author: Lehman, J.

text:
    In the Matter of the Estate of David L. Davies, Deceased. Joseph J. Davies, Appellant; Citizens Trust Company of Utica, Respondent.
    Decedent’s estate — debtor and creditor — real property — sale of real property to pay debts o£ decedent — devise of estate for life with absolute power of disposition constitutes, as to rights of creditors and purchasers, a gift of “fee absolute ”— sale for debts not confined to lifetime of debtor.
    1. Where rights of creditors to sell real piyperty for payment of the debts of a decedent are based upon section 149 of the Real Property Law, providing “ where an absolute power of disposition, not accompanied by a trust, is given to the owner of a particular estate for life or for years, such estate is changed into a fee absolute in respect to the rights of creditors, purchasers and incumbrancers, but subject to any future estates limited thereon, in case the power of absolute disposition is not executed, and the property is not sold for the satisfaction of debts,” in order to avail themselves of its provisions creditors must show, first, that the decedent received an absolute power of disposition within the meaning of the statute; and second, that the future estate limited upon the death of the life tenant is subject to any right which creditors may have to sell the decedent’s property after his death.
    2. Where a will devised real property to one for use during his natural life, giving him full powers to expend the principal, income, interest, rent and profits as he might see fit, with remainder upon his death of any part unexpended to a third party, the power to so dispose of the property, being subject to no trust or condition, was clearly “ absolute ” within the statutory definition.

      3. In respect to the rights of creditors and purchasers the particular estate was changed into a “ fee absolute ” subject to the future estate only “ in case the power of absolute disposition is not executed and the property is not sold for the satisfaction of debts.” There is no provision in the statute that a sale for debts must be made in the lifetime of the debtor and none will be implied. The clearly expressed intent of the Legislature was that in respect to the right of creditors the estate of the debtor was to be treated as a fee absolute; the debts of the holder of the particular estate were to be satisfied out of the property and future estates were to take effect only in case the property was not sold. The death of the debtor does not detract from the validity of the debt or from the strength of the claim of the creditor.

      Matter of Davies, 215 App. Div. 750, affirmed.
    (Argued January 12, 1926;
    decided February 24, 1926.)
    Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the fourth judicial department, entered November 11, 1925, which affirmed a decree of the Oneida County Surrogate’s Court directing a sale of real property belonging to the estate of David L. Davies, deceased, for the purpose of payment of his debts.

      Richard R. Martin for appellant.
    The remedy given to creditors under the provisions of section 149 of the Real Property Law is available only during the lifetime of a debtor and afforded no basis for the application of petitioner for the sale of the real property in question for the payment of the debts of David L. Davies under section 233 of the Surrogate’s Court Act. (Cutting v. Cutting, 86 N. Y. 522; Fowler on Real Property [3d ed.], 651.) “ Absolute power of disposition ” of the premises in question was not given to David L. Davies under the will of Fannie Eliza Davies, and section 149 of the Real Property Law for that reason has no application to the same. (Jackson v. Edwards, 22 Wend. 498; Ackerman v. Gorton, 67 N. Y. 63; Crooke v. County of Kings, 97 N. Y. 421; Coleman v. Beach, 97 N. Y. 545; Simmons v. Taylor, 19 App. Div. 499; Swarthout v. Ranier, 143 N. Y. 499; Terry v. Rector, etc., St. Stephen’s Church, 79 App. Div. 527; Matter of Briggs, 101 Misc. Rep. 191; 223 N. Y. 677; Terry v. Wiggins, 47 N. Y. 512; Thomas v. Wolford, 49 Hun, 145.)

      Henry T. Dorrance for respondent.
    David L. Davies became vested with the full fee and ownership to the property in question as against his creditors under section 149 of the Real Property Law of the State of New York. (Matter of Barney, 207 App. Div. 25; 239 N. Y. 584; Matter of Briggs, 101 Misc. Rep. 191; 223 N. Y. 677; Furniss v. Cruikshank, 230 N. Y. 495; Hodgman v. Cobb, 202 App. Div. 259; Brown v. Farmers Loan & Trust Co., 51 Hun, 386; 117 N. Y. 266; Leonard v. American Baptist Home Missionary Society, 35 Hun, 290; Farmers’ Loan & Trust Co. v. Kip, 120 App. Div. 347; 192 N. Y. 266; Barr v. Howell, 85 Misc. Rep. 330; Tillman v. Ogren, 227 N. Y. 495.) The deed from David L. Davies, as executor, to David L. Davies, individually, vested the full fee in David L. Davies, as against his creditors. (Cahill v. Russell, 104 N. Y. 402; Seaward v. Davis, 198 N. Y. 415; Read v. Knell, 143 N. Y. 484; Phillips v. Pike, 121 App. Div. 753; Hubbard v. Gilbert, 25 Hun, 596; Farmers’ Loan & Trust Co. v. Kip, 120 App. Div. 347; 192 N. Y. 266; Scheer v. Long Island Railroad Company, 127 App. Div. 267.)
   Lehman, J.

David L. Davies died on the sixth day of February, 1924. At the time of his death he owed various creditors the aggregate amount of $65,972.88. Substantially all the debts of the decedent are based upon liability incurred through his personal indorsement of the notes of a corporation of which he was treasurer. His personal estate is insufficient to pay his just debts. Consequently the Citizens Trust Company of Utica has obtained a decree for the sale of his real property in accordance with the provisions of section 233 of the Surrogate’s Court Act. The decree is challenged upon the ground that the decedent owned no “ real property,” within the meaning of that term as used in that section, which is subject to sale after his death.

The evidence establishes and the surrogate has found that in May, 1908, Fannie Eliza Davies, wife of the decedent, died leaving a last will and testament which contained the following provision: I direct that as soon as may be my estate shall be divided into two equal parts. One part I give, devise and bequeath to my husband David L. Davies for use during his natural life, giving him full power to expend the principal, income, interest, rent and profits as he may see fit, upon his death such part of the principal, income, interest, rent and profits as may be unexpended, I direct shall be paid to my son Joseph Jones or his issue.” The will further provided that the house in which the testatrix resided should be included in the one-half of her estate set aside for her husband. The remaining one-half of her estate the testatrix bequeathed to her son and she named her husband as executor under her will.

David L. Davies thereafter entered into an agreement with the son for the division of the estate into two parts and the house in which the testatrix and David L. Davies had resided was included in the part set aside for him. The agreement stated that this part shall be held by him “ in accordance with the terms of the will ” but thereafter David L. Davies made a deed of the house from himself as executor to himself as an individual. This deed, of course, gave him no greater rights to the property than he previously had received under the will. As executor he was given no power to convey the property; as legatee he received a life interest therein with power “ to expend the principal as he may see fit ” and even though the power to expend was untrammeled by any conditions, it did not include the right to transfer it to himself so that he might hold it in fee absolute. At the time of his death he still held it “ according to the terms of the will ” as he had agreed to do.

Section 149 of the Real Property Law (Cons. Laws, ch. 50) provides: “ When estate for life or years is changed into a fee.— Where an absolute power of disposition, not accompanied by a trust, is given to the owner of a particular estate for life or for years, such estate is changed into a fee absolute in respect to the rights of creditors, purchasers and incumbrancers, but subject to any future estates limited thereon, in case the power of absolute disposition is not executed, and the property is not sold for the satisfaction of debts.”

The creditors’ rights are based upon this section. In order to avail themselves of its provisions they must show, first, that the decedent received an absolute power of disposition within the meaning of the statute; second, that the future estate limited upon the death of the life tenant is subject to any right which creditors may have to sell the decedent’s property after his death. We are of opinion that the courts below have correctly decided that the creditors have successfully established both of these matters.

Section 153 of the Real Property Law provides that “ Every power of disposition by means of which the grantee is enabled, in his life time, to dispose of the entire fee for his own benefit, is deemed absolute.” The will of Fannie Eliza Davies gave her husband the right to expend the principal of the property bequeathed to him for life. If he saw fit to expend it, he could do so only by “ disposing ” of it; and such disposition would of course be for his own benefit. Since the power to so dispose of the property was subject to no trust or condition, it was clearly absolute ” within the statutory definition.

A life estate coupled with a power of sale in the life tenant to dispose of the fee for his own benefit gives to the life tenant practically the same right of enjoyment and power of disposition as a fee of the same property. Refined distinctions have been drawn before the incidents of such title were fixed by the Revised Statutes. It was felt that where such refinements left creditors or purchasers .helpless while the life tenant continued to enjoy the practical advantages of full ownership, the result was palpably unjust. For that reason the provisions which are now part of the Real Property Law were enacted. In respect to the rights of creditors and purchasers the particular estate was not merely assimilated to a fee but in the words of the statute was “ changed into a fee absolute.” No proceedings in court were necessary to make that change; by virtue of the statute itself the particular estate became a fee absolute. (See notes of the original Revisers.) That fee absolute was subject to a future estate limited thereon only “ in case the power of absolute disposition is not executed and the property is not sold for the satisfaction of debts.” The rights of creditors in respect to property owned in fee absolute by their debtor can be made effective only by sale of the property for the satisfaction of the debts. Those rights may ordinarily be enforced by sale even after the death of the debtor through proceedings authorized by the Surrogate’s Court Act. Since in respect to those rights, by virtue of the statute, the decedent debtor’s estate had before his death become changed into a fee absolute, the creditors may compel the sale of the property after his death unless we add to the express provision of the statute that the fee absolute was “ subject to any future estate limited thereon in case * * * the property is not sold for the satisfaction of debts,” an implied provision that such sale must be made in the lifetime of the debtor.

It does not seem to us that such provision may be implied fairly. The clearly expressed intent of the Legislature was that in respect to the right of creditors the estate of the debtor was to be treated as a fee absolute; the debts of the holder of the particular estate were to be satisfied out of the property and future estates were to take effect only in case the property was not sold. The rights of creditors were made superior to any future estate limited on the debtor’s particular estate. The mischief which the statute sought to end was that sometimes refined distinctions between an estate in fee and a particular estate Which gave the holder practically all the benefits of ownership in fee defeated just claims of creditors. The statute used apt language to effectuate this purpose completely. We should not read into the statute words not used by the Legislature which would defeat the purpose of the statute in part. The death of the debtor does not detract from the validity of the debt or from the strength of the claim of the creditor that the debt should be paid out of property which the debtor enjoyed and controlled and which he could apply to payment of his debts. It should not add to the rights of the holder of the future estate which could be defeated by sale of the property to satisfy the debts.

For these reasons the order of the Appellate Division should be affirmed, with costs.

Hiscock, Ch. J., Cardozo, Pound, McLaughlin, Crane and Andrews, JJ., concur.

Order affirmed.


source: Caselaw Access Project

author: Hiscock, Ch. J.

license: Public Domain

text:
    Western New York Water Company, Respondent, v. City of Buffalo et al., Appellants.
    Taxpayer’s action — Buffalo (city of) — municipal corporations — water works — nature and purpose of taxpayer’s action — act complained of must be injurious as well as illegal — judgment, in taxpayer’s action, restraining city from delivering water for use outside its limits cannot be upheld in absence of findings that such delivery was detrimental to interest of municipality, the public or the taxpayer.
    1. The nature and purpose of a taxpayer’s action presume that there will be more than illegality in order to enable him to intervene. The basic theory of such an action is that the illegal action is in some way injurious to municipal and public interests and that if permitted to continue it will in some manner result in increased burdens upon and dangers and disadvantages to the municipality and to the interests represented by it and so to those who are taxpayers. It is not the intention of the statute that a taxpayer shall be allowed to intervene and bring to the decision of the courts every act of a municipal officer which may be claimed to be illegal although coneededly it is entirely innocuous.
    2. The city of Buffalo contracted to deliver a large amount of water to one of the defendants on a parcel of land located within the city, which supply was then by an extension of the pipes conducted to an outside parcel. Assuming this to be illegal, a taxpayer’s action to restrain delivery of such water cannot nevertheless be successfully maintained in the absence of evidence warranting findings of possible detriment to the interests of the municipality, the public or the taxpayer, and where in such an action, findings, unanimously affirmed, and, therefore, controlling upon this court, fail to disclose waste or injury to any property, funds or estate of the municipality, a judgment in favor of plaintiff must be reversed. (Alischul v. Ludwig, 216 N. Y. 459, followed; Simson v. Parker, 190 N. Y. 19, distinguished.)

      Western N. Y. Water Co. v. City of Buffalo, 213 App. Div. 458, reversed.
    (Argued January 14, 1926;
    decided February 24, 1926.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered July 21, 1925, unanimously affirming a judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term.

      Frederick C. Rupp, Corporation Counsel (Frank C. Westphal of counsel), for City of Buffalo et al., appellants.
    The city of Buffalo has the legal right to supply water for industrial purposes to the Iroquois Gas Corporation. (City of Little Falls v. State of New York, 198 App. Div. 488; Dillon on Mun. Corp. [5th ed.] §§ 1317, 1322; Gibbs v. Consolidated Gas Co., 130 U. S. 396; People v. Manhattan Gas Light Co., 45 Barb. 136; Armour Packing Co. v. Edison Elec. Ill. Co., 115 App. Div. 51; Milwaukee v. Zoehrlant Leather Co., 114 Wis. 276; Bates v. Bassett,
      60 Vt. 530; Daggett v. Colgan, 92 Cal. 53; Henderson v. Young, 119 Ky. 224; City of Lawrence v. Methuen, 166 Mass. 206.) The plaintiff having failed to prove waste or fraud, cannot maintain this action, and the complaint should have been dismissed. (Altschul v. Ludwig, 216 N. Y. 459; Rogers v. O’Brien, 153 N. Y. 357.)

      William S. Rann for Iroquois Gas Corporation et al., respondents.
    There is no proof of waste or injury to the property, estate or funds of the city of Buffalo. There is not a shred of evidence of fraud or bad faith or wrongful or dishonest official action. There is thus left for decision only the narrow question whether the acts of the defendants complained of were or are without power. (Bush v. Coler, 60 App. Div. 47; Bush v. Coler, 60 App. Div. 56; 170 N. Y. 587; Talcott v. City of Buffalo, 125 N. Y. 280; Kittinger v. Buffalo Traction Co., 160 N. Y. 377; Hopper v. Willcox, 155 App. Div. 213.)

      Preston M. Albro for respondent.
    The sale of water by the defendant city for use without the city is illegal. (City of Paris v. Sturgeon, 50 Tex. Civ. App. 519; Farwell v. Seattle, 43 Wash. 141; Mayor, etc., of Gainesville v. Dunlop, 147 Ga. 345; Stauffer v. East Stroudsburg Borough, 215 Penn. St. 143.)
   Hiscock, Ch. J.

This action is brought by plaintiff as a taxpayer of the city of Buffalo under the provisions of section 51 of the General Municipal Law to restrain that municipality from selling water to the defendants, Iroquois Natural Gas Corporation and Isbell-Porter Company. It is also the holder of a bond issued by the municipality to raise funds for the purpose of extending the supply of water to the city and its inhabitants. The findings, which have been unanimously affirmed and which, therefore, are controlling upon us, disclose the following facts:

The plaintiff is engaged in the business of selling water and is a taxpayer of the city of Buffalo. The Gas Corporation is a public service corporation originally engaged in producing natural gas, almost all of which was supplied to the city of Buffalo and its residents. Some time since it was required by the Public Service Commission to manufacture gas which could be added to the natural supply and thereby a sufficient amount of gas insured for the use of the, municipality and its inhabitants. For the purpose of carrying out this requirement it purchased a considerable tract of land just outside of the municipality and also a small parcel which was located within the boundaries of the city. While it may be inferred that the location of the greater parcel of this land outside of the municipality was for the purpose amongst other things of securing lower taxation it also appears that it was advantageous in its proximity to railroad facilities. The Gas Corporation through the Isbell-Porter Company as contractor commenced the erection of a large factory upon the parcel outside of the city and in connection with the erection and use of this factory it arranged with the city of Buffalo to deliver a large amount of water to it on the parcel located within the city and which supply was then by an extension of pipes conducted to the outside parcel. While this extension of mains and water supply was made without the consent of the deputy water commissioner as required by the ordinances of the city, it involved no feature of concealment but apparently was in pursuance of a perfectly well-defined plan on the part of the municipality to sell and deliver water for use by these defendant corporations outside the city limits.

The city of Buffalo pumps its water from Lake Erie and there is no finding that it is supplying water to defendants at less than cost, that such sale impairs in any way its capacity to furnish an adequate supply for municipal purposes and to its inhabitants or that the supply to these defendants is part of a general plan upon which. the city has embarked of selling water to persons outside its boundaries under such circumstances as might constitute a speculative enterprise hable to be productive of injury to the city and its taxpayers. On the contrary, it has been found that there is no proof * * * that the conduct of the defendant city of Buffalo, in supplying water to the defendant Iroquois Gas Corporation, and delivering it to said Iroquois Gas Corporation’s land within the city of Buffalo; or that the conduct of the said Iroquois Gas Corporation in receiving said water upon its said land within said city, and conducting it to its said plant in the town of West Seneca, and using it there, results or has resulted in any waste of or injury to the property, estate or funds of said city of Buffalo.”'

The question is the one whether, on these facts, the plaintiff can maintain this action as a taxpayer, for I do not see that its position is strengthened any by its ownership of the bond referred to.

We shall assume, without deciding, that it is illegal for the city of Buffalo to deliver water to the Gas Corporation within the city with the knowledge and intention that it will and shall be then conducted by said Gas Corporation . to its premises outside the city for use thereon. But the fact that the municipality is thus engaged in effect in selling and delivering water to a corporation outside of the city and that this act may be illegal is not in our opinion enough to enable plaintiff to maintain this action. Under the provisions of the Municipal Law the action may be maintained for the purpose of preventing any illegal act or for preventing waste or injury to any property, funds or estate of the municipality. As we have pointed out, there are no findings which support it upon the latter ground and the plaintiff must rely upon the first ground of illegality.

Mere illegality is not enough. The very nature and purpose of a taxpayer’s action like the present one presume that there will be more than illegality in order to enable him to intervene. The basic theory of such an action is that the illegal action is in some way injurious to municipal and public interests and that if permitted to continue it will in some manner result in increased burdens upon and dangers and disadvantages to the municipality and to the interests represented by it and so to those who are taxpayers. It was not the intention of the statute that a taxpayer shall be allowed to intervene and bring to the decision of the courts every act of a municipal officer which may be claimed to be illegal although- concededly it is entirely innocuous. There are other penalties than a taxpayer’s action for those municipal officers who disregard their responsibilities and transgress their limitations. This rule limiting such a right of action is firmly established and was so recently and fully stated by this court in the case of Altschul v. Ludwig (216 N. Y. 459) that it seems unnecessary to repeat or attempt to amplify it at any great length. It was there said: The mere illegality of the official act in and of itself does not justify injunctive relief at the request of the taxpayer. To be entitled to this relief, when waste or injury is not involved, it must appear that in addition to being an illegal official act the threatened act is such as to imperil the public interests or calculated to work public injury or produce some public mischief.” The difference between that case and this significantly illustrates the limitations upon this kind of an action. There the action was upheld because there was danger that the proposed illegal acts of the officials would result in the erection of a theatre not properly safeguarded against fire risks and with the resulting possibility that there might be a lamentable destruction of human life. In this case nothing of that kind appears; there is no suggestion in the findings of possible detriment to the interests of the municipality, the public or the taxpayer.

The case of Simson v. Parker (190 N. Y. 19), relied on by respondent, is not at all in conflict with the preceding case; in fact it emphasizes the conditions under which such an action as the present one may be maintained by a taxpayer. In that case it appeared that the city being authorized to sell water to corporations or individuals outside of the city, provided such sale would not impair the supply for the city and its inhabitants, made a contract for a long term of years to furnish a fixed quantity of water to a manufacturing concern with the provision that in case it did not deliver the water it should be liable for damages. It is easy to see that the court was entirely justified in holding that a taxpayer’s action could be maintained to restrain such a contract on the part of the city within the principles of the Altschul case. The contract was not only illegal but it furnished the possibility of injury to the city and to its taxpayers either through impairment of the supply of water necessary for them or through a liability for damages in case the contract was not complied with.

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

Cardozo, Pound, McLaughlin, Crane and Lehman, JJ., concur; Andrews, J., dissents.

Judgments reversed, etc.


author: Crane, J. Pound, J.

text:
    Doris K. Sydney, Appellant, v. Macfadden Newspaper Publishing Corporation, Respondent.
    Libel — pleading — written or printed article tending to expose plaintiff to disgrace is libelous per se and actionable without alleging special damage — sufficient to allege in general terms that matter was published concerning her ■ — • article stating that married woman was lady love of man other than husband and that there was an agreement to marry between them libelous per se.
    1. Any written or printed article is libelous or actionable without alleging special damages if it tends to expose the plaintiff to public contempt, ridicule, aversion or disgrace, or induce an evil opinion of him in the minds of right-flunking persons, and to deprive him of their friendly intercourse in society. Nor is it necessary to state in the complaint any extrinsic fact for the purpose of showing the application to the plaintiff of the defamatory matter, but the plaintiff may state in general terms that such matter was published or spoken concerning him. (Rules Civ. Pr. 96.)
    2. The publication in a newspaper of a photograph of the plaintiff, a married woman, together with a statement that she, naming her, had become the “ lady love ” of a man other than her husband and that it was reported that there was a match or agreement to marry between them and that plaintiff was present at a party given by the man at the time he was questioned about the matter by a reporter, is libelous per se because plaintiff, identified not only by name, but by picture, is a married lady and cannot marry, or submit to such associations without disgrace. It is immaterial that the article says nothing about plaintiff being married. It speaks of plaintiff and gives her picture. This draws with it all that she is — her standing, her position in society and her relationship in life.

      Sydney v. MacFadden Newspaper Pub. Corp., 215 App. Div. 653, reversed.
    (Argued January 15, 1926;
    decided March 2, 1926.)
    Appeal from a judgment, entered December 7, 1925, upon an order of the Appellate Division of the Supreme Court in the first judicial department, which affirmed an order of Special Term granting a motion, by defendant, for judgment upon the pleadings.

      John Burlinson Coleman for appellant.
    To publish falsely in a newspaper, of a married woman, that she is the latest lady love of a man not her husband, holds her up to public ridicule, contempt, scorn, obloquy and shame and is, therefore, libelous per se. To publish that she is the latest lady love of such a character as Fatty Arbuckle only increases the shame and contempt to which the innocent victim of the false accusation is exposed. (Bennet v. Commercial Advertiser Assn., 230 N. Y. 125; Triggs v. Sun Printing & Pub. Assn., 179 N. Y. 144; Morey v. Morning Journal, 123 N. Y. 207; Mac

      Fadden v. Morning Journal Association, 28 App. Div. 508; Gates v. New York Recorder Co., 155 N. Y. 228; Woodhouse v. New York Evening Post, 211 App. Div. 75.)

      Joseph Schultz for respondent.
    In order to sustain the complaint it must appear that the article is either libelous per se or that as a legal result of such publication the plaintiff has suffered some pecuniary damage, in which case such special damage must be fully and specifically pleaded. (Crashley v. Press Publishing Co., 179 N. Y. 27; Hills v. Press Co., 202 N. Y. Supp. 678; Samuels v. Evening Mail Association, 6 Hun, 5; Hemmens v. Nelson, 138 N. Y. 517; Horton v. Binghamton Press Co., 122 App. Div. 332; Kloor v. N. Y. Herald Co., 200 App. Div. 200; Rossiter v. New York Press Co., 141 App. Div. 339.) In passing upon the question of whether the article is libelous per se, the court cannot take into account matters pleaded outside of the article itself. (O’Connell v. Press Publishing Co., 214 N. Y. 352; Hills v. Press Publishing Co., 202 N. Y. Supp. 678; Van Heusen v. Argenteau, 194 N. Y. 309; Bodeck v. Jones, 208 N. Y. Supp. 699.) If the publication is not libelous per se, special damage must be specifically pleaded. (King v. Sun P. & P. Assn., 84 App. Div. 311; 179 N. Y. 600; Langdon v. Shearer, 43 App. Div. 607.)
   Crane, J.

This is an action for libel. The defendant published an article regarding the plaintiff which the lower courts have held, the Appellate Division by a divided court, not to be libelous per se.

The plaintiff is a married lady, the wife of Basil Sydney, whom she married in 1918. She is a well-known actress of reputation and standing, appearing upon the stage under her maiden name of Doris Keane. By marriage her name is Doris Keane Sydney.

On December 15, 1924, the New York Evening Graphic, owned by the defendant, published a photograph of the plaintiff, together with the following:

“ Doris Keane is, according to rumor, ‘ Fatty ’ Arbuckle’s latest lady love. Doris is pretty, and ‘ Fatty ’ is cross, or was when some of those prying newspapermen attempted to interview him about the reported match. ‘ Fatty ’ dislikes publicity.”
And again:
“Arbuckle to Marry?
“ Maybe; Maybe Not.
“Monterey, Cal., Dec. 15 (By United Press).
Maybe Roscoe (‘ Fatty ’) Arbuckle is going to marry Doris Keane and maybe he is not.
“ ' Fatty ’ was noncommittal when interviewed as he served barbecue to Gouverneur Morris and Mrs. Morris and another guest, said to have been Doris.
“ The one time funny man of the screen was all dressed up in a chef’s costume, and performed merry antics for the picnic party yesterday at Point Lobos, when the newspaper men horned in.’
“ Maybe I am and maybe I am not. Meantime beat it while the beating is good and don’t try to catch me in that black box or I’ll do a movie comedy with this steak,’ Fatty tenderly announced.
“ Morris chimed in with remarks about the newspaper persons butting in on a private party.
“ The identity of the fourth member of the party was guarded, but little Doris had been visiting at the Morris home before the barbecue.”

As no special damage was pleaded, the plaintiff can only maintain her complaint, which alleged all the above facts by establishing that this article is libelous per se. (O’Connell v. Press Publishing Co., 214 N. Y. 352, p. 358.)

Any written or printed article is libelous or actionable without alleging special damages if it tends to expose the plaintiff to public contempt, ridicule, aversion or disgrace, or induce an evil opinion of him in the minds of right-thinking persons, and to deprive him of their friendly intercourse in society. (Bennet v. Commercial Advertiser Assn., 230 N. Y. 125; Triggs v. Sun Printing & Pub. Assn., 179 N. Y. 144.) A publication is libelous per se where its tendency is to disgrace the plaintiff, and bring him into ridicule and contempt. (Morey v. Morning Journal Assn., 123 N. Y. 207.)

To say of the plaintiff that she is Fatty Arbuckle’s latest lady love, and that Fatty was cross when the newspaper men interviewed him about the match, can have no other meaning than that Doris Keane (who is married) was the lady love of Fatty Arbuckle, and that there was a reported “ match ” between them. Such a statement must have the tendency to hold this married woman up to ridicule and contempt. Such conduct must have a tendency to disgrace a woman of fair repute in the minds of right-thinking people. The further statements in the article in the form of a query as to whether Arbuckle is to marry Doris Keane indicate that the word match ” means an agreement to marry. Credence is given to the report by the statement that Doris Keane was reported to be present at Fatty’s party when he was questioned about the matter. In substance and in fact, the defendant has printed of the plaintiff, who is married, that she has become Fatty Arbuckle’s lady love; that it is reported that there is a match or an agreement to marry between them; and that she was present at his barbecue when Fatty was questioned by the reporter.

According to some standards, all of this might have been considered quite a privilege and an opportunity for the woman. According to the ordinary standards, still I hope, in vogue among us, a married lady of good reputation would not so conduct herself, and if she did, the. natural tendency would result in her disgrace. Such an article, when false, necessarily causes great humiliation and mental anguish.

It has been suggested that this article says nothing about Doris Keane being married. This is true. Neither does it say she is alive, or of age, or a woman capable of being married. It speaks of Doris Keane and gives her picturp. This draws with it all that Doris Keane is,- — • her standing, her position in society, and her relationship in life. Such was the ruling in the Morey case, above cited. The article there published was the following:

“ Refuses to be Reconciled.
“A Rochester Society Belle Who Insists upon Being “ Married.
“ (Special to the Morning Journal.)
“ Rochester, N. Y. Oct. 19.— Upper tendom is highly excited over a threatened breach of promise suit against John E. Morey, Jr., a stockholder in the Union and Advertiser, and prominent in society circles. A prominent society belle will be plaintiff in the action. Morey and his friends are moving to effect a reconciliation, but the young lady insists on his marrying her.”

This court said: “ There can be no doubt that the publication is libelous per se.” No special damages were alleged or proved. And yet, over the defendant’s objection, the plaintiff, was allowed to prove that he was a married man, Earl, J., speaking for the court saying: “ This proof was competent, not to show special damage, as none was alleged, but to show the circumstances surrounding the plaintiff, and as bearing upon the hurtful tendency of the libel, and the general damage to which he was exposed.”

To publish the following: “ The Rev. Thos. J. Upton is a negro ” (Upton v. Times Democrat, 104 La. 141); or “August M. Flood, colored, through attorneys * * * filed suit yesterday ” (Flood v. News & Courier Co., 71 So. Car. 112), have been held to be libelous per se. On the face of these articles there is nothing libelous. It is not libelous to say a man is colored, if it be the truth; it becomes libelous because of the status of the person mentioned;— that he happens to be a white man. This, of course, he has to allege and prove in order to make the article libelous and to recover. (See, also, to the same effect Stultz v. Cousins, 242 Fed. Rep. .794, 6th Circuit.)

So here in this case, to' say that Doris Keane is Fatty Arbuckle’s love and is to marry him, is libelous because Doris Keane, identified not only by name, but by picture, is a married lady, and cannot marry, or submit to such associations without disgrace.

In Gates v. New York Recorder Co. (155 N. Y. 228) the defendant published regarding the plaintiff three days after her marriage that she was a “ dashing blonde, twenty years old, and is said to have been a concert-hall singer and dancer at Coney Island.” This court held the article libelous per se for the reason that people who read the article in the neighborhood where it was published knew that concert-hall singers and dancers at Coney Island were a disreputable class. To say that the words published of the plaintiff in the community where the character of the concert-hall is well known were not calculated to hold her up to disgrace and disrepute and to charge her with, unchaste conduct, is to reach a conclusion both illogical and unjust. Such a charge is libelous per 'se, and results in damages that cannot be measured by mere money compensation.” There is nothing on the face of the article which makes known what the concert halls at Coney Island were, but the fact that they were notorious, and known to the people reading the article could be proved, and thus show the article to be libelous per se. This in my judgment is good sense. The court should take the defamatory publication in determining its characteristics and result in the same way that the reading public, acquainted with the parties and the subject would take it. (Klumph v. Dunn, 66 Penn. St. 141, 147.)

Rule 96 of our Rules of Civil Practice provides: In an action for libel or slander, it is not necessary to state in the complaint any extrinsic fact for the purpose of showing the application to the plaintiff of the defamatory matter, but the plaintiff may state in general terms that such matter was published or spoken concerning him.” The plaintiff has alleged that this article was published about her. There can be no question about it, as her picture accompanied the article. Who is the plaintiff about whom the article is published? Doris Keane Sydney, the wife of Basil Sydney — a married woman.

The judgments below should be reversed, with costs in all courts, and the motion to dismiss the complaint denied, with ten dollars costs.

Pound, J.

(dissenting). To publish falsely of any man that he is threatened with a breach of promise suit is libelous and he may show in enhancement of general damages that he is a married man. (Morey v. Morning Journal Assn., 123 N. Y. 207.) To publish falsely of any woman that she is unchaste, or a performer in a disreputable dance hall is libelous and she may show in enhancement of general damages that she is married and has a family of children. (Enos v. Enos, 135 N. Y. 609.)

If it were libelous to publish falsely of a woman that she is a man’s latest lady love, coupled with the implication, not of unchastity but of prospective marriage, she might doubtless show, under the authorities cited, that she was a married woman, without pleading special damages, but a woman is not necessarily brought into contempt, ridicule, shame or disgrace because she is loved by a man with the honorable estate of matrimony in prospect. Juliet was Romeo’s latest lady love.

The pleader recognizes this rule. The article is not defamatory on its face. He must state some reasons why plaintiff should not be Fatty Arbuckle’s latest lady love which do not appear from the article itself. He, therefore, alleges extrinsic facts. Plaintiff is a married woman. Arbuckle is a notorious lover. The false allegation of intimacy, in itself colorless, becomes unholy and shameful. But this is not enough. Where the publication itself is not libelous the plaintiff must not only include in his complaint allegations of extrinsic facts to show that the words used in the article are actionable but must also allege and claim special damages arising from the publication. (Crashley v. Press Publishing Co., 179 N. Y. 27; McNamara v. Goldan, 194 N. Y. 315, 321.) The complaint is bad because special damages are not pleaded.

Of course, all defamatory publications are actionable per se but here the libel is the article plus the extrinsic facts which color its meaning. The rule as above stated is well established. If the court were prepared to take judicial notice of the bad reputation of Fatty Arbuckle, the case might be brought under the rule of the Gates Case (155 N. Y. 228), where the then bad character of Coney Island dance halls was recognized.

The judgment should be affirmed, with costs.

McLaughlin, Andrews and Lehman, JJ., concur with Crane, J.; Pound, J., writes dissenting opinion in which His cock, Ch. J., concurs; Cardozo, J., not voting.

Judgments reversed, etc.


author: Pound, J.

text:
    Nellie Hovell, Respondent, v. The Evergreens, Appellant.
    Negligence — fire — trial — evidence — action to recover for damage from fire alleged to have been started on defendant’s premises and negligently permitted to spread to plaintiff's premises — erroneous reception of evidence of other fires on defendant’s premises — error vital where no direct evidence as to how fire in suit started.
    In an action to recover for the destruction of plaintiff’s building and its contents from fire alleged to have been started m hay fields belonging to defendant and negligently permitted to escape to the plaintiff’s premises, it was error for the trial court to receive, over objection, evidence of prior fires on defendant’s premises, not negligent, ■which tended to establish nothing relative to the fire in question, and under the charge permit the jury to consider the fact that such other fires had occurred as bearing on the question whether at the time of the fire in suit defendant negligently started a fire on its property or negligently permitted it to spread to plaintiff's property, and where there was no direct evidence as to the manner in which such fire was started, the error was vital.

      Hovell v. Evergreens, 214 App. Div. 801, reversed.
    (Argued February 26, 1926;
    decided March 4, 1926.)
    Appeal from a judgment of the Appellate Division of the Supreme Court in the second judicial department,. entered August 26, 1925, affirming a final judgment entered upon the report of a referee after an interlocutory judgment in favor of plaintiff entered upon the answer of a jury to certain questions submitted to it.

      Andrew F. Van Thun, Jr., and Harold J. Roig for appellant.
    The trial court erred in admitting evidence, over objection and exception by the defendant, that during several years prior to January 6, 1920, other fires had been started in the cemetery. The trial court also erred in refusing to charge the jury as requested by the defendant that the jury cannot consider, in arriving at a determination of the claim of the plaintiff in this action, that other fires at other times had occurred in the cemetery grounds. (Wooster v. Broadway & Seventh Avenue R. R. Co., 72 Hun, 197; Zucker v. Whitridge, 205 N. Y. 50; Parsons v. Syracuse, B. & N. Y. R. R. Co., 205 N. Y. 226; Flannagan v. Brown, 211 App. Div. 694; Warner v. N. Y. C. R. R. Co., 44 N. Y. 465; Senecal v. Thousand Islands Steamship Co., 79 Hun, 574; Higgins v. L. I. R. R. Co., 129 App. Div. 415; Arnold v. Farmers’ Ins. Co., 116 App. Div. 60; 197 N. Y. 538; Rosenberg v. Peoples Surety Co., 140 App. Div. 436, 437; Cantor v. National Surety Co., 208 App. Div. 370.) Such incompetent and irrelevant testimony was clearly harmful to the defendant’s case; and the refusal by the trial court to charge as requested by the defendant was also harmful to the defendant’s case. The admission of such testimony and the refusal to charge had a natural tendency to mislead the jury and impair the fairness of the trial. (Engel v. United Traction Co., 203 N. Y. 321; Moore v. Rosemond, 238 N. Y. 356; Hanrahan v. N. Y. Edison Co., 238 N. Y. 194.)

      Sidney A. Clarkson for respondent.
    The trial court ruled correctly on the questions of law now raised by appellant. (Warner v. N. Y., O. & W. R. R. Co., 209 App. Div. 211; 239 N. Y. 507.) Even if the rulings were error, they are not substantial and defendant was not harmed. (Civ. Pr. Act, § 106; Post v. Brooklyn Heights R. R. Co., 195 N. Y. 62.)
   Pound, J.

The action was brought to recover damages for the destruction of a building and contents owned by plaintiff adjoining the hay fields in defendant’s cemetery, by means of a grass fire alleged to have been started in the cemetery grounds on January 6, 1920, and negligently permitted to escape to the premises of plaintiff.

The question of negligence was tried out before a jury which found for plaintiff. The evidence was sufficient to sustain a verdict for the plaintiff although the defendant denied that the fire started on its land. The question of damages was then tried out before a referee who reported the damages at $29,718. Final judgment was thereupon entered. The Appellate Division affirmed by a divided court.

The court received over objection and exception evidence, not of prior negligent fires on defendant’s property . which would have been inadmissible as tending to show a custom of negligence (Zucker v. Whitridge, 205 N. Y. 50, 60), but of prior fires, not negligent, sometimes very late in the fall and in the early spring, which tended to establish nothing relative to the fire of January 6, 1920. This was error. At the same time it might be urged that the reception of the evidence was unsubstantial and not reversible error as the whole matter of the earlier fires was gone into and it was fairly well established that the burning over of the grass lot in January had no relation to the customary operations of the defendant. The trial justice might have so instructed the jury. On the contrary, the following appears on the record (fol. 691-2):

“ Mr. Van Thun: The jury cannot consider, in arriving at a determination of the claim of the plaintiff in this action, that other fires at other times had occurred in the cemetery ground, that any such testimony in the case would have no bearing on the question in issue here, namely, whether on January 6th, 1920, a fire was negligently started by the defendant in the part of the cemetery immediately adjoining the plaintiff’s property and communicated thereto, or that the defendant negligently omitted to watch, tend and control a fire and thereby prevent its spreading to the plaintiff’s property.
“ The Court: The question whether this fire was negligently started, or whether it was allowed to spread through negligence of the defendant, that is the sole question for you to determine in this case. Other than that I refuse to charge.
Mr. Van Thun: Your Honor refuses to charge?
The Court: In your words, yes. In your words I refuse to charge it, other than as amended by my statement.”

The jury was thus permitted to consider the fact that other fires at other times had occurred on the cemetery grounds as bearing on the question whether on January 6, 1920, defendant negligently started a fire on its property or negligently permitted the fire to spread to plaintiff’s property. As there was no direct evidence as to the manner in which the fire of January 6 was started the error was vital. That because there had been periodically grass fires on the cemetery grounds there must have been a grass fire on January 6 which spread from defendant’s premises to those of plaintiff is a non sequitur.

The judgments should be reversed and a new trial granted, with costs to abide the event.

Hiscock, Ch. J., McLaughlin, Crane, Andrews and Lehman, JJ., concur; Cardozo, J., absent.

Judgments reversed, etc.


text:
    In the Matter of Theodorus Bailey, Respondent, against Robbins S. Rutherford, Appellant.
    Attorney and client — summary proceedings — where right to summary order can be reasonably questioned client referred to ordinary remedies — employment by attorney, at direction of client, of foreign attorney to collect judgment — retention by foreign attorney of portion of money collected as his fee — propriety of charge cannot be determined in summary proceeding in this State to compel attorney here to pay over money — attorney may not by summary proceeding be compelled to pay money which never came into his possession.
    1. The summary proceeding to compel an attorney to pay over moneys rests upon misconduct clearly established on the part of the attorney in retaining the client’s money. In all cases the client has relief in the ordinary tribunals for the determination of legal controversies and where his right to have a summary order can be reasonably questioned he must be referred to the ordinary remedies.
    2. In a summary proceeding to compel appellant, an attorney, to pay over money belonging to petitioner, his client, it appeared that petitioner employed appellant to enforce a claim against a third party, a judgment was obtained in this State which could not be collected and, assets being located in a foreign State, appellant was authorized by petitioner to employ an attorney in that State to collect the judgment, which he did in full, remitting the balance after deducting his fee to appellant. The question litigated was whether such charge was excessive and the referee erroneously directed appellant to account to petitioner for an amount in excess of what he held to be a fair fee. As between the petitioner and the foreign attorney the amount due cannot be determined in this proceeding and appellant never having had in his possession the amount retained by the foreign attorney, it would be extending summary relief beyond its defined limits to hold him responsible therefor.

      Matter of Bailey v. Rutherford, 213 App. Div. 858, modified.
    (Argued February 23, 1926;
    decided March 4, 1926.)
    Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the first judicial department, entered April 9, 1925, which affirmed an order of Special Term confirming the report of a referee requiring the appellant herein, an attorney, to pay over certain moneys to his client.

      John W. Renter and Frank H. Richmond for appellant.
    An attorney can be summarily held liable only for money actually received by him or coming under his control as attorney. (Ives v. South Buffalo Ry. Co., 201 N. Y. 271; 1 Fiero on Particular Actions & Proceedings [4th ed.], 132; Matter of Niagara, L. & O. Power Co., 203 N. Y. 493; Bowling Green Savings Bank v. Todd, 52 N. Y. 489; Matter of Knapp, 85 N. Y. 284; Matter of H-, an Attorney, 87 N. Y. 521; Schell v. Mayor, 128 N. Y. 67; Matter of Paschal, 10 Wall. 483; Matter of Hillebrandt, 33 App. Div. 191; Matter of Minnesota Phonograph Co., 148 App. Div. 57; 212 N. Y. 574; Matter of Mackintosh, 112 N. Y. Supp. 513; Matter of Jones, 117 App. Div. 775.) The proceedings should have been dismissed for failure of proof. (Matter of Niagara, L. & O. Power Co., 203 N. Y. 493; Matter of Knapp, 85 N. Y. 284; Matter of Hillebrandt, 33 App. Div. 191; Matter of Jones, 117 App. Div. 775; Matter of Minnesota Phonograph Co., 148 App. Div. 57; Matter of Post v. Evarts, 9 N. Y. Supp. 370.) The order appealed from cannot be sustained either on a theory of constructive or implied liability, or on a theory of joint reception and control by Mr. Rutherford and the Maryland attorney. (Matter of Niagara, L. & O. Power Co., 203 N. Y. 494; 2 Mechem on Agency, 1726, 1787; Matter of Minnesota Phonograph Co., 148 App. Div. 56; Post v. Evarts, 9 N. Y. Supp. 370; Lacher v. Gordon & Rosenblum, 127 App. Div. 140; Parker v. Gartside, 178 Ill. App. 634; Snell v. Niagara Paper Mills, 193 N. Y. 433; Ives v. South Buffalo Ry. Co., 201 N. Y. 271.)

      Adolph Bangser for respondent.
   Pound, J.

This is a summary proceeding to compel an attorney to fulfill his obligations by paying over money in his hands belonging to his client which, it is alleged, the attorney unlawfully retains. While the proceeding rests on the assumption that the attorney has deducted the sum of $3,500 from moneys received by him belonging to the client, it is perfectly clear that $2,000 of this amount was never in fact received by the attorney. We construe the order and findings of the referee which were adopted by the court as setting forth as a conclusion of law merely that this sum was included in the total of $3,500. The facts are not disputed and they sustain this construction of the findings.

Petitioner retained Rutherford, the appellant, as his attorney to enforce a claim of $10,000 against one Mrs. Story. He obtained a judgment against her in the Supreme Court-of this State which he could not collect. Assets were located in Maryland. Petitioner authorized Rutherford to retain a Maryland attorney. He retained one Musgrave. Musgrave collected the claim in full. The controversy arises over a balance of $7,714.50, prior remittances not being included. Musgrave deducted from this sum $3,000 for fees, of which he turned over $1,000 to Rutherford. He remitted in all to Rutherford $5,714.50 but suggested that they should have a fee of $3,500.

Rutherford sent petitioner $4,350.60, leaving a balance of $1,363.90, a portion of which he sent to Musgrave in adjustment of the additional $500 fee and the balance of which he retained. The question litigated was mainly whether a charge of $3,500 made either by Rutherford or Musgrave or both was excessive. The referee reported and the court found that a fair fee for Musgrave would be $1,025 and for Rutherford $250, total $1,275. He charged Rutherford with $3,363,90; credited him with allowances, $1,275; and directed him to pay over to Bailey $2,088.90. But Rutherford never received Mus-grave’s fee of $2,000, so that the balance of $88.90 is all that remained in his hands of the amount received by him from Musgrave.

The question is whether on these facts it can be said that Rutherford retained $2,000 of his client’s money without legal grounds. • Musgrave retained this amount. Should Rutherford be subject to the summary and severe measures incident to this proceeding because he agreed with Musgrave as to his fee and allowed him to retain $2,000 from the amount collected? This remedy has for its basis the retention of money by the attorney that justly belongs to his client, (Bowling Green Savings Bank v. Todd, 52 N. Y. 489, 493.) Rutherford holds no part of the $2,000. He never has had it in his possession. As between Bailey and Musgrave the amount due Mus-grave cannot be determined in this proceeding. The latter is outside the jurisdiction. He acted independently of Rutherford on a separate retainer.

The summary proceeding rests upon misconduct clearly established on the part of the attorney in retaining the client’s money. In all cases the client has relief in the ordinary tribunals for the determination of legal controversies and where his right to have a summary order can be reasonably questioned he must be referred to the ordinary remedies. In Matter of Minnesota Phonograph Co. (148 App. Div. 56, 60, 61; affd., on opinion below, 212 N. Y. 574) McLaughlin, J., said: “ One does not forfeit any of his rights by becoming an attorney at law. He has the same rights thereafter that other persons have, which includes the right to have asserted claims against him established in the regular and ordinary way, that is, by action, except only in the case where the claim is for money received for his client while he is acting as an attorney at law for him.” It would be extending summary relief beyond the limits thus clearly defined to hold Rutherford accountable for the fee retained by Musgrave in this proceeding.

The orders appealed from should be modified by directing the appellant to pay to respondent the sum of $88.90, and as so modified affirmed, with costs to appellant in all courts.

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

Ordered accordingly.


author: Crane, J.

text:
    International Fuel and Iron Corporation, Appellant, v. Donner Steel Company, Inc., Respondent.
    Corporations — contract — action for breach — defense that plaintiff had failed to procure certificate authorizing it to do business within State prior to making of contract — policy of State as to foreign corporation — section 110 of Stock Corporation Law may not be construed literally — to come within its provisions foreign corporation must carry on business with some continuity of act and purpose — single transaction not sufficient to bring contract within meaning and purpose of statute.
    1. The policy of this State, as manifested in its laws, is not to impose any unconscionable restrictions upon the transactions of foreign corporations here.
    2. Section 110 of the Stock Corporation Law (Cons. Laws, ch. 59) cannot be taken literally. A foreign corporation may transact some kinds of business within the State without procuring a certificate or submitting to control. If its business be interstate, it is beyond State interference. To come within this section, the foreign corporation must do more than make a single contract, engage in an isolated piece of business, or an occasional undertaking; it must maintain and carry on business with some continuity of act and purpose. Such an application of this statute to the facts as may-amount to an unlawful interference with interstate commerce must be avoided and the corporation must be doing business in the State at the time of making the contract, or before procuring the certificate. This section does not apply to a corporation which is not doing business, as these words are interpreted, prior to its procuring the certificate.
    3. The plaintiff, a foreign corporation, has sued the defendant for breach of contract and so far has been defeated for failure to procure the certificate mentioned in this section prior to the making of the contract. The only transaction which plaintiff had in the State of New York prior to procuring its certificate to do business was this one individual and single transaction with the defendant and its purchase and delivery of some steel scrap under this one contract. Within thirty days after its creation it obtained the necessary certificate from the Secretary of State authorizing it to do business here. The office in the State of New York maintained by a foreign corporation, must be one through which its business is being done. There is no evidence showing that fact. At the time the contract was made the plaintiff was not doing business within the State of New York as a continuous act. After obtaining permission to do business in this State, the parties reformed their contract and thereafter acted upon and under the contract as thus modified. It is the contract as thus modified, and not the original contract, which is sued upon. Under these circumstances this contract did not come within the meaning and purpose of the statute.

      International Fuel & Iron Corp. v. Bonner Steel Co., 214 App. Div. 810, reversed.
    (Argued January 13, 1926;
    decided March 4, 1926.)
    Appeal, by permission, from a judgment, entered November 23, 1925, upon an order of the Appellate Division of the Supreme Court in the fourth judicial department, overruling plaintiff’s exceptions, ordered to be heard in the first instance by the Appellate Division, denying a motion for a new trial and directing judgment in favor of defendant upon the nonsuit at a Trial Term.

      Adelhert Moot and W. V. Moot for appellant.
    After July 31,1920, when the plaintiff, appellant, had obtained authority to do business in New York State, the letters and telegrams exchanged between the parties during September and October modifying the original contract by providing for a flat increase of one dollar and forty cents per ton in price instead of adding increased freight on each particular car, and extending the time of performance of the contract, constituted the making of a new contract between the parties so as to authorize the courts of this State to pass upon the merits of this action. (Clark v. Dales, 20 Barb. 42; Imperator Realty Co. v. Tull, 228 N. Y. 447; Turner Construction Co. v. Union Terminal Co., 229 Fed. Rep. 702; Williams v. Morris, 95 U. S. 444.) The plaintiff was not doing business in New York State at the time the original contract was made in July, 1920. (Penn Collieries Co. v. McKeever, 183 N. Y. 98; Odell v. City of N. Y., 206 App. Div. 68; 238 N. Y. 623; Hovey v. De Long Hook & Eye Co., 211 N. Y. 420; People ex rel. Manila El. R. R. & L. Co. v. Knapp. 229 N. Y. 502; Tauza v. Susquehanna Coal Co., 220 N. Y. 259; Holzer v. Dodge Brothers, 233 N. Y. 216; Provident Savings Assn. v. Kentucky, 239 U. S. 103.) The original contract providing for the sale of steel scrap by the plaintiff to the defendant, and, therefore, permitting the plaintiff to purchase in foreign jurisdictions and ship in interstate commerce without forfeiting its right to sue in the courts of this- State, did not come within the prohibition of the statute by reason of the fact that the plaintiff purchased part of the steel scrap with which to fill this contract from domestic corporations instead of foreign corporations, the domestic corporations in turn purchasing the larger part of their requirements in foreign States. (Angldile Computing Scale Co. v. Gladstone, 164 App. Div. 370; System Co. v. Advertisers’ Cyclopedic Co., 121 N. Y. Supp. 611; Allgeyer v. La., 165 U. S. 578; Prov. S. Assn. v. Ky., 239 U. S. 103; People v. Hawkins, 157 N. Y. 1; Tauza v. Susquehanna Coal Co., 220 N. Y. 259; Matter of Int. Ry. v. P. S. Comm., 226 N. Y. 482; Helme v. Buckelow,
      229 N. Y. 370; Holzer v. Dodge Bros., 233 N. Y. 216; Chipman, Ltd., v. Jeffry Co., 251 U. S. 379.)

      Lyman M. Bass and Daniel J. Kenefick, Jr., for respondent.
    The plaintiff, a foreign stock corporation, was doing business in this State and cannot maintain an action in the courts of this State upon a contract made -herein without proving that prior to the making of the said contract it had secured from the Secretary of State the certificate required by section 15 of the General Corporation Law (now section 110 of the Stock Corporation Law). (Lewis Publishing Co. v. Lenz, 86 App. Div. 451; Welsbach Co. v. Norwich G. & El. Co., 96 App. Div. 54; South Amboy T. Cotta Co. v. Poerschke, 45 Misc. Rep. 358; Wood & Selick v. Ball, 190 N. Y. 217; Ac-Tin-O-Lyte Roofing Co. v. Werner, 209 App. Div. 742; American Can Co. v. Grassi Contracting Co., 102 Misc. Rep. 230; Manufacturing Co. v. Blitz, 131 App. Div. 17; Pittsburgh Plate Glass Co. v. Ravitch, 58 Misc. Rep. 191; Warner Instrument Co. v. Sweet, 65 Misc. Rep. 56; East Coast Oil Co. v. Hollins, 183 App. Div. 67.) The claim of appellant that the contract was modified “ as to a temporary suspension of shipments ” on October fourth, so as to take this case out from under the provisions of section 15 of the General Corporation Law is without avail. (Thomson v. Poor, 147 N. Y. 402; Imperator Realty Co. v. Tull, 228 N. Y. 447; Holden v. Efficient Craftsman Corp., 234 N. Y. 437; Bridges & Co. v. Barry, 237 N. Y. 281.) The fact that the parties acted under and carried out the contract made on July 13, 1920, will not take this case from under the provisions of section 15 of the General Corporation Law simply because part of the performance of the contract took place after July 31, 1920, on which date plaintiff for the first time secured authority to do business in this State. (Lupton’s Sons Company v. Automobile Club of America, 225 U. S. 489; Wood v. Ball, 190 N. Y. 217.) The transaction was not one of interstate commerce and was, therefore, subject to State regulation. (Kansas City Structural Steel Co. v. State of Arkansas, U. S. Sup. Ct. Nov. 16, 1925; Interstate Amusement Company v. Albert, 239 U. S. 560.)
   Crane, J.

Section 110 of article II of the Stock Corporation Law (Cons. Laws, ch. 59), formerly section 15 of the General Corporation Law, reads as follows:

Certificate of authority; change of name. 1. No foreign stock corporation other than a moneyed corporation shall do business in this State without having first procured from the secretary of state a certificate that it has complied with all the requirements of law to authorize it to do business in this State and that the business of the corporation to be carried on in this State is such as may be lawfully carried on by a corporation created under the laws of this State for such or similar business, or if more than one kind of business, by two or more corporations so incorporated for such kinds of business respectively. The secretary of state shall issue such certificate to any such corporation so complying. No such foreign corporation doing business in this State shall maintain any action in this State upon any contract made by it in this State, unless prior to the making of such contract it shall have procured such certificate. This prohibition shall also apply to any assignee of such foreign corporation and to any person claiming under such assignee or such foreign corporation or under either of them.”

The plaintiff, a foreign corporation, has sued the defendant for breach of contract and so far has been defeated for failure to procure the certificate mentioned in this section prior to the making of the contract. The question for us to determine is whether it appears from the evidence that the plaintiff was doing business in this State, within the meaning and purpose of this section so as to prevent it from maintaining the action. The contract is conceded; so is its validity. The defendant's breach and the consequent damage to the plaintiff are sufficiently proven. The one and only question is whether the statute bars the action, or, in other words, whether the facts bring the plaintiff within the prohibition of the act.

Before considering the facts, it may be well to repeat some of the legal propositions which attach to this section, and govern the activities within this State of foreign corporations.

That the section cannot be taken literally is quite evident. A foreign corporation may transact some kinds of business within the State without procuring a certificate or submitting to control. If its business be interstate, it is beyond State interference. “ A corporation of one State may go into another, without obtaining the leave or license of the latter, for all the legitimate purposes of such commerce; and any statute of the latter State which obstructs or lays a burden on the exercise of this privilege is void under the commerce clause.” (Dahnke-Walker Co. v. Bondurant, 257 U. S. 282, 291.)

A foreign corporation may send its agents into this State to make contracts for the purchase or sale of goods without falling within the inhibitions of our statute. (Angldile Computing Scale Co. v. Gladstone, 164 App. Div. 370, p. 372.) In this case it was said: A manufacturing corporation in Indiana has a right to send its agent into the State of New York, there to make contracts for the sale and delivery of its goods, and this right to make such contracts carries with it, by necessary implication, the right to enforce such contracts in the courts of this State, in the absence of lawful limitations upon that right.”

Again, we must bear in mind that the mere maintenance of an office for a corporation within another State is not in and of itself without other proof evidence that it is doing business within that State. The office may be maintained merely as a place of accounting, for the meeting of directors and officers, a station point for its superintendents or salesmen, or for mere show rooms. (People ex rel. Tower Co. v. Wells, 182 N. Y. 553, affg. 98 App. Div. 82; Hovey v. De Long Hook & Eye Co., 211 N. Y. 420, 425; People ex rel. Manila El. R. R. & L. Co. v. Knapp, 229 N. Y. 502, 510.)

To come within this section, the foreign corporation must do more than make a single contract, engage in an isolated piece of business, or an occasional undertaking; it must maintain and carry on business with some continuity of act and purpose. (Penn Collieries Co. v. McKeever, 183 N. Y. 98.) Judge Gray, writing for this court, said of these statutory provisions: I think that they should be construed, both upon the fair import of their language, as well as upon a just consideration of the public policy and of the State interests to be promoted, as, simply, preventing foreign corporations from entering the State by agencies and there engaging in the general prosecution of their ordinary business, without first complying with certain requirements of a reasonable nature and evidencing their compliance by obtaining a certificate to the effect.

The policy of our State, as manifested in its laws, is not to impose any unconscionable restrictions upon the transactions of foreign corporations here. * * * To bring into operation the statutory provision, the facts should show more than a solitary, if not accidental, transaction as was the one before us. They should establish that the corporation was conducting a continuous business. To be ‘ doing business in this State ’ implies corporate continuity of conduct in that respect; such as might be evidenced by the investment of capital here, with the maintenance of an office for the transaction of its business, and those incidental circumstances, which attest the corporate intent to avail itself of the privilege to carry on a business.” (pp. 101, 102, 103.)

To the same effect is the case of Cooper Mfg. Co. v. Ferguson (113 U. S. 727, 734) where it was said: The prohibition against doing any business cannot, therefore, be literally interpreted. * * * The making in Colorado of the one contract sued on in this case, by which one party agreed to build and to deliver in Ohio certain machinery and the other party to pay for it, did not constitute a carrying on of business in Colorado.”

In Angldile Computing Scale Co. v. Gladstone (supra) it was said: “ The ' doing business ’ referred to in the statute is the exercising of its corporate franchises; the maintaining of a place of business within the State in the sense that the corporations organized and doing business under the laws of this State maintain such places of business.”

One other principle we must mention. As the foreign corporation has the right without interference by the State to conduct interstate business, which would doubtlessly include selling goods in this State (Hovey v. De Long Hook & Eye Co., supra), we must avoid such an application of this statute to the facts as may amount to an unlawful interference with interstate commerce. (Tauza v. Susquehanna Coal Co., 220 N. Y. 259, 267.) A statute must be construed, if fairly possible, so as to avoid not only the conclusion that it is unconstitutional, but also grave doubts upon that score. (U. S. v. Jin Fuey Moy, 241 U. S. 394.)

And finally, I would like to call attention to an interpretation of this section of the Stock Corporation Law, which I think has either been overlooked by the courts below, or else not sufficiently emphasized. Taken literally, no corporation doing business in this State shall maintain any action upon any contract unless it procured the certificate prior to the making of the contract. This may be read so as to eliminate altogether the importance of the time when the corporation was doing the business in the State. That is, if a contract be made before the certificate be obtained, but the corporation do no other business within the State until after the procuring of the certificate, this section, taken literally, would prevent any action on such a contract. Here would be the case of a corporation doing business in the State, and a contract made before procuring the certificate. But such is not the law. The corporation must be doing business in the State at the time of making the contract, or before procuring the certificate. This section does not apply to a corporation which is not doing business, as these words are interpreted, prior to its procuring the certificate. (Odell v. City of New York, 206 App. Div. 68, p. 72; affd., 238 N. Y. 623.) In that case the contract was signed on April 18, 1907. The certificate authorizing the McNally Company, the contractor, to do business in this State was issued September 9, 1907. It appeared that the McNally Company never did business in this State before the signing of the contract; it had no bank account, and did not maintain any office in the State. The court said: “ The McNally Company was not doing business in this State when the contract in question was made and, therefore, had the right to sue thereon.”

I have referred to these cardinal principles which must be read into this provision of the Stock Corporation Law before referring to the facts in order that it may clearly appear as I now detail those facts that this plaintiff is not within the letter or the spirit of the law, and that its transactions come within many of these decisions to which I have referred.

Now for the facts. The plaintiff is a foreign corporation incorporated under the laws of the State of Delaware on the 28th day of June, 1920, for the purpose, among other things, of buying, selling and dealing in iron and steel. Its principal office was in the city of Philadelphia. The defendant is a New York corporation having its principal place of business in Buffalo, New York, engaged at all the times here mentioned in buying steel. On the 13th day of July, 1920, these parties entered into a contract in writing, whereby the plaintiff sold to the defendant 15,000 tons of steel scrap to be shipped between July 1st and November 1st, 1920, and delivered to the defendant in Buffalo, New York. The price was to be $25.50 per gross ton, f. o. b. cars your plant, Buffalo, N. Y.” The contract was mailed by the plaintiff to the defendant, signed and mailed back. A previous contract of like tenor had been brought by an employee from Philadelphia to Buffalo. Outside of the making of this contract, it does not appear that the plaintiff did any other business within the State of New York. In fact, the contract was made almost at its own creation, or a few days after its incorporation. The plaintiff was a dealer in scrap steel. It did not manufacture, it. The scrap steel was purchased in the open market, or from manufacturers. It could be purchased by the plaintiff in and shipped from any State into New York. On its face this was not an intrastate contract, and might be the cause of interstate shipments. In fact, subsequent correspondence between the parties shows that shipping points were from Michigan and the West. At least part of the material was to come from without the State.

On July 31, 1920, the plaintiff obtained from the Secretary of State a certificate authorizing it. to do business in New York. Prior to that time the only thing which the plaintiff did was to make this contract with the Donner Steel Company, Inc., purchase and deliver some of the steel scrap. Here was a single, individual transaction. There is nothing to show that before July 31, 1920, the plaintiff was carrying on business within the State of New York by any continuity of action, by the maintenance here of any office for the transaction of its business, or by doing any business with the exception of this one contract and a few deliveries thereunder.

The defendant says that the plaintiff maintained an office in New York. I do not so read the evidence. Apparently, the plaintiff was organized to take over other corporations. One of these was the Industrial Coal & Coke Corporation of New York. Whether this was a live corporation doing business does not appear. All the evidence we have on this point is the following, regarding a Mr. Lyons, who was a director of the plaintiff. In reading this evidence, remember that the plaintiff was incorporated on June 28, 1920, and the contract with the defendant was made two weeks thereafter — July 13, 1920; and a certificate to do business in New York procured one month thereafter — July 31, 1920. Here is what is said about a New York office:

Q. He (Mr. Lyons) was in charge of the New York office? A. Yes, and also he was vice-president.”
“ Q. Did he have anything to do with this contract that you know of? A. Not that I know of.”
Q. He was in charge of the New York office, as I understand, since your corporation was formed? A. Yes.”
Q. Back the 1st of July, 1920? A. At the time this contract was made Mr. Lyons was in Europe.”
Q. But who was in charge of your New York office the 1st of July, 1920? A. No one.”
“ Q. There were five people down there, were there not? A. Yes, Mr. Lyons was President, I think — it was his company, the Industrial Coal & Coke Corpora ■ tion of New York, which was one of the companies which was taken in on the formation of the International Fuel & Iron Corporation, and he had an organization of some sort there of the Industrial Coal & Coke Corporation which, later on, automatically came over to the International Fuel & Iron Corporation when it was taken over. But Mr. Lyons was at that time in Europe and there was really no one functioning as the head of the New York office.”

At what time the Industrial Coal & Coke Corporation was taken over by the plaintiff does not appear. The office was the office of the Coal & Coke Company. What kind of an office it was, whether it was doing any business, who the five persons were in the office, nowhere appears. The plaintiff had no office in New York State unless this Coal & Coke office be considered one. But there is not the least evidence to show that this office did anything for the plaintiff, or in fact was doing any business at all. As the above cases indicate, the office in the State of New York maintained by a foreign corporation, must be one through which its business is being done, not one for the purposes stated in those cases.

This outline of the evidence brings the case within nearly all of the authorities above cited.

At the time the contract was made, July 13, 1920, the plaintiff was not doing business within the State of New York.

The contract was not necessarily an intrastate contract, but one which the plaintiff could and in part did perform by interstate shipments. We should not apply this statute to shipments or contracts which would make the application and the law unconstitutional.

The only transaction which this plaintiff had in the State of New York prior to procuring its certificate to do business was this one individual and single transaction with the defendant and its purchase and delivery of some steel scrap under this one contract.

It does not appear that prior to July 31, 1920, or within one month after its creation, the plaintiff was carrying on or conducting its business within the State of New York, as a continuous act, with the intent and purpose of doing business here before obtaining its certificate. On the contrary, the facts indicate that its intention was just the reverse. Within thirty days after its creation it obtained the necessary certificate from the Secretary of State authorizing it to do business here. To hold that a contract made within those thirty days, and before it was doing any business in the State, could not be enforced, because a few deliveries made under that one contract may have occurred before procuring the certificate, would be contrary to the spirit, purpose and meaning of this provision of the Stock Corporation Law.

The contract as made July 13, 1920, was modified in the following August, after the plaintiff had procured its certificate authorizing it to do business in New York State. The price per gross ton of the steel was raised from $25.50 per ton to $26.90. This change was made in writing, agreed to by the parties. The .increase in price was to meet the increase in freight rates talcing effect August 26th. In the correspondence between the parties prior to the adoption of this change the plaintiff stated that there would be an increase in the rate for scrap purchased for the defendant in New England, to and from Detroit, and from numerous other Michigan points. The contract was thereupon modified.

Therefore, after obtaining permission to do business in this State, the parties reformed their contract in a minor particular, it is true, but nevertheless, modified it, and thereafter acted upon and under the contract as thus modified. It is the contract as thus modified, and not the contract as it existed July 13, 1920, which is sued upon. Such a circumstance moved the Federal court'in Turner Construction Co. v. Union Terminal Co. (229 Fed. Rep. 702, 704) to say regarding a Florida statute in some particulars like our own: “But after both the parties were free of any disability they could make a new contract and recognize the instrument already signed as embodying the terms of it.”

I do not want to be understood as saying that if this modification were all that we had in a case otherwise within the statute, it would be sufficient to remove the prohibition thereof. But I do claim that under all of the facts and circumstances of this case, it is a matter to be taken into consideration in determining whether this contract as a whole was actually made while the plaintiff was doing business within the State of New York, and before receiving permission. It is a circumstance which bears upon the plaintiff’s intention to do business before procuring such a certificate and the continuity of that business, if there was any. As stated, there was this one contract executed two weeks before the plaintiff could procure permission to do business in this State, recognized, acted upon and modified in writing after such permission was obtained. Under these circumstances this contract did not come within the meaning and purpose of the statute.

For the reasons here expressed, the judgments of the court below should be reversed and a new trial granted, costs to abide the event.

Hiscock, Ch. J., Cardozo and Lehman, JJ., concur; Pound, McLaughlin and Andrews, JJ., dissent.

Judgments reversed, etc.


author: Andrews, J.

text:
    In the Matter of the Application of William H. Young, Respondent. John S. Jenkins, Appellant.
    Decedent’s estate — real property — sale — title — devise of real estate to nephew for life with remainder to his children and issue of deceased children or if none to two grandnephews for life with remainder to their children — • grandnephews and their living issue entitled to notice of petition of life tenant for sale of property.
    1. The testator devised certain real estate to Ms nephew for life with remainder to Ms surviving children and to the issue of deceased children per stirpes. If, however, tMs nephew left no descendants then to two grandnephews of the testator, in equal shares for life with remainder to their cMIdren.
    2. Under the provisions of the Real Property Law (Cons. Laws, ch. 50, § 67), upon petition made by the life tenant, title could not be conveyed under an order for the sale of the premises without notice to the grandnephews or to their cMIdren if any such there are.

      Matter of Young, 215 App. Div. 780, reversed.
    (Submitted February 24, 1926;
    decided March 4, 1926.)

      Appeal from an order of the Appellate Division of the Supreme Court in the second judicial department, entered December 4, 1925, which affirmed an order of Special Term denying an application by the purchaser at a judicial sale to be relieved from his purchase.

      Frank C. Barker for appellant.
    The failure to give notice of this proceeding to the Formans, contingent life tenants, and to their children, contingent remaindermen, rendered the order of sale ineffective and made the title unmarketable. (Bamberger v. Stern, 105 Misc. Rep. 394; Hess v. Hess, 233 N. Y. 164.)

      Harry C. Miller for respondent.
    The Formans, contingent remaindermen, are not necessary parties to this proceeding and failure to join them as parties does not make the title unmarketable- nor entitle the purchaser to be relieved from his contract. (Bamberger v. Stern, 105 Misc. Rep. 394; 188 App. Div. 920; Matter of Mersereau, 233 N. Y. 540.)
   Andrews, J.

The testator devised certain real estate to his nephew, William H. Young, for life with remainder to his surviving children and to the issue of deceased children per stirpes. If,- however, this nephew left no descendants then to the grandnephews of the testator, G. L. Forman and C. E. B. Forman, in equal shares for life with remainder to their children.

The question before us is whether upon the petition of the original life tenant proper title may be conveyed under an order for the sale of premises made, however, without notice to the two Formans or to their children if any such there are. If not, the order appealed from must be reversed.

Where real property is devised to one for life with a contingent remainder to persons whose identity cannot be definitely fixed until the death of the life tenant the court may authorize its sale whether any of the persons who may eventually be entitled to the remainder are or are not in existence, but notice of such a proceeding must first be given to the life tenant and to every other person in being having an estate or interest, vested or contingent, in reversion or remainder, in said real property * * * provided that where a future estate or interest is limited in any contingency to persons who shall compose a certain class upon the happening of a future event, it shall be sufficient if such notice be served upon the persons who would have been entitled to such estate or interest if such event had happened immediately before the application is made.” (Real Prop. Law [Cons. Laws, chap. 50], sec. 67.)

The meaning of this provision seems reasonably clear. The children of William H. Young and their issue were a class. Had this remainder after his death been limited to them it would have been sufficient to have given notice, as was in fact done, to the living members of that class. (Matter of Mersereau, 233 N. Y. 540.) The will, however, did more than this. It provided for a second contingency. If none of his issue survived the life tenant, then the real estate passed to the Formans for life with remainder to their children. The living members of a class may represent that class. They do not represent others to whom the property may pass if none of that class survive. While relating to another matter what was said in Hess v. Hess (233 N. Y. 164) seems to justify this conclusion. The Formans and their living issue were entitled to notice.

The orders appealed from should be reversed, with costs in all courts, and the motion should be granted, with ten dollars costs.

His cock, Ch. J., Pound, McLaughlin, Crane and Lehman, JJ., concur; Cardozo, J., absent.

Orders reversed, etc.


author: McLaughlin, J.

text:
    The Farmers’ Loan and Trust Company, Individually and as Trustee under the Will of Herbert B. Turner, Deceased, Appellant, v. Elizabeth M. Turner, Individually and as Executrix of Thornton F. Turner, Deceased, et al., Respondents.
    Trustees — commissions —■ trustee entitled only to commissions on its testator’s equity in the real or personal property received or paid out — provisions of Civil Practice Act and Surrogate’s Court Act controlling amount of trustee’s commissions should be read together — commissions same in proceedings instituted in either court.
    1. A trustee who at the time of its testator’s death held mortgages on his real property and thereafter paid to itself part of the amount thereof out of the proceeds of a life insurance policy augmented by contributions from testator’s children and the balance from the proceeds received on a sale of such property, is not entitled to commissions on the amount of the mortgages. It is entitled only to commissions on its testator’s equity in the real or personal property received or paid out.
    2. Section 1548 of the Civil Practice Act and section 285 of the Surrogate’s Court Act which govern or control the amount of commissions to be awarded to a trustee should be read and construed together. The commissions, whether the action be brought in the Supreme Court for the settlement of the account or whether the proceeding be instituted in the Surrogate’s Court, are the same.

      Farmers’ Loan & Trust Co. v. Turner, 213 App. Div. 866, affirmed.
    (Argued February 26, 1926;
    decided March 30, 1926.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered May 22, 1925, which affirmed a judgment judicially settling the accounts of the trustee under the will of Herbert B. Turner, deceased, entered upon the report of a referee.

      C. Alexander Capron and James D. Ouchterloney for appellant.
    The trustee is entitled to commissions on the full amount of the proceeds of sale or on the full value of the real property, undiminished by the amount of the mortgages thereon at the date of testator’s death. (People ex rel. Stafford v. Surrogate’s Court of Genesee County, 229 N. Y. 495; Phœnix v. Livingston, 101 N. Y. 451; Robertson v. de Brulatour, 188 N. Y. 301; Matter of Bush, 227 N. Y. 85; Matter of Potter, 106 Misc. Rep. 113; Matter of Bearns, 188 App. Div. 215; Trimm v. Marsh, 54 N. Y. 599; Matter of Barker, 230 N. Y. 364; Cox v. Schermerhorn, 18 Hun, 16; Baucus v. Stover, 24 Hun, 109.)

      John B. Warner and Harry C. Miller for Herbert T. Lorentzen et al., respondents.
    The value of the real property devised to the trustee cannot be taken as the basis upon which to award commissions. (Robertson v. de Brulatour, 188 N. Y. 301; Matter of Hamersley, 99 Misc. Rep. 218.) The trustee is entitled to commissions only upon the proceeds of sale of the real property in excess of the mortgages thereon, and not upon the gross proceeds of sale. (Baucus v. Stover, 24 Hun, 109; Matter of Mercantile Trust Co., 210 N. Y. 83.)

      Russel S. Coutant and Hall Park McCullough for John M. Turner, respondent.
    Plaintiff as trustee is entitled to commissions only on the equity of the real property. (Matter of Mercantile Trust Co., 210 N. Y. 83.)
   McLaughlin, J.

A single question is presented by this appeal and that is the commissions to which the trustee is entitled under the last will and testament of Herbert B. Turner.

The testator, a resident of New Jersey, died on the 8th day of July, 1903. At the time of his death he owned two pieces of real estate in the city of New York. This real estate, with certain personal property, he gave and devised to the plaintiff in trust for certain purposes specified in his will. He had upwards of $50,000 fife insurance. The real estate was subject to mortgages thereon aggregating $200,000. One of the pieces of real estate was located on Madison avenue, New York city, upon which there was a mortgage of $160,000 made by the decedent to the trust company individually and held by it at the time of his death. The other piece of real estate was on Twenty-eighth street, New York city, and that was subject to a mortgage of $40,000 made by the decedent to the trust company individually and held by it at the time of his death. He expressed in his will a desire that his children should add or contribute to the life insurance fund enough to make $60,000 which amount should be used by the trust company in reducing the mortgage on the Madison avenue property to $100,000. His children, in obedience to his desire, paid to the trust company a sum sufficient to make, with his fife insurance, $60,000 and that amount the trust company paid to itself, thereby reducing its mortgage from $160,000 to $100,000.

The trust company subsequently sold the Madison avenue property for $400,000, and out of the purchase price it paid to itself, in satisfaction of the balance due on the mortgage thereon, $100,000. It sold the Twenty-eighth street property for $75,000 ($20,000 cash, and a purchase-money mortgage for $55,000). At the time the sale was made the trust company individually held a mortgage on that property for $40,000 and out of the purchase price it paid to itself $20,000 in cash and assigned and transferred to itself individually a participating interest to the extent of $20,500 in the purchase-money mortgage.

The receipt of the purchase price for both parcels and the satisfaction of the mortgages thereon were simultaneous transactions, and deeds of conveyance were not delivered to the purchasers until the trust company, as mortgagee, had received the full amount of the mortgage incumbrances in the manner above indicated.

This action was brought in the Supreme Court for the purpose of settling its account as trustee under the will of the testator. The only issue raised on the settlement of its account was the amount of commissions to which it was entitled. This issue was sent to a referee to hear and determine. The referee reported that the trust company was entitled only to commissions on the testator’s equity in the real estate mentioned*. Judgment was entered on the report and the trust company appealed to the Appellate Division. The Appellate Division unanimously affirmed the judgment and, by permission, this court allowed an appeal to it.

I am of the opinion that the judgment is correct and should be affirmed. The plaintiff, as trustee, was entitled only to commissions on the testator’s equity in the real or personal property received or paid out. It did not actually and in fact receive or pay out the amount of the mortgages. It is true that it did in form receive and pay out that amount but only in form. The testator at the time of his death did not own or have any interest in the real estate referred to, except his equity therein. The mortgages were owned and held by the trust company. It could not use the proceeds of the life insurance policy, augmented by contributions of the testator’s children, to pay itself, and claim commissions thereon any more than it could, by taking sufficient of the proceeds of the purchase money received on the sale of the real estate, pay to itself a sum sufficient to discharge the incumbrances and claim commission therefor. It would, it seems to me, be a travesty on justice to hold that, by shifting money from one pocket and putting it into the other, such act constituted receiving and paying out within the meaning of the statute. There are two statutes which govern or control the amount of commissions to be awarded to a trustee. Section 1548 of the Civil Practice Act (formerly section 3320 of. the Code of Civil Procedure) provides that “ Except as otherwise prescribed in regard to a testamentary trustee, a trustee of an expressed trust is entitled, and two or more trustees of such a trust are entitled, to be apportioned between or among them according to the services rendered by them respectively, as compensation for services as such, over and above expenses, to commissions as follows. * * * ” Section 285 of the Surrogate’s Court Act (formerly seetion 2753 of the Code of Civil Procedure) provides: “ On the settlement of the account of any * * * testamentary trustee, the surrogate must allow to him his * * * expenses actually paid by him * * *,” and commissions specified.., The value of any real or personal property, to be determined in such manner as the surrogate may direct, and the increment thereof, received, distributed or delivered, shall be considered as money in making computation of commissions. * * * ”

The section of the Civil Practice Act and the section of the Surrogate’s Court Act should be read and construed together. The commissions, whether the action be brought in the Supreme Court for the settlement of the account or whether the proceeding be instituted in the Surrogate’s Court, are the same. It would be an unwarranted and unjustified holding that an executor, administrator or trustee would be entitled to more commissions in one than in the other. The Legislature never intended such result.

The question presented by this appeal has, in principle, been decided by this court (Matter of Mercantile Trust Co., 210 N. Y. 83), and also by the late General Term (Baucus v. Stover, 24 Hun, 109). (See, also, Estate of Pease, 149 Cal. 167; Matter of Security Life Ins. & Annuity Co., 31 Hun, 36, p. 39; Matter of Smith Co., 31 App. Div. 39.) In the Baucus case the real estate of the testator was mortgaged and by virtue of a power in the will the executors sold the same, realizing a certain amount, and after satisfying the mortgage by payment a small surplus remained in their hands. The court held that the executors were entitled to commissions only upon the proceeds of the sale of the real estate aside from and above the amount of the incumbrances thereon at the time of the testator’s death; that the executors did not receive and could not have received anything more than the value of the equity, and it was upon this amount that commissions were to be computed. This case was cited with approval in the Mercantile Trust Co. case. There substantially all of the decedent’s personal estate consisted of 5,200 shares of copper stocks which had been purchased and at the time of his death were still being carried by his brokers on a margin. The executor directed the sale of these shares of stock to pay for the testator’s indebtedness to the brokers and, after such sale, there remained 500 shares upon which the brokers did not have a lien. We held that commissions were to be computed only upon the 500 shares; in other words, that commissions were to be computed only on the equity which the testator had in the stock at the time of his death. That rule is applicable here and was properly applied.

The judgment appealed from should, therefore, be affirmed, with costs.

Hiscock, ■ Ch. J., Pound, Crane, Andrews and Lehman, JJ., concur; Cardozo, J., absent.

Judgment affirmed.