text:
    Margaret Fay, an Infant, by Anna Hoey, Her Guardian ad Litem, Respondent, v. Horace De Camp, Appellant.
    (Argued October 8, 1931;
    decided November 17, 1931.)

      Edward P. Mowton for appellant.
    At the time of the accident plaintiff was either an employee of the defendant, covered by the terms of the workmen’s compensation policy, and entitled to compensation, but not to a recovery at common law, or was at common law a fellow-servant of the defendant’s chauffeur, for whose acts at the time of the accident defendant was not responsible because plaintiff assumed the risks of the negligence of a fellow-servant. (Van Gee v. Korts, 252 N. Y. 241; Queck-Berner v. Macy, 240 N. Y. 341; Littler v. Fuller, 223 N. Y. 369; Listori v. N. Y. C. R. R. Co., 251 N. Y. 327; Aioss v. Sardo, 249 N. Y. 270; Mahoney v. Cayuga Lake Cement Co., 126 App. Div. 164; Vogel v. American Bridge Co., 180 N. Y. 373; Andrews v. Reining, 111 App. Div. 435; Erjanschek v. Kramer, 141 App. Div. 545; Ryan v. Phipps, 146 App. Div. 642; Martin v. Puget Sound Electric R. Co., 241 Pac. Rep. 360.)

      Charles D. Lewis and Thomas J. O’ Neill for respondent.
    The action was maintainable at common law because the chauffeur’s negligence in the course of his duty in driving the defendant’s automobile could not be imputed to the plaintiff and did not constitute a risk assumed by her. Such negligence was a matter extraneous to the plaintiff’s employment and the plaintiff’s injuries were not received while she was performing her duties as an upstairs maid under her contract of employment, which contract neither expressly nor by implication required the plaintiff’s traveling or being transported in the defendant’s automobile as a part of the hiring. (Vick v. N. Y. C. & H. R. R. R. Co., 95 N. Y. 267; O’Bierne v. Stafford,
      87 Conn. 354; Roth v. Adirondack Co., 193 App. Div. 303; Pierson v. Interborough Rapid Transit Co., 184 App. Div. 678; Matter of Kowalek v. N. Y. Consolidated R. R. Co., 229 N. Y. 489; Ewan v. Lippincott, 47 N. J. L. 192; Matter of Scholtshauer v. C. & L. Lunch Co., 233 N. Y. 12.)
   Crane, J.

Horace De Camp had a home at 952 Fifth avenue, New York city, at Rye and at Old Forge, New York, at which places he maintained establishments .with the help of numerous servants and employees. Margaret Fay, a young lady, twenty-two years of age, was employed by him as an upstairs chambermaid to take care of the rooms. Other servants did the cooking and the waiting at table. The defendant also had an automobile and a chauffeur used for domestic service, as distinguished from business employment.

On the 6th day of August, 1926, the help left the defendant’s place at Rye to go to his camp at Old Forge, and were being driven there in defendant’s car operated by his chauffeur, when at Cranesville an accident occurred, through the negligence of the chauffeur, causing injury to Miss Fay.

Although the employer had taken out workmen’s compensation insurance to cover his domestic employees, failure to comply with certain provisions of the law made the act unenforceable. Miss Fay, therefore, elected to bring this action to recover at common law against her employer for the negligence of his chauffeur, and the question is whether she was at the time a fellow-servant with that employee.

Since Priestly v. Fowler (3 M. & W. 1) and Farwell v. Boston & Worcester Rail Road Corp. (4 Metc. 49), much has been written and many things decided about the fellow-servant rule. The underlying principle is that the plaintiff is precluded from recovery wherever the functions which he and the negligent co-employee were discharging, although not identical or even similar in character, were yet such that the two servants were contributing directly to the common object of their common employer in that enterprise for which their services were engaged, or, to employ a terminology which is frequently found in the books, the injured servant’s right to recover does not depend upon the fact that he may have been in a different department of the service from the delinquent. (4 Labatt on Master & Servant [2d ed.], p. 4070.)

Both the chauffeur and the maid were engaged by the employer in maintaining the home and place of abode, the maid attending to her department of keeping the house in order, and the chauffeur in transporting the occupants to and from the house or from one home to the other. Both were performing work reasonably connected with the running and maintenance of the defendant’s summer places in accordance with his tastes. Had the employer been carrying on a business in which he employed the chauffeur, and while so engaged in that business the chauffeur had run over or injured a domestic servant, we can see clearly that they would not be fellow-servants.

The plaintiff had not ceased her employment or terminated her duties. She was the upstairs maid at Rye and was to be the maid at Old Forge. To get there she was being transported in her emplqyer’s car by another employee of his. The risks connected with such transportation in order to perform her duties and to continue her daily tasks were reasonably to be anticipated and considered when entering his employ.

Such we find to be the ruling in Erjauschek v. Kramer (141 App. Div. 545), where the maid was injured while riding with her employer and his wife in an automobile driven negligently by the chauffeur. The relationship, we have held in numerous cases, remains unbroken while the servant is in__th_e_ course of transportation to and from his place of employment where the parties by their contract of hiring inferentially so stipulate. Seldom do we find an express stipulation for transportation; rather, it is gathered by implication from the duties and surrounding circumstances. (See Vick v. N. Y. C. & H. R. R. R. Co., 95 N. Y. 267; Matter of Kowalek v. N. Y. Cons. R. R. Co., 229 N. Y. 489; Van Gee v. Korts, 252 N. Y. 241.) Neither is it necessary that the servant be under compulsion to use the afforded transportation. (Donovan’s Case, 217 Mass. 76; St. Bernard Cypress Co. v. Johnson, 222 Fed. Rep. 246; Ionnone v. N. Y., N. H. & H. R. R. Co., 21 R. I. 452; McGuirk v. Shattuck, 160 Mass. 45.) What is usually or customarily done by persons shifting from city to summer residence in connection with transporting the household is a matter which must be considered.

The housekeeper has been considered a fellow-servant with the son of her employer engaged in carrying coal (Waxham v. Fink, 86 Neb. 180); a scrub woman, the fellow-servant of a night watchman (Ryan v. Phipps, 146 App. Div. 642), and a chambermaid with a housekeeper (Ahern v. Hildreth, 183 Mass. 296).

In McGuirk v. Shattuck (160 Mass. 45) the employer sent his coach to get a laundress. She was hurt while being taken to his house through the driver’s negligence. The court held that she was a fellow-servant with the driver. On the other hand, where a domestic servant was injured while being driven to church in her master’s car, she was permitted to recover for injuries received through the chauffeur’s negligence on the theory that her services had been suspended when she was proceeding upon her own affairs. (O’Bierne v. Stafford, 87 Conn. 354.)

The facts vary in every case, but within the principle to which the decisions have attempted to adhere, we think the maid in this case and the chauffeur were fellow-servants at the time of the accident, and that the plaintiff, under this common-law rule, now firmly established in the law, cannot recover.

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

Cardozo, Ch. J., Pound, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur.

Judgments reversed, etc.


source: Caselaw Access Project

author: O’Brien, J.

license: Public Domain

text:
    James Keon, Respondent, v. Saxton & Company, Appellant.
    (Argued October 12, 1931;
    decided November 17, 1931.)

      Roy Plant, Henry C. Burnstine and Emanuel J. Freiberg for appellant.
    Technical defects in a pleading cannot be made the basis for granting a motion for summary-judgment where the proofs are sufficient to entitle a party to defend. (Curry v. MacKenzie, 239 N. Y. 267; Donnelly v. Bauder, 217 App. Div. 59; Weinberg v. Goldstein, 226 App. Div. 479.) The counterclaims were properly interposed and were improperly stricken out. (Seibert v. Dunn, 216 N. Y. 237; Merry Realty Co. v. S. & H. R. E. Co., 186 App. Div. 538; More v. Rand, 60 N. Y. 208; Chamberlin v. Day, 3 Cow. 353; Selwyn & Co. v. Waller, 212 N. Y. 507; Clark v. Rowling, 3 N. Y. 216; Matter of Williams, 208 N. Y. 32; Wisconsin v. Pelican Ins. Co., 127 U. S. 265.) Damages need not be liquidated to be a proper subject of setoff. (Reab v. McAlister, 8 Wend. 109; Gage v. Angell, 8 How. Pr. 335; Lignot v. Redding, 4 E. D. Smith, 285; Boston Mills v. Eull, 6 Abb. Pr. |N. S.] 319; Taylor v. Root, 43 N. Y. 335; Cottle v. New York, W. S. & B. R. R. Co., 27 App. Div. 604; Knight v. Rothschild, 132 App. Div. 274; Gutta Percha & R. Mfg. Co. v. Mayor, 108 N. Y. 276; Feinstein v. Jacobs, 139 App. Div. 192; Hunt v. Chapman, 51 N. Y. 555; Bathgate v. Haskin, 59 N. Y. 533; Valett v. Baker, 129 App. Div. 514; American Guild v. Damon, 186 N. Y. 360; Peeke v. Hydraulic Const. Co., 23 App. Div. 393.) The damages sought by the counterclaims are legally recoverable. (Hadley v. Baxendale, 9 Exch. 341; Messmore v. N. Y. Shot & Lead Co., 40 N. Y. 422; Booth v. Spuyten Duyvil Rolling Mill Co., 60 N. Y. 487; Wakeman v. Wheeler & Wilson Mfg. Co., 101 N. Y. 205; Cohen v. Platt, 69 N. Y. 348; Orester v. Dayton Rubber Mfg. Co., 228 N. Y. 134; Harris v. Panama R. R. Co., 58 N. Y. 660; Rice v. Manley, 66 N. Y. 82; Grand Tower Co. v. Phillips, 23 Wall. 471.)

      Myle J. Holley for respondent.
    The defendant’s alleged setoff or counterclaim is insufficient to constitute a cause of action and states no damages legally recoverable by the defendant. (Martin v. Bigelow, 36 Misc. Rep. 298; Bowsky v. Schlichten, 132 N. Y. Supp. 421; Jacobs v. Monaton Realty Investment Corp., 212 N. Y. 48; Deutsch v. Textile Waste Merchandising Co., 212 App. Div. 681; Schnabel v. Hanover Nat. Bank, 78 Misc. Rep. 35; Merchants’ Nat. Bank v. Hall, 83 N. Y. 338.) Defendant’s alleged setoff or counterclaim, being for unliquidated damages, cannot be interposed in this action brought by the assignee of a judgment. (Merry Realty Co. v. S. & H. R. R. Co., 186 App. Div. 538; Frick v. White, 57 N. Y. 103.)
   O’Brien, J.

Plaintiff’s assignor had a contract with defendant for the sale of two carloads of eggs to be delivered each week between March 20, 1925, and June 1, 1925. The seller- delivered six carloads but was paid for only five and it brought an action against this defendant in the United States District Court in Iowa for the unpaid balance. Its claim was reduced to judgment in the Federal court and its assignee, this plaintiff, instituted the present action in this State to enforce that judgment which had been obtained by default. The answer sets up four counterclaims by which it pleads the seller’s breach of contract in failing to make deliveries at the rate of two carloads a week and alleges, as the result of such omissions, loss in profits in the sum of “at least ” $5,000. On the theory that these counterclaims are for unliquidated damages and are in the nature of setoffs, these defenses have been stricken out.

In former times much learning had been acquired, delicate distinctions had been developed and extensive legalistic energy had been expended in formulating rules for setoff and recoupment. (2 George II, ch. 22; Bouvier’s Law Dictionary; Waterman on Setoff; Holbrook v. American F. Ins. Co., 6 Paige, 220, 223; Butts v. Collins, 13 Wend. 139; Batterman v. Pierce, 3 Hill, 171; Schubart v. Hartean, 34 Barb. 447; Seibert v. Dunn, 216 N. Y. 237; Merry Realty Co. v. Shamokin & Hollis R. E. Co., 186 App. Div. 538, 541.) Those rules, somewhat arbitrary and artificial, surrounded defendants with impediments often subversive of justice. Even as late as the year 1874, when Frick v. White (57 N. Y. 103) was decided, the Code of Procedure of that day, by section 112, recognized a rigid difference in the case of an assignment between setoff and recoupment and by section 150 established a standard for counterclaims less tolerant than that embodied in the Code of Civil Procedure and the present Civil Practice Act. Since the adoption of these later statutes slender and inequitable distinctions are not encouraged. Without going so far as to hold that in every possible contingency all differences have been obliterated, the modern tendency has been to extend the liberal rule included within section 501 of the Code of Civil Procedure and section 266 of the Civil Practice Act relating to counterclaims so as to cover those defenses which formerly were defined as setoff and recoupment. The counterclaim created by our statutes is more comprehensive than those ancient pleas. (Seibert v. Dunn, supra.) In the language of the Civil Practice Act, it tends to diminish plaintiff’s recovery. Even at common law the defense alleged in this action would have fallen within the class of defenses denominated as recoupment. Defendant’s claim for reduction of the sum alleged in plaintiff’s cause of action grows out of the same transaction as the contract upon which plaintiff’s claim is founded and, as such, would not at common law have been required to be stated at a liquidated sum. Under our modern practice counterclaims for unliquidated damages are good.

The fact that this defense is urged against an assignee who acquired title to the claim after the alleged breach of contract by plaintiff had occurred, does not weaken defendant’s counterclaim as a mere pleading. (Seibert v. Dunn, supra.) Section 266 of the Civil Practice Act allows as a counterclaim a cause of action not only against a plaintiff but, in a proper case, against the person whom he represents. Section 267, subdivision 1, expressly provides for the allowance of a counterclaim against an assignee when defendant’s demand existed against the original party at the time of the assignment and before notice thereof and if it might have been allowed against the party while the contract belonged to him. Such a counterclaim does not, however, allow defendant to recover more than the assignee’s claim.

The judgment of the Appellate Division and that of the Special Term should be reversed and the motion to strike out the counterclaims and for summary judgment denied, with costs in all courts.

Cardozo, Ch. J., Pound, Crane, Lehman, Kellogg and Hubbb, JJ., concur.

Judgments reversed, etc.


author: Hubbs, J.

text:
    Francis A. Cundill, Respondent, v. A. W. Millhauser Corporation, Appellant.

      (Argued October 1, 1931;
    decided November 17, 1931.)

      Stephen Callaghan and Harry Edwards for appellant.
    There is no evidence to show that a delivery of the' shipment was contemplated by the parties or made by the plaintiff at Hamburg, Germany, on January 21, 1926, or at any other time or place. (Seaver v. Lindsay Light Co., 233 N. Y. 273; Willets & Patterson v. Abekobei & Co., 197 App. Div. 528; Richards Co. v. Wreschner, 174 App. Div. 484; Stein Co. v. Robertson, 171 N. Y. 101; Wessel v. Seminole Phosphate Co., 13 Fed. Rep. [2d] 999; Rushing v. Manhattan Co., 224 Fed. Rep. 74; Schlopflocher v. Essgee Co., 197 App. Div. 781; Carocopos, Inc., v. Chieves & Co., 203 App. Div. 104; Harper v. Hochstim, 278 Fed. Rep. 102; Klipstein v. Dilsizian, 273 Fed. Rep. 473; Diamond Alkali Export Co. v. Fl. Bourgeois, [1921] 3 K. B. 443.) The plaintiff failed to establish a cause of action to recover the contract price.
      (Glass & Co. v. Misroch, 239 N. Y. 475; Reichbart v. Smith Eisman Corp., 199 App. Div. 571.)

      James Madison Blackwell, Arleigh Pelham and Arthur G. Syran for respondent.
    The contract is the usual c. i. f. contract. (Thames Mersey Marine Ins. Co. v. United States, 237 U. S. 19; Matter of Bullard, 210 App. Div. 476; 240 N. Y. 388; Smith Co. v. Moschalades, 193 App. Div. 126; Seaver v. Lindsay Light Co., 223 N. Y. 273; Hernandez v. Brookdale Mills, 201 App. Div. 325; Mee v. McNider, 109 N. Y. 500; Dwane v. Weil, 199 App. Div. 719; 235 N. Y. 527; American Sugar Ref. Co. v. Page & Shaw, 16 Fed. Rep. [2d] 662; Pennick & Co. v. Helvetia Com. Co., 212 App. Div. 519; Standard Casing Co. v. California Casing Co., 233 N. Y. 413; Smith Co. v. Marano, 267 Penn. St. 107; Ruttonjee v. Frame, 205 App. Div. 354; Warner, Barnes & Co. v. Warner Sugar Ref. Co., 117 Misc. Rep. 247.) Upon presentation of the proper documents, the plaintiff became entitled to the purchase price of the goods in question. (Smith Co. v. Moschalades, 193 App. Div. 126; Ruttonjee v. Frame, 205 App. Div. 354; 237 N. Y. 115.)
   Hubbs, J.

This is an action to recover the purchase price of twenty-five tons of antimony. The action is under subdivision 1 of section 144 of the Personal Property Law (Cons. Laws, ch. 41), which reads: “ Where, under a contract to sell or a sale, the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract or the sale, the seller may maintain an action against him for the price of the goods.”

The theory of the respondent is that the title of the property passed when the antimony was placed on board ship at Hamburg. Appellant contends that title to the antimony never passed and that the action was improperly brought under subdivision 1 of section 144 of the Personal Property Law and that the only cause of action which respondent has is one to recover damages for refusal to accept the antimony.

The determination of the question depends upon whether the contract of sale is a c. i. f. contract. It reads in part as follows:

“ New York, December 31, 1925 “ To Messrs. A. W. Millhauseb Cobp.,
“ 25 Broadway, New York City “ Deab Sib (s) : Herewith we confirm sale to you for the
account of Ourselves.
“ Thru C. S. Trench & Co.
Quantity Article Price
“ 25 tons Chinese Antimony Begulus 21% si
(each 2,240 99% per lb.
lbs. net) c.i.f.
New York.
“ Shipment — Promptly from Hamburg.
“ Duty — For account of buyers.
“ Insurance — For account of sellers.
“ Payment — Net cash against shipping documents payable upon arrival of steamer.
“ Terms: This contract is contingent upon strikes, floods, fire, riots, war, rebellion, Force Majeure and all other causes beyond our control, but it is our option to make shipment or deliveries as soon as possible after such contingencies have been removed. Contract is based on the present tariff, any change in duty to be for buyer’s account.
“No arrival, no sale, but proof of shipment to be given by sellers, each shipment to constitute a separate delivery. Variation of 10 days in time of shipment or delivery not to constitute ground for rejection.”

Following the above quoted provisions were other provisions not now material. The contract was signed by the seller and accepted in writing by the buyer. If the contract was a c. i. f. contract, the action was properly brought. If not, the judgment in favor of the plaintiff must be reversed. (Glass & Co. v. Misroch, 239 N. Y. 475.)

This court, in Seaver v. Lindsay Light Co. (233 N. Y. 273, 276) has defined a c. i. f. contract as follows: The meaning of the letters c. i. f. in an executory contract is * * * well understood in the commercial world. They mean the cost of the merchandise, insurance thereon, and freight charges to point of destination. * * * Unless there is something in a c. i. f. contract, to indicate to the contrary, the seller completes his contract when he delivers the merchandise called for to the shipper, pays the freight thereon to point of destination, and forwards to the buyer bill of lading, invoice, insurance policy and receipt showing payment of freight.”

At the time this contract was entered into, the goods were in transit between China and Hamburg. The shipment arrived in Hamburg on the 17th day of January, 1926, and was transshipped by lighter to Bremen where it was placed on the steamer Hannover which sailed for New York on January 24th, 1926, and arrived in New York on February 11th, 1926.

The trial court found that the antimony was shipped from Hamburg within the contract time and that the contract was a c. i. f. contract. When the antimony arrived in New York, the buyer refused to accept it.

The invoice, receipt for freight, bills of lading and other documents were not forwarded by the seller to the purchaser as required under a c. i. f. contract but were retained by the seller and tendered to the buyer in New York after the goods had arrived. The insurance policies were never tendered. The bills of lading were through bills of lading and did not contain the name of the buyer as assignee. The insurance policies were issued to bearer “ for account of whom it may concern.” The seller, by failing to forward the shipping documents and insurance policies to the buyer, failed to carry out the obligation placed on a seller under a c. i. f. contract and thereby placed his own construction upon the contract. (1 Williston on Sales [2d ed.], p. 606.)

The contract as written did not conform to the regular c. i. f. contract form. Under such a contract, the insurance should be for the benefit of the buyer as the title passes on shipment and the risk of the voyage is on the buyer. Here the provision of the contract was Insurance — For account of sellers.” The terms of the contract as to payment were also in conflict with the terms of a c. i. f. contract. The contract of sale reads Payr ment — Net cash against shipping documents payable upon arrival of steamer.”

Postponement of the time of payment alone would not prevent the contract from being a true c. i. f. contract as a provision for future payment of the price would not affect the vesting of title. Here, however, was more than a postponement of time of payment of the price and in effect an agreement that shipping documents were not to be forwarded but to be presented after arrival of the steamer, manifesting an agreement that if the steamer did not arrive, no payments were to be made and clearly indicating that the risk of the voyage was on the seller. So also the words No arrival, no sale ” are repugnant to the idea of a c. i. f. contract.

In Wessel v. Seminole Phosphate Co. (13 Fed. Rep. [2d] 999, 1003) it is said: The clause no arrival no sale ’ has a well understood meaning, viz., that if the goods do not arrive at destination, the buyer acquires no property in them and does not become liable to the sellers for the price. (Harrison v. Fortlage, 161 U. S. 57; Moore v. W. R. Grace & Co., [C. C. A. 4th] 287 Fed. Rep. 103.) ”

In view of the fact that a c. i. f. contract has a definite, well-understood meaning in commercial fife and that under such a contract title passes upon delivery to the carrier, the payment of the carrying charges and the prompt forwarding to the buyer of the bill of lading, invoice, insurance policies and receipt showing the payment of carrying charges, it seems clear that the contract in question is not a straight c. i. f. contract and that title did not pass as it would if the instrument were a c. i. f. contract. The provisions “ Insurance — For account of sellers;” “ Payment — Net cash against shipping documents payable upon arrival of steamer ” and “No arrival, no sale,” in connection with the conduct of the seller in fading to promptly forward the documents, indicate that the letters c. i. f. written under the agreed price to be paid for the goods referred only to the price and meant that the seller was to pay the freight and insurance. (Dwane v. Weil, 199 App. Div. 719 at 732; affd., 235 N. Y. 527.)

The letters c. i. f. in the contract created an inference that the instrument was in fact a c. i. f. contract. The express terms of the contract were, however, utterly inconsistent with such inference. The express terms must prevail, and the letters c. i. f. must be limited and applied to the price and not to the passing of title.

The respondent seeks to escape the effect of the express terms of the contract and his failure to comply with the terms of a c. i. f. contract on the ground that the testimony establishes that the contract was the kind of c. i. f. contract which the parties had in mind, and the kind in common use by merchants in New York city engaged in that kind of business. The testimony relied upon falls far short of establishing such a contention. It is also urged that the letters c. i. f. were typewritten while the words “No arrival, no sale ” were part of a printed form. The case of Dwane v. Weil (supra) is relied upon as establishing the principle that in such a situation the printed words must be disregarded and the contract treated as a true c. i. f. contract. No doubt that case would be authority for respondent’s position if that were the only conflict in terms appearing.

In the contract in question the words Payment —■ Net cash against shipping documents payable upon arrival of steamer ” were also typewritten, as was the provision that insurance should be for account of sellers.” Those clauses which were inconsistent with a c. i. f. contract taken in connection with the conduct of the seller in failing to promptly forward the documents clearly distinguish the case at bar from the case relied upon.

The finding that the instrument constituted a c. i. f. contract was a conclusion of law without evidence to support it. As title to the goods was not transferred, an action for the purchase price cannot be maintained under subdivision 1 of section 144 of the Personal Property Law.

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

Caedozo, Ch. J., Pound, Cbane, Lehman, Kellogg and O’Bbien, JJ., concur.

Judgments reversed, etc.


author: Lehman, J.

text:
    Municipal Service Real Estate Company, Inc., Respondent, v. D. B. & M. Holding Corporation, Defendant, and The National Sugar Refining Company of New Jersey, Appellant.

      (Argued September 28, 1931;
    decided November 17, 1931.)

      Henry F. Cochrane and Walter J. Vreeland for appellant.
    As the result of the notice served upon the appellant to come in and defend this action, the appellant may be liable for any judgment obtained therein against its co-defendant. (Hilliker v. Rueger, 165 App. Div. 189; 219 N. Y. 334; Morette v. Bostwick, 56 Misc. Rep. 140.) A party defendant brought into an action on the ground that it is or may be ultimately liable for a judgment recovered therein, may answer the allegations of the complaint and plead by way of separate defenses thereto all matters and facts tending to prevent a recovery against it. (Olmstead v. Rawson, 188 N. Y. 517; Morette v. Bostwick, 127 App. Div. 701.)

      'Horace R. Lamb and George M. Billings for respondent.
    The defendant-appellant will not be bound by a judgment running in the plaintiff’s favor against the original defendant unless the latter permits the defendant-appellant to assume the defense of the action or controversy between the original defendant and the plaintiff. (Port Jervis v. First Nat. Bank, 96 N. Y. 550; Oceanic Steam Navigation Co. v. Compania Trans-Atlantic, 134 N. Y. 461; Cornell v. Travellers Ins. Co., 175 N. Y. 239; Olmstead v. Rawson, 188 N. Y. 517; Hilliker v. Rueger, 228 N. Y. 11; National Metal Box Co. v. Gotham, 125 App. Div. 101; Morette v. Bostwick, 127 App. Div. 701; Fedden v. Brooklyn Eastern District Terminal, 204 App. Div. 741.) The right of the plaintiff to litigate the issues with a defendant of its own choosing in an action at law for damages only will not be interfered with. (Fedden v. Brooklyn Eastern District Terminal, 204 App. Div. 741; Chapman v. Forbes, 123 N. Y. 532; Bauer v. Dewey, 166 N. Y. 402; Frank

      hauser v. Smith, 223 App. Div. 35.) The Legislature did not intend, by enacting subdivision 2 of section 193 of the Civil Practice Act, to burden the plaintiff with the maintaining of his action against an additional defendant whom he had not sued and against whom he could not obtain judgment. (Greenhouse v. Rochester Taxi Cab Co., 218 App. Div. 224; Bozzuffi, v. Darrieusecq, 125 Misc. Rep. 178; Federal Lighterage Co. v. Italia, 125 Misc. Rep. 181; Testing Laboratories v. Krainin, 124 Misc. Rep. 667; Otis Elevator Co. v. Miller, 127 Misc. Rep. 421.)
   Lehman, J.

The defendant D. B. & M. Holding Corporation conveyed to the plaintiff certain premises in the city of New York, by deed containing a warranty of title. The plaintiff has brought an action against its grantor for breach of that warranty. The National Sugar Refining Company had conveyed the premises to the defendant by deed containing a similar warranty of title. Upon application of the defendant the court ordered that the National Sugar Refining Company be brought in as an additional party defendant. In accordance with the provisions of subdivision 2, section 193 of the Civil Practice Act, the order contained a direction that a supplemental summons be served on the National Sugar Refining Company and an amended answer alleging the claim of the defendant against the National Sugar Refining Company.

The amended answer of the defendant D. B. & M. Holding Corporation contains denials of the allegation of the complaint, and after alleging its claim against the National Sugar Refining Company for indemnity, demands judgment that the complaint be dismissed and that if judgment for any amount be rendered in favor of the plaintiff, the defendant may have judgment against the National Sugar Refining Company for the same amount. Thereupon the defendant the National Sugar Refining Company filed an answer to the complaint, setting forth various defenses to the plaintiff’s cause of action, but not denying any of the allegations of the claim made against it by the original defendant. Upon motion of the plaintiff that answer has been stricken out.

The plaintiff seeks a money judgment for damages against its grantor. It has no controversy with, and makes no claim for damages against, a prior grantor who may have conveyed with similar warranty of title; but if the plaintiff is entitled to damages from its grantor, then its grantor in turn will be entitled to indemnification from the National Sugar Refining Company. Proof of the same facts which would establish the plaintiff’s cause of action and entitle the plaintiff to judgment against its grantor would also establish that grantor’s right to indemnification; and a successful defense against the plaintiff’s asserted cause of action would destroy the basis of any claim for indemnification. If the original defendant chooses, it may by appropriate notice to its indemnitor offer to the indemnitor control of the defense of the action; then any judgment rendered in that action will be binding upon the indemnitor when call is made upon him for indemnification, though the indemnitor was not a party to the original action. (1 Freeman on Judgments [5th ed.], §§ 451, 454.) That is true even though the indemnitor refuses to assume such control and neglects to interpose a denial or defense which would have defeated the plaintiff’s claim. (Chamberlain v. Preble, 93 Mass. 370; Brewster v. Countryman, 12 Wend. 446.) It is not true unless the indemnitor is given opportunity to controvert the claim made against the original defendant. If the original defendant chooses to maintain control of the defense, then the indemnitor suffers no real injury though the defense be feeble or even pretended, for a judgment so obtained is binding only upon the parties to the action. The indemnitor is not entitled to an order of intervention in such an action which might compel a plaintiff to litigate a cause of action with a second defendant with whom it has no controversy, or compel the original defendant to divide control of the defense. (Garrigues Co. v. Casualty Co., 220 N. Y. 588.)

To obviate the delays and difficulties attendant upon circuity of action, the Legislature has, in subdivision 2 of section 193 of the Civil Practice Act, provided a method by which a party to an action in which a claim is made against such party may establish, in the same action, the liability of an indemnitor or other third person ultimately “ hable to such party wholly or in part for the claim made against such party in the action.” The purpose and intended effect of the new statutory provision is clearly defined in the statute itself. The third person is brought in as a party to the action to meet a claim asserted against him by one of the original parties to the action. The order bringing in the third person as a party must direct that the party asserting such claim shall serve “ a pleading alleging the claim of such party against such person, * * * and that such person plead thereto, so that the claim of such moving party * *' * may be determined in such action, which shall thereupon proceed against such person as a defendant therein to such judgment as may be proper.” The plaintiff has made no claim against the defendant and may decline to litigate any issues tendered by a person against whom it makes no complaint and demands no judgment. By the express terms of' the statute the controversy between the defendants shall not delay a judgment to which the plaintiff is entitled, unless the court otherwise directs.” The additional defendant can create no controversy with the plaintiff by serving an answer to the complaint against the original defendant, and the order granting the plaintiff’s motion to strike out the answer must be affirmed.

In arriving at this conclusion we have assumed that the answer alleges facts sufficient, if proven, to defeat the plaintiff’s cause of action. Our decision is based upon the plain language of the statute, which gives no right to any party to plead or prove a defense in a cause of action asserted solely against another party. The statute does not provide, expressly or by fair implication, that a judgment in favor of the plaintiff against one defendant shall constitute a binding adjudication against a third person brought in as an additional party defendant. It provides only for such judgment ” against the additional defendant as may be proper.”

A “ proper judgment ” is, of course, a judgment rendered in accordance with due process of law after a trial in which a party against whom the judgment is rendered has had fair opportunity to present his evidence or defense in answer to the claim which is adjudicated against him. The statute contemplates that the claim by the original defendant against the indemnitor shall be alleged in a supplemental pleading. The indemnitor may interpose an answer to that pleading and to no other. Thus the issues are defined in the controversy between the plaintiff and the original defendant by the pleadings of the parties to that controversy and the issues in the controversy between the two defendants are defined by the pleadings of the two defendants. Sometimes those issues may be the same, sometimes the issues may be different. The original defendant may, if it choose, raise no issues upon the claim of the plaintiff against it. Then judgment in favor of the plaintiff against the original defendant must follow. The validity of the original defendant’s claim for indemnification against the liability which it has not chosen to dispute depends upon the existence of the primary liability. That the indemnitor may dispute, and by answer to the supplemental pleading alleging the claim of the original defendant for indemnification, may interpose a pleading which will define the issues he desires to raise in regard to the original liability. The record here does not disclose whether the appellant has served an answer to the supplemental pleading of the original defendant, thus defining the issues in the controversy between the two defendants. The answer which has been stricken out is the answer to the complaint only.

The statute does not define how the issues in the two controversies shall be tried in one action. The trial justice must exercise a wise discretion in the conduct of the trial so that the claim for indemnification may be determined without unfair impediment or delay in the entry of a judgment to which the plaintiff is entitled. In England, Rules of Practice which provide for analogous procedure have been given a similar effect. (See Barton v. London & North Western Ry. Co., 38 Ch. Div. 144.) There must be opportunity for proper cross-examination of witnesses whose testimony is intended to establish the primary liability and opportunity to put in a defense. The trial justice must so direct the conduct of the trial that such- opportunity is afforded. Perhaps at times it may be proper to postpone trial of the issues in the controversy between the two defendants until after the controversy between the original defendant and the plaintiff has been determined. No question of trial procedure is now before us. Enough now to decide that an indemnitor or other third person made a party to the action under the provisions of subdivision 2 of section 193 of the Civil Practice Act does not thereby become a party to the original controversy and may enter a defense only to the claim for indemnification or contribution, made against him by the original defendant.

The order should be affirmed, with costs, and the questions certified answered in the negative.

Cardozo, Ch. J., Pound, Crane, Kellogg, O’Brien and Hubbs, JJ., concur.

Order affirmed, etc.


text:
    Robia Holding Corporation, Appellant, v. James J. Walker, as Mayor of the City of New York, et al., Respondents.
    (Argued September 30, 1931;
    decided November 17, 1931.)

      Louis J. Altkrug and Louis B. Eppstein for appellant.
    The right to establish and collect tolls for the use of bridges and tunnels is a franchise, a sovereign prerogative of the State, and vests in a person or a corporation, whether municipal or private, only when, and only so far as, granted by the State Legislature. (Clark v. City of Des Moines, 19 Iowa, 199; Toll Bridge Co. v. Estill County, 210 Ky. 170; Ft. Smith Light T. R. Co. v. Williams, 149 Ark. 159; Brethitt County v. Hammonds, 150 Ky. 502; Peru Turnpike Co. v. Peru, 91 Vt. 295; Fort Plain Bridge Co. v. Smith, 30 N. Y. 44; Brooklyn City Ry. Co. v. Whalen, 191 App. Div. 737; Browne v. City of New York, 241 N. Y. 96.) The city of New York has never been authorized or empowered to establish and collect tolls for the use of bridges or tunnels except where such power was expressly delegated to it by the Legislature. (City of Pineville v. Pineville Bridge Co., 179 Ky. 375; Brooklyn City Ry. Co. v. Whalen, 191 App. Div. 737; Browne v. City of New York, 241 N. Y. 96.) The Home Rule amendment to the Constitution and the City Home Rule Law have not changed the situation. (Browne v. City of New York, 241 N. Y. 96; Brooklyn City Ry. Co. v. Whalen, 191 App. Div. 737; Matter of McCoy v. Apgar, 241 N. Y. 71; Adler v. Deegan, 251 N. Y. 467; City of New York v. Village of Lawrence, 225 App. Div. 1; 250 N. Y. 425.)

      Arthur J. W. Hilly, Corporation Counsel (William E. C. Mayer and J. Joseph Lilly of counsel), for respondents.
    The city of New York is empowered to adopt a local law and other municipal ordinances and resolutions providing for the fixation of tolls and charges for the use by vehicles and pedestrians of bridges or tunnels to be constructed, maintained and operated by the city at the public expense. (Const. N. Y. art. 12, § 3; City Home Rule Law, §11; Browne v. City of New York, 241 N. Y. 96; Matter of Mayor of New York [Elm Street], 246 N. Y. 72; City of New York v. Village of Lawrence, 250 N. Y. 429; Alder v. Deegan, 251 N. Y. 467; Brooklyn City Ry. Co. v. Whalen, 191 App. Div. 737; 229 N. Y. 570; United Soc. v. Eagle Bank, 7 Conn. 456; Waterford Turnpike v. People, 9 Barb. 161; People ex rel. Savings Bank v. Butler, 147 N. Y. 164; Topham v. Interurban St. Ry. Co., 96 App. Div. 323; Osborne v. International Ry. Co., 226 N. Y. 421; Gubner v. McClellan, 130 App. Div. 716; Matter of McAneny v. Board of Estimate, 232 N. Y. 377; Fort Plain Bridge Co. v. Smith, 30 N. Y. 44; People ex rel. Lehigh V. Ry. Co. v. Tax Comm., 247 N. Y. 9; Matter of State of New York, 70 Misc. Rep. 72; Schieffelin v. Goldsmith, 253 N. Y. 243.)
   Lehman, J.

The Board of Estimate and Apportionment of the city of New York has, by resolution adopted on or about March 15, 1929, determined that a bridge connecting the boroughs of Manhattan, The Bronx and Queens and a tunnel connecting the boroughs of Brooklyn and Queens, should be constructed at the public expense, and has directed the Comptroller to issue corporate stock or serial bonds of the city of New York “ for the purpose of providing the necessary means for the construction of the said tri-borough bridge and the said tunnel at the public expense.” Thereafter and on June 27, 1929, it adopted a second resolution providing that subject to the concurrence herein of the Board of Aldermen and pursuant to the provisions of Section 169 of the Greater New York Charter the Comptroller be and hereby is authorized to issue, in the manner provided by section 169 of the Charter, corporate stock in an amount not exceeding three million dollars * * * the proceeds to the amount of the par value thereof to be used by Department of Plant and Structures for preparation of plans and construction (partial appropriation) for the Triborough Bridge connecting the Boroughs of Manhattan, The Bronx and Queens.” The Board of Aldermen thereafter by ordinance concurred in this resolution.

Section 169 of the Greater New York Charter (Laws 1901, ch. 466, as amd. L. 1916, ch. 615, § 2) provides for the issue of corporate stock and serial bonds for revenue-producing ” improvements. That term is declared in the same section to be applicable to that class of improvements * * * the expenditure for which shall, at the time it is authorized, be determined by the board of estimate and apportionment to have a substantial * * * prospective earning power.” The Board of Estimate and Apportionment has formally made such a determination in its resolution. Only through tolls or charges exacted for the use of the proposed bridge or tunnel can such improvements have any substantial prospective earning power. Claiming that the city is without power to exact such tolls or charges, this plaintiff has, in a taxpayer’s action, challenged the validity of the resolution and ordinance authorizing the issue of the bonds. The courts below have passed upon the merits of the challenge without regard to the form of action in which the challenge is offered. We follow the same course.

After the Board of Estimate and Apportionment had adopted its resolution of March 15, 1929, determining that the bridge and the tunnel should be constr acted as revenue-producing public improvements,” the Municipal Assembly, in accordance with a suggestion contained in the resolution, passed two local laws which purported to give to the Board of Estimate and Apportionment power “ to establish and fix such charges and tolls as it may deem convenient or necessary for the operation and maintenance ” of the proposed bridge and tunnel. If these local laws constitute a valid exercise of a legislative power conferred upon the city of New York under the “ Home Rule ” amendment to the Constitution (Const, art. 12, § 3) and the statutes adopted by the Legislature to carry out its purpose, then there can be no doubt that the city of New York may charge rates and tolls for the use of the proposed bridge and tunnel, and may issue bonds to provide for the cost of their construction as revenue-producing improvements.”

This court has pointed out that under the City Home Rule Law (Cons. Laws, ch. 76), local laws may be enacted by a city only where they touch the city’s property, affairs or government in one or more of certain enumerated ways.” (Browne v. City of New York, 241 N. Y. 96, 119.) There we said: l< Under the Home Rule Law, the city may redistribute its powers among its officers and employees. For the better execution of those powers, it may at times create instrumentalities that have been theretofore unknown. It may not transform its own powers under the guise of an amendment of the powers of its agents ” (p. 121). Because of that distinction, this court held that a local law is ineffective if its purpose or effect is to confer upon an agent or officer of the city a power which the Legislature has denied to the city itself. We must apply the same test here.

In the opinion in which this court formulated the test, it pointed out that the fine of division will at times be hard to draw, for the two classes shade into each other ” (p. 120). Since a municipal corporation performs its functions through its officers and agents, a statutory enlargement or limitation of the powers and functions of the instrumentalities created to perform the corporate functions may in effect enlarge or limit the corporate functions of the city. So long as the Legislature had sole and exclusive authority both to confer corporate powers on a municipal corporation and to distribute such powers among its officers or employees, such distinctions carried no practical consequences. Where the court could discern in the language of the statute a legislative intent that the city might exercise a particular power, it was immaterial whether the power was conferred directly upon the city by express terms or indirectly, and by necessary implication, from a grant of power to a municipal officer. When the legislative authority was divided and authority conferred upon the city to pass local laws relating to the powers and duties of its officers and employees, but not to enlarge its own corporate functions, the distinction marks the line between the field which is still reserved to the Legislature and the field in which legislative authority has been conferred upon the city.

In Browne v. City of New York (supra) the line was plainly marked. The purpose of the local legislation was to confer upon an agent of the city a power which, as the courts had previously decided, was not conferred upon the city by the Greater New York Charter, or by any other statute. (Brooklyn City R. R. Co. v. Whalen, 191 App. Div. 737; affd., 229 N. Y. 570.) The Legislature had, indeed, consistently denied this power to the city.

In the case now under consideration, the Legislature has not in express terms conferred upon the city the right to charge rates or tolls for bridges or tunnels which it is authorized to construct and operate, and the courts have not heretofore decided whether that power is granted by fair implication. The Legislature has never refused to grant such power to the city. On the contrary, after the city had passed the local laws which purported to confer upon a city instrumentality authority to fix charges and tolls for bridges and tunnels, the Legislature in at least two statutes unequivocally recognized the power of the city and its officials to fix such charges and tolls. (Laws of 1930, chs. 373, 437.)

Unquestionably, the Legislature still has authority, under the methods provided in Home Rule amendment to the Constitution, to pass laws conferring such power upon the city. An unequivocal recognition by the Legislature of the power of a governmental agent to authorize' the collection of tolls or charges on a bridge may constitute an implied grant of such power. (See Irvine Toll Bridge Co. v. Estill County, 210 Ky. 170.) Certainly it may constitute an adoption of the local law even if the local law originally exceeded the powers of the municipality. A majority of the Appellate Division placed their decision sustaining the validity of the proposed bond issue on that ground.

We prefer to place our decision upon the broader ground that the local laws were valid at their inception. Though the Legislature, under the Constitution, may still confer new powers upon a city, the method of the exercise of that power is subject to restrictions imposed by the Constitution. The courts below have held that the Legislature has acted in accordance with those restrictions. We do not now decide that question. At least these statutes represent a legislative construction of the statutory powers of the city. Such construction is not binding upon the courts if they disagree with that construction. Here we agree with the legislative interpretation.

The Legislature has expressly conferred upon the city, acting through the Board of Aldermen, power to build bridges over, and tunnels under any stream or waterway within or adjoining the limits of the city, and to authorize the issue of bonds for that purpose. (Greater New York Charter, § 47.) The Legislature has also expressly granted to every city power to establish, construct and maintain, operate, alter and discontinue bridges, tunnels and ferries, and approaches thereto.” (General City Law; Cons. Laws, ch. 21, § 20, subd. 9.) It has never in express terms granted to the city power to impose charges for the use of bridges, tunnels and ferries. The problem in this case is whether it has done so by implication.

Many authorities, judicial and extra-judicial, have been cited to us for the rule that a legislative grant to a municipal corporation of power to impose charges for the use of any highway or part of a highway, which it is authorized to construct and maintain for the public use, must rest upon unequivocal language clearly expressing a legislative intent. Grants by the State even to a civil division of the State must, it is said, be strictly construed. The rule may constitute a valid canon of construction, a guide in judicial search for legislative intent, but it can never be applied to defeat a legislative intent when that is found. No corporation, public or private, may exercise powers not granted by the State, and the words of a grant may not be extended beyond their fair intendment — neither may they be restricted in manner to defeat such intendment. In the construction of statutes, as well as contracts, “ the law has outgrown its primitive stage of formalism when the precise, word was the sovereign talisman, and every slip was fatal.” (Wood v. Duff-Gordon, 222 N. Y. 88, 91.) What is expressed, even in a grant by the sovereign, includes all that is reasonably implied in the language used. (See Peru Turnpike v. Peru, 91 Vt. 295.) A power to construct and maintain a highway may by fair intendment include the right to build bridges as part of the highway. It would not by fair intendment include a power to charge tolls upon a bridge which has become part of such highway. (3 Dillon on Municipal Corporations, § 1158, and cases there cited.) Perhaps even where the Legislature has granted to a city express power to construct and operate bridges, authority to pay for such bridges out of tolls or charges is not necessarily implied; yet the power expressly granted may be so phrased that even he who runs may read in the language used a clear intention to include subsidiary powers appropriate to its exercise. The language used must be construed in accordance with its purpose and plain intent. No arbitrary rule can limit or extend the effect of the language used beyond its intendment when that intendment plainly appears in the light of all surrounding circumstances.

Here the power conferred upon the city by its charter to construct and operate bridges and tunnels was, as we have pointed out, combined with a power to provide for the cost of bridges and tunnels so constructed by the issue of municipal bonds. (§ 47.) The power to issue bonds for such improvements is so regulated by the provisions of section 169 of the Greater New York Charter that it could not be effectively exercised unless such improvements were revenue-producing.” It cannot be, and is not, disputed that, when the Legislature adopted those sections of the charter, it contemplated that tolls and charges would be imposed for the use of any bridge erected by the city out of funds provided by bond issues. It is said, however, that the Legislature may have intended that before any bonds could be issued to provide for the construction of a particular bridge, authority must be obtained from the Legislature to exact charges upon the proposed bridge. Such constructions would impute to the Legislature an intention to make its grant of authority illusory.

We find no reason for imputing to the Legislature so extraordinary an intention. Before the Greater New York Charter was enacted, the Legislature had authorized the construction of two great bridges to connect two boroughs of Greater New York — though at that time they were separate cities. Because they were separate cities, it was found expedient to create for their erection and operation new quasi-public corporations, and the Legislature in creating such corporations gave them express authority to exact tolls and charges. (Laws of 1875, ch. 300; Laws of 1895, ch. 789, as amd. by Laws of 1896, ch. 612.) After the greater city was formed, the powers of these specially created instrumentalities were conferred by the city charter upon the city acting through its Commissioner of Plant and Structures. The Legislature thus recognized that the power to charge tolls upon great bridges connecting two boroughs of the city was, at least, appropriate in connection with a power to construct and operate bridges. We cannot find any ground for the conclusion that the Legislature intended to withhold such power from the city when it built and operated new bridges.

If there were doubt about the legislative intent, it would be, in great measure, dissipated by the provision of the General City Law, conferring upon cities power to establish, construct and * * * operate * * * bridges, tunnels and ferries.” (§ 20, subd. 9.) Certainly in the operation of ferries, if not of bridges and tunnels, a charge or toll is a usual, perhaps universal, custom, and it would be unreasonable to hold that in granting to cities the power to operate ferries as well as bridges or tunnels, the Legislature intended to withhold power to charge for their use. Other sections of the charter and other statutes throw little further light upon the legislative intent to include in the power to construct and operate bridges and tunnels the power to charge rates and tolls. We conclude that the legislative intent is clear, and we are fortified in our conclusion by the legislative recognition in recent statutes that in the local laws the city has regulated the exercise of powers conferred upon it by the sovereign State, and has not indirectly sought to confer upon itself powers denied to it by the sovereign.

The judgment should be affirmed, with costs.

Cardozo, Ch. J., Pound, Crane, Kellogg, O’Brien and Hubbs, JJ., concur.

Judgment affirmed.


author: Lehman, J. Crane, J.

text:
    Glens Falls Indemnity Company, Appellant, v. The Chase National Bank of the City of New York, Respondent.
    (Argued October 7, 1931;
    decided November 17, 1931.)

      William J. Killea and Paul Kieffer for appellant.
    Defendant’s predecessor converted the check. (Wagner Trading Co. v. Battery Park Nat. Bank, 228 N. Y. 37; Standard Steam Specialty Co. v. Corn Exchange Bank, 220 N. Y. 478; Neg. Inst. Law, §§ 95, 98.) There can be no negotiation of a check between co-payees and, therefore, plaintiff’s indorsement and delivery of the check to its co-payee did not divest it of title to the check in the hands of one who converted it. (Stelling v. Grabowsky, 19 N. Y. Supp. 280; Collyer v. Cook, 28 Ind. App. 272; Spaulding v. First Nat. Bank, 210 App. Div. 216; 239 N. Y. 586; Moskowitz v. Marrow, 251 N. Y. 380; Marrow v. Moskowitz, 255 N. Y. 219.)

      Wolfgang S. Schwabacher, Harold P. Seligson and Edward Garfield for respondent.
    This action for conversion cannot be maintained because plaintiff divested itself of title to the check when it indorsed and delivered the instrument to the co-payee. (Goddard v. Lyman, 31 Mass. 268; Sneed v. Mitchell, 2 N. C. 289; Logue v. Smith, Wright [Ohio], 10; Bond v. Holloway, 18 Ind. App. 251; Citizens Nat. Bank v. Walton, 96 Va. 439; Voris v. Schoonover, 91 Kan. 530; Union Bank v. Spies, 151 Iowa, 178; Williams v. Thornton, 160 Tenn. 229; Page v. Ford, 65 Ore. 450; Bedell v. Carll, 33 N. Y. 581; Everett v. Vendryes, 25 Barb. 383; 19 N. Y. 436; Burdick v. Green, 15 Johns. 247; Slattery v. National City Bank, 114 Misc. Rep. 51; Stelling v. Grabowsky, 19 N. Y. Supp. 280; Collyer v. Cook, 28 Ind. App. 272.) Plaintiff’s indorsement is an indorsement in blank and did not operate to reserve any title in the plaintiff, and no facts are pleaded from which a reservation of title can be inferred. (Neg. Inst. Law, §§ 63, 66, 67, 68, 69, 113.) Plaintiff’s interest in the check was validly vested in the bank. (Seaboard

      Nat. Bank v. Bank of America, 193 N. Y. 26; Caledonian Ins. Co. v. National City Bank, 208 App. Div. 83.)
   Lehman, J.

The plaintiff sues for the conversion of a check and its proceeds by a trust company whose liabilities have been assumed by the defendant. According to the allegations of the complaint, which we must assume to be true, the check was payable to the order of Adnaloy Realty Corporation and/or the plaintiff herein. It was delivered by the maker to the plaintiff. Thereafter the plaintiff delivered the check to the co-payee, Adnaloy Realty Corporation, with the indorsement upon it, Payment approved. Glens Falls Indemnity Company, by Sidney G. Barnett, Attorney.” The president of the Adnaloy Realty Corporation, Michael F. Longo, indorsed the check Adnaloy Realty Corp., by Michael F. Longo Pres.,” and Michael F. Longo,” and without authority from the plaintiff or the Adnaloy Realty Corporation deposited the check to his own credit and account with the trust company. The trust company collected the amount of the check from the bank on which it was drawn and applied the proceeds in part payment of a personal obligation owing to it by Michael F. Longo.

Earlier doubt and conflict of authority as to whether an instrument drawn payable to the order of “ one or some of several payees ” is negotiable, has been resolved by the Negotiable Instruments Law (Cons. Laws, ch. 38, § 27); Daniel on Negotiable Instruments ([6th ed.] § 103). Rights arising under such an instrument are now determined by the provisions of the statute. The holder of an instrument drawn payable to the order of one or more of several payees may collect or negotiate it; but since a holder,” as defined by the statute, means the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof ” (Neg. Inst. Law, § 2), no one of the several payees to whose order the instrument is drawn is its holder unless he is also in possession of it.

The Glens Falls Indemnity Company became the holder of the check upon delivery to it. It is said that delivery of the check by the Glens Falls Indemnity Company, one of the payees and the holder of the check to the Adnaloy Realty Corporation, the other payee named in the check, with the indorsement Payment Authorized ” upon it, made the Adnaloy Realty Corporation an indorsee or bearer of the check. Nothing in the words indorsed on the check shows an intention to give these words so extraordinary an effect, but it is argued that section 113 of the statute gives the indorsement that effect regardless of the intention of the parties. The force of that argument may well be doubted; but the rights and obligations of the Adnaloy Realty Corporation and of the defendant remain the same whether ¡ve accept or reject that argument. The Adnaloy Realty Corporation became the holder of the check when possession of the check was delivered to it, because it was a payee of the check by its terms, even if it did not become an indorsee or bearer by the indorsement upon it. The trust company accepted the check from Michael F. Longo with notice that Longo’s title, if any, was derived from the holder, Adnaloy Realty Corporation, by indorsement which he himself had placed upon the note as president of the corporation. Since Longo had in fact no authority to indorse the check as agent of the Adnaloy Realty Corporation, title to the check and its proceeds never passed to him or from him to the trust company which had notice of the defect in Longo’s title. By the acts of the trust company the holder of the check has been deprived of possession of the check, and any rights of property it may have in the check have been invaded. It has right of action for conversion against the defendant (Wagner Trading Co. v. Battery Park Nat. Bank, 228 N. Y. 37), but it asserts no such right. The question here presented is whether the plaintiff, as one of several payees to whose order a check is drawn, may bring an action for its conversion, though at the time of the alleged conversion it was not the holder of the instrument.

The Negotiable Instruments Law deals with rights of parties under the instrument. It does not affect the rights of other parties or even the rights of parties, as between each other, arising outside of the instrument, bo possession of the instrument or its proceeds.

Doubtless a party may have title to a negotiable instrument or right to its possession though not a holder of the instrument. Just as title to an instrument may be transferred without indorsement, though, in such case, the new owner is not a holder ” of the instrument (Neg. Inst. Law, § 79), so title to the instrument and its proceeds, or at least right to possession of the instrument, may be in one person though, for convenience in collecting or other reason, another person is the holder of the instrument. In such case, the holder can transfer to an innocent purchaser a perfect title to the instrument, though his own title be defective. Against a title so transferred no other person may assert superior rights of which the purchaser had no notice. That rule does not apply here, for the Adnaloy Realty Corporation has transferred no title to the trust company and the trust company has acquired no title of any kind. Therefore, even though the trust company had no notice at the time of the conversion that the plaintiff retained any title or right of property which it might assert against the Adnaloy Realty Corporation, the trust company by wrongfully talcing the check from the Adnaloy Realty Corporation can certainly not acquire a title ” or right of possession better than even the Adnaloy Realty Corporation had. If, therefore, the allegations of the complaint show that by the wrongful acts of the trust company, the plaintiff has been deprived of rights retained by it after the check was delivered to its co-payee, then the complaint is sufficient.

The complaint fails to allege that the plaintiff had any right to possession of the instrument or any property therein, except such right or property as it may have, as one of the payees to whose order the instrument was drawn. The only right arising under the instrument was a right to deal with the instrument as a “ holder ” while it was in its possession. It parted with its rights as holder by delivery of the instrument to a co-payee, even if it did not negotiate the instrument to the co-payee by indorsement and delivery. Therefore, the rights of the plaintiff are no greater if we deny to the indorsement the effect urged by the defendant, just as the liability of the trust company, which never acquired title to the instrument, is no less if we give it that effect. The defendant in either case would be hable to any party which has any title or right of property in the check which the trust company invaded by dealing with the check as the property of Longo, and the plaintiff in either case would not, so far as appears from the allegations of the complaint, have any property or right to possession which was invaded.

What is said and decided here refers, of course, only to the rights of parties to an instrument drawn to the order of one or more of several payees. We do not pass upon the rights of the parties to an instrument which is drawn to the order of joint payees. Then, too, other questions might arise even as to the rights of one of several payees to whose order the instrument is drawn in the alternative, where there is allegation or proof that the possession of one payee is in fact possession as servant or agent of another payee. Here there are no allegations of such facts, but on the contrary, an allegation that the plaintiff “ delivered ” the note to the other payee.

For these reasons the judgment should be affirmed, with costs.

Crane, J.

(concurring). On the 11th day of January, 1929, Isaac Blumberg & Company delivered to the plaintiff, the Glens Falls Indemnity Company, its check dated that day, in the amount of $19,250, drawn on the Bank of America, New York city, payable to the order of Adnaloy Realty Corporation and/or the Glens Falls Indemnity Company. Thereupon the latter company indorsed said check as follows: Payment approved Glens Falls Indemnity Co., by Sidney G. Barnett, Attorney,” and caused the same to be delivered to one Michael F. Longo, president of the Adnaloy Realty Corporation. That this was a delivery to the Adnaloy Realty Corporation was not only evidenced by the delivery to its principal officer, the president, but is confirmed by the repeated statements in the brief of the appellant that the indorsement and delivery of the check was to the co-payee. The statement is made more than once that this indorsement and delivery of the check was to the Adnaloy Realty Corporation.

The president, to whom the check had been delivered, took it to the Interstate Trust Company (now the Chase National Bank), having indorsed it “ Adnaloy Realty Corp. by Michael F. Longo, Pres.,” and “ Michael F. Longo.” The trust company collected the check from the Bank of America and applied the amount to a loan which it had made to Michael F. Longo. This debt, even if antecedent, constituted a valuable consideration for the check. (Neg. Inst. Law, § 51.)

The Glens Falls Indemnity Company has brought this action against the Interstate Trust Company for the conversion of the check, alleging in its complaint the facts heretofore stated, and that Longo, the president of the Adnaloy Realty Corporation, had no authority to use the check for his own indebtedness, all of which was known to the Interstate Trust Company. Do these facts constitute a cause of action in conversion by the Glens Falls Indemnity Company?

The Adnaloy Realty Corporation makes no complaint. It has not claimed that its president has converted its property or that the Interstate Trust Company had no right to pass the amount of the check to bis indebtedness. For all we know, Ms acts, if unauthorized, were ratified. However tMs may be, the action is not brought by that corporation for the conversion of its property, and thus Wagner Trading Co. v. Battery Park Nat. Bank (228 N, Y. 37) is not applicable. We there held that “ Any person taMng checks made payable to a corporation, which can act only by agents, does so at his peril and must abide by the consequences if the agent who indorses the same is without authority, unless the corporation is negligent or is otherwise precluded by its conduct from setting up such lack of authority in the agent ” (p. 42). The negligence or authority of the Adnaloy Realty Corporation is not before the courts by tMs pleading, as that corporation makes no claim to the fund and is not sumg for any illegal acts or conversion by its president. TMs smt rests upon a claim by the Glens Falls Indemnity Company that its property has been converted and that its check has been wrongly applied by the president of another company, a co-payee.

What were the rights of these two payees to tMs check? A negotiable instrument may be drawn payable to the order of two or more persons jointly; or one or some of several payees. (Neg. Inst. Law, § 27.) Where the instrument is payable to the order of two or more persons who are not partners, all must indorse, unless the one indorsing has authority to indorse for the others. (§ 71.) This applies to joint payees. But where the instrument is made payable to one or some of several payees, one may indorse and pass title. Where a note is made payable' “ to the order of A or B,” the indorsement of either is sufficient to pass title. (Voris v. Schoonover, 91 Kan. 530.) In Union Bank v. Spies (151 Iowa, 178) it was held that a note payable to the Royal Mutual Life Insurance Company, or Hugh Blackman,” is payable to either and negotiable by the indorsement of either. (See, also, Page v. Ford, 65 Ore. 450; Williams v. Thornton, 160 Tenn. 229.)

Had the Glens Falls Indemnity Company cashed the check after indorsing its name on the back thereof good title would have passed to the person taking it. Is there anything in the law which prevents its thus passing title by indorsement and delivery to its co-payee? I think not. Even a joint payee of a negotiable instrument may legally assign it to one of the others (Goddard v. Lyman, 31 Mass. [14 Pick.] 268); and this may be accomplished by indorsement and delivery. (Daniel on Negotiable Instruments [6th ed.], § 701-a; Sneed v. Mitchell’s Executors, 2 N. C. [1 Hayw.] 289.) This check in question could have been given by the Glens Falls Indemnity Company to the Adnaloy Realty Corporation without indorsement and that company could have collected the entire amount or exercised the same rights and privileges which belonged to its co-payee. All parties, including the defendant, are presumed to have known this law of negotiable paper. If the plaintiff, without indorsing the note, had passed it over to the president of its co-payee, he could have cashed it for his company, and the Adnaloy Realty Co poration could have received and collected the money. What was there, therefore, to put the defendant trust company on notice that this money or check belonged to the Glens Falls Indemnity Company? True, it had notice that the check was the property of the Adnaloy Realty Corporation, but it had no notice, actual or constructive, from the indorsements that the Glens Falls Indemnity Company had not parted with its title.

Not being obliged under the law to indorse the check in order to permit or authorize the Adnaloy Realty Corporation to collect or cash it and take the money, the indorsement must have meant something. Counsel for the appellant concedes, and such must be the fact, that if the president, Longo, had deposited the check in the name of his company, the plaintiff could not maintain this suit for conversion. The indorsement of the check and the delivery to the corporation through its president authorized that corporation to deposit the check for collection and to collect it. If this be so, how can we say that the trust company had notice of the plaintiff’s claim to title? Conceding the plaintiff could not maintain an action for conversion if Longo had put the money in the name of his company, how can we say that putting it in his own name gave notice to the trust company the property did not belong to his company but belonged to a third party? It does not follow logically, because the bank had notice from the form of indorsement that the money belonged to the Adnaloy Realty Corporation, that it also had notice that it was the property of the Glens Falls Indemnity Company. The positions are inconsistent. The plaintiff by its indorsement, “ Payment approved, Glens Falls Indemnity Co., by Sidney G. Barnett, Attorney,” and by the delivery to President Longo, passed title to the check to the Adnaloy Realty Corporation in so far as third persons were concerned who subsequently took for value and without notice. The trust company to whom Longo owed money took the check for a valuable consideration against all the world except Longo’s company. As to it, the trust company had notice through the form of the indorsement that the money should be paid to the realty corporation and not to Longo. It had no notice that the plaintiff still had title to the check. Whatever adjustments were to be made between the plaintiff and the realty corporation, the plaintiff, by its indorsement and delivery, had parted with its title as to third parties cashing or taking the check for value and without notice. What the plaintiff is trying to do here is to make that rule of law stated in Wagner Trading Co. v. Battery Part Nat. Bank (supra), which made the form of Longo’s indorsement notice to the trust company that the check belonged to his company, also notice to the trust company that the check belonged to the Glens Falls Indemnity Company. The duty upon the part of banks to make inquiry or to take notice of the rights or duties of their depositors has not been carried to this extent.

The plaintiff, having parted with its title in the manner heretofore stated, cannot maintain this action in conversion, and the complaint was properly dismissed.

Cardozo, Ch. J., Pound and Kellogg, JJ., concur with Lehman, J., Crane, J., concurs in result in separate opinion in which O’Brien, J., concurs; Hubbs, J., not sitting. Judgment affirmed.


text:
    Albert C. Wills, Respondent, v. Investors Bankstocks Corporation, Appellant. (Actions 1 and 2.)

      (Argued October 14, 1931;
    decided November 17, 1931.)

      Charles H. Meyer and Jerome G. Rosenhaus for appellant.
    Title to the shares of stock did not pass to the plaintiff upon any theory of agency. (Wamsley v. Atlas S. S. Co., 168 N. Y. 533; McCoy v. American Express Co., 253 N. Y. 477.) The firm with which plaintiff did business acted as a dealer and not as a stockbroker in these transactions. (Gast v. Buckley, 64 S. W. Rep. 632; White v. Brownell, 2 Daly, 329; Markham v. Jaudon, 41 N. Y. 256; Coolidge v. Old Colony Trust Co., 259 Mass. 515; Trowbridge v. O'Neill, 243 Mich. 84; Matter of Solomon & Co., 268 Fed. Rep. 108; Porter v. Wormser,
      94 N. Y. 431.) The law of principal and agent applicable to the relationship of stockbroker and customer cannot be applied. (Le Marchant v. Moore, 150 N. Y. 209; Roca v. Byrne, 145 N. Y. 182; Markham v. Jaudon, 41 N. Y. 256; Richardson v. Shaw, 209 U. S. 365; Papadopulos v. Bright, 264 Mass. 42; Crehan v. Megargel, 235 Mass. 279; Chase v. Boston, 180 Mass. 458; Rice v. Winslow, 180 Mass. 500; Hall v. Paine, 224 Mass. 62; Gifford v. Eastman, 251 Mass. 520; Trowbridge v. O’Neill, 243 Mich. 84.) Title to the shares of stock did not pass to the plaintiff under the law of sales for the transactions involve executory contracts of sale. (Decker v. Furniss, 14 N. Y. 611; Anderson v. Read, 106 N. Y. 333.) Title to property, not transferable at the date of the sale, does not pass until there has been an appropriation to the contract. (Pers. Prop. Law, § 156; Coolidge v. Old Colony Trust Co., 259 Mass. 215.) No appropriation of the stock to the contracts is shown. (Pers. Prop. Law, § 100, rule 4, subd. 1.)

      Howard C. Kelly for respondent.
    Title to the shares of stock passed to plaintiff and an action for conversion lies. (Markham v. Jaudon, 41 N. Y. 235; Richardson v. Shaw, 209 U. S. 365; Strickland v. Magoun, 119 App. Div. 114; 190 N. Y. 545; Douglas v. Carpenter, 17 App. Div. 329; Shiel v. Stoneham, 77 Misc. Rep. 125; Taylor v. Ketchum, 28 N. Y. Super. Ct. 507 Mann v. Sands, New York City Court Rep. 25; Le Marchant v. Moore, 150 N. Y. 209; Talmage v. Third Nat. Bank, 91 N. Y. 531; Kittridge v. Grannis, 214 App. Div. 486; 244 N. Y. 168; Rumery v. Brooks, 205 App. Div. 283; Brown v. Carpenter, 182 App. Div. 650; Rosenkranz v. Saberski, 40 Misc. Rep. 650; Mullen v. Quinlan & Co., 195 N. Y. 109; Eno v. Sage, 83 Misc. Rep. 389; Weaver v. Barden, 49 N. Y. 286; Matter of Mills, 125 App. Div. 730; 193 N. Y. 626; Tuckerman v. Mearns, 262 Fed. Rep. 607; Trow-bridge v. O’Neill, 243 Mich. 84; Van Tine v. Hilands, 131 Fed. Rep. 124.) The defendant never had the right of setoff. (Morris v. Windsor Trust Co., 213 N. Y. 27; American Brake Shoe & Foundry Co. v. New York Rys. Co., 10 Fed. Rep. [2d] 920; Topas v. Grant, 18 Fed. Rep. [2d] 724; Van Zandt v. Hanover Nat. Bank, 149 Fed. Rep. 127; Wycoff v. Anthony, 90 N. Y. 442.)

      Carl A. de Gersdoff' for Association of Bank Stock Dealers of New York, amicus curice.

   Lehman, J.

The defendant is a dealer in bank and insurance company stocks which are not bought and sold on the Stock Exchange and are known as over the counter ” securities. Its place of business was connected with the place of business of J. S. Schofield & Co., in Waterbury, Conn., by a private wire for “ teletype ” messages. The plaintiff made an agreement on November 18, 1929, with J. S. Schofield & Co. for the purchase of twenty shares of .¿Etna Life Insurance Company stock at the price of $101§ per share. It does not appear whether the plaintiff understood that he was buying the stock from J. S. Schofield & Co. as dealers, or through J. S. Schofield & Co. as brokers, but he received a “ confirmation of sale ” over the signature of J. S. Schofield & Co. stating: “We are pleased to Confirm Sale to you to-day November 19th, 1929, of 20 .¿Etna Life Insurance 101|, $2,030.” On November 20th the plaintiff agreed to purchase 10 shares of the stock of Equitable Trust Company and received from J. S. Schofield & Co. a similar memorandum.

The stocks which the plaintiff agreed to buy were not at that time in the possession of J. S. Schofield & Co. Indeed, the stock of Equitable Trust Company was “ new ” stock which had not at that time been issued. J. S. Schofield & Co., in its turn, agreed to purchase similar stock from the defendant, but at a price several dollars per share less than the price which plaintiff agreed to pay. Prior to each purchase from the defendant, the defendant had been informed by J. S. Schofield & Co. that they desired to purchase that stock to fill an order for a customer at a higher price. Promptly after each purchase, the defendant received notice from J. S. Schofield & Co. that the stock purchased should be transferred to the name of the plaintiff, and in letters confirming the notices, previously sent over the private wire, J. S. Schofield inclosed their check for the purchase price of the stock to eliminate the possibility of delay in transfer.” The receipt of these checks was acknowledged by the defendant in letters which stated, we have this day placed ” the stock “ in transfer into the name of Albert C. Wills, 93 Bank Street, Waterbury, Conn.”

The statements contained in the letters that the defendant had this day ” placed the stock in transfer was ■untrue. In fact, though the defendant had purchased stock to fill the order received from J. S. Schofield & Co., no such stock had been delivered to the defendant at that time. Before the stock was delivered to the defendant, J. S. Schofield & Co. had become bankrupt, and owed the defendant a large sum of money on a general account, though the purchase price of this particular stock had been paid to the defendant. Then the defendant refused to deliver the stock, though it retained the purchase price. The plaintiff, claiming that he is the owner of the stock, has brought two actions, which have been tried together, for its Conversion.

The defendant attempts to justify its refusal to deliver the stock to the plaintiff on the ground that it agreed to sell the stock to J. S. Schofield & Co. as principal and not as the plaintiff’s broker, that it received from the buyer the purchase price of the stock in advance of delivery, and that, though it may be accountable to J. S. Schofield & Co., the buyer, or to the trustee in bankruptcy, for the moneys received in advance, it may apply those moneys upon the amount due to it from the bankrupt on its general account. The Appellate Division, holding that the defendant had notice that J. S. Schofield & Co. acted as agent or broker for the plaintiff in purchasing the stock, and that the defendant may not defeat the claim of the plaintiff by an assertion that it was dealing with the broker as a principal (LeMarchant v. Moore, 150 N. Y. 209), directed judgment in favor of the plaintiff for the value of the stock.

Perhaps the checks in payment for the stock were delivered to defendant, not only in advance of delivery of the stock, but conditionally upon the transfer of the stock to the plaintiff. Perhaps the moneys so delivered to the defendant belonged to the plaintiff, and the defendant received them with notice of the plaintiff’s ownership. We do not now pass upon the ethical or legal justification of defendant’s claim that it may apply those moneys upon an indebtedness due from J. S. Schofield & Co. The plaintiff has not demanded back the purchase price. He does not claim title to the moneys paid to the defendant. He claims title to the stock which the defendant agreed to sell, and he can recover only upon proof that title at some time passed to him.

We need not now decide whether there is any evidence to sustain the finding of the Appellate Division that J. S. Schofield & Co. acted as brokers for the plaintiff in purchasing the stock. Even though we should assume that the defendant’s contract for the stock was made with the plaintiff as the disclosed principal of J. S. Schofield & Co., yet, under that contract, no title to the stock passed at that time to the plaintiff. The seller did not, at that time, have title to the stock which it agreed to sell, and did not make any contract whereby it undertook to make a present transfer of the property in specific goods. The defendant’s contract was a “ contract whereby the seller agrees to transfer the property in goods to the buyer.” (Pers. Prop. Law; Cons. Laws, ch. 41, § 82.) The goods were then unascertained. The defendant might thereafter acquire goods of the stipulated description for the purpose of complying with its contract to transfer property in goods of that description to the buyer, but the property in the goods acquired would pass to the buyer only when such goods “ in a deliverable state are unconditionally appropriated to the contract * * * with assent of the buyer.” (Pers. Prop. Law, § 100, rule 4; Coolidge v. Old Colony Trust Co., 259 Mass. 515.)

It has been said that, probably, the rule that property in goods passes by mere appropriation on the part of the seller with the assent of the buyer “ has been reached by an extension of the doctrine of delivery.” (1 Williston on Sales [2d ed.], § 274, note 14.) In order to pass property in unascertained or future goods appropriation,” even with the assent of the buyer, must be more than a selection on the part of the vendor, where he has the right to choose the article which he has to supply in performance of bis contract.” (Wait v. Baker, 2 Exch. 1; Procter & Gamble Co. v. Peters, White & Co., 233 N. Y. 97.) Something must be done, or, at least, something must happen, which by assent of both parties shall carry out their intent that at that point property shall actually pass to the buyer. Then where the seller still retains possession, he, “ by operation of law becomes bailee of the goods.” (1 Williston on Sales, § 274, note 14.)

Doubtless here the evidence shows that both the plaintiff and J. S. Schofield & Co. assented to a transfer of property in stock which the defendant might thereafter unconditionally “ appropriate ” to the contract by placing stock of the stipulated description “ into transfer ” in the plaintiff’s name. The defendant wrote that it had made such appropriation, though it had no title to and was not in possession of any stock of that description. In fact it never made any appropriation of the stock in the manner assented to by the buyer, and, therefore, no property in the stock which it agreed to sell ever passed to the buyer. Certainly if the certificates of stock which the defendant had purchased and intended to appropriate to the contract had been lost or destroyed, the consequent loss would have fallen on the defendant and not. the plaintiff.

It is said that the defendant should be estopped from denying the representation it made in its letters, that stock had been appropriated to the contract; and that when stock of the stipulated description came into the defendant’s possession, the property in that stock passed to the plaintiff, by reason of that estoppel. We do not attempt now to define the limits of the doctrine that a seller may be estopped by his own acts from a denial that title to property has passed and that title may pass by estoppel. (See 1 Williston on Sales, §§ 130, 131.) No estoppel arises in any case where there has been no act done and no change of position in reliance upon an untrue representation. Here the buyer paid the purchase price before the representation was made, and thereafter took no action and refrained from no action he might otherwise have taken, in reliance upon that representation. His position is exactly the same as if no such representation had been made.

If the plaintiff owned the money paid for the purchase price of the stock and the defendant accepted the price with notice of the plaintiff’s ownership, the plaintiff may be able to recover the purchase price so paid in an appropriate action. Perhaps the plaintiff may have a cause of action for breach of contract, either as the disclosed principal or the disclosed assignee of the contract to sell made by the defendant. Such questions must be decided in appropriate actions. The plaintiff has failed to establish a cause of action for conversion, since no title to any stock passed to the buyer under the contract to sell.

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

Crane, J.

(dissenting). The opinion of my associate, Judge Lehman, in this case has applied to stock certificates the Personal Property Law relating to sales. This, I think, is a mistake. The Personal Property Law applies to the buying and selling of commodities, things that can be manually delivered. Stock is a chose in action, a mere fractional interest in the capital of a corporation. That interest is evidenced by a certificate which certifies the share of the holder. The certificate, however, is not the thing which is bought and sold. Any particular certificate of stock may be delivered to meet the contract of sale. A broker or agent does not buy any particular certificate. (Richardson v. Shaw, 209 U. S. 365.) Can title to stock pass without delivery of the certificate of stock? We have given the answer in Le Marchant v. Moore (150 N. Y. 209), where we held that the notification by Evans & Company, brokers, to their client in England, that they had purchased stock in compliance with an order, passed title to the stock, although the certificates were held by Moore & Schley in New York.

With this background of law, and applying it to the facts in this case, I reach a different conclusion from the prevailing opinion. The plaintiff, Albert C. Wills, lived in Waterbury, Conn., at which place J. S. Schofield & Co. maintained a stock brokerage office. They had direct line communication with the defendant corporation, the New York city correspondent. Wills purchased through Schofield & Co., ACtna Life Insurance Company stock and Equitable Trust Company stock. The order was given by Schofield to the defendant, the Investors Bank-stocks Corporation, which purchased the stock and so informed Schofield. The plaintiff paid Schofield and he paid the defendant in full, so that it had no lien upon the stock for any moneys advanced in that particular transaction. At the time the purchase price was paid Schofield notified the defendant that the stock was bought and paid for in behalf of Wills, the plaintiff, and asked to have the certificates, the evidence of the stock interest, transferred to Wills’ name. The defendant wrote back notifying Schofield that it had purchased the stock, held it for Wills and would have the certificates put in Wills’ name. The correspondence establishes these facts beyond peradventure of a doubt, as to the ¿Etna Life Insurance Company stock.

« November 19, 1929.
“ Investors Bankstocks Corp.
“ 30 Broad Street
“ New York City
“ Gentlemen: Through the teletype this morning, we advised you to have twenty shares of ¿Etna Life Insurance Company stock transferred to the name of Albert C. Wills. To eliminate the possibility of delay in delivery of this stock we are inclosing our check for $1980.00 and hope that you will forward stock to us as soon as transferred so we can make delivery to our client.
Very truly yours,
“ J. S. SCHOFIELD & CO.
“ L. A. Bouet “ G. H.”
., T c c p “ November 20, 1929. “
., T c c p “ J. S. Schofield & Co.
Waterbury, Conn.
“ Gentlemen: We acknowledge receipt of your check for $1980.00 covering T-9 of November 19th, and have this day placed twenty (20) shares ¿Etna Life Insurance Company into transfer in the name of Albert C. Wills, 95 Bank Street, Waterbury, Connecticut, in accordance with your instructions.
Yours very truly,
“ INVESTORS BANKSTOCKS CORPORATION William J. Ahlbart,
“ Asst. Cashier.”

In my judgment title to the stock passed to Wills. The possession, subsequently, of the certificates by the defendant was the possession of the title-evidence to the plaintiff’s property; these certificates were evidence of the stock or the stock interest which the defendant had purchased through Schofield for Wills, the disclosed principal. They belonged to Wills. It is not the certificates which the defendant has converted, but the stock, the fractional interest represented by the certificate. This has the value; the certificate is mere paper.

The Personal Property Law regarding the appropriation of certain goods by a seller to a contract of purchase has no application. I think the defendant has no right to hold these shares of stock, fully paid for, and apply them on a general indebtedness owing to it by Schofield. The judgment should be affirmed.

Cardozo, Ch. J., Pound, Kellogg, O’Brien and Hubbs, JJ., concur with Lehman, J.; Crane, J., dissents in memorandum.

Judgments reversed, etc.