author: Hubbs, J. Crane, Ch. J.

text:
    Emil Hauser, Appellant, v. Augusta M. Bartow, Respondent.

      Argued January 6, 1937;
    decided March 23, 1937.

      Max L. Schallek, Alfred Englander and Leon Vogel for appellant.
    The complaint states a cause of action for abuse of process. (Dishaw v. Wadleigh, 15 App. Div. 205; Dean v. Kochendorfer, 237 N. Y. 384; Foy v. Barry, 87 App. Div. 291; Assets Collecting Co. v. Myers, 167 App. Div. 133; Coulter v. Coulter, 214 Pac. Rep. 400; Matter of Dolowich, 246 App. Div. 209; Sneeden v. Harris, 109 N. C. 349.)

      Victor D. Borst, Jr., for respondent.
    The complaint fails to state a cause of action for abuse of process. (Lobel v. Trade Bank, 229 N. Y. Supp. 778; Lyons v. Scriber, 174 N. Y. Supp. 332; Kushdan v. Wilker Realty Co., Inc., 197 App. Div. 659; McClerg v. Vielee, 116 App. Div. 731; Deane v. Kochendorfer, 237 N. Y. Supp. 384; Doane v. Hescock, 155 N. Y. Supp. 210; Beardsley v. Kilmer, 200 App. Div. 378; Auburn & Cato Plank Road Co. v. Douglass, 9 N. Y. 444; Morris v. Tuthill, 72 N. Y. 575) Silverman v. U. F. A. Eastern Division Distribution, Inc., 236 N. Y. Supp. 18; Dishaw v. Wadleigh, 15 App. Div. 205; Risser v. Liberman Bros., 102 App. Div. 482.) This action is a collateral attack on the final accounting and of the incompetency proceeding and no attack can be made on those proceedings in this action by the plaintiff. (Warren v. Union Bank, 157 N. Y. 259; Butler v. Jarvis,
      4 N. Y. Supp. 137; Bridenbaker v. Hegeman, 98 N. Y. 351; Hull v. Hull, 225 N. Y. 342.) The plaintiff has failed to allege a successful termination of the prior action. (Risser v. Liberman Bros., 102 App. Div. 482; Dishaw v. Wadleigh, 15 App. Div. 205; Lyons v. Scriber, 174 N. Y. Supp. 332; Kushdan v. Wilker Realty Co., 197 App. Div. 659.)
   Hubbs, J.

This is an action to recover damages for malicious abuse of process. The lower courts have dismissed the complaint on the ground that it fails to state a cause of action. The complaint alleges that respondent conspired with others “ maliciously and wilfully, and without legal cause or warrant ” to have appellant declared incompetent so that she might control his property and prevent his executing a new will; that without the knowledge of appellant, respondent commenced a proceeding in the Supreme Court to have herself appointed committee of his person and property, and falsely and maliciously represented in that proceeding that he was violent and that it would endanger his life to appear in court and thereby induced the court to issue its process; that she was thereafter appointed committee of his person and property; that she caused him to be removed as an officer and director of a company in which they were each stockholders, sold certain securities and otherwise managed his property; that appellant was unaware of these proceedings until some time thereafter when respondent threatened to deprive him of his liberty; that he then applied to the Supreme Court, a jury trial was had on the issue of his competency, resulting in a verdict to the effect that appellant was then competent and an order was entered discharging respondent as committee and ordering her to account, and that she accounted and allowances were made to her for commissions, attorneys’ fees and other expenses.

The sole question before the court is: Do the facts so pleaded constitute a good cause of action?

The legal purpose of appointing a committee of one’s person and property is to conserve the property of the incompetent and to look after, care for and protect the person.

The complaint in effect alleges that such was not the purpose of the respondent, but that knowing that he was not incompetent, she conspired with others to have him wrongfully declared to be incompetent for a wrongful and ulterior purpose; that the apparently lawful act was unlawful because done untruthfully and maliciously with the sole purpose of injuring and damaging the appellant in order to bring about a financial benefit to herself. Assuming, as we must, that the allegations of the complaint are true, if it alleges a cause of action it should not have been dismissed because it was given a wrong label. If it sets forth facts which constitute a legal wrong which the law recognizes, it is sufficient as a pleading.

“ The gist of the action for abuse of process lies in the improper use of process after it is issued. To show that regularly issued process was perverted to the accomplishment of an improper purpose is enough.” (Dean v. Kochendorfer, 237 N. Y. 384, 390). “ The action is not for the wrongful bringing of an action or prosecution, but for the improper use, or rather ' abuse,’ of process in connection therewith — as the Pennsylvania court has aptly put it, for a perversion of legal process. The process of law must be used improperly and this means something more than a proper use from a bad motive. * * * If the process is employed from a bad or ulterior motive, the gist of 'the wrong is to be found in the uses which the party procuring the process to issue attempts to put it. If he is content to use the particular machinery of the law for the immediate purpose for which it was intended, he is not ordinarily hable, notwithstanding a vicious or vindictive motive. But the moment he attempts to attain some collateral objective, outside the scope of the operation of the process employed, a tort has been consummated. * * * The tortious character of the defendant’s conduct consists of his attempt to employ a legitimate process for a legitimate purpose in an improper manner, and this point must be clearly shown by the plaintiff to entitle him to maintain his action.” (Harper on The Law of Torts, § 272, pp. 593-595.)

It is not enough that the actor have an ulterior motive in using the process of the court. It must further appear that he did something in the use of the process outside of the purpose for which it was intended. (Cf. note, 27 Harvard Law Review, p. 594.) Every one has a right to use the machinery of the law, and bad motive does not defeat that right. There must be a further act done outside the use of the process — a perversion of the process. If he uses the process of the court for its proper purpose, though there is malice in his heart, there is no abuse of the process. He may be liable for malicious prosecution, but the distinction between these two wrongs must be kept in mind. As soon as the actor uses the process of the court, not to effect its proper function, but to accomplish through it some collateral object, he commits this tort. A concrete example may make this more intelligible. If one resorts to legal process to have another declared incompetent, and uses it for that purpose, he does not commit the wrong, though he may be guilty of another wrong, no matter what his motives, hopes or expectations may be. But if he makes use of that process, not for the purpose of attaining its proper end, but to extort fnoney, or to coerce action, that is a perversion'of process.

In this case, whatever may have been respondent’s motives, she used the process of the court for the purpose for which the law created it. She used it, she did not abuse it. Nowhere in the complaint can there be found any allegation that respondent did any act by virtue of the order adjudging the appellant incompetent and appointing her as committee of his person and property which was not within the scope of her duties as such committee or was in excess of the powers granted to her as such committee. The complaint, therefore, fails to state a cause of action for abuse of process.

It is urged that the complaint may be sustained as a complaint in an action for malicious prosecution. It appears, however, that the former proceeding has not been determined in appellant’s favor. That it has been so determined is a necessary allegation in an action for malicious prosecution. If the rule were otherwise there might exist at the same time two judgments between the same parties directly in conflict upon the same issue. True it is that there are cases to the effect that the action will lie without such allegation where the original proceeding was without personal service and the defendant therein had no opportunity to defend. (Bump v. Betts, 19 Wend. 421; Swensgaard v. Davis, 33 Minn. 368; Apgar v. Woolston, 43 N. J. L. 57; Whitten v. Bennett, 86 Fed. Rep. 405.)

«Assuming, however, that even though the order appointing the committee may have been jurisdictionally void, and that it would furnish no bar to an action for malicious prosecution of the incompetency proceedings, nevertheless the alleged incompetent thereafter appeared in the proceeding and, after his appearance, there was a conclusive adjudication of the validity of the original order.

The complaint alleges:

“ Nineteenth. That immediately upon the discovery by the plaintiff of the fact of the appointment of the defendant as committee, the plaintiff began an investigation of such appointment, and in and about the month of March, 1935, caused an application to be made to the Supreme Court of the State of New York, Westchester County, to set aside said appointment, which application resulted in an order of said Supreme Court directing a trial by jury of the issue of his competency.

“ Twentieth. That thereupon a jury trial of said issue was had in the Supreme Court, Westchester County, which resulted in a verdict by said jury that the plaintiff was competent both as to person and property.

“ Twenty-first. That thereupon an order was entered in said court discharging the defendant as such committee, and directing her to account for her acts as such, and thereupon the defendant accounted and allowances were made to her both for commissions, attorneys’ fees and other expenses which she had incurred in and about the management of said property belonging to the plaintiff, and the defendant accepted such commissions and made such expenditures.”

The proceedings upon that application are a part of the record in this appeal. In March, 1935, the plaintiff obtained orders to show cause why an order should not be made vacating and setting aside the order of this court adjudging said Emil Hauser an incompetent and appointing Augusta M. Bartow as committee of his person and property.” The petition upon which this order was presented shows that shortly after the defendant was appointed committee of the plaintiff’s person and property, the plaintiff was informed that she “ was perfectly willing to return the control of Ms property to him by the Fall of 1934 as she felt that the treatments which he was getting would put petitioner m good physical condition, for wMch reason your petitioner took no further steps in the matter.” The petition concludes with these words: Wherefore, your petitioner prays that the order of this court made the first day of August, 1934, appointing your petitioner’s half-sister Ms committee should be. set aside and vacated and an opportunity be given to your petitioner to defend the question of competency before a jury so that this Honorable Court may make an order removing said committee and restoring Ms property .to the petitioner.” Upon the return of the order to show cause the motion was granted to the extent of ordering that the competency of the incompetent be tried at the trial term of this court to be held,” etc. The plaintiff here might have contested, upon the return of the order to show cause, the validity of the original order made without notice to him. (Matter of Blewitt, 131 N. Y. 541.) Instead, he availed himself of the practice, also approved in that case, of showing that he was not incompetent at that time.

After the defendant was discharged as committee she filed her account and upon that accounting she was allowed commissions in the sum of $2,133.94.

Under those circumstances there has been a conclusive adjudication that the original order was valid; that is, issued upon sufficient cause. Indeed, since the petition of the appellant herein prays for the discharge of the committee of his person, and alleges, in effect, that for months after he knew of the appointment of the committee, he acquiesced therein, it is too late now to urge that the proceeding was initiated without cause. The appellant had his day in court and failed in his effort to have respondent’s original appointment revoked. It stands, therefore, as an adjudication after trial which bars an action for malicious prosecution.

It follows that no cause of action is stated and the judgment dismissing the complaint should be affirmed.

The judgment should be affirmed, with costs.

Crane, Ch. J.

(dissenting). One who has been wrongfully declared insane without notice or hearing at the instance of another, acting maliciously, knowing the allegations of insanity to be false, must have some remedy for such injustice. It cannot be that the form of action or the name we give it fails to arouse the court.

The complaint in this action has been held to be insufficient as not stating a cause of action for an abuse of process. In my opinion it is entirely immaterial whether it be called such or an action of malicious prosecution; it states a grievance recognized by law. (Keller v. Butler, 246 N. Y. 249, 254.) In that case the court said: Names and classifications of remedies are not indispensable to a court, although they may be convenient and necessary for the student. Justice may not tarry to tabulate. 0 The fact is, such a wrong must have a remedy. It is provided either in the action for malicious prosecution or in an action for abuse of process.” Continuing, we cited cases in the nature of malicious prosecutions for abuse of process. That insanity proceedings may be the basis for malicious prosecution, see Harper on The Law of Torts (§ 268); Reade v. Halpin (193 App. Div. 566, 569); Cooley on The Law of Torts ([4th ed.] §127). Even a civil proceeding brought to harass and oppress may give rise to such a remedy. (Burt v. Smith, 181 N. Y. 1.)

Says Harper in his Law of Torts (§ 268): “ Even under the narrow English rule, the action may be brought for insolvency or bankruptcy proceedings, since the reputation and credit of the plaintiff have sustained direct, pecuniary loss, and in most jurisdictions the action will lie for civil proceedings accompanied by arrest, attachment, or injunction. The institution of lunacy or insanity proceedings also comes within the principle since the liberty of the person charged is involved.”

Where the alleged insane person has had no notice or hearing the decision of the court finding him incompetent is not such a determination as bars the action for malicious prosecution. (Bump v. Betts, 19 Wend. 421; Swensgaard v. Davis, 33 Minn. 368; Apgar v. Woolston, 43 N. J. L. 57.) In the Swensgaard case it was said: “ The general rule, making the right to maintain an action of this nature [malicious prosecution] to depend upon the fact that the prosecution complained of has resulted in a determination in favor of the accused, is applicable only when the course of the prosecution has been such that the accused had the opportunity to controvert the facts alleged against him, and to secure a determination in his favor.”

Taking the essential allegations in the complaint we find them to set forth: The defendant maliciously and willfully and without legal cause or warrant, sought to have the plaintiff declared incompetent, so as to procure his property. That in July, 1934, the defendant, without the knowledge of the plaintiff, began a proceeding in the Supreme Court to have herself appointed committee of the plaintiff’s person and property, and caused such proceedings to be taken without notice to the plaintiff and without his knowledge, and she falsely and maliciously represented in said proceedings that the plaintiff was violent, and that it would endanger his life to appear in court; and she thereby induced the court to issue process and to appoint the defendant committee of the plaintiff’s person and property. The plaintiff was entirely unaware of these proceedings until late in 1934 when defendant threatened to deprive him of his liberty; that immediately after discovering what had been done the plaintiff applied to the Supreme Court to set aside the appointment. The application was granted after a jury on a hearing had declared the plaintiff competent.

The complaint then sets forth the following: “ That at all times the defendant knew that the plaintiff was not incompetent, insane or a lunatic.”

Here, in my opinion, we have pleaded a sufficient and complete cause of action for malicious prosecution. The judgment below should be reversed, with costs, and the motion to dismiss the complaint denied, with costs.

What a trial of this action may show we cannot tell; the plaintiff may not sustain his case. Now, however, we are dealing solely with his broad allegations- as if they were true.

The judgment should be reversed.

Lehman, Loughran, Finch and Bippey, JJ., concur with Hubbs, J.; Crane, Ch. J., dissents in opinion in which O’Brien, J., concurs.

Judgment affirmed.


source: Caselaw Access Project

author: Rippey, J.

license: Public Domain

text:
    Elsie Smith, Respondent, v. Thomas P. Smith, Jr., Appellant.
    Argued January 25, 1937;
    decided March 23, 1937.

      Harold St. L. O’Dougherty and Peter A. McCabe for appellant.
    The evidence warranted a dismissal of the complaint on the merits. (McKee v. McKee, 267 N. Y. 96; Pearson v. Pearson, 230 N. Y. 141; Umbach v. Umbach, 183 App. Div. 495; Strnad v. Strnad, 238 App. Div. 572; Donohue v. Donohue, 180 App. Div. 561.) Caution should be exercised before adjudging defendant as cruel, inhuman and of unsafe conduct. (Kennedy v. Kennedy, 73 N. Y. 369; Pearson v. Pearson, 230 N. Y. 141; Donohue v. Donohue, 180 App. Div. 561; Lundquist v. Lundquist, 184 App. Div. 949; DeVide v. DeVide, 186 App. Div. 814; Greene v. Greene, 244 App. Div. 219; Umbach v. Umbach, 183 App. Div. 495; Maloney v. Maloney, 131 Misc. Rep. 830; Averett v. Averett, 189 App. Div. 250.)

      Myron Krieger for respondent.
    The facts found by the Appellate Division are sustained by the weight of evidence. (Getty v. Roger Williams Silver Co., 221 N. Y. 34; Larkin v. N. Y. Tel. Co., 220 N. Y. 27; Matter of McMillan, 218 N. Y. 64; White v. Lehigh Valley R. R. Co., 211 App. Div. 177; Pearson v. Pearson, 230 N. Y. 141; Weinreb v. Weinreb, 199 App. Div. 966; Kissam v. Kissam, 21 App. Div. 142; Smith v. Smith, 92 App. Div. 442; Heylum v. Heylum, 119 Misc. Rep. 113; Lutz v. Lutz, 9 N. Y. Supp. 858; McNulty v. McNulty, 119 App. Div. 150.) Plaintiff having sustained the burden of proof on all grounds found by the Appellate Division, dismissal by the trial court of her complaint upon the merits was contrary to law. (McNulty v. McNulty, 119 App. Div. 150.)
   Rippey, J.

This is an action for a separation (Civ. Prac. Act, § 1161). Plaintiff sought to maintain her action on the grounds (1) of neglect and refusal by defendant to provide for her; (2) of cruel and inhuman treatment by defendant, and (3) that there was such conduct on the part of the defendant toward her as to render it unsafe and improper for her to live with him. Defendant denied that he had neglected or refused to provide for her or that he had treated her in any improper manner. After a trial, in which plaintiff was given every opportunity to prove her charges, the complaint was dismissed. Upon appeal, the Appellate Division, by a divided court, reversed the findings and decree made by the trial court upon the law and the facts, adopted the findings proposed by plaintiff to the trial court which it had refused to make, and directed the Special Term to enter a decree for the plaintiff on the grounds stated in (2) and (3) above, which was accordingly done. From the decree thus entered and from the order of the Appellate Division, defendant has appealed to this court. -From our examination of the facts, which it is our duty to make (Civ. Prac. Act, § 589, subd. 2), we are satisfied that the findings made by the Appellate Division cannot be sustained, and that the findings and decree of the trial court must be reinstated.

The parties were married February 11, 1912, and lived together as husband and wife continuously until September 6, 1934, except for a period of about six months in 1920, and for a period of about three months in 1930, when defendant felt compelled and justified because of disagreements between the parties to five elswhere than with the plaintiff. On September 6, 1934, plaintiff, voluntarily and without cause, packed her belongings and left the defendant. She gave him no previous notice that she was going to leave and left no word or notice as to where she had gone. She took her departure after he had left home in the morning for work. At all times during their marriage defendant had provided for her support and maintenance to the fullest extent within his means and had liberally provided for his son’s education through college. Even after the plaintiff had abandoned him on September 6, 1934, as soon as he learned of her whereabouts, he voluntarily sent her $80 each month until this action was commenced. Both of the lower courts refused to find that defendant had refused and neglected properly to provide for or support the plaintiff.

The marriage relations of the parties were more or less unhappy from the beginning. Between 1920 and 1930, differences arising out of religious and other matters became more and more pronounced, for all of which plaintiff was largely responsible. Exclusive of testimony relating to such disagreements and quarrels, plaintiff relied upon two specific instances of cruel and inhuman treatment. The first occasion occurred on a Sunday morning in 1930, when plaintiff interfered in an attempt by defendant to have his son attend Sunday school. Plaintiff testified that defendant struck her at that time. This, defendant denied. There were no witnesses to the incident and no testimony to corroborate the story of either. The trial court did not believe her story. Where truth hangs Upon the credibility of witnesses, courts should consider the advantages of the trial court who has seen and heard the witnesses. (Boyd v. Boyd, 252 N. Y. 422.) The second occasion was in March, 1934, when a violent episode occurred when defendant discovered a clandestine meeting between his wife and another man.. Defendant made no charges of infidelity. Although a quarrel occurred, plaintiff did not testify that any blows were struck. She and her mother testified that defendant acted violently and in a threatening manner. Such conduct on the part of the defendant, under the circumstances disclosed by the record, should not have surprised her. There was nothing done here to indicate any cruel or inhuman treatment of plaintiff by the defendant. There was no testimony by any one that any blows were struck or that defendant threatened his wife with bodily harm.

Otherwise, giving plaintiff the advantage of every favorable inference that can possibly be drawn from the testimony, this record contains nothing further than that there were more or less frequent quarrels between the parties and incompatibility. That furnishes no ground for a decree of separation in this State. (Donahue v. Donohue, 180 App. Div. 561; Kennedy v. Kennedy, 73 N. Y. 369; Pearson v. Pearson, 230 N. Y. 141, 146, 148.) In the Kennedy case (quoting from Bishop on Marriage and Divorce, p. 717), it is said that There must be either actual violence committed with danger to life, limb or health, or there must be a reasonable apprehension of such violence ” (p. 374), to constitute cruel and inhuman treatment. In the Pearson case this court said: “ Cruelty is not limited to bodily hazard and hardship * * *. The test of cruel and inhuman treatment where no blows are struck or threatened should be applied with great caution. Insulting and angry words may cause discomfort and annoyance, but their natural purpose and effect is neither to injure health nor to endanger reason. Incompatibility of temper is no ground for separation in New York. The misery arising out of domestic quarrels does not justify a termination of the legal rights and duties of husband and wife. For such ills the patients must minister unto themselves; our courts of justice offer no cure. To the Well-established rule this case presents no exception.”

The record here affirmatively shows that the plaintiff apprehended no danger of bodily harm from anything which arose out of any of the quarrels between the parties. None of them interfered with her social or church activities. It is quite clear that she had no fear of violence from her husband, for she continued to live with him steadily after the incident in March, 1934, for a period of six months until she voluntarily and without cause abandoned him. The evidence here is undisputed that the defendant has always been a man of good habits, a steady worker and a good provider. There is not a shred of evidence upon which there could be based a finding that his habits or conduct were such as to make it unsafe or improper for plaintiff to live with him.

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

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

Judgment accordingly.


author: Per Curiam.

text:
    Isaac Mendelsohn, Respondent, v. Joseph Rosenberg, Appellant, Impleaded with Others.
    Submitted March 2, 1937;
    decided March 23, 1937.

      Lloyd B. Kanter for appellant.

      Benjamin Cohen for respondent.
    The order is not a final order affecting a substantial right, and is one made in the exercise of discretion, and is not reviewable by the Court of Appeals. (Klasko Finance Corp. v. Belleaire Hotel Corp., 257 N. Y. 1; Geller v. Flamount Realty Corp., 260 N. Y. 346.)
   Per Curiam.

Although this court allowed the appeal in this cause, it has been called to our attention that the order is not appealable. (Matter of Steinman v. Conlon, 208 N. Y. 198; Hand v. Ortschreib Building Corp., 254 N. Y. 15. See Jewelers’ Mercantile Agency v. Jewelers’ Weekly Pub. Co., 155 N. Y. 241.) We, therefore, do not pass on the merits but reserve the question until properly before us for review.

The appeal should be dismissed, with costs.

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

Appeal dismissed.


text:
    Edna B. Levine et al., Appellants, v. Russell Blaine Company, Respondent.
    Argued March 9, 1937:
    decided March 23, 1937.

      Samuel M. Zuckerman and Mildred Zuckerman for appellants.
    The defendant was negligent in providing for the use of its tenants a rough and coarse handxope which was entirely covered with stiff bristles, slivers, splinters and other dangerous particles which protruded through and extended from the surface layers thereof and which was exposed and in no wise protected by any cover or precautionary measure so that when touched it would prevent any sliver, bristle or other part of the rope from pricking or lacerating the skin and causing damage and in permitting the dangerous and defective rrpe and the condition it Was in to exist for a period of two months prior to the accident. (Sellers v. Dempsey, 26 App. Div. 22; Rosen v. Potterbaum, 151 App. Div. 713; Nadel v. Fichten, 34 App. Div. 188; Albert v. Wachsman, 169 N. Y. Supp. 138; Harkin v. Crumbie, 14 Misc. Rep. 439; Toitman v. Roosin, 166 N. Y. Supp. 821; Knupfle v. Knickerbocker Ice Co., 84 N. Y. 488; Deane v. Stegherr, 160 N. Y. Supp. 1113.) The accident was foreseeable. (Hall v. N. Y. Tel. Co., 214 N. Y. 49; Condran v. Park & Tilford, 213 N. Y. 341; Lowery v. Manhattan Ry. Co., 99 N. Y. 158; Metallic Comp. Casting Co. v. Fitchburg, 109 Mass. 277; Ramsey v. Carolina-Tenn. Power Co., 143 S. E. Rep. 861; Hollidge v. Duncan, 199 Mass. 121; Wagner v. International Ry. Co., 232 N. Y. 176.) The trial court erred in excluding expert testimony as to the general custom concerning the use of handropes and all expert testimony concerning the nature, texture and use of handropes. (Garthe v. Ruppert, 264 N. Y. 290; Shannahan v. Empire Engineering Corp., 204 N. Y. 543; Rich v. Pelham Hod Elevating Co., 23 App. Div. 246; Jarvis v. Brooklyn Elevated R. R. Co., 16 N. Y. Supp. 96; 133 N. Y. 623; Jenks v. Thompson, 179 N. Y. 20.)

      H. H. Brown and E. C. Sherwood for respondent.
    There was no evidence from which negligence on the defendant’s part could be inferred. (Naffky v. Yosovitz, 268 N. Y. 118; Burke v. Witherbee, 98 N. Y. 562; McKinney v. N. Y. Consolidated R. R. Co., 230 N. Y. 194;
      Paul v. Consolidated Fireworks Co., 212 N. Y. 117; Vandenberg v. Reiss Construction Co., 263 N. Y. 500; Glasier v. Town of Hebron, 131 N. Y. 447; Cleveland v. New Jersey Steamboat Co., 125 N. Y. 299; Loftus v. Union Ferry Co. of Brooklyn, 84 N. Y. 455; Demjanik v. Kultau, 242 App. Div. 255; Polsey v. Waldorf-Astoria, Inc., 220 App. Div. 613; Rowley v. Newburgh Light, Heat & Power Co., 151 App. Div. 65; MacRae v. Chelsea Fibre Mitts, 145 App. Div. 588.) The trial court did not err in excluding expert testimony concerning the use of hand-ropes. (Ryan v. Cortland Carriage Goods Co., 133 App. Div. 467; Harley v. B. C. M. Co., 142 N. Y. 31; Burke v. Witherbee, 98 N. Y. 562; Bennett v. Long Island R. R. Co., 163 N. Y. 1; Sweeney v. B. & J. Envelope Co., 101 N. Y. 520; Chaffee v. Erie R. R. Co., 140 App. Div. 38; Paul v. Consolidated Fireworks Co., 133 App. Div. 310; Cleary v. Dietz Co., 222 N. Y. 126; Ruback v. McCleary, Wallin & Crouse, 220 N. Y. 188.)
   Per Curiam.

In a tenement house, maintained by the defendant, the hand rope used by the tenant in operating a dumbwaiter was, according to the testimony, dirty and rough. Stiff bristles or slivers protruded from the rope. "While the plaintiff Edna Levine was using the rope, a' stiff piece of fibre cut her finger. Infection developed and amputation of the arm followed. The Appellate Division has reversed a judgment rendered against the defendant for the consequent damages and has dismissed the complaint.

Ordinarily the fitness of a rope for a particular use and possibility of danger arising in such use depends upon its tensile strength rather than upon any other qualities. We are agreed that upon this record the plaintiffs failed to prove that a reasonable man would have foreseen or guarded against the risk of injury to his tenants from bristles or slivers of the rope as described by the witnesses, or even as shown by the part which the plaintiffs offered in evidence. A more doubtful question is whether the plaintiffs were prevented from supplying the necessary proof by the erroneous exclusion of evidence intended to show a general custom or practice to equip dumbwaiters with ropes which do not develop any bristles, slivers or splinters, and of expert evidence' concerning the nature and qualities of rope.

We have said that “ General usage or custom may be shown in order to establish a standard of construction and equipment. When a question of negligence is involved the general usage or practice is competent to show either ordinary care or the failure to exercise such care. (Shannahan v. Empire Engineering Corp., 204 N. Y. 543.) One is not obliged, however, to use the best methods or to have the best equipment or the safest place, but only such as are reasonably safe and appropriate for the business.” (Garthe v. Ruppert, 264 N. Y. 290, 296, opinion by Crane, J.)

A smoother rope might have advantages other than greater safety. Its customary use might be due to these advantages, and might not show a general recognition that risk of injury would arise from use of a rougher rope. Proof of such custom or practice would then be insufficient, standing alone, to show negligence on the part of an owner who made other choice; but the chain of proof might, in this case, have been completed if evidence of customary use of a different rope had been supplemented by expert evidence explaining how and why one kind of rope may cause a foreseeable risk of injury which others customarily avoid by choice of a rope of a different kind. Perhaps even if the plaintiffs’ proffered evidence had been admitted it would still have been true that no reasonable inference could be drawn that the defendant was negligent, but the rulings at the trial unduly hampered the plaintiffs in the presentation of their case.

The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.

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

Judgments reversed, etc.


text:
    H. William Thompson, Doing Business under the Name of Lyric Theatre, Respondent, v. Fred Boekhout et al., Appellants
    Argued March 3, 1937;
    decided March 23, 1937.

      Norman A. O’Brien for appellants.
    The controversy was a labor dispute or grew out of a labor dispute and was governed by section 876-a of the Civil Practice Act.
      (United Electric Coal Co. v. Rice, 80 Fed. Rep. [2d] 1; Wiley v. Solvay Process Co., 215 N. Y. 584; Caddy v. Interborough R. T. Co., 195 N. Y. 415; People ex rel. Bockes v. Wemple, 115 N. Y. 302; Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260; J. H. & S. Theatres v. Fay, 260 N. Y. 315; American Furniture Co. v. I. B. of T. C. & H. of A. Chauffeurs, etc., 268 N. W. Rep. 250; Senn v. Tile Layers Protective Union, 268 N. W. Rep. 270; Kansas v. Personetta, 114 Kan. 680; Tri-City Central Trades Council v. American Steel Foundries, 238 Fed. Rep. 728; Iron Moulders Union v. Allis-Chalmers Co., 166 Fed. Rep. 45.)

      Jeremiah T. Mahoney and William E. Goldman for International Longshoremen’s Association et al., amici curiæ.

    The controversy between plaintiff and defendants involves a labor dispute within the purview of section 876-a of the Civil Practice Act. (Wallace Co. v. International Assn., 63 Pac. Rep. [2d] 1090; Levering & Garrigues Co. v. Morrin, 71 Fed. Rep. [2d] 284; Miller Parlor Furniture Co. v. Furniture W. I. Union, 8 Fed. Supp. 209; Cinderella Theatre Co. v. Sign Writers’ Local Union, 6 Fed. Supp. 164; American Furniture Co. v. I. B. of T. C. & G. of A., 268 N. W. Rep. 250; Scofes v. Helmar, 205 Ind. 596; Wisconsin State Federation v. Simplex Shoe Mfg. Co., 215 Wis. 623; Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260; Bossert v. Dhuy, 221 N. Y. 342; Nann v. Raimist, 255 N. Y. 307; J. H. & S. Theatres v. Fay, 260 N. Y. 315; Tri-City Central Trades Council v. American Steel Foundries, 238 Fed. Rep. 728; Iron Moulders Union v. Allis-Chalmers Co., 166 Fed. Rep. 45.)

      Nicholas J. Weldgen for respondent.
    No labor dispute was involved and section 876-a of the. Civil Practice Act has no application. (Remington-Rand, Inc., v. Crofoot, 248 App. Div. 356; LaRose v. Possehl, 156 Misc. Rep. 476; Lauf v. Shinner, 82 Fed. Rep. [2d] 68; Scavanger Service Corp. v. Courtney, 85 Fed. Rep. [2d] 825; Safeway v.
      Retail Clerks Union, 184 Wash. 322; American Foundry v. Tri-City Council, 257 U. S. 184.)
   Per Curiam.

The application of section 876-a of the Civil Practice Act is confined to injunctions in cases “ involving or growing out of a labor dispute.” The Legislature has in the same section defined “ labor disputes.” That definition makes clear the intent of the Legislature to subject injunctions issued in disputes involving or growing out of the relations of employer and employee to special regulations deemed appropriate to the nature of such disputes. Where the owner of a small business seeks to avoid labor disputes ” as defined in the statute, by running his business without any employees, an attempt to induce or coerce him to hire an employee or employees, upon terms and conditions satisfactory to persons associated in such attempted inducement or coercion is not a “ labor dispute ” within the letter or spirit of the statutory definition. We hold that the statute has no application in this case. For that reason we do not consider the respondent’s contention that the statute is not valid.

The order should be affirmed, with costs, and the question certified answered in the affirmative.

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

Order affirmed, etc.


author: Hubbs, J.

text:
    The People of the State of New York, Respondent, v. Brooklyn and Queens Transit Corporation, Appellant.
    Argued March 8, 1937;
    decided April 20, 1937.

      Trdbue Carswell and George D. Yeomans for appellant.
    It was error to exclude from consideration the defense that defendant owned the strip of land in question and had the right to devote it to railroad use in the maintenance and operation of its trolley loop terminal. (People v. Sutherland, 252 N. Y. 86.) There was no offer and acceptance of a dedication of the strip of land for a public street. The maps do not indicate any offer of dedication of the land for a public street or constitute in any wise any proof of a dedication. (Nichols Copper Co. v. Connolly, 208 App. Div. 667; 240 N. Y. 596; Matter of Fox St., 54 App. Div. 479; Stillman v. City of Olean, 228 N. Y. 322; Mark v. Village of West Troy, 76 Hun, 162; 151 N. Y. 453; People v. Underhill, 144 N. Y. 316; Smith v. Smythe, 197 N. Y. 457; Matter of City of New York [Wallace Ave.], 222 N. Y. 139; Matter of City of New York [Saratoga Ave.], 226 N. Y. 128.) The evidence does not show that the defendant and its predecessors threw open their property for use by the general public as a passageway and with intent that it should become a public street. (N. Y. C. & H. R. R. R. Co. v. Village of Ossining, 141 App. Div. 765; 207 N. Y. 648; Conklin v. N. Y. C. & H. R. R. R. Co., 149 App. Div. 739; 207 N. Y. 752; Lehigh & H. R. R. Co. v. Village of Warwick, 164 App. Div. 55.) There was no acceptance by the municipality of any offer of dedication. (People v. Underhill, 144 N. Y. 316; Smith v. Smythe, 197 N. Y. 457; Matter of City of New York [Wallace Ave.], 222 N. Y. 139.) On the evidence there was not, as a matter of law, such user by the public and exercise of control and dominion by the city as to establish the character of the strip of land as a public street, for the purpose of the conviction of the defendant. (Speir v. Town of New Utrecht, 121 N. Y. 420; Palmer v. Palmer, 150 N. Y. 139; Johnson v. City of Niagara Falls, 230 N. Y. 77; People v. Sutherland, 252 N. Y. 86; Klin Co. v. N. Y. R. T. Corp., 271 N. Y. 376.) It was not possible for the municipality to acquire the land here in question for a public street, paramount to the rights of the railroad companies. (Matter of City of Buffalo, 68 N. Y. 167; Matter of Mayor [161st St.], 52 Misc. Rep. 596; 135 App. Div. 912; 198 N. Y. 606; Matter of City of New York [Saratoga Ave.], 226 N. Y. 128; City of Cohoes v. Morrison, 42 Hun, 216; 116 N. Y. 662; Speir v. Town of New Utrecht, 121 N. Y. 420; Pennsylvania R. Co. v. Freeport, 138 Penn. St. 91; Conabeer v. N. Y. C. & H. R. R. R. Co., 156 N. Y. 474; Adirondack Power & Light Co. v. Evans, 226 App. Div. 490; Matter of City of New York [Realty Associates], 256 N. Y. 217.)

      Charles P. Sullivan, District Attorney (John H. W. Krogmann of counsel), for respondent.
    The evidence warranted the finding that the People had acquired rights by user in Palmetto street, that it was in fact a public highway, and it follows therefrom that a conviction of the defendant could properly be had. (Matter of Fox Street, 54 App. Div. 479; Bissell v. N. Y. C. R. R. Co., 23 N. Y. 61; Smyles v. Hastings, 22 N. Y. 217; People ex rel. Minard v. Donovan, 228 App. Div. 596.) The Highway Law (Cons. Laws, ch. 25) establishes the public right in and to the area in the case at bar, irrespective of any dedication by the owner. (Jaynes v. Sammis, 132 N. Y. 239; Wellsville v. Hallock, 139 N. Y. Supp. 961; Davenpeck v. Lambert, 44 Barb. 596; McCutcheon v. Terminal State Comm., 88 Misc. Rep. 601; Buffalo v. D., L. & W. R. R. Co., 68 App. Div. 488; 178 N. Y. 561; Ivory v. Deerpark, 116 N. Y. 476; Porter v. Village of Attica, 33 Hun, 605; McCarthy v. Lake Shore R. R. Co.,
      76 N. Y. 592; People v. Sutherland, 252 N. Y. 86.) There is no evidence of any abandonment. The highway having been established, the burden would be upon the defendant to establish abandonment. There was no attempt to offer proof in that regard. (Horey v. Haverstraw, 124 N. Y. 273; Trainer v. Lewis, 243 App. Div. 630; Town of Leray v. N. Y. C. R. R. Co., 226 N. Y. 109.)
   Hubbs, J.

The only question presented for determination upon this appeal is whether the land involved is a public street or highway.” Upon that issue, the burden of proof was upon the People to establish beyond a reasonable doubt that the land in question constituted a public highway or street. (People v. Sutherland, 252 N. Y. 86.) The Court of Special Sessions had jurisdiction to determine that question, as the issue was not as to the title of land but as to whether the particular land constituted a “ public street or highway.” (People v. Loehfelm, 102 N. Y. 1.)

The information charged that “ The defendant on or about November 16, 1934, and for several months prior thereto, prior to the time of filing this information did unlawfully maintain a public nuisance at the public highway on Palmetto Street and Myrtle Avenue at Ridgewood in the Borough and County of Queens, City and State of New York, by maintaining thereon four sets of trolley tracks and using same as a terminal for six trolley lines and by continuously blocking the same with parked trolley cars, thereby preventing free access to, over and along said highway by persons operating motor or horse-drawn vehicles. * * * ”

In section 1530 of the Penal Law a public nuisance ” is defined as “ a crime against the order and economy of the state, and consists in unlawfully doing an act, or omitting to perform a duty, which act or omission: * * * 3. Unlawfully interferes with, obstructs, or tends to obstruct, or renders dangerous for passage * * * a public park, square, street or highway * *

Defendant concedes that it has maintained four sets of trolley tracks on the land in question and has used it as a terminal. In 1865 Nicholas Wyckoff, the owner of the land in question and adjoining land, filed a map in Queens County Register’s office on which he plotted the land into lots with streets. One street was called Palmetto street. The land so plotted was used as farm land. Thereafter a large part of that land, including the land plotted as Palmetto street, was conveyed by farm description to Andrew Ginder. In 1871 Cinder filed another map in the Register’s office showing the land divided into lots and indicating Palmetto street located as before. He thereafter conveyed certain of the lots with reference to that street. In 1880 and 1881 the Bushwick Railroad Company (one of defendant’s predecessors) established a large railroad terminal which included the area of Palmetto street as indicated on the maps extending from Myrtle avenue on the south to St. Nicholas avenue on the north. The land used as a terminal was acquired in fee by conveyances from Ginder and his grantees and included all lots abutting on Palmetto street as designated on the map between Myrtle and St. Nicholas avenues.

Prior to 1880 and 1881, when the railroad company obtained title, nothing is shown to have been done tending to establish acceptance by the city and construction of a street on the strip of land in question or that there was any public user thereof. In 1881 the Bushwick Railroad filed- a map, now in the records of the Register’s office of Kings county. That was a route map of one of its lines. Part of the route was along Palmetto street as that street is projected through and over the lands of the Bushwick Railroad Company. Two other maps were produced by the People. It does not appear that those maps were made by the authority of the owners of the property or by authority of the city. From 1881 until the electrification of the railroad in 1898, the strip of land in question was used exclusively by the railroad for terminal purposes. There was no paving except in front of the waiting room and in front of the office.

From 1896 until 1917 a system of terminal operations similar to the one now in use was maintained on the strip of land. There were four tracks without pavement between and no space for vehicular traffic. In 1917 the railroad company reconstructed the tracks, laying three tracks instead of four and placed paving between the tracks but not outside of the rails. In 1923 and the years following the company paved other portions of the so-called street until now it is paved for its full width but without curbs or walks. Some of this paving was done at the oral request of the Transit Commission in order to afford passengers better facilities. In 1931 the fourth track was again constructed. During all these years the railroad company continued to use this strip of land and the adjoining land for its terminal operations.

Land on each side of the so-called street was conveyed by the railroad company to individuals in 1919 and 1920 by deeds which excluded any part of this strip. The city does not maintain lights thereon, but it is lighted by the railroad company.

The prosecution relies maimy upon the maps above referred to showing Palmetto street at the location in question to establish that the land in question constituted a public street or highway. There was produced also another map setting forth the changes in the street system of the city, duly approved by the Board of Estimate and Apportionment, and including Palmetto street covering the land in question.

The People also furnished evidence as to the use of the street by the public and of certain activities by the city. In effect, the evidence as to use was that witnesses had seen extensive use of this street by vehicles as well as by pedestrians; that certain owners of the abutting property conducted business thereon and used the street for exits and entrances; that the area in question was patrolled by the New York City Police Department; that it was used by the motor patrol and by police officers each hour; that No Parking ” signs were placed on the street by the police department; that in April, 1934, on four days employees of the city were engaged in laying an ash walk on a portion of the premises and that a city fire hydrant was placed in the area. Basing its claim on that evidence, the prosecution contends that the land in question was a public street, first, because of dedication and acceptance, and, second, upon a prescriptive right under section 189 of the Highway Law (Cons. Laws, ch. 25). As to the latter ground, it is clear under the decisions that use alone does not make a public highway. Section 189 in effect states-that all lands which shall have been used by the public as a highway for a period of twenty years or more shall be a highway with the same effect as if duly laid out and recorded as one. In People v. Sutherland (supra, p. 91) this section was construed and ihe court said: On the other hand, mere travel by the public over a country road not laid out or dedicated by the owner without more has never been held to be use of the road by the public as a highway, under section [then] 209 of the Highway Law. Many private roads are thus used by the public without becoming public highways. The road must not only be travelled upon by the public but it must also be kept in repair or taken in charge and so adopted by the public authorities. 1 We think all this is implied in the words used as public highways.’ * * * The burden was on the People to establish that the road had been taken charge of by the public authorities and treated and regarded by them as a public highway like the town highways generally, for the period of twenty years or more, so that the town became responsible for its condition (Highway Law, § 74), and persons obstructing the same became subject to punishment under Penal Law, section 1530.”

This brings us to the question of dedication and acceptance. Whether land has been dedicated by the owner to the use of public travel and whether it has been accepted for that purpose involves the intent and acts of the owner and the intent and acts of the municipality.

“ The intent of the respective parties must be followed by appropriate and characteristic acts upon the part of each party.” ([Flack v. Village of Green Island, 122 N. Y. 107, 113.) The owner’s acts and declarations should be such as to manifest an intention to abandon or devote his property to the specific public use.” (Cook v. Harris, 61 N. Y. 448, 454.) £ Where a plot is made and recorded, the requisite intention is generally indisputable.’ (Dillon on Mun. Corp. § 636.)” (Flack v. Green Island, supra, p. 114.) 11 To constitute a public highway by dedication, there must not only be an absolute dedication, a setting apart and a surrender to the public use of the land by the proprietors, but there must be an acceptance and a formal opening, by the proper authorities or a user.” (Niagara Falls Suspension Bridge Co. v. Bachman, 66 N. Y. 261, 269.) In the case of a highway, the public must accept the highway, and before such acceptance the dedication may be revoked. Such acceptance may be proved by long public use, or by the positive acts of the public authorities in recognizing and adopting the highway.” (Cook v. Harris, supra, p. 456.)

The trial court may have been justified in finding that there was a dedication of the strip of land in 1865 by Wyckoff and a rededication in 1871 by Ginder. There is, however, no proof in this record that there was any acceptance prior to the time the Bushwick Railroad became seized of the land. From 1881 the railroad and its successors used the land within the described street for its terminal operations. Such use was repugnant to the idea of a continuing dedication. In the face of this continued use, the maps subsequently drawn by the railroads cannot be construed as a dedication. No doubt the railroad company’s route map of its lines showing this area as a street was made for the purpose of identifying the location of its property. Palmetto street above and below the disputed strip is a public street, and the use of that name in connection with this area is understandable.

Even though there had been a dedication, the facts in this record are not sufficient to show an acceptance by the city. The premises were used as a terminal, and between thirty and forty thousand persons were accommodated there daily. Use of this area by pedestrians not on business with the carrier could be inferred to have been made with the permission of the railroad. Such use by vehicles may have been likewise permitted. The only acts of the city, cited in support of an acceptance, are: the use of the strip by travelers; the placing of the fire plug; the policing of the area; the placing of No Parking ” signs, and the isolated instance of putting an ash sidewalk on a portion of the premises. In view of the fact that this district was built up and that so many people use it every day on railroad business, these acts do not evidence an intent to accept the street, particularly after such a lapse of time.

What the city has failed to do is even more significant than what it has done affirmatively. This section is a closely built up part of the city. The streets surrounding it are paved, lighted, and have curbs and sidewalks. Yet this strip of land was never paved by the city, sidewalks were not built thereon, nor were lights placed thereon by the city. Crowds of people were daily accommodated on the strip by the railroad company. Besides all this, it has for many years used this land in this manner without objection on the part of the city.

The judgments should be reversed and the information dismissed.

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

Judgments reversed, etc.


author: Finch, J.

text:
    Antonio Grossi, Respondent, v. Rialto Security Corporation, Appellant.

      Argued March 22, 1937;
    decided April 20, 1937.

      Norman Handel and Samuel Gutterman for appellant.
    By the later assignment to him, plaintiff acquired only the right, title and interest which the assignor possessed and nothing more. (Salem Trust Co. v. Manufacturers’ Finance Co., 264 U. S. 182.) The provisions of the factoring agreement expressly permitted the defendant to charge the deficiency on the “ Group B ” accounts against the surplus on the “ Group A” accounts. (National Nassau Bank v. Ludington’s Sons, Inc., 164 App. Div. 466; United States Trust Co. v. Mendelson, 209 App. Div. 751; Matter of Shanaburgh, 154 Misc. Rep. 559; Seibert v. Dunn, 216 N. Y. 237.)

      Samuel Sobel, Stanley R. Weinstein and Henry Uselaner for respondent.
    There were no defenses existing against the assignor in favor of the defendant at the time of the assignment to the plaintiff. The agreement between the original parties was fully performed at that time. (Merchants Bank of Buffalo v. Weill, 163 N. Y. 486; Union Trust Co. of Rochester v. Allen, 239 App. Div. 661; Kommel v. Herb-Gner Constr. Co., 256 N. Y. 333; Myers v. Davis, 22 N. Y. 489.)
   Finch, J.

The facts in this case are agreed upon by-stipulation. On May 6, 1931, the defendant, the Rialto Security Corporation, entered into a factoring agreement with the Nugent Shoe Company. Pursuant to this agreement eleven assignments of accounts receivable were made to the defendant prior to August 10, 1931, and the defendant advanced moneys on this collateral in accordance with the factoring agreement. For the purposes of this discussion these assignments will be referred to as Group A. On August 10, 1931, the Nugent Shoe Company executed an assignment of its right, title and interest in the Group A accounts to the plaintiff subject to the prior rights of the defendant and notice of this assignment was given to the defendant. Thereafter the Nugent Shoe Company continued to make assignments of accounts receivable to the defendant until November 14, 1931, and the defendant continued to advance money on such additional collateral. These latter assignments will be designated as Group B.

Ultimately the Group A assignments returned a surplus of $750 over and above all moneys advanced by the defendant in connection with these assignments. The collection of the Group B assignments, however, resulted in a deficit of more than $1,000. The sole question involved on this appeal is whether the defendant may apply the $750 surplus toward the $1,000 deficit.

The plaintiff contends that since the defendant was given notice of the assignment to the plaintiff by the Nugent Shoe Company of its equity in the Group A accounts prior to the transactions involved in Group B, he was entitled to the $750 surplus. The official referee reported in favor of the defendant. Special Term refused to confirm the report of the referee and granted judgment in favor of the plaintiff in the sum of $750. The Appellate Division has affirmed.

The factoring agreement between the defendant and the Nugent Shoe Company contains the following provisions:

“9. To pay to the Assignor the balance due on the assigned accounts when all of the accounts assigned shall have been collected and when the Factor shall have been reimbursed for all advances and charges on all accounts assigned on business done with the Assignor.”

29. That the Factor shall have a lien on all moneys, property or collateral of the Assignor, now or hereafter in the Factor’s hands or under the Factor’s control, for any and all indebtedness which may exist in its favor, under this agreement, and also for any other indebtedness now existing or which may hereafter be contracted under this agreement or otherwise.”

, “ 35. It is understood that any deficiency in the collections of any moneys due under one assignment, may be collected by the Factor, at its option, out of any moneys that may become due to the Assignor out of any other assignments made by the said Assignor to the said Factor, and the moneys collected on these assignments may be applied to the payment of any deficiency in any other assignment, without notice to the Assignor.”

Under these provisions, in the absence of the assignment to the plaintiff, the defendant would have been entitled to apply the surplus resulting from the Group A transactions to the deficit resulting from the Group B transactions. Does the assignment to the plaintiff, upon notice to the defendant, deprive the latter of this right? The assignment to the plaintiff informed him of the prior rights of the defendant. Whether or not he had such notice his rights can be no greater than those of - his assignor, the Nugent Shoe Company. (See Salem, Trust Co. v. Manufacturers Finance Co., 264 U. S. 182.)

The respondent relies upon the rule that an assignee who has given notice of the assignment may not be prejudiced by any new dealings between the original parties. (Myers v. Davis, 22 N. Y. 489.) This rule applies where subsequent to the assignment the parties engage in new dealings. The test is whether or not the assignor has completed performance under the contract at the time of the assignment. (National Nassau Bank v. Ludington’s Sons, Inc., 164 App. Div. 466; United States Trust Co. v. Mendelson, 209 App. Div. 751; Seibert v. Dunn, 216 N. Y. 237.) In the case at bar the factoring-agreement was a continuing one and the Nugent Shoe Company had agreed not to apply for advances cn accounts from any source other than the defendant. All stich advances were to be made by the defendant and tho defendant was to have a lien on all accounts assigned which lien would protect not only the particular loan made at the time of the assignment but, also, all prior or subsequent loans.

At the time of the assignment not only had the defend ant not completed collection of the Group A accounts, but it was not certain whether these collections would result in a surplus or a deficit. The contract provided that the factor could make up any deficiency out of all accounts whether assigned before or after the defaulting accounts. The assignment to the plaintiff could not deprive the defendant of this right.

It is true that if the defendant had refused to make any further advances to the shoe company after it had been given notice of the assignment to the plaintiff it would not have suffered a loss. At the time of the assignment, however, it had no means of ascertaining whether the Group A accounts would result in a deficit or a surplus. It had a right to grant additional advances in order to spread its risk. It had a right also to protect itself by granting advances for additional accounts receivable upon which it would have a lien for any indebtedness existing in its favor. It turned out that further protection for the Group A accounts was unnecessary and that the Group B accounts would not have furnished such protection, but this was not determinable at the time of the assignment. The assignment to the plaintiff could not deprive the defendant of its contract right to such added protection for existing assignments or of the right to apply any moneys collected on the assignments to the payment of any deficiency on any other assignments. Moreover, the defendant had a right to continue with its business of loaning on accounts, and the Nugent Shoe Company had agreed not to borrow from any other source. Following the making of these loans, the defendant had a right under its contract to a lien upon the surplus of any account or group of accounts to make up any deficit.

The judgment of the Appellate Division and that of the Special Term should be reversed and the complaint dismissed, with costs in all courts.

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

Judgments reversed, etc.


author: O'Brien, J.

text:
    Ambrose J. McNamara, Appellant, v. Herbert S. Powell et al., Respondents.
    Argued March 8, 1937;
    decided April 20, 1937.

      Ambrose J. McNamara, in person, appellant.
    The dismissed complaint sets forth a cause of action for an injunction to enjoin the defendants from manufacturing and selling plaintiff’s improved muffler invention. (Tabor v. Hoffman, 118 N. Y. 30; Eastern Extracting Co. v. Greater New York Extracting Co., 126 App. Div. 928; Little v. Gallus, 38 N. Y. Supp. 487; Eastman Kodak Co. v. Warren, 108 Misc. Rep. 680; Hoeltke v. Kemp Mfg. Co., 56 S. C. 938; 80 Fed. Rep. [2d] 912; Dupont Powder Co. v. Masland, 244 U. S. 100; Feasel v. Noxall Polish Mfg. Co., 268 Fed. Rep. 887; Philadelphia Extracting Co. v. Keystone Extracting Co., 176 Fed. Rep. 830; Allen-Qualley Co. v. Shellmar Products Co., 36 Fed. Rep. [2d] 623.) The judgment obtained in the 1928 action is not a bar to the within action. (Kirk La Shelle Co. v. Armstrong Co., 263 N. Y. 85; Mandeville v. Reynolds, 68 N. Y. 528; Lapiedra v. Am. Surety Co., 247 N. Y. 25; Throckmorton Case, 98 U. S. 61; Fuhrmann v. Fanroth, 254 N. Y. 479; Rose v. Hawley, 141 N. Y. 366; Ward v. Town of Southfield, 102 N. Y. 293; Hunt v. Hunt, 72 N. Y. 217; Michigan v. Phœnix Bank, 33 N. Y. 9; Hall v. Hall, 139 App. Div. 120; Ward v. Textile Com. Co., 139 App. Div. 109; Bookstaver v. Jayne, 60 N. Y. 146; Vandergrift v. Cowles Engineering Co., 161 N. Y. 435.)

      Clarence E. Williams and Thomas L. Wilder for respondents.
    The matters set forth in the complaint have been tried between the parties and decided adversely to the plaintiff and have become and are res adjudicata. (McNamara v. Powell, 230 App. Div. 871; Werring v. Selig, 241 App. Div. 67; 264 N. Y. 688; 266 N. Y. 566; Reich v. Cochran, 151 N. Y. 122; Bridenbaker v. Kissell, 131 Misc. Rep. 534; Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304; Barber v. Kendall, 158 N. Y. 401.)
   O'Brien, J.

Defendant Powell was engaged in the manufacture of mufflers for automobiles. A confidential relationship existed between plaintiff and him. Plaintiff conceived a new idea for mufflers and in confidence revealed his idea to Powell and, in reliance upon the confidential relationship existing between them, consented that Powell, as his agent, should make a model of the invention from drawings furnished by plaintiff and should test it on an automobile. Shortly thereafter Powell entered upon a fraudulent scheme to procure this invention without compensation to plaintiff, and he and the corporate defendant then appropriated plaintiff’s ideas and, without his knowledge, manufactured and sold mufflers of the design invented by plaintiff, and have continued to manufacture and sell them. Each filed an application for a patent with the United States Patent Office but, after prolonged litigation, the Federal courts awarded to plaintiff the right to letters patent. These are the allegations in the complaint in which the relief demanded is an injunction to restrain defendants from manufacturing the muffler made according to plaintiff’s design, from using or selling it, and from malting any claim of interest in it. The complaint also demands an accounting for all profits made by defendants. At the time of the trial of this action, no patent had been issued to either party.

No answer was served to this complaint, but defendants moved to dismiss it upon several grounds, among them being the allegation that a final judgment rendered on the merits in favor of the individual defendant Powell in a former action in which the same issues were involved constitutes a bar. The complaint was dismissed upon the ground that the determination in the former action that plaintiff and defendant had entered into an agreement dated December 11, 1927, constitutes res judicata.

From an examination of the pleadings, findings and judgment in the former action, we have reached the conclusion that the issue therein was essentially different from the issue herein, and that such agreement as is asserted to have been made between plaintiff and this individual defendant did not in any way tend to deprive plaintiff of any right asserted by him in the present action. That litigation consisted of an action by this plaintiff and his wife to compel this individual defendant specifically to perform an alleged contract, dated December 11, 1927, whereby plaintiff sought to prove that Powell had agreed to deliver to him a bond and mortgage, executed November 29, 1924, by plaintiff and his wife upon real estate owned by them. The complaint in that action was dismissed for the reason, as found, that there was a failure of consideration by this plaintiff for the alleged agreement of December 11, 1927. These are the instruments which, in that action, plaintiffs attempted to prove amounted to an agreement by Powell to surrender the mortgage: “ Dec. 11, 1927. This agreement made and entered into the eleventh day of December, 1927, between Herbert S. Powell and Ambrose J. McNamara. It is agreed that Ambrose J. McNamara agrees to assign and give to Herbert S. Powell all patent rights or rights of patent that he may by virtue of invention or conception have in the ventura or cone type muffler to Herbert S. Powell such rights to cover the patenting the use of the cone shaped opening or the arrangement of same with the baffle plates or the hot tube insert. It is agreed that Herbert S. Powell is to give to Ambrose J. McNamara a satisfaction of the mortgage which he now holds on the property at 342 Catherine Street, Utica, N. Y., deeded in the names of Margaret D. McNamara and Ambrose J. McNamara.” That instrument was signed by McNamara, but Powell refused to sign it. On the same day, however, Powell did execute the following instrument: “Utica, N. Y. Dec. 11,1927. I, Herbert S. Powell, agree to deliver to Margaret D. McNamara and Ambrose J. McNamara the mortgage which I now hold on the property which they own at 324 Catherine, with all interest and back interest receipted paid in full.” The finding in that action is that this instrument did not express the full agreement of the parties, and there is a further finding that on December 11, 1927, McNamara and Powell orally-agreed that if McNamara would assign to Powell all his interest in the muffler, in that event Powell would satisfy the mortgage. The court found in that action that McNamara had failed to convey to Powell his interest in the muffler, that there was a total failure of consideration on the part of McNamara, that he had failed to carry out his part of the agreement and, therefore, had no standing in court to compel Powell to cancel and discharge the bond and mortgage. From the findings and judgment in that action, we reach the conclusion, different from that drawn by the courts below, that McNamara had not contracted away his rights in the muffler and that the judgment is not res judicata against him. If that judgment can be held to have any effect upon the present litigation such effect must be favorable to plaintiff. That judgment decrees that, for the reason that plaintiff did not assign his interest in the muffler to Powell, he was in no position to enforce specific performance in respect to cancellation of the mortgage.

The judgment of the Appellate Division and that of the Special Term should be reversed and the motion to dismiss the complaint denied, with costs in all courts*.

Crane, Ch. J., Lehman, Htjbbs, Loughran, Finch and Kippey, JJ., concur.

Judgments reversed, etc.


text:
    The People of the State of New York, Respondent, v. Frank Speciale, Appellant.
    Argued March 8, 1937;
    decided April 20, 1937.

      Joseph Heller for appellant.
    Section 66 of the Transportation Corporations Law (Cons. Laws, ch. 63), alone or if read together with section 65 of the statute, are laws which do not prohibit, or make unlawful, the acts of the defendant. (United States v. Reese, 92 U. S. 214; Klinkenstein v. Third Ave. R. Co., 246 N. Y. 327; People ex rel. Warren v. Beck, 144 N. Y. 225; People v. Flanagan, 152 Misc. Rep. 916; People v. Tyrrell, 154 Misc. Rep. 379.)

      Charles P. Sullivan, District Attorney (John H. W. Krogmann of counsel), for respondent.
    The evidence sustained the finding by the trial court that the defendant was guilty of a misdemeanor. (Matter of Long Beach v. Public Service Comm., 249 N. Y. 480; Bee Line, Inc., v. LaGuardia, 244 App. Div. 151; Huff v. City of New York, 202 App. Div. 425; Bogart v. Walker, 231 App. Div. 499; People v. Walt, 115 Misc. Rep. 120; 197 App. Div. 929; United Traction Co. v. Smith, 115 Misc. Rep. 73; Keller v. Erie R. R. Co., 183 N. Y. 67; Marra v. N. Y. C. & H. R. R. R. Co., 139 App. Div. 707; Green Island, Ice Co. v. Norton, 42 Misc. Rep. 238; 105 App. Div. 331; City of New York v. New Jersey & S. I. Ferry Co., 173 App. Div. 496.)
   Per Curiam.

Section 66 of the Transportation Corporations Law (Cons. Laws, ch. 63) provides: No stage, omnibus fine, stage route, motor vehicle line or route, nor any vehicle in connection therewith, and no vehicle carrying passengers at a rate of fare of fifteen cents or less for each passenger within the limits of a city or in competition with another common carrier which is required by law to obtain the consent of the local authorities of such city to operate over the streets thereof shall be operated wholly or partly upon or along any street, avenue or public place in any city, nor shall a certificate of public convenience and necessity be issued therefor, until the owner or owners thereof shall have procured, after public notice and a hearing, the consent of the local authorities of such city, as defined by the railroad law, to such operation, upon such terms and conditions as said local authorities may prescribe. * * *.”

The defendant has been convicted of a violation of this provision upon facts stipulated by the parties as follows: The defendant drove an omnibus in connection with an omnibus line on a route on public streets of the city of New York; the omnibus carried passengers at the rate of five cents for each passenger; the city of New York gave no consent to the operation of the omnibus and no certificate of convenience and necessity had been issued therefor; the omnibus was registered with the Motor Vehicle Bureau of the State of New York; it was not owned by the defendant, who was licensed as a chauffeur by the State of New York; the defendant drove the vehicle under the direction of its owner to whom he turned over fares collected by him.

On these facts, we think the defendant was not one of the class of persons upon whom the duties defined by section 66 of the Transportation Corporations Law were thereby imposed. That section is to be read with section 65 which applies to persons proposing to operate a bus line. (See Matter of City of Long Beach v. Public Service Comm., 249 N. Y. 480.) Neither section is addressed to a mere chauffeur. (Cf. Vehicle and Traffic Law; Cons. Laws, ch. 71, § 2.)

The judgments should be reversed and the information dismissed.

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

Judgments reversed, etc.


text:
    Title Guarantee and Trust Company, Appellant, v. Mortgage Commission of the State of New York, Respondent.

      Argued January 7, 1937;
    decided April 20, 1937.

      Timothy N. Pfeiffer, Sinclair Hamilton, Wilber Stammler and Joseph V. McKee for appellant.
    The intention that the plaintiff share pro rata with the other certificate holders is manifest. Intention is always the decisive test. (Granger v. Crouch, 86 N. Y. 494; Granger v. Craig, 96 N. Y. 648; Perillo v. Zunino, 259 N. Y. 21; Matter of Lawyers Mortgage Co., 151 Misc. Rep. 744; 242 App. Div. 617; 265 N. Y. 508; Kelly v. Middlesex Title Guarantee & Trust Co., 115 N. J. Eq. 592; 116 N. J. Eq. 574.) The relationship of the plaintiff and its assignee-certificate holders shows that pro rata distribution of their respective aliquot shares between them was intended. (Matter of People, 264 N. Y. 69; President of Manhattan Co. v. Prudence Co., 266 N. Y. 202; Fullerton v. National B. & T. Ins. Co., 100 N. Y. 76; Matter of Prudence Co., 82 Fed. Rep. [2d] 755; Symmers v. Carroll, 207 N. Y. 632; Granger v. Crouch, 86 N. Y. 494; Lowenfeld v. Wimpie, 139 App. Div. 617; 203 N. Y. 646; United States v. Home Title Ins. Co., 285 U. S. 191; Kelly v. Middlesex Title Guarantee & Trust Co., 115 N. J. Eq. 592; 116 N. J. Eq. 574; E. T. C. Corp. v. Title Guarantee & Trust Co., 271 N. Y. 124.) Intention is the decisive test and, in the absence of a contrary intention, the pro rata rule is applied. (Domeyer v. O’Connell, 364 Ill. 467; Granger v. Crouch, 86 N. Y. 494; Granger v. Craig, 96 N. Y. 648; Perillo v. Zunino, 259 N. Y. 21; Matter of Preston, 54 Hun, 10; Orleans County Nat. Bank v. Moore, 112 N. Y. 543; Bridenbecker v. Lowell, 32 Barb. 9; Matter of Georgi, 21 Misc. Rep. 419; President of Manhattan Co. v. Prudence Co., 266 N. Y. 202; Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69; Matter of Lawyers Mortgage Co. [Borg], 151 Misc. Rep. 744; 242 App. Div. 617; 265 N. Y. 508.) In any event, the plaintiff should share pro rata with other certificate holders on all certificates repurchased by it from the holders thereof at full face value. (Ryan v. Staples, 78 Fed. Rep. 563; Matter of Fidelity Union Title & Mortgage Guarantee Co., 118 N. J. Eq. 155; English v. Carney, 25 Mich. 178; Goring’s Executrix v. Shreve, 37 Ky. 64; American Brake Shoe &

      Foundry Co. v. New York R. Co., 277 Fed. Rep. 261; Westinghouse Electric & Mfg. Co. v. Brooklyn R. T. Co., 288 Fed. Rep. 221.) The statement as agreed upon by the parties is conclusive and binding. (New York Tel. Co. v. Siegel-Cooper Co., 202 N. Y. 502; Marx v. Brogan, 188 N. Y. 431; Bradley v. Crane, 201 N. Y. 14; People v. Hewson, 224 N. Y. 136; Fearing v. Irwin, 55 N. Y. 486.)

      Maurice Finkelstein, Frieda B. Hennock, John J. Clarke and Benjamin J. Rabin for respondent.
    The contract between the parties contains a clear implication that the certificate holders are entitled to priority. (Gillet v. Bank of America, 160 N. Y. 549; Moran v. Standard Oil Co., 211 N. Y. 187; American Surety Co. v. Pauly, 170 U. S. 133.) In the absence of any direct expression of intention in the contract between the parties, the certificate holders are entitled to priority. The assignee of a part interest in a bond and mortgage is entitled to priority over the assignor. (Fullerton v. National B. & T. Ins. Co., 100 N. Y. 76; Matter of New York Title & Mortgage Co., 272 N. Y. 556; Matter of Lawyers Mortgage Co., 272 N. Y. 554.) The natural equities reinforce the conclusion that the certificate holders are entitled to priority. (Matter of Balfe, 152 Misc. Rep. 739.) The appellant is a trustee for the certificate holders, and, as such, its interest in the trust res is subordinate to that of the other beneficiaries. (Lowenfeld v. Wimpie, 139 App. Div. 617; 203 N. Y. 646; E. T. C. Corp. v. Title Guarantee & Trust Co., 271 N. Y. 124; Chicago, M. & St. P. Ry. Co., v. Des Moines, 254 U. S. 196; Matter of Burr, 143 Misc. Rep. 877; 239 App. Div. 774; Earle v. Earle, 93 N. Y. 104; Matter of Ungrich, 201 N. Y. 415.)
   Hubbs, J.

The Title Guarantee and Trust Company, appellant, was engaged in the- business of banking, title insurance and mortgage loans. It owned two mortgages and sold participating certificates therein. The Bond and Mortgage Guarantee Company guaranteed the mortgages, both as to principal and interest, to appellant and all certificate holders. The certificates were in the following form:

“ Title Guarantee and Trust Company, hereinafter called the Company/ has received from the sum of $ for the purchase of and hereby assigns to the purchaser an undivided share equal to that amount, with interest thereon at the rate of % per annum, in the bond of for $ due 19 and in the first mortgage securing the same, covering

Interest days 1st and 1st.

“ This bond and Mortgage, together with the policy of the Bond and Mortgage Guarantee Company, guaranteeing to holders of this and similar certificates payment of principal and interest, are held by the Company as depositary and agent for the holders of such certificates which shall never aggregate more than the amount of principal remaining unpaid on said bond and mortgage, upon the following terms and conditions which are agreed to by the holder of this certificate.

“ 1. The Company holds and shall continue to hold said bond and mortgage, said policy of Bond and Mortgage Guarantee Company and the other instruments and evidences of title relating thereto for the benefit of the purchaser and any other persons interested therein.

“ 2. The Company, on receipt of the interest and principal of said bond and mortgage, as required therein, shall distribute the same among the persons entitled thereto. If payments not so required are made, certificates for the same amount will be called in and paid off.

“ 3. The Company shall have full power to take any action it may deem necessary or desirable in order to enforce any of the provisions of said bond and mortgage and to protect the mortgage security.

4. The Company may for its own corporate account be the holder or pledgee of similar shares in said bond and mortgage.

5. The Company may take up and cancel this certificate at any time on thirty days’ notice in writing to the purchaser and payment at its office, 176 Broadway, New York, of the amount then owing to the nurchaser for principal and interest.

6. This certificate is not negotiable. The only way ■ that the interest of the purchaser can be transferred is by the surrender of this certificate to the Company duly assigned and the issuing of another certificate to the transferee.”

After certain certificates were issued, appellant repurchased some which had been previously sold and canceled them. Thereafter, it issued new certificates to itself for the amount of the canceled certificates and the balance of the mortgages over and above the amount evidenced by the certificates which were outstanding. The certificates -were issued by appellant to itself “ for the sole purpose of evidencing the amount of the interest which the title company at that time had in the said mortgage.”

The Bond and Mortgage Guarantee Company is in rehabilitation, pursuant to the provisions of article 11 of ■the Insurance Law (Cons. Laws, ch. 28). The respondent Mortgage Commission, pursuant to the provisions of chapter 19 of the Laws of 1935, as amended, took over the servicing of the mortgages in which the appellant had issued participating certificates which were guaranteed by the Bond and Mortgage Guarantee Company.

The servicing of those mortgages involved the collection of interest and the distribution of the same to the persons entitled thereto. The amount collected upon those mortgages as interest aggregated less than the amount of interest due and payable to certificate holders other than appellant. It paid to the certificate holders other than the appellant their pro rata share of the interest collected, assuming that appellant was entitled to an equal distribution on the amount of the interest which it retained in the mortgages. It retained such balance pending a judicial determination of the rights of the parties.

The questions involved were submitted to the Appellate Division on an agreed statement of facts in the following form:

A. In respect to said mortgage of $295,500:

“ 1. Is the Title Company now entitled to receive from the Mortgage Commission the said sum of $525.96?

“ 2. Is the Title Company entitled to receive from the Mortgage Commission any payment of interest on said certificate No. 161320 for $156,550, at a time when there remains unpaid any sum due and owing to certificate holders other than the Title Company?”

B. In respect to said mortgage of $300,000:

“1. Is the Title Company now entitled to receive from the Mortgage Commission the said sum of $488.91?

2. Is the Title Company entitled to receive from the Mortgage Commission any payment of interest on said certificate No. 161569 for $21,000, at a time when there remains unpaid any sum due and owing to certificate holders other than the Title Company?”

The Appellate Division has answered the four questions in the negative and has rendered judgment in favor of respondent upon the ground that the certificates held by appellant do not represent similar shares within the meaning of provision 4 of the certificate and that the natural equities of the stiuation are with respondent.

This court has already decided with reference to similar securities issued by a corporation guaranteeing payment of its own issues that, in the absence of contractual provisions to the contrary, the issuing corporation, where a reservation of the right to purchase for its own account securities of the particular issue was specified in the agreement, may share in proceeds of assets pledged as collateral to the securities issued by it only to the extent of uncanceled certificates held by it. The reason for not permitting the issuing companies to share as owner of the part of the mortgage not assigned was that as between the company and the certificate holders the relation of debtor and creditor existed growing out of the guaranty of payment issued by it. (Mechanics’ Bank v. Bank of Niagara, 9 Wend. 410; Matter of Lawyers Mortgage Co. [545 West End Ave.], 157 Misc. Rep. 813; affd., 248 App. Div. 715; affd., 272 N. Y. 554; Matter of Lawyers Mortgage Co. [1399-1413 Madison Ave.], 151 Misc. Rep. 744; affd., 242 App. Div. 617; leave to appeal denied, 242 App. Div. 629; leave to appeal denied, 265 N. Y. 508.)

In the case at bar the relation of debtor and creditor does not exist.

We are now required to consider participating certificates issued by a corporation which instead of itself guaranteeing payment, procures a guaranty from another corporation. Respondent contends that as certificates were issued for certain specific amounts representing undivided shares of the total face amount of the mortgage instead of for fractional parts of the mortgage debt, the certificate does not assign to the certificate holder a specific percentage of the bond and mortgage or any aliquot portion thereof, but merely assigns a certain dollar interest therein, and that it follows that it was clearly intended that the certificate holder should receive the amount represented by his certificate before the assignor should receive anything out of the property in question. We are of the opinion that the certificate holders became tenants in common, each entitled to an aliquot share of the mortgage referred to in the certificate. Such is the purport of the opinion in Perillo v. Zunino (259 N. Y. 21, 25), in which Crane, J., stated: “ The plaintiff’s certificate, at the face value of $2,770, would, of course, be worth the aliquot part of the value of this third mortgage.”

If the appellant is entitled to share in the proceeds of the collateral on a retained interest, it is equally entitled to share in a part sold and repurchased for value, regardless of whether it holds or cancels the certificate covering the part repurchased and if for reasons equitable or otherwise, it is not entitled by reason of interest retained to share in such proceeds as against those to whom it has sold an interest in the security, it could not by the sale and repurchase of a part of the interest so sold, acquire as against other holders of certificates a right which it would not have had had it retained that part.

The question here is, first, whether the owner of the mortgages, which assigned a part of them, thereby postponed its interest to that of its assignees as a matter of law, and, if not, whether, under the facts of the particular case, it is equitably not entitled to enforce its legal claim before full satisfaction of the interest of its vendees.

Under the decisions in this State, it appears well established that the owner of a mortgage who assigns a part of it does not, as a matter of law, in the absence of an agreement to the contrary, postpone his interest to that of his assignee.

In Granger v. Grouch (86 N. Y. 494, 498) the defendants sold to one Purdy, for a consideration of about $13,000, certain real property on contract, providing for conveyance to the vendors of certain other real estate, the giving of a bond and mortgage on the property purchased for $6,500 and payment of the balance of about $3,200 in cash. Upon the closing of the contract, the arrangement was modified by substituting for the cash payment two notes and another bond and mortgage upon the same property. The two mortgages were recorded at the same moment. No agreement for priority was found. When the notes came due, Purdy could not pay. He borrowed of plaintiff the amount and plaintiff, after ascertaining from the record that the two mortgages were concurrent liens, took an assignment of the smaller mortgage with other security furnished by Purdy. The situation is no different from what it would have been had the defendant held one mortgage and assigned a part of it to the plaintiff. Discussing the question as to which security, if either, had priority, this court said: “ The decisive test in every case is the intention of the parties, either as actually expressed, or as derivedfrom the natural equity of the situation.”

The court there pointed out that in Mechanics’ Bank v. Bank of Niagara (supra) both expressed intention and natural equity favored the assignee, and in Stafford v. Van Rensselaer (9 Cow. 316) clear evidence of intention and priority was present. The court reached the conclusion that the mortgages were concurrent, neither intended or understood to have any preference over the other and that the parties should share pro rata in the proceeds. The primary debtor there remained indebted, as in the instant case, and all that was involved was an assignment of a part of the debt from his original creditor to another. That is precisely the situation here. We consider the case authority for the applicability of the pro rata rule as between assignor and assignee of a part of a mortgage indebtedness.

While this court in Fullerton v. National B. & F. Ins. Co. (100 N. Y. 76, 80) said: “ * * * the case may be regarded in the aspect most favorable to the appellants, as one where part only of a debt has been assigned, the assignor reserving the other part to itself. In such case it is obvious the parties must either share pro rata in the security, or one must have priority over the other. It seems most reasonable that hi the absence of a plain declaration to the contrary, it should be applied first to the payment of that part of the debt which was assigned. (Van Rensselaer v. Stafford, Hopkins, 569; Bryant v. Damon, 6 Gray, 564.) Otherwise, since the mortgaged land was not sufficient to satisfy both, the assignor would gain priority over its cestuis que trust,” the statement must be considered in the light of the facts which, as shown by the quotation, involved a trust relationship, a relationship, as a result of which, the assignor was equitably not entitled to enforce his legal claim before full satisfaction of the interest of the vendee. Later decisions have not lessened the effect of the decision in Granger v. Crouch (supra).

In Orleans County Nat. Bank v. Moore (112 N. Y. 543) it was held that where a mortgage is given to secure various debtors and there is a foreclosure sale, the payment to the creditor not being voluntary but by operation of law, in the absence of directions given in the security, the proceeds are to be applied pro rata, each debt sharing in the fund without regard to priority of date or to the fact that for some of the debts the creditor holds other securities.

In Perillo v. Zunino (supra) a restaurant company gave to the defendant a bond and mortgage as security for the sum of $23,000. The defendant Zunino executed certificates of participation in the indebtedness, one of which he sold to plaintiff’s assignor. Subsequently, he satisfied the mortgage, leaving the bond as the sole security. Plaintiff’s security not having been satisfied, he commenced an action against Zunino and the court held that Zunino had no power to satisfy the mortgage; that upon an accounting, he might be charged with the resulting damages growing out of his breach of trust or required to hold the proceeds for the benefit of the plaintiff. The Appellate Division having granted judgment for the face value of the plaintiff’s' certificate and interest, this court modified the judgment, saying that the plaintiff’s certificate at the face value of $2,770 would, of course, be worth the aliquot part of the value of the mortgage; that the plaintiff was not entitled to the amount of his certificate unless the mortgage was worth its face value. While it does not so appear in the reported decision of this case, it appears from the records and briefs that the defendant Zunino himself owned a substantial interest in the bond and mortgage.

That the intention of the parties, as evidenced by the agreement or relationship, has been held to vary this rule is also settled in this jurisdiction. (Stafford v. Van Rensselaer, supra; Mechanics’ Bank v. Bank of Niagara, supra.)

The pro rata rule is not applicable where the equities of the situation require that one party be preferred over another as where a trust relationship or that of debtor and creditor exists. (Fullerton v. National B. & F. Ins. Co., supra; Mechanics’ Bank v. Bank of Niagara, supra.)

An examination of the authorities in other jurisdictions leaves doubt as to just where the weight of authority may rest as between the two rules, one requiring a preference to assignees of a part of a security, the other requiring pro rata distribution between an assignor and assignees. Many cases cited as authority for one or the other rule will be found to be based on facts indicating intention for or against preference which makes them of little aid. The States in which it has been asserted that the assignee takes priority are not in accord as to what is to be the basis of priority, in some it being held that assignees take preference according to the due date of the obligations and in, others according to the date of the assignments. They are in accord only in holding that where there is an assignment of a part of a security, it is an assignment pro tanto.

Text writers likewise differ widely in their interpretations as to the weight of authority.

Perhaps the trend of legal thought on the question may be indicated in "the following statement from the Restatement of the Law of Trusts, American Law Institute (Yol. 1, pp. 57 and 58): “ If a partial assignment of a chose in action is made, the assignor does not become trustee for the assignee. * * * There is a fiduciary relation between trustee and beneficiary. In the case of a partial assignment, as in the case of a total assignment, there is not a fiduciary relation between the assignor and the assignee.”

If there be no fiduciary relation, it is difficult to see how, on principle, priority should exist in favor of an assignee where no contract therefor has been made between the parties and the relation of debtor and creditor does not exist. We see no good reason, in the absence of special equities, for establishing an arbitrary rule that the vendee of a part of a security takes priority over the vendor.

The difficulty, it seems to us, is not in stating the rule in the absence of special equities or expressed intent, but rather in determining what contractual provisions evidence an intent or the existence of special equities sufficient to warrant a determination that the vendee of part shall be entitled to preference over his vendor in the proceeds of a particular equity.

Nothing in the certificates here under consideration warranted a belief on the part of the vendees that the vendor itself intended to assume any direct obligation to the vendees. The certificates reserve to the vendor the right to hold shares in the bond and mortgage and reserve the right to cancel the certificates upon payment of the amount owing for principal and interest. There is no ambiguity in the agreement. Neither is there any evidence of representations as to the value of the security or the 'purpose of the vendor to assume an obligation beyond that expressed in the certificates. If priority were to be decreed in favor of the certificate holders other than the appellant, it would have to be based upon an equity founded upon something outside of the contract itself, and there is nothing in the agreed statement of facts to constitute a basis for finding such an equity in favor of the certificate holders. The statement of facts agreed upon by the parties is conclusive and binding upon this court, and we cannot go outside of that statement in reaching a decision. (New York Tel. Co. v. Siegel-Cooper Co., 202 N. Y. 502.)

We are unable to agree with the conclusion of the court below that from the facts before us the natural equities of the situation are all with the respondent.

There is nothing in the record to indicate knowledge on the part of the appellant that the guaranty which it procured from the Bond and Mortgage Guarantee Company was not good at the time it was given or believed by the appellant to be good. There was no misrepresentation as to the identity of the guarantor. The court below assumes that the buyers were entirely without knowledge as to the adequacy of the guaranty and also that the seller was chargeable with full knowledge. The facts submitted do not warrant any such assumption of fact. There is here a controlling principle of law not applicable where the issuing corporation itself guarantees the obligation, and what has been said by the courts of this State as to the preference to which holders of similar certificates so guaranteed are entitled is not applicable, under the facts of this case.

The situation here presented has been considered at length in Domeyer v. O’Connell (364 Ill. 467, 480). The court there said: “ We are of the opinion that neither logically nor equitably can it be said that an assignee who purchases what be must be held to know is but a part of the mortgage debt is entitled to have bis note paid in full out of an insufficient security merely because of the assignment, without more. The logical and equitable principles which should control in a situation where, as here, all notes mature on the same day, bring us to the conviction that assignees and the mortgagee should share pro rata in the proceeds of insufficient security.”

There the court was dealing with mortgage notes not guaranteed. Procurement by the mortgagee of a guaranty to itself and certificate holders of payment of principal and interest of the original obligation does not of itself impose on the mortgagee an increased burden. True it is that the guaranty may make certificates of participation in the mortgage more attractive to investors, but they have, so far as the agreed statement of facts discloses, the same opportunity as had the mortgagee to satisfy themselves of the adequacy of the guaranty, and they cannot neglect to inquire into that situation and then claim priority over the mortgagee, and assignor, in the event the guaranty proves inadequate.

We believe that in this State the courts are committed to the proposition that in the absence of an agreement or proven intent to the contrary, the existence of a trust relationship or proof of some equitable reason why priority should exist in favor of an assignee, the assignor of part of a mortgaged indebtedness who has not assumed a liability as guarantor is entitled to share pro rata with his assignee in the proceeds of insufficient security. Such rule we approve and find applicable to the facts as presented in the agreed statement upon which this action is submitted.

The order and judgment of the Appellate Division should be reversed and judgment directed for the plaintiff, with costs in all courts.

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

Judgment accordingly.