowler, 107 U. S. 529.)

      Thomas C. Burke, S. Fay Carr and William L. Marcy, Jr., for George S. Van Schaick, as Superintendent of Insurance, respondent.
    The bonds and mortgages deposited with the depositary are the property of the guaranty company, and such deposit is a pledge for the security of holders of guaranteed first mortgage certificates. (Clark v. Howard, 150 N. Y. 232; Brown v. Bedell, 263 N. Y. 177; Barber v. Hathaway, 47 App. Div. 165; 169 N. Y. 575; Bank of Rochester v. Jones, 4 N. Y. 497; Campbell v. Parker, 22 N. Y. Super. Ct. Rep. 322; Markham v. Jaudon, 41 N. Y. 235; American Surety Co. v. Philippine Nat. Bank, 245 N. Y. 116; Appleton v. Citizens’ Central Nat. Bank, 190 N. Y. 417; 216 U. S. 196.) The Superintendent of Insurance has power to administer the deposited bonds and mortgages for the benefit of the certificate holders. As a statutory receiver, the Superintendent can, under direction of the court, charge the deposited bonds and mortgages with the expenses of their administration. (Matter of People [Norske Lloyd Ins. Co.], 242 N. Y. 148; Lafayette Trust Co. v. Beggs, 213 N. Y. 280; Matter of Maxwell, 218 N. Y. 88; Lion Bonding Co. v. Karatz, 262 U. S. 77.) The contract rights of the certificate holders are strengthened, not impaired, by the plan, which affords certificate holders their own remedy in administering the deposited bonds and mortgages. (Wheeler v. Newbould, 16 N. Y. 392; Queen v. Fryer, 232 App. Div. 222; Persons v. Gardner, 42 App. Div. 490; Van Tuyl v. Scharmann, 208 N. Y. 53.) The transfer of the administration of the deposited bonds and mortgages was effected by due process of law. (Ballard v. Hunter, 204 U. S. 241; Jacob v. Roberts, 223 U. S. 261; City of New York v. Wright, 243 N. Y. 80.) Chapter 745 of the Laws of 1933 is constitutional. (Matter of Nemerov, 149 Misc. Rep. 797; Matter of Title & Mortgage Guarantee Co. of Buffalo, 149 Misc. Rep. 643.)

      John F. Caskey and Clarence FI. Brand for Bond and Mortgage Guarantee Company, amicus curia.

    There is no impairment of the obligation of contract in compelling assent to a fair plan of reorganization. (People ex rel. Durham Realty Corp. v. La Fetra, 230 N. Y. 429; Funkhouser v. Preston Co., 290 U. S. 163; Broadway Trust Co.
      v. Manheim, 47 Misc. Rep. 415; International Trust Co. v. Myers, 252 Mass. 94; 273 U. S. 380; Cumberland Glass Mfg. Co. v. DeWitt, 237 U. S. 447; Equitable Holding Corp. v. Woody, 63 Fed. Rep. [2d] 751; Mitchell v. Clark, 110 U. S. 633; New York v. United States, 257 U. S. 591; Muhlker v. New York & Harlem Ry. Co., 197 U. S. 544; Sauer v. City of New York, 206 U. S. 536; Noble State Bank v. Haskell, 219 U. S. 104.) The power given to the court to approve and put into effect a plan of reorganization which it considers fair and just, and which has been consented to by at least two-thirds of the certificate holders, is simply the power which courts of equity have long exercised, limited by the new requirement of consent of certificate holders. (Matter of Metropolitan Ry. Co., 208 U. S. 90; Burnrite Coal Briquette Co. v. Riggs, 274 U. S. 208; May Hosiery Mills Co. v. F. & W. Grand Stores, 59 Fed. Rep. [2d] 218; Crosthwaite v. Moline Plow Co., 298 Fed. Rep. 466; Railroad Co. v. Howard, 7 Wall. [U. S.] 392; Louisville Trust Co. v. Louisville Ry. Co., 174 U. S. 674; Northern Pacific Ry. Co. v. Boyd, 228 U. S. 482; Kansas City Terminal Ry. Co. v. Central Union Trust Co., 28 Fed. Rep. [2d] 177; 271 U. S. 445.) No fixing of the duration of the emergency by the Legislature is necessary. (Luther v. Borden, 7 How. [U. S.] 1; Sliosberg v. New York Life Ins. Co., 244 N. Y. 482; Block v. Hirsh, 256 U. S. 135.) The requirements of the Schackno Act as to notice to certificate holders are adequate and comply with all constitutional requirements. (Pennoyer v. Neff, 95 U. S. 714; Boswell’s Lessee v. Otis, 9 How. [U. S.] 336; Matter of Empire City Bank, 18 N. Y. 199; Happy v. Mosher, 48 N. Y. 313; Campbell v. Evans, 45 N. Y. 356; Matter of Union E. R. R. Co., 112 N. Y. 61; City of New York v. Wright, 243 N. Y. 80.)

      William L. Marcy, Jr., S. Fay Carr and David L. Landy for Frances L. Esty, respondent.
    The plan does not change or impair the pre-existing property and contract rights of the certificate holders or the guaranty company. (Jerome v. McCarter, 94 U. S. 734; Fidelity Ins., Trust & Safe Deposit Co. v. Roanoke Iron Co., 68 Fed. Rep. 623; International Trust Co. v. Decker Bros., 152 Fed. Rep. 78; Raht v. Attrill, 106 N. Y. 423; Lockport Felt Co. v. United Boxboard & Paper Co., 72 N. J. Eq. 686; Sloman v. Security Trust Co., 248 Mich. 419.) Chapter 745 of the Laws of 1933 as applied by the plan merely modifies a remedy existing at the time the purchaser of a certificate acquired property and contract rights. (Matter of Second Russian Ins. Co. [Hamburg Ins. Co.], 219 App. Div. 46; 244 N. Y. 606; Reed v. Squire, 217 App. Div. 494; Matter of Russian Reinsurance Co., 223 App. Div. 378; Matter of Casualty Co. of America [Rubin], 244 N. Y. 443; Van Tuyl v. Scharmann, 208 N. Y. 53; Lafayette Trust Co. v. Beggs, 213 N. Y. 280; Matter of Societa v. Broderick, 260 N. Y. 260; Matter of Horowitz, 235 App. Div. 248; Ogden v. Saunders, 12 Wheat. 213; McCracken v. Hayward, 2 How. [U. S.] 608; Sliosberg v. New York Life Ins. Co., 244 N. Y. 482.) The provision that approval of the plan by two-thirds in amount of the certificate holders and by the court shall make the plan binding upon all holders does not deprive them of property without due process of law. (Pocket Veto Case, 279 U. S. 655; Paddell v. City of New York, 211 U. S. 446; People v. Nebbia, 262 N. Y. 259; People v. Griswold, 213 N. Y. 92; People ex rel. Durham Realty Corp. v. La Fetra, 230 N. Y. 429; United States v. Fisher, 2 Cranch, 359; McCulloch v. Maryland, 4 Wheat. [U. S.] 316; Matter of Barrett & Co., 27 Fed. Rep. [2d] 159; Valley v. Northern Fire & Marine Ins. Co., 254 U. S. 348.) The act is a valid exercise of the police power in a field where the public has an extraordinary interest. The guaranty company is an insurance corporation and as such is subject to the State’s power over the business of insurance. (Bowers v. Lawyers Mortgage Co., 285 U. S. 182; United States v. Home Title Ins. Co., 285 U. S. 191; O’Gorman & Young v. Hartford Ins. Co., 282 U. S. 251; Matter of Bean v. Stoddard, 207 App. Div. 276; Brustein v. New Amsterdam Casualty Co., 135 Misc. Rep. 352.) The act is a valid emergency law. (Home Loan & Building Assn. v. Blaisdell, 290 U. S. 398.)

      Abraham L. Gutman. Louis F. Lee, Olin Potter Geer, Ralph W. Crolly and Burton A. Zorn for Society for Ethical Culture in the City of New York, et al., amici cwrice.

   Lehman, J.

On August 14, 1933, an order was made and entered in the Supreme Court authorizing and directing the Superintendent of Insurance of the State of New York forthwith to take possession of the property of the Title and Mortgage Guarantee Company of Buffalo and to conduct the business thereof in such manner and take such steps towards the removal of the causes and conditions which make necessary the granting of this order, as the Superintendent of Insurance shall consider wise, subject to the directions of the court, pursuant to the provisions of Article XI of the Insurance Law of the State of New York.” The order contained the usual provisions directing the said company, its officers, directors, depositories, trustees, agents, servants and employees and all other persons, having any property or records belonging to the said company, to deliver them to the Superintendent of Insurance and restraining the waste of assets by any person, the prosecution of actions at law, suits in equity, special or other proceeding against the company or the Superintendent of Insurance and restraining all persons from making or executing any levy upon the assets of the corporation, or from in any way interfering with the Superintendent of Insurance of the State of New York or his successors in office in his or their possession, control and management of the property of said corporation.”

The Marine Trust Company of Buffalo holds in its possession bonds and mortgages in the name of Title and Mortgage Guarantee Company of Buffalo, which have been deposited with it by that company under certain written agreements. Those agreements are in, substantially, the same form. Each provides that" upon request in writing of the President, a Vice President, the Secretary or Treasurer of the Title & Mortgage Company, the Trust Company shall certify, authenticate and deliver certificates from time to time in the form herein specified to an aggregate amount equal to but in no event exceeding, the total principal sum secured to be paid by the bonds and mortgages held by the Trust Company or deposited under the terms of this agreement and owing thereon; and the Title & Mortgage Company shall be at liberty to sell and dispose of such certificates.” Certificates have been issued as provided in these agreements. Each certificate refers to a specific agreement and the bonds and mortgages deposited thereunder. These certificates have been sold by the Title and Mortgage Guarantee Company. The certificates issued under each agreement constitute a separate series. ¿The purchasers and holders of these certificates have, by the terms of the certificates, acquired rights and interests in the bonds and mortgages deposited under the particular agreement under which that series of certificates was issued] Upon the petition of the Superintendent of Insurance, an order was entered on December 11, 1933, authorizing and directing him to administer, as a separate and distinct trust, each series of bonds and mortgages and other securities, real estate and cash for the benefit of the holders of the certificates issued in such series pro rata according to the amounts of their respective holdings, unless their rights be otherwise determined. In order to enable the Superintendent to carry out this direction, the depositary of the bonds and mortgages, The Marine Trust Company, is authorized and directed, upon requisition of the Superintendent of Insurance, as rehabilitator. to deliver to him deposited bonds and mortgages " for the purpose of foreclosing same or accepting deeds in lieu of foreclosure,” and also for other purposes, such as enabling said Rehabilitator either to assign or satisfy the same,” or for the purpose of carrying out a compromise. Other orders have been made in regard to specific bonds and mortgages which supplement the general order directing the administration of the deposited bonds and mortgages. ¿By order dated January 8, 1934, a “ plan promulgated by * * *, Superintendent of Insurance of the State' of New York, for the reorganization of the rights of the holders of mortgage investments known as Series R of Title & Mortgage Guarantee Co. of Buffalo ” was approved by the court. That plan was approved in writing by the holders of more than two-thirds in total amount of the certificates of that series7J The order provided that The Marine Trust Company, as depositary, deliver to the corporation, mentioned and provided in said plan, all bonds and mortgages, securities, moneys, deeds and other assets and properties deposited with it by Title & Mortgage Guarantee Co. of Buffalo in said Series R of Mortgage Investments.”

The depositary has appealed directly to this court from each of said orders pursuant to the provisions of section 588, subdivision 3, of the Civil Practice Act on the ground that the statutory provisions authorizing these orders are invalid under the Constitutions of the State and of the United States. fUpon this appeal only the constitutional question shall be considered and determined by the court??

The attack is not directed against the provisions of the Insurance Law (Cons. Laws, ch. 28) which authorize the court, in proper case, to direct the Superintendent of Insurance to take possession of the property of a corporation, organized under the Insurance Law, and to conduct its business for the purpose of rehabilitating or liquidating such company. The Superintendent becomes a statutory receiver; the property of the corporation is brought into the protective arm of the law and the receiver is subject to directions of the court except in so far as discretionary power is vested by the Legislature in him. (Cf. Isaac v. Marcus, 258 N. Y. 257; Matter of People [Russian Reinsurance Co.], 255 N. Y. 415; Matter of People [Norske Lloyd Ins. Co.], 242 N. Y. 148; Matter of Casualty Co. of America [Rubin Claim], 244 N. Y. 443; Lafayette Trust Co. v. Beggs, 213 N. Y. 280.) The provisions of section 63 of the Insurance Law (Laws of 1909, ch. 300) have been enlarged and are now embodied in article XI of the Insurance Law (Laws of 1932, ch. 191). Express power is conferred upon the Superintendent of Insurance for rehabilitation of domestic insurers.” No question is now raised as to the power of the Legislature to confer upon him authority to secure that end. Invalidity, if such there were, of a particular power which the Legislature has attempted to confer upon the Superintendent of Insurance while liquidating the property or conducting the business of a corporation with a view to its rehabilitation would not affect the unquestioned power of the Legislature to authorize the courts to appoint the Superintendent of Insurance as statutory receiver in the cases specified in article XI of the Insurance Law and to direct him to take possession of the property and to conduct the business of corporations to which the Insurance Law is applicable^ The appellant here does not contend otherwise. It does not contest the right of the Superintendent of Insurance to exercise the powers of a statutory receiver as provided in the Insurance Law and in the order dated August 14, 1933, authorizing him to take possession of the property of the Title Mortgage and Guarantee Co. of Buffalo and to conduct its business; but neither the Insurance Law nor the order, granted in accordance therewith, contain any express provision for the administration of “ mortgage investments ” of the company taken over by the Superintendent of Insurance and which were sold or guaranteed by such company or for the adoption of any plan of reorganization of such mortgage investments.” (The orders which are before the court for review on this appeal and which do contain such provisions rest upon chapter 745 of the Laws of 1933, popularly known as the Schackno Law, and the challenge of the appellant is directed towards the power of the Legislature, under the Constitutions of the United States and the State of New York, to enact that law!]

That law, as amended by chapter 780 of the Laws of 1933, applies to mortgage investments ” which are defined therein to “ include all interest in bonds, notes and other evidence of indebtedness of individuals, partnerships, associations or corporations, secured by mortgage or mortgages or deeds of trust or similar. evidence of interest in real estate upon real property, guaranteed by a guaranty corporation, and all collateral trust bonds or notes of a guaranty corporation which are secured by pledge of any such interests; but shall not include any such bond, note or other evidence of indebtedness when the same shall be held entirely by only one person, firm or corporation or any such collateral trust obligations when all of them having the same security are held entirely by only one person, firm or corporation.”

The statutory definition covers many forms of interest ” in bonds, notes and other evidence of indebtedness, but every “ interest ” must, from its nature, arise from contract and be defined by contract and must attach to the obligation of a contract. It attaches to the obligation of the debtor and to the obligation embodied in the mortgage, deed of trust or pledge which secures it. It attaches, too, to the guaranty of the guaranty corporation. fThe Legislature has decreed that the rights of the holders of such interests shall not be enforced in strict accordance with the letter of the contract. To that extent it has impaired the obligations of contrae^ The statute and the orders of the court granted pursuant thereto are. assailed on that ground. The prohibition, contained in section 10 of article I of the Constitution of the United States, that no State shall pass any law impairing the obligation of contracts, like the broader prohibition, contained in the Fourteenth Amendment, that no State shall deprive any person of life, liberty or propperty without fdue process of law¿2“ is not an absolute one and is not to be read with literal exactness like a mathematical formula/^/ (Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398, opinion by Hughes, Ch. J., decided January 8, 1934.) In that opinion the relevant decisions of the Supreme Court of the United States have been exhaustively set forth and considered. We repeat here only some of the general conclusions of the court drawn from these decisions: “ Not only are existing laws read into contracts in order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. The policy of protecting contracts against impairment- presupposes the maintenance of a government by virtue of which contractual relations are worth while,— a government which retains adequate authority to secure the peace and good order of society. ¿This principle of harmonizing the constitutional prohibition with the necessary residuum of state power has had progressive recognition in the decisions of this court. * * * The economic interests of the State may justify the exercise of its continuing and dominant protective power notwithstanding interference with contracts. * * * The question is not whether the legislative action affects contracts incidentally, or directly or indirectly, but whether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that en<£j * * * Undoubtedly, whatever is reserved of state power must be consistent with the fair intent of the constitutional limitation of that power. The reserved power cannot be construed so as to destroy-the limitation, nor is the limitatian to be construed to destroy the reserved power in its essential aspects. They must be construed in harmony with each other.”

These general principles must guide the court in the determination of whether in a particular case an attempted exercise of the reserved power of the State transcends the limitation placed by the Constitution upon that power. No unchanging yardstick can be fashioned applicable at all times and under all circumstances by which the validity of each statute may be measured and determined. “ Every case must be determined upon its own circumstances.” (Von Hoffman v. City of Quincy, 4 Wall. [U. S.] 535, 554.) Mechanical concepts of jurisprudence make easy a decision on the strength of seeming authority.” (People v. Nebbia, 262 N. Y. 259, 270.) Authority may establish the criteria to be applied in the ever-changing conditions of a complex economic civilization, they do nothing more.

The decisions of the United States Supreme Court do certainly establish these criteria: [''Legislation which impairs the obligation of a contract or otherwise deprives a person of his property can be sustained only when enacted for the promotion of the general good of the public, the protection of the lives, health, morals, comfort and general welfare of the people and when the means adopted to secure that end are reasonable] Both the end sought and the means adopted mustre legitimate, i. e., within the scope of the reserved power of the State construed in harmony with the constitutional limitation on that power. Even the economic interests of the State may justify the exercise of its continuing and dominant protective power notwithstanding interference with contracts.” (Home Building & Loan Assn. v. Blaisdell, supra.)

The statute now attacked contains a legislative declaration of the facts which, in the opinion of the Legislature, create the existence of a public emergency affecting the health, safety, and comfort of the people requiring the provisions of this act.” This declaration of fact is confirmed by common knowledge.

Without reciting these facts at length, it is sufficient to say that mortgage investments are widely held by investors through ownership of certificates ” of an interest in particular mortgages, guaranteed by guaranty companies. Owing to a sudden change in economic conditions many owners of real estate are unable at the present time to meet the obligations of the mortgages on their property. Defaults are numerous and immediate liquidation of a substantial amount of these mortgages through foreclosure or other court proceedings would so demoralize the general real estate market that there might be realized on such bonds, mortgages or other security substantially less than the face amount thereof and substantially less than would be realized if they were disposed of in an orderly manner over a reasonable period of time.” Free liquidation now of such obligations would result in such unprecedented demands upon the resources of the guaranty corporations that their resources would be sufficient only to pay a relatively small portion of such demands.”

It cannot be doubted that the free liquidation of great amounts of indebtedness secured by mortgages would result in widespread ruin to real estate owners and in probable widespread damage to investors. That situation affects the economic welfare of the community and affects the vital interests of the comunity. ¿^Legislation intended to relieve that situation is directed towards a legitimate end. Further discussion of that question is forestalled by the recent decision of the Supreme Court of the United States in Home Building & Loan Assn. v. Blaisdell (supra). The question remains whether the means adopted by the Legislature are also legitimate and reasonable.

The Legislature has, by other statutes, recently adopted, changed the remedy of all holders of bonds and mortgages for the enforcement of their contractual rights. Resort even to the modified remedy may impose hardship on the debtor and injuriously affect the economic welfare of the State. The constitutional limitations upon the reserved power of the State preclude legislation which would entirely relieve a debtor from the hardship of compliance with an obligation voluntarily assumed.The owner of that obligation may, nevertheless, in his own interest, decide to postpone resort to legal remedy for its enforcement or may enter into an agreement for a change of that obligation and it is common knowledge that investors often find it to their own interest to adopt such course. Choice of whether to forego or to avail himself of the remedies afforded by the law for the enforcement of a legal remedy is left by such statutes to the owner.

The statute now under attack may properly be regarded as a supplement to these statutes. It affects only the holders of interests in contractual obligations which are held by more than one person, firm or corporation and which are guaranteed by a guaranty corporation. Where more than one person has an interest in a contractual obligation it is evident that there can be no voluntary agreement for change in the contractual obligations' unless all consent and conversely there can be no enforcement of the contractual obligation except by a common agreement or by a person authorized to act in accordance with the terms of the original obligation or contract or by a person appointed in his stead. Ordinarily the holder of certificates of an interest in guaranteed mortgages has no rights or duties in connection with the mortgage at least as long as the guaranty company is doing business and complies with its own undertakings. The guaranty company under its contract with the holder of the certificate may decide whether to foreclose or extend the mortgage, to waive or to resort to a remedy for any default. It assumes the risk of ultimate deficiency in payment of the indebtedness secured by the mortgage and maintains control of the primary obligation. In effect the mortgages underlying the certificates are regarded by the parties as security for the obligation of the guaranty company. When the guaranty company becomes insolvent or ceases to do business, a situation arises not provided for in its agreement with the holders of the certificates. When the guaranty becomes of doubtful value, the holders of the certificates must rely upon the mortgages for satisfaction of their claims and, when the guaranty company ceases to conduct business, some other person, or corporation, must be substituted for it, authorized to administer or, at least, to enforce the mortgage investments- in which all the certificate holders are interested.

The Schackno Act provides that the Superintendent, who has taken over a guaranty corporation for rehabiliation, or liquidation, shall be authorized with respect to any bonds, mortgages or other security held by such guaranty corporation or otherwise, against -which any mortgage investments have been issued, to do by himself or by his authorized agent, any of the following:

(a) To receive, collect and sue for the interest and principal of the bonds, mortgages and other security held by such guaranty corporation or otherwise, or to bring any foreclosure action on the same and take title to the property sold under such action in such name or names as he may determine;

(b) To deduct from any sum so obtained a reasonable amount to cover the costs and expenses of any such collection, suit, or foreclosure action, or any other functions performed by him pursuant to this act;

“ (c) To distribute the balance of such sums so collected to the holders of such mortgage investments or, at the election of the superintendent, (1) to withhold, for such time as he deems expedient or desirable, all or any part thereof from distribution, or, (2) in his discretion, to apply all or any part thereof for any purpose whatsoever which he deems advisable or necessary for the protection of the interests of the.holders of such mortgage investments.”

We find no substantial basis for any claim that any of such provisions are invalid. It is said that the certificate holders are the owners of the mortgages underlying the certificates and that the statute permits the Superintendent of Insurance to take over and liquidate their property without, even, making provision for notice to the holders of the certificates and thus deprives them of their property without due process of law. Though the certificate states that the company “ assigns to the registered holder hereof an undivided, coordinate share of the same amount in the principal sum secured by the bonds and mortgages deposited or which may hereafter be deposited by the company with the Marine Trust Company of Buffalo, * * * as depositary under the terms of an agreement bearing date June 10, 1927, subject to which this ■ certificate is issued, together with interest thereon at the rate of h\% per annum,’’¿jan analysis of all the terms of the certificate and of the contract, to which it is subject, discloses that the guaranty company has entered into an unconditional promise to pay, ten years from the date of the certificate, the principal sum secured and accrued interest and has transferred to the holder only an interest in the deposited mortgages as collateral security for its debtjZ(Certainly the holder acquires, prior to default, no rights in the mortgages other or greater than the rights of a holder of collateral security and the guaranty company retains at least the rights of an owner who has cumbered his title with a lien.X True the certificate provides that the guaranty company shall exercise these rights as “ agent ” for the holder of the certificate, but we construe the contract in accordance with its substance and effect, not with its form. [go construed, the guaranty company is a primary debtor, assigning the mortgages only as collateral security for the debt. The impairment of these obligations must be judged accordingly./

The Statutory receiver of a corporation, subject to the provisions of the Insurance Law, may certainly administer the property of such corporation even though a creditor ' has a hen on some of such property, at least where the corporation itself has power of administration. We recognize that there may be forms of interest covered by the statute where all property in mortgage investments has been transferred from the guaranty corporation or which confer upon a third person power to administer such investments. No such forms have been called to our attention. It does not matter that there are, or may be, individual cases of another aspect. The Legislature was entitled to deal with the general or typical situation.” (Home Building & Loan Assn. v. Blaisdell, supra.) Even if the corporation had a right to administer the investments only as fiduciary or agent, the investments could not be abandoned and the Superintendent might be empowered to administer them at least until they were claimed by the owners or some person authorized to represent the owners. A statute may be unconstitutional which, without notice to an owner, bars reclamation by the owner of property in the hands of a receiver or liquidator (Matter of International Milling Co., 259 N. Y. 77), but this statute has no such effect. Where the administration of property is the duty and part of the business of a corporation, taken over by a liquidator or rehabilitator, then the continued administration by him is merely an incident of the liquidation or rehabilitation proceedings and deprives those interested in such property of no rights. Only where there is a deprivation of rights is notice and opportunity to be heard in opposition necessary.

It is said that in some minor particulars the powers of administration accorded to the Superintendent of Insurance are greater than the authorized powers exercised by the guaranty company. He may take from the depositary securities which the guaranty company agreed to leave in the custody of the depositary. The depositary had no property in or right to the securities so deposited. When the guaranty company became insolvent, the depositary had no duty or function except to hold the-deposited securities till they could be delivered to some person authorized to conserve or administer the securities for the benefit of those entitled to their proceeds. A I direction to deliver the securities to the Superintendent of Insurance, who has such authority, impairs no obligation of the contract. He is permitted to deduct * * * a reasonable amount to cover the costs and expenses of any such collection, suit, or foreclosure action, or any other functions performed by him pursuant to this act.” It is said that the guaranty company could make no such deduction. That is true, at least, in the sense that the guaranty company was bound to pay to the holders the full sum secured. The statute does not deprive the certificate holders of a right to compel the guaranty company to collect without expense, or to pay the full sum it promised to pay without deduction of expenses. The right to compel the guaranty company to collect without expense was lost when that company ceased to do business. Thereafter the rights which remained in the certificate holder were to collect upon the mortgages and to claim the deficiency from the company. Any person or corporation collecting the mortgages might incur expenses and these expenses would be a charge’ on the fund. WTien the Legislature authorized the Superintendent to administer that fund in place of the corporation, it is plain that it could also direct that the expenses should be a charge on the fund just as the expenses would have been in case such administration had been made by any other authorized person. The certificate holders are relieved of fees or compensation payable ordinarily to trustee or agent. In arriving at this conelusion we give the language of the statute its fair construction. Doubtless any construction that would impose on the fund a charge for functions performed by the Superintendent of Insurance outside of the administration of this fund, would be subject to more serious attack. We construe the statute as authorizing deductions only for collection and “ other functions performed by ” the Superintendent in the administration of the property or mortgages in which a single group of certificate holders are interested.

What we have said here applies with equal force to the provisions of the statute which authorize the Superintendent to withhold for a time distribution of moneys collected or to apply them for the protection of the interests of such certificate holders. These are powers which are, in true sense, incidental to the power of administering the mortgage investments. They deprive neither the group of persons who have an interest in such investments nor any individual member of that group of any right which they or he was given by contract. Rather, they constitute a remedy in a condition where the original contract failed to provide remedy.

These powers vested in the Superintendent must, indeed, be regarded as provisions for safeguarding the interests of groups of holders of mortgage investments until a plan can be devised for permanent administration of these investments. Pending action by the group the fund must be conserved. Provision for such conservation is made by the statute. So, too, provision is made for the adoption of a plan for permanent administration. The powers vested in the Superintendent of Insurance extend no further than to conserve the fund and as incident thereto, to bring actions to enforce the contractual obligations which constitute the fund until a plan is adopted for the permanent administration of the fund; to charge upon the fund the expenses of this administration of the fund; and in bis discretion and for the protection of the owners, to withhold payment of the balance of the fund until a plan is adopted. These powers are no greater than are ordinarily exercised by a receiver appointed in an equity action to conserve the fund and the Legislature could vest them in the Superintendent of Insurance.

The essential purpose of the statute is, however, to provide for the adoption of a plan for the permanent administration of the mortgage investments in which groups of investors are interested. All else is subsidiary. If the provisions for the adoption of such plan transcend the Kmitations of the legislative power, then the statute fails of its purpose. Each holder of a certificate is, under his contract, entitled to insist upon the enforcement of the bond, mortgages and other security in which he has an interest and to a pro rata share of the moneys collected. Foreclosure at the present time may be beset by insurmountable obstacles for there may be no money available to pay the expenses of necessary action. Foreclosure may destroy the investment of the other holders of certificates of the same series; for the property, at the present time, may, at a forced sale, bring no more than the amount of the tax hens. Foreclosure may ruin the owner of the equity of redemption. General foreclosure of the vast amounts of mortgages in which groups of certificate holders are interested might so demoralize the real estate market that the value of all mortgages would be diminished and the credit of insurance companies and savings banks destroyed. In spite of all this the owner of a single certificate in a series has a contractual right to insist upon the enforcement of every contractual obligation in which he is interested and to refuse to accede to any impairment of such obligation by agreement. The statute was intended to meet that situation.

It does so by providing that after a hearing upon a proposed plan or agreement for the readjustment, modification or reorganization of the rights of the holders of any mortgage investment the Supreme Court may approve such plan, but that such plan shall not become effective until the holders of two-thirds in principal amount of such mortgage investments (exclusive of any part thereof held by the guaranty corporation which sold or guaranteed such mortgage investments) or their agent duly authorized, shall have consented to such plan.” Such hearing must be held not less than twenty days after mailing of notice addressed to each holder at the address furnished him by theuguaranty corporation.

¿The fairness of these provisions is evident. They do not give to a majority in interest, however large, the ; power to coerce another holder to accede to any plan of ‘ reorganization by the majority. They do not give the court power to coerce a single holder to accede to any plan of which the court approves. They do give the • court authority, after a hearing, to approve a reorganization plan which is consented to by two-thirds in amount; of those interested and to declare such plan effective;

We may assume that except for this statute a certificate holder might stand upon his contractual rights and refuse to accede to any plan of reorganization of the' rights of the holders of the mortgage investment, however advantageous the plan of reorganization might be. We may even assume that the Legislature could not pass a law which would compel a single holder to accede to such a plan though approved by the court and consented to by a majority in amount of all the holders of interest in an investment, if only the rights of the parties j to the contract were involved. ¡Here, as we have said, 'j much more is involved. Unreasonable insistence on j contractual rights may work serious injury to the economic j welfare of all the people^ The statute must be judged ! in the light of that factX Under conditions as they exist j at present, the vital interests of the community call for legislation by which the investments of great numbers of people may be conserved and ruin averted. The Legislature has characterized the situation as a public emergency.” It is immaterial whether we call the situation an emergency or not. It is a situation in which the Legislature could properly declare, as it has done, that it is “ essential for the public interest to provide a procedure under which such bonds, mortgages or other security may be liquidated in an orderly manner and under which the assets of the guaranty corporations may be administered and conserved equally and ratably in the interests of holders of mortgage investments.”

It has been said that “ while emergency does not create power, emergency may furnish the occasion for the exercise of power.” (Home Building & Loan Assn. v. Blaisdell, supra.) Extraordinary conditions may call for extraordinary remedies. Whether an emergency exists or not, the test in each case is whether a situation exists which calls for the exercise of the reserved power of the State and whether the remedy adopted by the State is reasonable and legitimate. /An individual may not justly complain of a reasonable'" legislative invasion of his usual rights or a reasonable legislative restriction of his usual liberty for the purpose of averting an immediate danger which threatens the safety and welfare of the community. /

To secure the foundations of credit and good faith in the performances of obligations, to prevent the adoption by the States of laws for the defeat of creditors and invasion of contractual obligations, the constitutional limitation was placed upon the States’ power of changing the relative situation of debtor and creditor, of interfering with contracts.” (Ogden v. Saunders, 12 Wheat. [U. S.] 213, 354.) Here the Legislature has not attempted to change the relative situation of debtors and creditors or provided that any obligation of a contract shall be impaired without the consent of two-thirds in amount of the holders of an interest in such obligations. Performanee by the debtor according to the letter of the bond may be demanded unless holders in that amount consent to its postponement or alteration. ¿The statute is directed solely towards facilitating agreement among such holders in a plan which will be fair to all and to prevent unreasonable insistence upon the letter of the obligation of contracts when, under changed conditions, such insistence might work injury both to individuals similarly situated and to the community^? It gives, indeed, to the creditors as a group a remedy which they did not have before; it deprives no one of a remedy which he would use for his legitimate benefit or without injury to others.

Impairment of the obligation of contracts to that extent and under analogous safeguards is not without precedent even in normal conditions. Analogy might be drawn between the provisions of the statute and the provisions of the Bankruptcy Law in regard to composition agreements. So, too, analogy may be found in decrees of courts of equity providing for corporate reorganizations. We do not press these analogies; distinctions might be pointed out. We recognize, of course, that they have not arisen from the invocation of the reserved power of the State. We refer to them only as an indication that in appropriate conditions it is not unreasonable to give effect to a plan which an informed court, after hearing, has approved as fair to the entire group interested and to all the individuals in that group and to which a majority of that group consent. When a State decrees that in order to meet threatened danger to the community plans adopted with such safeguards may be declared binding on all, the law is not unreasonable. It does not destroy credit or undermine confidence in private faith. It does not take one man’s property or contractual rights for the benefit of others. It does not deprive any one of a substantial right even for the benefit of a community:.

True, when normal conditions are restored, when strict enforcement of the obligations of mortgage investments no longer constitutes an imminent danger to the vital interests of the community, further operation of the statute may be unreasonable. On such question we do not now passT] We consider now only whether the present remedy provided for present conditions is reasonable and legitimate. “A law depending upon the existence of an emergency or other certain state of facts to uphold it may cease to operate if the emergency ceases or the facts change even though valid when passed.” (Chastleton Corp. v. Sinclair, 264 U. S. 543, 547.) Failure by the Legislature to limit the operation of the law to a definite term does not render the law invalid so long as the conditions which justify the passage of the law remain.

At times postponement of the enforcement of contractual obligations or their temporary impairment may be the means reasonably adopted to meet a temporary condition. Indefinite postponement of remedy might in effect be a deprivation of right, and permanent impairment might be an unreasonable remedy. If the Legislature exceeds the limitation of its reserved powers then the statute is invalid. In such case these factors may be decisive. ¡ That is not true here. There is no postponement here of the enforcement of the obligation of contracts and such permanent impairment as may result from the application of the statute is subject to safeguards which reasonably protect all substantial rights; deprives no one unreasonably of rights and is adopted to secure a legitimate end.

Other objections are also urged. We have considered them and found them without substance. We refer briefly to only one further objection. We are told that the Legislature has delegated to the Superintendent of Insurance legislative powers. The statute which is directly attacked does not itself contain any provision which might be regarded as giving to the Superintendent any such power. We are referred, however, to the provisions of chapter 40 of the Laws of 1933, which provide that during the period of emergency set forth in that statute the Superintendent of Insurance shall have the power to suspend any provision of the insurance law in whole or in part. In addition to. such power and not in limitation thereof, he shall also have power during such period to make, rescind, alter and amend rules and regulations imposing any condition upon the conduct of the business of any insurer which may be necessary or desirable to maintain sound methods of insurance and to safeguard the interests of policy holders, beneficiaries, and the public generally during such period. In the discretion of the superintendent of insurance such rule or regulation may be published in a manner to be prescribed by him or may be otherwise brought to the attention of the insurer affected in a manner to be prescribed by the superintendent of insurance.” (§ 2.)

Such rule or regulation may be inconsistent with existing law, and in such event, shall supersede such existing law inconsistent therewith.” (§3.)

//Even assuming that these provisions transcended the power of the Legislature, they cannot affect the validity of every administrative act performed by the Superintendent or of statutes giving the Superintendent administrative powers. No exercise of legislative powers conferred by chapter 40 of the Laws of 1933 upon the Superintendent of Insurance is essential in the administration of mortgage investments. Moreover, the provisions of chapter 40 of the Laws of 1933 have been ] amended, since so as to remove possible attack on such ground./

b find that economic conditions create an immediate danger to the economic welfare and the vital interests of the community. We find that the Legislature in the exercise of its reserved power has adopted a remedy which is reasonably calculated to meet such conditions. No impairment of contract which results will substantially injure any person. The statute merely furnishes a shield, against unreasonable attack on the vital interests of the community and an additional remedy for enforcement of obligations in manner fair to.allT^

The orders should be affirmed, without costs.

Pound, Ch. J., Crane, Hubbs and Crouch, JJ., concur; O’Brien, J., concurs on the authority of Home Building & Loan Assn. v. Blaisdell (290 U. S. 398) and Nebbia v. People (291 U. S. 502); Kellogg, J., not sitting.

Orders affirmed.


source: Caselaw Access Project

author: Pound, Ch. J.

license: Public Domain

text:
    Isidor Haber, Appellant, v. Paramount Ice Corporation, Respondent.
    (Argued March 9, 1934;
    decided March 20, 1934.)

      Isidor E. Schlesinger, Robert E. Tinsley and David Masnick for appellant.
    The parties having stipulated that the trial court visit the premises of both plaintiff and defendant in order to ascertain the conditions, are bound by the findings of the trial court based upon such personal inspection, in the absence of any showing of fraud or misconduct. (Braisted v. Brooklyn & R. B. R. R. Co., 46 App. Div. 204; Weiant v. Rockland, 61 App. Div. 383; Hentz v. City of Mt. Vernon, 78 App. Div. 515; Faught v. Leith, 201 Ala. 452; Whatley v. Nesbitt, 204 Ala. 334; Brown v. Colorado, 47 Col. 294; Garvey v. L. I. R. R. Co., 159 N. Y. 323.)

      Frank W. Holmes for respondent.
   Pound, Ch. J.

The appeal from an order granting a new trial after a judgment of reversal is properly in this court. (New York State Const, art. VI, § 7 [2].) The action was to restrain a private nuisance alleged to exist by reason of the operation of an ice plant. If the Appellate Division had made new findings of fact, this court would not be limited to the review of questions of law. The mere reversal of the findings of fact indicates that the Appellate Division decided on conflicting evidence that such findings were not sustained. Instead of rendering final judgment upon the right of the parties, it deemed proper to grant a new trial on the facts. (Canst, art. VI, § 8.) This left all questions of fact for the consideration of the trial court on the new trial. We are limited in this case to a review of questions of law (Canst, art. VI, § 7), and must affirm and order judgment absolute against the appellant, unless the point relied on by appellant can be sustained.

Appellant contends that, because the learned trial justice, by consent of parties, viewed the premises and based his decision in part on such inspection the Appellate Division was as matter of law compelled to accept his findings of fact as conclusive. This might be so if the question were as to the existence of a particular fact. (Gervey v. Long Island R. R. Co., 159 N. Y. 323.) Thus in Braisted v. Brooklyn & R. B. R. R. Co. (46 App. Div. 204, 205) Cullen, J., writing for the court, said: “ The learned "counsel for the appellant contends that the evidence does not show that there was any violation of the injunction. He admits that the work of dredging and filling was renewed, but asserts that it was carried on in such a manner as not to cast any mud or offensive materials on the plaintiff’s land. By the record before us it appears that the referee, on the consent of both parties, made a personal inspection of their premises. As Ms report is the result of such inspection, as well as of the testimony taken by Mm, it is impossible for us to review Ms determination founded on Ms personal observation.”

Here the ultimate question for the decision of the trial court was whether plaintiff was entitled to the equitable remedy of injunction or whether an award of damages would adequately compensate him. The trial judge did not pass on that question. His view of the premises was not, under the circumstances, conclusive on Ms decision. He found that defendant was maintaining a nuisance and that plamtiff was entitled to an injunction. The Appellate Division by Davis, J., indicated clearly that the new trial was granted M order to determine, first, whether a nuisance existed and, secondly, whether an award of damages would adequately compensate the injured party. (Forstmann v. Joray Holding Co., 244 N. Y. 22.)

From the nature of the findings of the trial court, the Appellate Division was not bound to affirm a judgment for injunctive relief, even though a view of the premises had been had by the trial justice.

The order should be affirmed and judgment absolute ordered against the appellant on the stipulation, with costs in all courts.

Crane, Lehman, O’Brien, Hubbs and Crouch, JJ., concur; Kellogg, J., not sitting.

Ordered accordingly.


text:
    Louis O’Donnell et al., Copartners under the Firm Name of O’Donnell Towing and Transportation Company, Appellants and Respondents, v. Marine Transit Corporation, Defendant, and Globe and Rutgers Fire Insurance Company, Respondent and Appellant.

      (Argued March 13, 1934;
    decided March 23, 1934.)

      Jay Leo Rothschild, William F. Purdy, Louis Rivkin and John E. Purdy for plaintiffs, appellants and respondents.
    The policy issued by the insurer inures to the benefit of the plaintiffs and they may recover directly from the insurer for the loss sustained. (Atlantic Basin Iron Works v. American Ins. Co., 250 N. Y. 322; Aldrich v. N. Y. Life Ins. Co., 235 N. Y. 214; Bushey & Sons v. American Ins. Co., 237 N. Y. 24; Hagan v. Scottish Union & National Ins. Co., 186 U. S. 423; Duncan v. China Mut. Ins. Co., 129 N. Y. 237; Symmers v. Carroll, 207 N. Y. 632; Clinton v. Hope Ins. Co., 45 N. Y. 454; Cassidy v. Hall, 97 N. Y. 159; Pattison v. Blanchard, 5 N. Y. 186; Utica City Nat. Bank v. Gunn, 222 N. Y. 204; Becker v. Frasse & Co., 255 N. Y. 10; Atwater & Co. v. Panama R. R. Co., 246 N. Y. 519.) Defendant appellant is not entitled to the benefit of the other insurance which was effected by the plaintiffs. (New York & P. R. S. S. Co. v. Ætna Ins. Co., 204 Fed. Rep. 255; Marcus v. United States Casualty Co., 249 N. Y. 21; Broadway Realty Co. v. Lawyers T. Ins. & T. Co., 226 N. Y. 335; Halpin v.
      Insurance Co., 120 N. Y. 73; Aldrich v. Great American Ins. Co., 195 App. Div. 174; Farmers’ Feed Co. v. Scottish Union Ins. Co., 173 N. Y. 241.) Plaintiffs are entitled to recover reasonable counsel fees incurred in defending the Federal proceedings which were prosecuted by the insurer to avoid its obligation to plaintiffs. (Wille v. Maier, 256 N. Y. 465; Du Bois v. Hermance, 56 N. Y. 673; Greene v. Barrett, Nephews & Co., 238 N. Y. 207; Warner v. Doscher, 213 App. Div. 117; 241 N. Y. 605; Bliss v. Sickles, 142 N. Y. 647; Fisher v. Wakefield, 203 N. Y. 539.)

      Boring R. Becraw for defendant, respondent and appellant.
    The plaintiffs were not insured by the policy. (Hagan v. Scottish Union & National Ins. Co., 186 U. S. 423; Duncan v. China Mut. Ins. Co., 129 N. Y. 237; Donahue v. Kettell, 1 Cliff. 135; Parker v. Washington Tug Co., 83 Wash. 575; Vandewater v. Mills, 19 How. [U. S.] 82; Ward v. Thompson, 22 How. [U. S.] 330.) So far as the judgment denies recovery to the plaintiffs of the sum received by plaintiffs’ attorney in the Federal court proceedings it is correct. (Fernald v. Provident Washington Ins. Co., 27 App. Div. 137; McWilliams v. Home Ins. Co., 40 App. Div. 400.)
   Pound, Ch. J.

This is an action on a policy of marine insurance. The policy consists of a printed form with a rider composed of three typewritten pages, containing twenty-six paragraphs. It is provided that “ the terms and conditions of this form [the typewritten rider] are to be regarded as substituted for those of the policy to which they are attached, when they conflict.” This raises the questions (a) was there a contract of insurance between the plaintiffs and the insurance company; (b) if so, what was that contract? The difficulty in answering * * * arises out of the practice of annexing to the standard form of marine insurance policy a rider * * * to and about which the printed clauses in the standard form have little or no application.” (Atlantic Basin Iron Works v. American Ins. Co., 250 N. Y. 322, 325.)

A brief history of the transactions between the parties will be helpful.

The plaintiffs are copartners engaged in business as operators of tugs and barges, conducting their business under the name and style of O’Donnell Towing and Transportation Company, and were owners of the tug Hugh O’Donnell. The defendant Globe and Rutgers Fire Insurance Company is a domestic insurance corporation.

Marine Transit Corporation at all material times was engaged in the business of transporting grain and other cargo by water in barges owned or chartered by it, which barges,- being without motive power, were towed by tugs. In October, 1925, Marine Transit Corporation had contracted to transport a cargo of grain from Buffalo. It had the necessary barges, but required a tug for towing.

Accordingly Marine Transit Corporation entered into an agreement with the plaintiffs by which the latter were to furnish the tug O’Donnell to tow the barges, it being agreed that the profits of the venture were to be equally divided between Marine Transit Corporation and plaintiffs, and that the former was to insure the cargo with carrier’s liability insurance, to cover the interests of plaintiffs and itself in the cargo, and the legal liability of each of them, with respect thereto, the cost of the insurance to be borne equally by Marine Transit Corporation and the plaintiffs.

Prior to this time and in June, 1925, the defendant Globe and Rutgers Fire Insurance Company had issued to Marine Transit Corporation the policy in suit.

In November, 1925, barges of Marine Transit Corporation laden with cargo, and in tow of the tug Hugh O’Donnell, left Buffalo for New York. The trial court found: Before completion of the voyage of carriage, a loss was occasioned, so that the cargo on two of the barges was destroyed ” (or damaged).

The trial court has found that thereafter the owner of the cargo which was destroyed — the Spencer Kellogg Company — commenced an action against the plaintiffs in the United States District Court for the Southern District of New York to recover the value of the cargo so destroyed by reason of plaintiffs’ legal liability. Such action resulted in judgment in favor of the plaintiffs therein in the sum of $38,878.

The judgment was paid by plaintiffs with money obtained from United States Merchants and Shippers Insurance Company, which in May, 1925, had issued a policy of insurance to plaintiffs covering any payments in discharge of certain liabilities arising from the operation of the tug Hugh O’Donnell.

Judgment herein was entered for the plaintiffs. On appeal the judgment was affirmed by the Appellate Division, second department, one justice dissenting.

It is the contention of the appellant insurance company that, as a matter of law, the plaintiffs were not insured by the policy, or that if insured the provisions of the policy prevent any recovery in the action.

We may assume, without deciding, that the policy in suit, covering Marine Transit Company, on account of whom it may concern,” covers and was intended to cover the plaintiffs.

In Duncan v. China Mutual Ins. Co. (129 N. Y. 237, 244) this court said: “ The technical phrase for whom it may concern ’ or any other terms of equivalent import * * * will be applied to the interest of the party for whose benefit it was intended by the person who procures or orders the insurance. These terms will not carry the benefit of a policy to a risk or an interest not fairly within the contemplation of the parties to the policy.”

Let us then pass to the nature and amount of the coverage. As the case now stands, the Spencer Kellogg judgment against plaintiffs has been paid in full by the United States Merchants and Shippers Insurance Company under its policy of insurance.

The printed portion of the policy herein provides: Marine Transit Corporation on account of whom it may concern in case of loss to be paid in funds current in the United States. Does make and cause themselves to be insured.

“* * * jf gaid assured shall have made any other insurance upon the premises aforesaid prior in day of date to this policy, then the said Insurance Company shall be answerable only for so much as the amount of such prior insurance may be deficient towards fully covering the premises hereby assured.”

The typewritten rider provides:

“ 17. It is understood and agreed that the insurance covered hereunder shall be binding upon this company regardless of any other insurance which may have been effected on the property by persons other than the assured * *

21. This policy covers 100% interest as above, but this company not to be liable for more than one hundred thousand ($100,000) dollars, on any one vessel, at any one time.”

“ 26. The terms and conditions of this form are to be regarded as substituted for those of the policy to which they are attached, when they conflict.”

Appellant insurance company contends that there is no conflict in these provisions; that it is subject to no liability because the prior insurance fully covered the loss, and the terms and conditions of the rider are to be regarded as substituted for those of the printed policy only when such conflict appears.

The terms of the policy limit the extent of the insurance policy to a deficiency where there is prior insurance. By reason of prior insurance, there is no deficiency here. When we turn to the rider, we find that (a) other insuranee is permitted; (b) the policy covers 100% interest as above. This seems wholly consistent with the limitation of liability to a deficiency. Once the deficiency is established, the policy covers 100% interest, not 80% nor mere contribution with co-insurers. There are no co-insurers.

Prior insurance is permitted. Such prior insurance bears the entire loss if it is large enough in amount to cover such loss. The policy in suit did not become effective as to plaintiffs because their loss has been paid in full by prior insurers. Read as a whole the language of the policy " does not justify the court in pushing words out of their setting and relationship to spell out a liability.” (Atlantic Basin Iron Works v. American Ins. Co., supra, p. 330.)

So far as the judgment denies recovery to the plaintiffs of the sum of $6,100, received by plaintiffs’ attorney in the Federal court proceedings, it is correct. The demand rests on the assumption that the insurer not only failed to pay a just claim but sought to carry on a sham battle through another. The policy sued on here is one of indemnity against liability as a common carrier or bailee. Counsel fees are no part of such liability.

Under the circumstance of cross-appeals the reversal should be without costs.

The judgments should be reversed and the complaint dismissed, without costs. (See 264 N. Y. 596.)

Crane, Lehman, O’Brien, Hubbs and Crouch, JJ., concur; Kellogg, J., not sitting.

Judgments reversed, etc.


text:
    The People of the State of New York, Respondent, v. Ralph Krennen, Appellant.
    (Submitted March 16, 1934;
    decided March 23, 1934.)

      Lawrence Kovalsky and David Goldstein for appellant.
    The sentence imposed was excessive. The maximum sentence that defendant could have received was an indeterminate sentence of five to ten years. (People ex rel. Hubert v. Kaiser, 206 N. Y. 46; Ford v. State, 162 Ga. 422; Belter v. State, 178 Wis. 57; Penal Law, § 32; People v. Wein, 196 App. Div. 368.) The court had no power to go behind the judgment of conviction and pass unfavorably to the defendant on issues which had been decided in the defendant’s favor by the plea of guilty and judgment of conviction thereon. (People v. Bennett, 182 App. Div. 871; 224 N. Y. 594; People v. Caruso, 249 N. Y. 302.)

      William Copeland Dodge, District Attorney (.Irving Jay Tell of counsel), for respondent.
    The sentence was legal and proper. (People v. Kevlon, 221 App. Div. 224; People v. Paradiso, 248 N. Y. 123; People v. Caruso, 249 N. Y. 302; People v. Procito, 261 N. Y. 376.)
   Pound, Ch. J.

Defendant was indicted for the crime of robbery in the first degree, which charged that he was armed with a loaded pistol.

He pleaded guilty of robbery third degree. Then, as appears by the clerk’s minutes, “ After taking testimony, the court adjudicates that the defendant was armed with a pistol during the commission of the crime.”

Because defendant was armed with a pistol during the commission of the crime, five to ten years were added to his sentence, under Penal Law, section 1944.

The plea of guilty was of the same effect as a verdict of conviction by a jury. This amounted to a conviction of robbery while unarmed. (Penal Law, § 2128.)

On such a conviction the judge would consider the question of increased punishment before imposing sentence. The proper procedure is laid down in People v. Caruso (249 N. Y. 302, 305). “ If in the act of committing any felony the defendant be armed with a dangerous weapon, his punishment is increased.” “ The Convicted defendant, who was armed, must in every instance receive a prison sentence for the felony plus an additional term for carrying the weapon.” (People v. Procito, 261 N. Y. 376, 379; Matter of Dodd v. Martin, 248 N. Y. 394.)

After plea, the judge should conduct an inquiry and take testimony, if necessary, before passing sentence.

On the trial of the indictment for robbery, first degree, the People would have to prove the fact that defendant was armed with a dangerous weapon in order to establish the offense charged, but on a verdict or plea of robbery, third degree, the judge makes the necessary inquiry to determine whether the increased punishment should be inflicted. The fact that defendant was armed with a dangerous weapon during the commission of the crime is no part of the crime itself.

The judgment should be affirmed.

Crane, Lehman, O’Brien, Hhbbs and Crouch, JJ., concur; Kellogg, J., not sitting.

Judgment affirmed.


author: O’Brien, J.

text:
    In the Matter of John Potts et al., Respondents, v. Abraham Kaplan et al., Constituting the Municipal Civil Service Commission of the City of New York, Respondents, and John B. Duffy et al., Appellants.

      (Argued March 2, 1934;
    decided April 17, 1934.)

      Reginald Field for appellants.
    The intention of the Legislature in veterans’ preference legislation has never been to afford certain men a financial recompense for disability, but to create a class of men preferred in employment because of their self-sacrificing service to the State in time of war. (Matter of Christey v. Cochrane, 211 N. Y. 333; Matter of Gianatasio v. Kaplan, 142 Misc. Rep. 611; People ex rel. Fonda v. Morton, 148 N. Y. 156; Matter of Keymer, 148 N. Y. 219; Opinion of Justices, 166 Mass. 595; State ex rel. Kangar v. McDonald, 246 N. W. Rep. 900.)

      Aaron H. Kaufman for Disabled American Veterans of the World War et al., amici curice.

      S. Bertram Friedman and Roy P. Monahan for American Legion of New York County et al., amici curia.

      Albert de Roode and H. Eliot Kaplan for petitioners-respondents.
    The disability which entitles a veteran to preference must be a real and substantial one, the existence and character of which is to be determined by the New York authorities. (United States v. Railroad Co., 17 Wall. [U. S.] 327; Hammer v. Dagenhart, 247 U. S. 251.) The disability referred to in section 6 of article V of the State Constitution must be such disability as actually or presumptively impairs materially the earning capacity of the preference claimant. (Matter of Marhoffer v. Marhoffer, 220 N. Y. 543; Eastern District Piece Dye Works, Inc., v. Travelers Ins. Co., 234 N. Y. 441; Travelers Ins. Co. v. Pomerantz, 246 N. Y. 63; Law v. United States, 290 Fed. Rep. 972; Wills v. United States, 7 Fed. Rep. [2d] 137; Nordberg v. United States, 51 Fed. Rep. [2d] 271; Knight v. United States, 45 Fed. Rep. [2d] 202; Elbag v. United States, 48 Fed. Rep. [2d] 281; Matter of Morgan v. Ford, 143 Misc. Rep. 887; People v. N. Y. C. R. R. Co., 24 N. Y. 485; Roschen v. Ward, 279 U. S. 337.)

      Paul Windels, Corporation Counsel (Charles E. Rams-gate and Paxton Blair of counsel), for Abraham Kaplan et al., constituting the Municipal Civil Service Commission of the City of New York, respondents.
   O’Brien, J.

Respondents are honorably discharged veterans of the World war. Four of them have passed competitive examinations for promotion to the rank of lieutenant in the fire department of the city of New York and three have passed competitive examinations for promotion to the rank of sergeant in the police department. All hold positions on eligible lists promulgated by the Municipal Civil Service Commission. The intervening appellants, also honorably discharged veterans, have passed the same examinations, but with lower ratings than respondents, and have secured positions on the same eligible lists. On the theory that appellants are disabled veterans within the meaning of section 21 of the Civil Service Law (Cons. Laws, ch. 7), the Commission has placed their names near the head of the eligible lists and thus conferred upon them a preference in certification for promotion. On motion by respondents an alternative order of mandamus directed the Civil Service Commission to rescind its action in approving appellants’ applications for preferences or to show cause why it should not and the following questions have been certified to this court: “ (1) Should the word ' disability ’ as used in section 21 of the Civil Service Law, be interpreted as meaning a disability that materially impairs the applicant’s earning capacity? (2) Does the record herein disclose any illegal, capricious or arbitrary act by the Municipal Civil Service Commission of the City of New York, in connection with the granting of preference to interveners under section 21 of the Civil Service Law? (3) Have petitioners herein a grievance sufficient to enable them to maintain a proceeding for an order of mandamus?”

Section 21, as amended by Laws of 1930, chapter 374, is phrased in these words: In every public department and upon all public works of the State of New York and of the cities, counties, towns >and villages thereof,, any honorably,discharged soldiers, sailors, marines or nurses of the army, navy or marine corps of the United States disabled in the actual performance of duty in any war, to an extent recognized by the United States Veterans’ bureau, who are citizens and residents of this State and were at the time of their entrance into the military or naval service of the United States, and whose disability exists at the time of his or her application for such appointment or promotion, shall be entitled to preference in appointment and promotion without regard to their standing on any list from which such appointment or promotion may be made to all competitive and noncompetitive positions provided their qualifications and fitness shall have been ascertained as provided in this chapter and the rules and regulations in pursuance thereof; and a person thus preferred shall not be disqualified from holding any position in the civil service on account of his age or by reason of any physical disability provided such age or disability does not render him incompetent to perform the duties of the position applied for.” This statute conforms with the provisions of article V, section 6, of the Constitution as adopted November 5, 1929, and those provisions are not repugnant to the Constitution of the United States in denying equal protection of the laws and abridging the privileges or immunities of citizens of the United States. (Matter of Gianatasio v. Kaplan, 142 Misc. Rep. 611; 257 N. Y. 531; appeal dismissed, 284 U. S. 595.)

Appellant Duffy’s standing on the eligible list according to merit is number 303 and by reason of the preference accorded him by the Commission under its interpretation of section 21-of the Civil Service Law his name has been advanced to number 2 on the list. By the same process Harte has been raised from 565 to 5, Farrell from 683 to 7 and Golebwski from 695 to 1. None is incompetent to perform the duties of fireman or policeman. Each has passed the rigid physical examination and has satisfactorily performed his duty.

The Veterans’ Bureau, June 7, 1920, granted Duffy a disability rating of temporary partial ten per cent disability for varicose veins sustained in military service but his name is now carried on its records as disabled to . an extent of less than ten per cent and compensation has been discontinued. Under date of October 14, 1932, this report concerning Duffy was issued by the Veterans’ Bureau: Less than 10% — 0% (zero per cent) disabled. The diagnosis is given as follows: History of varicose veins, not shown on any recent examination slight varicocele.” The medical examiners in the fire department examined him on October 25, 1932, and November 29, 1932, and reported a small varicose vein in the region of the left leg over the calf muscle but failed to find any evidence of varicocele or any physical disability and recommended that his application for disability preference be denied.

Harte, according to a report from the Veterans’ Bureau dated June 9, 1930, had a scar on the left knee where a semi-lunar cartilege had been removed and at that time his disability was rated as permanent partial one per cent. He receives no compensation. On April 28, 1932, he was examined by a medical examiner of the Municipal Civil Service Commission who found a scar about one inch in length and three-eighths of an inch in width on the left knee but no impairment of function or motion of the joint. His gait is normal and apparently there is no residual disability. Denial of his application for preference was recommended. On May 24, 1932, the chief medical officer of the fire department made similar report.

In respect to Farrell, the Veterans’ Bureau reported under date of June 13, 1932: “ 0% — no disability from 5/8/31. * * * Scar right groin slight, no recurrence.” He receives no compensation. Under date of December 8, 1932, the medical examiner of the Municipal Civil Service Commission reported an oblique scar in the right inguinal region. “ The scar is well healed, not depressed, contracted or tender to palpation, but there is a slight impulse to coughing, which is readily elicited by the examining finger. This ultimately will result in a potential hernia, which will require surgical correction. This defect, however, has apparently not been recognized as yet by the Veterans’ Bureau.”

Golebwski was physically examined on December 2, 1932, and stated that he had developed hemorrhoids by sleeping on the ground. Later he admitted to the medical examiner of the Civil Service Commission that he had sustained no actual .injury and the examiner found no existing disability. Golebwski has submitted no affidavit in this mandamus proceeding nor is there in the record any certificate from the Veterans’ Bureau to indicate disability at any time arising from military service.

The record shows, therefore, that the Veterans’ Bureau had at some time recognized to some extent slight disabilities in all appellants with the possible exception of Golebwski. The medical examiners on the staffs of the Municipal Civil Service Commission and the police and fire departments have thus reported that at the time appellants made application for preference these disabilities, with such negligible exceptions as scars which are invisible while the subject is clothed, no longer exist.

The question before us requires interpretation of this expression in section 21 of the Civil Service Law, disabled in the actual performance of duty in any war, to an extent recognized by the United States Veterans’ Bureau, * * * and whose disability exists at the time of his or her application for such appointment or promotion.” We think that, pursuant to this statutory provision which follows so closely the language of the Constitution, the Civil Service Commission and the appointing officer must accept at their face value certificates issued by the Veterans’ Bureau or its successor, the Veterans’ Administration. (Act of July 3, 1930, ch. 863; 46 Stat. 1016; U. S. Code, tit. 38, ch. 1-A, § 11.) For the purpose of determining the fact of disability in war, the State has designated that body as its agent. That the applicant whose name appears on such a certificate has been disabled in actual performance of duty in war and that the nature or character and degree of his disability were such as that body has recognized is evidence not subject to rebuttal. The certificate on these facts is conclusive. Whether such disability exists at the time of the application for appointment or promotion is a fact to be proved or disproved. The Civil Service Commission is the authority in the first instance to determine this fact and in the absence of some illegal, capricious or arbitrary conduct, its decision is controlling. If it misinterprets the statute, its act in giving preference to an applicant who no longer suffers a disability is illegal. If, while properly construing the law, it should disregard the reports of its competent medical examiners its conduct would be capricious or arbitrary.

The Commission, acting in good faith, failed to apprehend the full meaning of a statute which to us is not entirely clear. The purpose of the constitutional amendment and of the statute enacted in pursuance of it does not, according to our interpretation, refer to disabilities which impair earning capacity. Bather, as we think, it points toward a reward for one who had, even in a slight degree, sustained in war service some physical depreciation which the Federal government had recognized as such and whose impaired physique due to such recognized illness, disease or wound has continued to exist. As we view it, the statute bears no relation to earning power. Some lessening of bodily force or some disfigurement, even if unrelated to capacity for wage earning but present at the time of appfieation for a preference, is the subject at which the statute aims. A scar on part of the body concealed by clothing can scarcely be contemplated as an impairment such as the Veterans’ Bureau intended to recognize as a disability. A scar at some time may be external evidence of some inward disability and may be visible long after the disability has ceased, but in itself it does not, nor in our opinion did the Veterans’ Bureau intend that it should, constitute a disability.

The record shows that the Veterans’ Bureau rated Duffy as “ less than 10% — 0% (zero per cent) disabled; ” Hart as one per cent and the examining surgeon has reported no disability; Farrell as 0% no disability from 5/8/31. Scar right groin slight, no recurrence,” and since no report from the Veterans’ Bureau is before us in relation to Golebwski, the order of the Appellate Division should be modified by granting a peremptory order of mandamus in accordance with this opinion, and as thus modified affirmed, without costs. The first question certified should be answered No ” and the second and third questions answered " Yes.”

Pound, Ch. J., Hubbs and Crouch, JJ., concur; Crane and Lehman, JJ., concur in result and vote to answer all questions in the affirmative; Kellogg, J., not sitting.

Ordered accordingly.


text:
    The People of the State of New York, Respondent, v. Lovell Landers and Addie Exum, Appellants.

      (Argued March 1, 1934;
    decided April 17, 1934.)

      Henry Klauber, Louis Baron and Francis P. Heffernan for Lovell Landers, appellant.
    It was error for the court to permit the jury to view the premises of the garage after the cause was submitted to them and after they had begun their deliberation. (People v. Thorn, 156 N. Y. 286; United States v. Seufert Co., 87 Fed. Rep. 35; People v. Milner, 122 Cal. 171; Denver T. & F. W. R. Co. v. Ditch Co., 11 Col. App. 41; McGar v. Bristol, 71 Conn. 652; Chicago, K. & W. R. Co. v. Parsons, 51 Kan. 408; Menard v. R. R. Co., 150 Mass. 386; Chicago, R. I. & P. R. Co. v. Farwell, 59 Neb. 544; Blincoe v. Choctaw, O. & W. R. R. Co., 16 Okla. 286; Seattle & M. R. R. Co. v. Roeder, 30 Wash. 244; State v. McCausland, 82 W. Va. 525.) The conduct of the jury while viewing the premises of the garage constituted prejudicial and reversible error. (Forehand v. State, 51 Ark. 553; Smith v. State, 122 Ga. 156; Yates v. People, 38 Ill. 531; Logan v. State, 46 Tex. Crim. Rep. 573; State v. Sanders, 68 Mo. 202;
      People v. Thorn, 156 N. Y. 286; People v. Gallo, 149 N. Y. 106; People v. Klein, 213 App. Div. 66; Code Crim. Proc. §§411, 412; People v. Slover, 232 N. Y. 264; People v. Smith, 172 N. Y. 210.) It was error to permit the District Attorney to read into the testimony statements written by a witness in letters which were never introduced in evidence. (Peck v. Lake, 3 Lans. 136; Tibbets v. Sternberg, 66 Barb. 201; Greenfield v. People, 85 N. Y. 75; People v. Dorthy, 156 N. Y. 237.)

      Joseph B. Handy for Addie Exum, appellant.
    Without incompetent testimony and testimony admitted against the defendant Landers but not against the defendant Exum “ unless connected,” and which was not connected nor evidence offered to connect it, nothing remains from which even an inference might be drawn of the defendant Exum's guilt. (Penal Law, § 2; People v. McGuire, 135 N. Y. 639; Levering v. Commonwealth, 132 Ky. 666.) The visit of the jury to the garage while it was deliberating on a verdict, and the conduct of the jury on the visit, was prejudicial error and is sufficient to require a reversal. (Higgins v. Los Angeles Gas & Electric Co., 115 Pac. Rep. 313; Wilson v. United States, 116 Fed. Rep. 484; Forehand v. State, 51 Ark. 553; Smith v. State, 122 Ga. 156; Yates v. People, 38 Ill. 531; Jim v. State, 4 Humph. 289; Logan v. State, 46 Tex. Crim. Rep. 573; Consolidated Ice-Mach. Co. v. Trenton Hygenic Ice Co., 57 Fed. Rep. 898; Ewers v. National Improvement, 63 Fed. Rep. 562; People v. Conkling, 111 Cal. 616; Bowler v. Washington, 62 Me. 302; People v. Klein, 213 App. Div. 66; People v. Gallo, 149 N. Y. 106; People v. Thorn, 156 N. Y. 286; People v. Johnson, 110 N. Y. 134.)

      Thomas J. Walsh, District Attorney (Farrell M. Kane and Joseph A. McKinney of counsel), for respondent.
    It was not error for the trial court to permit the jury to view the premises of the garage after the cause was submitted to them and after they had begun their deliberatians. (People v. Thorn, 156 N. Y. 286.) It was not error to permit the District Attorney to read into testimony statements written by a witness in letters which were never introduced in evidence. (People v. Buchanan, 145 N. Y. 1; People v. Barone, 161 N. Y. 451.) Statements of defendant Landers made to the witness are admissible against defendant Exum to prove conspiracy. (People v. Storrs, 207 N. Y. 147; State v. Pratt, 121 Mo. 566.)
   Pound, Ch. J.

The People’s theory is that the woman defendant, Addie Exum, hired the man defendant, Lovell Landers, to kill her husband, Irving Exum, in order that she might get his insurance money. The fact of the killing of Exum by shooting is established beyond a reasonable doubt. The case against Landers is largely established by the evidence of a highly disreputable young woman, Annie Caruso, of his admissions to her. If what she said is true, her evidence is enough to establish the coldest kind of deliberate murder. She is not uncorroborated but without her evidence we think there could be no conviction. The jury passed on her evidence and we cannot reject it as incredible, even though we may in a proper case consider the credibility of witnesses. (People v. Arata, 255 N. Y. 374.)

The evidence against the woman is largely circumstantial. She failed to take the stand. No presumption arises against her by reason thereof. (Code Crim. Pro. § 393.) The jury may have found that she collected the insurance money, paid the killer, and sought to cover up the nature of the transaction. Yet she does not become an accessory before the fact (principal) by mere approval of a crime after the event. (People v. Swersky, 216 N. Y. 471, 476.) We see nothing to connect her with the commission of the crime as a principal. It does not appear that she was a principal as defined by Penal Law (§2). The People’s brief relies on the statement of Landers to Annie Caruso that he was going to get paid for killing some woman’s husband. This evidence was not received against Mrs. Exum, unless connected ” and it never was connected. Yet the court refused to strike out such evidence as against her. What Landers told Annie Caruso was mere hearsay against Mrs. Exum. This was reversible error. It is highly probable that it was this incompetent evidence that led to the conviction of Mrs. Exum.

Other questions are presented as to both defendants. The court allowed the jury to suspend its deliberations, after the case had been submitted to it, in order to view the premises at Morris’ garage. The power of the trial judge to permit this practice is now challenged, although no objection was made at that time.

View of premises, when ordered and how conducted, is governed by Code of Criminal Procedure, section 411. It is argued from the location of this section in the Code in title VII, chapter 1, entitled “ The Trial,” that a view may be ordered only during the trial, after the jury has been impaneled and that the trial ends when the case is submitted to the jury. The power of the court is not so limited, at least when the parties consent. The trial in common parlance may extend from arraignment to verdict and sentence. (People ex rel. Steckler v. Warden, 259 N. Y. 430.) The view was not of the place in which the crime charged was to have been committed but of the place in which a material fact occurred. It was for purposes of checking up on part of Annie Caruso’s evidence, i. e., whether she could from where she stood see Landers go into the garage, where the gun with which the crime was committed was hidden. Of course the material point was whether he came out of the garage and told Annie that the gun was still there.

The view is not a part of the trial. (People v. Thorn, 156 N. Y. 286.) It does not appear that the jurors were guilty of any misconduct in viewing the premises, such as talking with outsiders. (People v. Gallo, 149 N. Y. 106.) They sought to understand the evidence. Discussion among themselves was proper and would not constitute error. (Snyder v. Massachusetts, 291 U. S. 97.)

During the cross-examination of Annie Caruso letters were shown to her and identified by her as having been written by her. They were not introduced into evidence but were used to direct the attention of the witness as to prior statements which tended to impeach her testimony on the stand. The District Attorney, when he took the. witness again, proceeded to ask her whether in these letters she had made other statements which tended to corroborate her direct testimony and to show her relations to Landers. This was improper as against defendant Landers as proving mere declarations on her part. It all bore, however, on the credibility of the witness and her relation to Landers rather than on the guilt of the accused. The error, if any, was not material. (People v. Katz, 209 N. Y. 311, 339.)

The judgment of conviction of the defendant Lovell Landers should be affirmed.

The judgment of conviction of the defendant Addie Exum should be reversed and a new trial ordered on the ground that the evidence is insufficient to establish the guilt of such defendant as a principal in the commission of the crime charged. (See 264 N. Y. 665.)

Crane, Lehman, O’Brien and Crouch, JJ., concur; Hubbs, J., concurs as to the defendant Landers but dissents as to the defendant Exum and votes to affirm as to such defendant; Kellogg, J., not sitting.

Judgment accordingly.


author: Crane, J.

text:
    Sarah Kowalsky, as Administratrix of the Estate of Meyer Kowalsky, Deceased, Respondent, v. The Conreco Company, Inc., Appellant, Impleaded with Others.
    (Argued March 14, 1934;
    decided April 17, 1934.)

      William B. Davis and E. C. Sherwood for appellant.
    The complaint should have been dismissed as to the defendant-appellant. (Shillak v. White, 136 N. Y. 625.) The repair of the bar and its fastenings as well as the replacement of the window pane was incidental to the performance of the contract between the defendant Conreco Company and the defendant Moreng. When the Conreco Company made a contract with a competent and experienced iron worker to remedy all defects, it had done its duty, if the defects were being remedied with due speed. (Engel v. Eureka Club, 137 N. Y. 100; Doremus v. Auerbach, 176 App. Div. 512; Grim v. Lehigh Valley Coal Co., 171 App. Div. 493; 227 N. Y. 558; Jehle v. Ellicott Square Co., 31 App. Div. 336; Joyce v. Convent Ave. Constr. Co., 155 App. Div. 586; Hogan v. Arbuckle, 73 App. Div. 591; Murphy v. Altman, 28 App. Div. 472; Silverman v. Binder, 130 App. Div. 581; Callan v. Pugh, 54 App. Div. 545.)

      Max M. Hirson and Max L. Bothenberg for respondent.
    The defective condition having been created and maintained by the defendant-appellant, it is not relieved of liability by delegating the obligation of repair to others. (Haefeli v. Woodrich Engineering Co., 255 N. Y. 442; McGlone v. Angus, Inc., 248 N. Y. 197; Christensen v. Hannon, 230 N. Y. 205; Thomas v. Solvay Process Co., 216 N. Y. 265; Hess v. Bernheimer & Schwartz Brewery Co., 219 N. Y. 415; Campbell v. De Parma, 183 N. Y. Supp. 679; Caspersen v. La Sala Bros., 253 N. Y. 491; De Lee v. Pardy Constr. Co., 249 N. Y. 103; Herman v. City of Buffalo, 214 N. Y. 316.)
   Crane, J.

The Conreco Company, Inc., was the owner of premises 16-18 West Third street, borough of Manhattan, New York city, which consists of a seven-story loft building used for business purposes. The fire department of the city of New York had placed a fire violation on these premises on December 8, 1926. Practically all the iron window shutters were defective, corroded, full of holes and in need of extensive repairs. The order of the fire department directed the owner to replace and repair the iron window shutters and their iron appurtenances. This included the iron horizontal bar at the middle of each window to which the shutters were fastened when closed. Joseph Finneran, inspector of fire prevention in the fire department, who made the report, testified that he included the “ bar in the shutters. Q. So that when you say the shutter do you include in that shutter, the hooks and the bar and anything used to fasten the shutter or keep it from swinging or closed? A. Yes, sir, and hinges.”

On January 19, 1927, the owner wrote the fire department, Regarding order 5335-F to replace the defective shutters with proper iron shutters at all openings, we wish to inform you that we are receiving estimates for this work and the order will be given out within a few days,” and on February 17, 1927, another letter informed the chief of the bureau of fire prevention that an order had been given out to the Joseph Moreng Iron Works, 208 East Nineteenth street, to do the work. The contract with these “ works ” required the repairs to be acceptable to the fire department including painting “as we wish to have this violation dismissed at the earliest possible moment.” Joseph Moreng who took the contract, testified that to obtain the release of the violation was part of his job. The contract called for doing all work necessary to achieve this end. “ I couldn’t get my money until the violation was removed.” The painting also included all “ the bars, the hooks and the plates. Q. I call your attention to your contract with Jennings & John (subcontractors). Don’t you specifically provide for the replacement of bars and the repair of them? The Court: I sustain the objection. I think he has given you a picture enough that he included the bars.” Further on in the record the court asks of Moreng: “ Let us not get excited. Do you know that the contract you made with John, Mr. Moreng, contained this clause: ‘Also repair and adjust all shutters on said building and furnish all necessary catches, hooks, cross-bars, hooks and eyes/ et cetera; do you know that was in it? The Witness: I do.”

John, the subcontractor, also testified that in making his bid to Moreng he went over and tried every bar and shutter, open and closed. He noticed the fastening of bars, the nature of the screws and their heads. Every bar, he says, was tight.

The point to this recital of the evidence is that the owner gave out repair work to be done which included fixing and fastening any loose or defective bars, all a part of the order given by the fire department.

Moreng sublet this contract to Alexander John, doing business under the trade name and style of Jennings & John. Had John or bis men been hurt by an unsafe or insecure shutter or bar-fastening, the owner of the building would not have been Hable. He had employed them to make the repairs, to remove the danger, to fasten and secure the bars and shutters. No responsibifity rests upon an owner of real property to one hurt through a dangerous condition which he has undertaken to fix. The duty of an owner to repair impHes that the workman employed to make the repair assumes the risk. The law that an owner must keep the place reasonably safe for a contractor and his subcontractors does not apply where the work itself is of an unsafe nature or the defects are due to the imperfect and negfigent work of the contractor himself.

An employee cannot recover for injuries received while doing an act to efiminate the cause of the injury. As was said in Mullin v. Genesee County El. L., P. & Gas Co. (202 N. Y. 275, at p. 279): “ The reason for this exception to the general rule is that it would be manifestly absurd to hold a master to the duty of providing a safe place when the very work in which the servant is engaged makes it unsafe. If a man is engaged in tearing down a house he is constantly exposed to dangers of his own creation; and in such a case all those who are engaged in the same common purpose are fellow-servants for whose negligence in executing the details of the work the master is not liable, even though ' the work is done in successive stages, different parts thereof being devolved upon different persons, and the labor performed by one set of employees being prior in time to that performed by another set.’ ” (See, also, Hess v. Bernheimer & Schwartz Brewing Co., 219 N. Y. 415.)

Therefore, if John or his employee had fallen out the window because of a defective shutter bar no recovery could have been had against the owner. The defect John was hired to remove. Had he failed to do so, it was his own fault; or had he fallen in doing any other part of the work, it was a danger he and his employees assumed.

John undertook to repair all the shutters, bars, nuts, bolts, fastenings to the rear windows of the building and in doing so broke the glass in some of the windows. He had not finished his work as it had not been accepted by the .fire department, the owner or his contractor. When notified about the broken glass, he said he would fix it at once, and undertook to do so. He sent Meyer Kowalsky who, while putting a pane of glass in a window on the seventh floor, leaned against or took hold of the cross-bar, which gave way, causing his death. This action is brought by Kowalsky’s administratrix to recover damages for the negligence. The negligence if any was that of John, the subcontractor who had contracted to fix the window-bars, and who from the evidence apparently failed to do so. The owner is not liable for this unfortunate accident on the ground that he had furnished John and his employees or, subcontractor an unsafe place to work, as Kowalsky, John’s employee or subcontractor, was killed through defects which John was in the act of repairing. Neither is the owner hable for the negligence of John in doing or failing to do his work; Kowalsky was on the premises to help John complete it so as to remove fire department violations and get his pay.

The judgment, therefore, so far as appealed from, should be reversed and the complaint dismissed, with costs in all courts. (See 264 N. Y. 674.)

Pound, Ch. J., Lehman, O’Brien, Hubbs and Crouch. JJ., concur; Kellogg, J., not sitting.

Judgment accordingly.