text:
    State Bank of Commerce of Brockport, New York, by Joseph A. Broderick, as Superintendent of Banks, Appellant, v. Howard G. Stone, as Treasurer of the Farm Department of the Monroe County Farm and Home Bureau Association, Respondent.

      (Argued January 24, 1933;
    decided February 28, 1933.)

      Harlan W. Rippey and Harold G. Hutchens for appellant.
    The undertaldng given and the pledge of the bonds by the plaintiff bank was ultra vires and, as such, could not be ratified and made a valid transaction by any subsequent action of the bank. (Nassau Bank v. Jones, 95 N. Y. 115; National Park Bank v. G. A. M. W. & S. Co., 116 N. Y. 281; Cola Nat. Bank v. United States, 167 U. S. 362; Gause v. Commonwealth Trust Co., 196 N. Y. 134; F. & M. State Bank v. Common School District, 134 Minn. 286; Commercial Bank v. Citizens Trust Co., 153 Ky. 566; Jemison v. C. S. Bank, 122 N. Y. 135; Wilson v. Kings County Elevated R. R. Co., 114 N. Y. 487; Life Association of America v. Rundell, 103 U. S. 22; People ex rel. Tiffany & Co. v. Campbell, 144 N. Y. 166; Baltimore & Ohio R. R. Co. v. Smith, 56 Fed. Rep. [2d] 799; Tennessee v. State, 50 How. Pr. 447; Central Transportation Co. v. Pullman Car Co., 139 U. S. 24.) The president and vice-president of the bank had no authority to execute the undertaking or to pledge and deliver the bonds. (Gause v. Commonwealth Trust Co., 196 N. Y. 134; Broadway Theatre Co. v. Dissau Co., 45 App. Div. 475.) There was no consideration for the undertaking and no benefit derived by the bank from the transaction and consequently there was no estoppel. (American Surety Co. v. Philippine Nat. Bank, 245 N. Y. 116; Appleton v. Citizens Nat. Bank, 190 N. Y. 417; 216 U. S. 196; Oklahoma City Nat. Bank v. Ezzard, 58 Okla. 251; First Nat. Bank v. Mott Iron Works, 258 U. S. 240; U. S. Fidelity Co. v. First State Bank, 160 Miss. 239; Norton v. First Nat. Bank, 61 N. H. 58; Peoples Bank v. Managers Nat. Bank, 101 U. S. 181; Thomas v. City Nat. Bank, 40 Nev. 501; Gause v. Commonwealth Trust Co., 196 N. Y. 134; Shipman v. Bank of New York, 126 N. Y. 318; Cassidy v. Ulman, 170 N. Y. 505; Kellogg v. Olmstead, 125 N. Y. 189.)

      Earl F. Case for respondent.
    The transaction was not ultra vires. (Smith v. Lansing, 22 N. Y. 520; Matter of Spencerport Bank, 255 N. Y. Supp. 482; Matter of Jayne & Mason Bank, 252 N. Y. Supp. 68; Matter of McCarthy, 139 Misc. Rep. 149; American Surety Co. v. Philippine Nat. Bank, 245 N. Y. 116.) The transaction was entered into with the knowledge and consent of the board of directors by their executive and finance committee and they are bound thereby. (National F. Co. v. Spiegelman Co., 189 N. Y. Supp. 449; 190 N. Y. Supp. 831; Quackenboss v. Globe & Rutgers F. Ins. Co., 177 N. Y. 71; Gause v. Commonwealth Trust Co., 124 App. Div. 438; 196 N. Y. 134; Logan v. Fidelity-Phœnix F. I. Co., 161 App. Div. 404; 220 N. Y. 688; Jourdan v. L. I. R. R. Co., 115 N. Y. 380; Trustees of Canandaigua v. McKechnie, 90 N. Y. 618; Lyon v. West Side T. Co., 132 App. Div. 777; Rathbun v. Snow, 123 N. Y. 349; Ernst v. Cary Safe Co., 113 Misc. Rep. 620.) The bank or its liquidator cannot keep the deposit which it secured by reason of the contract and repudiate the contract. It is estoppel from doing so. (American Surety Co. v. Philippine Nat. Bank, 245 N. Y. 116; Whitney Arms Co. v. Barlow, 63 N. Y. 62; Albreck v. Chemical Nat. Bank, 176 U. S. 618; Western Nat. Bank v. Armstrong, 152 U. S. 346; Bushnell v. Chautauqua Nat. Bank, 10 Hun, 378; Dencomb v. N. Y. C. & H. R. R. R. Co., 184 N. Y. 190; Smith v. Lansing, 22 N. Y. 520.)
   Crane, J.

TMs appeal, by leave of the Appellate Division, brings up for review a question which in recent years has been growing in importance with the development of the banking business throughout the country, and which has finally resulted in the’ expression of very firm and sound views by the highest courts, although the point is here now for the first time in this court. May a bank, to retain or obtain general deposits of private funds, pledge its assets for the security of such deposits? The facts of this particular case are the following.

This action was brought to recover possession of fifteen bonds of $1,000 each, owned by the State Bank of Commerce of Brockport, New York, and transferred to the defendant on October 2, 1931, as collateral security for deposits of the defendant at the bank, then amounting to the sum of $5,638.84. The defendant is the treasurer of the Farm Department of the Monroe County Farm and Home Bureau Association, formed, pursuant to subdivision 28-a of section 12 of the County Law (Cons. Laws, ch. 11; amd. L. 1924, ch. 248). This association is for the improvement of agricultural and home conditions and to conduct demonstration work in agricultural and home economics. Its work is carried on under the direction of Cornell University. Part of its funds are furnished through the State College of Agriculture; other sums are received from the Federal government, and dues of five dollars a year, from its membership, open to the public. The budget of its receipts and expenditures is approved by Cornell University. It is not a municipal corporation. (General Corp. Law; Cons. Laws, ch. 23, § 3, subd. 1.)

On or about October 2, 1931, the defendant had on deposit with the State Bank of Commerce of Brockport, New York, $2,228.71, and after that date deposited additional moneys to the amount of $2,915. To retain this deposit and to obtain the additional money the bank, through its executive committee, of less than the required number, executed a contract to secure the sum, and thereafter delivered to the defendant $10,000 Goodyear Tire and Rubber Company first mortgage and collateral trust five per cent bonds due May 1,1957, with May 1,1932, and future coupons attached; $5,000 Missouri Pacific Railroad Company first and refunding mortgage five per cent gold bond, Series F, due March 1, 1977, with March 1, 1932, and future coupons attached.

The bank having become insolvent, the Superintendent took possession on December 16, 1931, at which time the above stated amounts were on deposit with the bank, and passed into the hands of the liquidator. The Superintendent of Banks brought this action to recover the bonds, as having been transferred and pledged with the defendant, contrary to law. There is no statute requiring or authorizing such a disposition of bank assets.

At the close of the trial the Special Term ordered that the possession of the bonds be delivered to the Superintendent of Banks, upon his depositing with the Central Trust Company of Rochester, New York, in place of the bonds, the sum of $6,000 to the credit of the defendant, and subject to the further order of the court. Later, an order was made that the trust company pay to the defendant $4,000, on or after August 15, 1932. The judgment of the Special Term, made August 3, 1932, dismissed the complaint upon the merits, and directed the payment of the balance of the $6,000 fund to the defendant. The appeal to this court is from this judgment and the previous order, by leave of the Appellate Division, which affirmed both.

The objections which have been made to the pledging of a bank’s assets to secure deposits are, first, that it gives extra, secret protection to the secured depositor at the expense of the unsecured; and, second, that the bank invites the public to deposit moneys upon a misrepresentation of its financial condition, as its published periodical statements contain no mention of these secret withdrawals of its assets.

Whatever confusion there may have been in the decisions of the courts bearing upon this question has been due very largely to the treatment of deposits as if they were loans. The distinction has not always been recognized. That banks, incorporated under our banking laws, have the capacity to borrow money, as incidental to the banking business, and the powers expressly granted, has long been established. To do so, they necessarily must give security to obtain the loans. (Curtis v. Leavitt, 15 N. Y. 1, 52; Auten v. United States Nat. Bank, 174 U. S. 125.) But even in Curtis v. Leavitt, decided in 1857, the court recognized the possibility of a distinction between a deposit and a loan. As Comstock, J., in the prevailing opinion, said: “A general deposit in a bank, in its exact legal result, is a loan of money (Chapman v. White, 2 Seld. 412); yet it may be true, as my learned associate, Judge Selden, thinks, that a power to receive deposits is not a power to borrow money in the more general and appropriate sense of those words.”

The recent case of Farmers & Merchants State Bank of Ogilvie v. Consolidated School District (174 Minn. 286 [April, 1928]), in opinion by Stone, J., has made the distinction very clear in deciding that a bank has no power to pledge any of its assets to secure the repayment of general deposits, except as authorized by statute regarding State and municipal funds. Referring to the earlier decisions which held that a deposit was simply a loan of money and that the power to borrow money carries the power to secure its payment by collateral, the opinion states: The essential premise of that opinion is that with respect to the power to give security bank deposits and bank borrowings are alike. That seems to us unsound. Bank deposits and bank borrowings are alike in but the one respect that one result of each is the relation of debtor and creditor. In every other respect the two operations are not only different but in complete antithesis. Deposits are attracted by the strength of a bank, whereas its borrowings are compelled by weakness or other adverse circumstance. (The borrowing of money has been said to be ‘ so much out of the course of ordinary and legitimate banking as to require those making the loan to see to it that the officer or agent acting for the bank had special authority to borrow money.’ Western Nat. Bank v. Armstrong, 152 U. S. 346.) Large deposits signify health, and large borrowings banking disease. Springing from opposite causes, the two by their existence signify opposite conditions — deposits the normal, and borrowings the abnormal. Moreover the antithesis holds to the end, for the withdrawal of a deposit is a loss, whereas the payment of a loan is a gain. Deposits continued and increased evidence banking success, whereas borrowings continued and increased portend failure. Save in the relation of debtor and creditor common to both, the two are different in their every incident — not only different but opposed in origin, in purpose, and in effect. How it comes then that the obvious truth that a bank may pledge collateral for borrowed money can be used to sustain the same power in the case of deposits we cannot understand. The former is clearly necessary, usual and incidental, whereas the latter is neither necessary, usual or incidental, but is positively dangerous” (pp. 291, 292).

As dealing with the question of the power to pledge assets for deposits, the opinion further states views which we quote because of their succinctness and sound reasoning: At the outset it [pledge of assets] evinces a willingness to favor the secured depositor at the expense of those less favored. Then it actually sets apart for his exclusive benefit part of a fund to no part of which he should have any such right, and in every part of which the other depositors should have the same right as himself. It is in derogation of that fair and equal treatment of all depositors which is fundamental in the ethics of banking. A conclusive test is that no bank can make a practice of securing deposits by pledging assets and live. A few such transactions made known to its clientele would put any bank out of business. The practice would properly be taken to show that the institution was intrinsically so little deserving of deposits that resort to the too attractive lure of collateral was compelled by adverse circumstances. * * * So, if the practice of securing deposits by pledge of assets is resorted to at all, it must be done secretly. That is enough to condemn it. Any power the exercise of which will not stand the light of publicity cannot be allowed to banks (pp. 289, 290).

The Supreme Court of Minnesota had the support of two previous cases cited in all the discussions upon this subject. (Commercial Banking & Trust Co. v. Citizens Trust & Guaranty Co., 153 Ky. 566, and Divide County v. Baird, 55 N. D. 45.) The statutes of Kentucky permitted banks to exercise such powers as may be necessary to carry on the business of banking, using phraseology similar to our own Banking Law (Cons. Laws, ch. 2), section 106. In deciding that its State banks had no express or implied power to secure the payment of a depositor by the pledging of its assets, the Court of Appeals of Kentucky said: “ This is clearly an act ultra vires and unlawful. No such power has been conferred upon banks in this State, nor should authority to do so be granted anywhere.' * * * Large depositors, if secured, might absorb the greater part of the assets of the bank and inflict loss upon unsecured depositors and financial ruin upon innocent stockholders under the double liability law. The law [Banldng Law] contemplates, and was evidently framed to insure, fair and uniform dealings by the banks with all of their depositors. A secret pledge to secure one, while others are left without security, although it may be without specific intent to defraud, would nevertheless, in case of loss, justify such an inference. Public policy will not, therefore, tolerate a practice which might, sooner or later, in the event of finding trouble with the bank, enable it to pay and protect the favored few at the expense of the equally deserving many. * * * Banks publish statements of their assets, and individuals deposit on the faith of these published statements. It is well known that good statements as to assets induce people to deposit their money in banks making such statements. It would be a crowning act of injustice to hold that deposits, thus induced, are nevertheless cut off from sharing in these assets, until some unknown favored few, who have been secretly secured, are satisfied; and it would be a palpable fraud on the part of a bank thus to procure deposits, when its assets were secretly pledged. * * * The aim and trend of all modern legislation on the subject of banks has been to protect the depositor ” (pp. 572, 573, 574, 577).

The Supreme Court of North Dakota in the case above cited came to the same conclusion, adding to the views above expressed the following: It must be obvious that the banking laws now in force and the forms used and the practice followed in making and publishing reports on the condition of state banks, all approved by the State Banking Department, are as clearly calculated to deceive the public, as to the condition of the bank, as if they had been deliberately adopted for that very purpose, if the contention be sound that its bills receivable may be pledged to secure a general deposit. If the power exist, it is without limit or qualification in the statutes; and there is no requirement, legal or administrative, which removes the mantle of absolute secrecy from the transaction. The bank could — as every business man knows has been done on occasion — make the pledge agreement, keep the assets in its possession, and execute its receipt therefor to the favored depositor, all without a trace on the records of the corporation showing the transaction which actually took place ” (p. 56).

To the same effect see also Arkansas-Louisiana High way Improvement District v. Taylor (177 Ark. 440 [May, 1928]); Foster v. City of Longview (26 S. W. Rep. [2d] 1059 [April, 1930]); Bliss v. Pathfinder Irrigation District (122 Neb. 203 [Jan. 1932]); Porter v. Canyon County Farmers’ Mut. Fire Ins. Co. (45 Ida. 522); Schornick v. Butler ([Ind.] 172 N. E. Rep. 181).

We now come to the Federal courts and have before us Baltimore & Ohio R. R. Co. v. Smith (56 Fed. Rep. [2d] 799), decided in March of 1932 by the Circuit Court of Appeals, Third Circuit. The Revised Statutes of the United States, paragraph 7 of section 5136 (12 U. S. C. A. title 12, § 24, ¶ 7) clothe national banks with the following powers: “To exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other-evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes according to the provisions of this chapter.”

This is the exact language of the Banking Law of this State, section 106, subdivision 1, with the exception that by our law, money may be loaned on real as well as personal security, and that the issuing and circulating of notes is omitted. The court held that there was no implied power in a Federal bank to pledge part of its assets as security for private deposits, and said: “ Power is thus given to conduct a banking business and all incidental power necessary to carry it on. * * * Is the power to pledge a bank's property to secure private deposits necessary to carry on the business of banking? There is no evidence showing that it is necessary. On the other hand, inference is fairly reasonable that thousands of successful banks have never exercised such power ” (P- 801)._

Referring to the various acts of Congress requiring security for the deposit of public money, such as the postal savings, moneys deposited by receivers, State moneys or moneys of any political subdivision of a State or of Indian moneys, the court said: “ In none of these acts is any mention whatever made of the power to pledge assets to secure private deposits. If Congress had intended to give such power to national banks, it would have expressly indicated such intention. The fact that it did authorize national banks to pledge their property to secure public deposits, but was silent as to private deposits, clearly indicates that it did not intend to give that power in the case of private deposits ” (p. 802).

The force of this authority in our court is drawn from the interpretation of the Federal Banking Law, which is exactly our own in this particular. Under it, there is no implied authority drawn from the custom of banks to pledge assets for private deposits.

The few authorities which may seem to tend to an opposite conclusion have special features which distinguish them, or else have not been followed in the recent trend of authorities. Leonard Co-operative Creamery Assn. v. First State Bank (168 Minn. 28) was decided before Farmers & Merchants State Bank of Ogilvie v. Consolidated School District (174 Minn. 286), above quoted. Ward v. Johnson (95 Ill. 215) treated the money as if it were a loan. Ahl v. Rhoads (84 Penn. St. 319) fails to discuss this point, and Citizens State Bank v. First Nat. Bank (98 Kan. 109) dealt with a pledge authorized by statute.

The prevailing view that banks are unauthorized in the absence of statute to secure private deposits by a pledge of assets has received favorable comment in the law reviews. (See 45 Law Rep. Anno. [N. S.] 950; 77 Univ. of Penn. Law Rev. 916; 79 Univ. of Penn. Law Rev. 608; 41 Yale Law Journal, 1076; 22 Ill. Law Rev. 449.)

We share these opinions expressed by the highest courts of other States from which we have so copiously quoted. Reason as well as authority indicates that a bank has no implied power to pledge its assets as security for private deposits. To open the door to such a practice would permit officers and directors to favor their relatives and friends, submitting our entire banking system to justifiable suspicion. Faith in the honesty and integrity, impartiality and fairness of our banks is the backbone of credit and the strength of commercial enterprise.

Whatever doubt there may have been regarding the power of banks to secure the deposits of public moneys has been removed by statute. (State Finance Law; Cons. Laws, ch. 56, § 8; L. 1909, ch. 10, § 44; County Law, § 145; L. 1931, ch. 419; L. 1932, ch. 97; and Greater New York Charter, § 196; L. 1901, ch. 466, amd. L. 1917, ch. 617.) An act of the Legislature was evidently thought necessary, even as to public moneys, to enable banks to pledge certain securities for undertakings or deposits. Such were the last three enactments above mentioned. (Matter of Carnegie Trust Co., 206 N. Y. 390.)

This leads to the conclusion that the agreement made by the State Bank of Commerce of Brockport, New York, with the defendant, and the pledge of $15,000 in bonds to secure a $5,000 deposit was contrary to law and beyond the power and authority vested in the officers of the bank.

This does not necessarily mean, however, that the judgment of the courts below must be reversed, as we have to consider the effect of ultra vires. In pledging these bonds, the officers were acting for and on behalf of the bank, and for its business, apparently seeldng to obtain deposits which, under the Banking Law, it was authorized to receive. They applied the deposits to the bank’s business and the bank has had and received the benefit of the money due to the agreement which the bank made, and the bonds which it delivered as security. Under these circumstances it would not be just for the bank or its creditors to accept all the benefits and repudiate the burdens, unless the acts of the bank be in violation of some direct and positive statute. Whatever the difference of view there may be as to the effect of ultra vires on corporate contracts, in no jurisdiction can a party retain what it has received under such a contract and refuse to perform the contract. (Appleton v. Citizens’ Central Nat. Bank, 190 N. Y. 417; American Surety Co. v. Philippine Nat. Bank, 245 N. Y. 116, where the authorities in this State are reviewed.)

The judgment and orders below must, therefore, be affirmed to the extent in which they have required the defendant to return the pledged bonds upon the repayment of the deposited money, with interest. This is the effect of the order and the judgment appealed from, and we do not understand that they go any further.

One word, however, remains to be said regarding the effect of this decision, which is stated to be a test case. By no means do we hold that although banks have no implied authority to pledge their securities for private deposits, yet after the thing is done it cannot be undone. In this particular case-the bank became insolvent and was taken over by the Superintendent of Banks. His duties, however, do not begin with insolvency. Our Banking Law has many provisions seeking to preserve the solvency of banks, and secure depositors. Thus, section 39 makes it the duty of the Superintendent to examine banks twice a year. " On every such examination inquiry shall be made as to the condition and resources of such corporation, banker or broker, the mode of conducting and managing its affairs, the actions of its directors or trustees if a corporation, the investment of its funds, the safety and prudence of its management, the security afforded to those by whom its engagements are held, and whether the requirements of its charter and of law have been complied with in the administration of its affairs; and as to such other matters as the superintendent may prescribe.”

Section 56 prescribes: “Whenever it shall appear to the superintendent that any corporation * * * has violated its charter or any law, or is conducting its business in an unauthorized or unsafe manner, he may issue an order directing the discontinuance of such unauthorized or unsafe practices,” and in case of its failure to comply, he is authorized by section 57 to take possession of the business.

The Superintendent, therefore, is not compelled to wait until insolvency to interfere with the pledging of a bank’s securities for private deposits. It is his duty to ascertain the facts and in such manner as to him seems advisable, and at such time as comports with the necessity of the occasion, compel banks to again retake their assets, if so pledged, upon the return of the deposits, when demanded.

The judgment should be affirmed, with costs.

Pound, Ch. J., Lehman, Kellogg, O’Beien, Hubbs and Chough, JJ., concur.

Judgment affirmed.


source: Caselaw Access Project

author: Kellogg, J.

license: Public Domain

text:
    Sidney Goodman, Appellant, v. Marcol, Inc., Respondent.

      (Argued January 18, 1933;
    decided February 28, 1933.)

      Irvin E. Klein for appellant.
    The court erred in failing to submit to the jury the question of defendant’s good faith, in terminating the contract of employment with plaintiff. (Sibbald v. Bethlehem Iron Co., 83 N. Y. 378; Travis v. Bowron, 138 App. Div. 554; St. Regis Paper Co. v. Hubbs & Hastings Paper Co., 235 N. Y. 30; L’Ecluse v. Field, 154 App. Div. 685; Schwartzman v. Pines Rubber Co., 189 App. Div. 749.)

      John A. Wallace for respondent.
    The evidence fails to disclose any question of good faith for a jury to consider. (Sibbald v. Bethlehem Iron Co., 83 N. Y. 378; Wylie v. Marine Nat. Bank, 61 N. Y. 415.)
   Kellogg, J.

In November, 1927, the defendant employed the plaintiff to sell for it a certain apartment house, at the price of $180,000. Nothing was said as to the length of the term of employment, or as to the commissions to be paid. In March, 1928, the plaintiff interested Mr. and Mrs. Charles Ross, and so informed the defendant, officers of which visited the premises with the Rosses, that they might inspect the same. The Rosses made to the plaintiff an offer of $170,000 for the property, which was rejected by the defendant; they subsequently made an offer of $172,500, which was likewise rejected; still later they offered $175,000, and again rejection followed. On the rejection of each offer, the Rosses requested a few more days to consider the matter, and the plaintiff continued his efforts to bring them to the defendant’s terms. In the latter part of April, 1928, the' Rosses finally made an offer to the plaintiff of $177,500. The plaintiff reported this offer to Mr. Calhoun, the treasurer of the defendant, saying, “ well, I have the folks up to $177,500, and I feel within a few days I probably will be able to consummate and get them up to $180,000.” Calhoun, instead of expressing his satisfaction, made this response: By the way, what is your commission?” The plaintiff said the usual commission of two and one-half per cent, or $4,500. Thereupon Calhoun said: Hell, I would not pay any such commission to anybody to sell that piece of property; take it out of the market. I can get plenty of brokers to sell it to them for half or less than half that commission.” This answer was reported by the plaintiff to the Rosses, who said they were going away for the summer; that they desired the plaintiff meanwhile not to propose a sale to any other persons. Within two weeks thereafter the defendant employed a broker named Lockwood to negotiate with the Rosses. On August 10, 1928, Lockwood and Calhoun attended the Rosses at their summer home, and upon this occasion the Rosses agreed to purchase for $180,000. The sale was shortly thereafter concluded, upon terms of payment, except for the total amount, which were not better than those proposed by them through the plaintiff. Thereafter the defendant paid Lockwood’s firm, as commissions, the sum of $2,100, which was less than half the prevailing rate. The plaintiff brought this action, charging that the defendant wrongfully and in bad faith, and for the purpose of defrauding plaintiff of his commissions, withdrew the property from the market. At the conclusion of the plaintiff’s case, a motion to dismiss the complaint was granted, and the judgment of dismissal has been affirmed.

The principles governing such a case as this were authoritatively laid down by Judge Finch in Sibbald v. Bethelehem Iron Co. (83 N. Y. 378, 379, 382, 383, 384). It was there said that the duty of the broker is “to bring the minds of the buyer and seller to an agreement for a sale, and the price and terms on which it is to be made, and until that is done his right to commissions does not accrue;” that “ a broker is never entitled to commissions for unsuccessful efforts;” that “ if he fails, if without effecting an agreement or accomplishing a bargain, he abandons the effort, or his authority is fairly and in good faith terminated, he gains no right to commissions.” However, this must be taken with one important limitation. “ If the efforts of the broker are rendered a failure by the fault of the employer ” he does not lose his commissions. This “ upon the familiar principle that no one can avail himself of the non-performance of a condition precedent, who has himself occasioned its non-performance.” Usually a broker is entitled to a fair and reasonable opportunity to perform his obligation. If this be granted, “ the right of the principal to terminate his authority is absolute and unrestricted,” provided “ that he may not do it in bad faith, and as a mere device to escape the payment of the broker’s commissions. Thus, if in the midst of negotiations instituted by the broker, and which were plainly and evidently approaching, success, the seller should revoke the authority of the broker, with the view of concluding the bargain without his aid, and avoiding the payment of commissions about to be earned, it might well be said that the due performance of hi's obligation by the broker was purposely prevented by the principal.” The remarks of Judge Daniels in Satterthwaite v. Vreeland (3 Hun, 152) were quoted as a correct statement. They were to the effect that to maintain a claim by the broker for his commissions, he must either show that he had procured a purchaser at the stipulated price or that the defendant had deprived him of the opportunity to do so while the privilege ” lasted. In Donovan v. Weed (182 N. Y. 43, 46) Cullen, J., after remarking that the authority of Sibbald v. Bethlehem Iron Co. (supra) had never been questioned, stated: “ In other words, the law as settled by that case is that to entitle a broker to commission he must procure a purchaser during the term of his employment; that where no definite time is fixed the broker has a reasonable time in which to effect the sale; but that after the lapse of a reasonable time the principal may terminate his authority and reheve himself from liability unless such" action is taken in bad faith for the purpose of depriving the broker of the fruits of his labor at the time such labor was about to prove effectual.”

The evidence here is not only sufficient, it strongly impels to the conclusion that the plaintiff was acting within a reasonable time when he submitted the last offer received of $177,500; that his labor to procure the stipulated price of $180,000 was about to prove successful; that he was dismissed from his employment by the defendant, not because a reasonable time had elapsed, but solely that the defendant might save itself from the payment of the customary commissions. When the plaintiff reported to Calhoun his last offer, stating that he expected shortly to get the stipulated price, Calhoun, perceiving that this would in all likelihood eventuate, at once turned his thoughts to the subject of commissions, stating that he could get the work done for less than half the plaintiff’s price. So he dismissed the plaintiff and made good his word of procuring the desired sale at one-half the charge proposed by the plaintiff. We think that questions of fact arose which required a submission of the case to the jury.

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

Pound, Ch. J., Crane, Lehman, O’Brien, Hubbs and Crouch, JJ., concur.

Judgments reversed,' etc.


text:
    Edward K. Macrum et al., Appellants, v. Richard W. Hawkins et al., Individually, and Constituting the Board of Supervisors of Suffolk County, et al., Respondents.

      (Argued January 12, 1933;
    decided February 28, 1933.)

      M. E. Harby for appellants.
    Incumbency in office as member of the board of supervisors was incompatible with incumbency in office as member of the planning board. (People v. Ahearn, 131 App. Div. 30; 196 N. Y. 221; People ex rel. Ryan v. Green, 58 N. Y. 295; Attorney-General ex rel. Moreland v. Detroit Common Council, 112 Mich. 145; State v. Wittmer, 50 Mont. 22; People v.
      Conoly, 238 N. Y. 332; People ex rel. Earwicker v. Dillon, 38 App. Div. 539; Lambert Lumber Co. v. Jones Eng. Const. Co., 47 Fed. Rep. [2d] 74; People v. Tremaine, 252 N. Y. 27; Williams v. City of New York, 118 App. Div. 756; 192 N. Y. 541; Village of Fort Edward v. Fish, 156 N. Y. 366.) Because three incumbents on the board of supervisors accepted appointment to the second incompatible office, such incumbents on the first board vacated their incumbency thereon. (People ex rel. Kelly v. Common Council, 77 N. Y. 503; People ex rel. Henry v. Nostrand, 46 N. Y. 375; Commonwealth v. Hawks, 123 Mass. 525; Public Officers Law, § 31; Young v. Rochester, 73 App. Div. 81; People v. Carrique, 2 Hill, 93; People v. Dillon, 38 App. Div. 539; King v. Hughes, 5 B. & C. 886.) The board of supervisors was without power even by a statutory vote, without the request of taxpayers or towns, to authorize the issuance of bonds for the construction of bridges across navigable waters and, in no event, did it have power to obstruct navigation. (County Law, art. 5.) If section 320-b of the Highway Law be held authority for the construction of the bridges, then it authorizes by inference bridges which obstruct navigation, and by inference thereby abrogates the right of free navigation, (People ex rel. Lehigh V. Ry. Co. v. State Tax Comm., 247 N. Y. 9; Transit Commission v. L. I. R. R. Co., 253 N. Y. 345; Delaware, L. & W. R. R. Co. v. City of Buffalo, 158 N. Y. 266; City of Buffalo v. Delaware, L. & W. R. R. Co., 136 App. Div. 274; 204 N. Y. 562.) A Federal permit cannot legalize a bridge over navigable waters if it is forbidden, or if it is not affirmatively authorized by statute. (Little Falls Fibre Co. v. Ford & Son, 249 N. Y. 495; People v. International Bridge Co., 223 N. Y. 137; 254 U. S. 126; Cummings v. Chicago, 188 U. S. 410.)

      Joseph Steven Frank and Guy 0. Walser for respondents.
    The board of supervisors had power to authorize construction of the bridges by the county as part of the roads in the county road system in which the bridges lie. Questions of design, location or extent of impairment of navigation are not for the courts. (Matter of Burns, 155 N. Y. 23; People ex rel. Morrill v. Supervisors, 112 N. Y. 585; Keene v. Supervisors, 142 N. Y. 271; Markey v, County of Queens, 154 N. Y. 675; Robia Holding Corp. v. Walker, 257 N. Y. 431; Escanaba Co. v. United States, 107 U. S. 678; Cummings v. Chicago, 188 U. S. 410; Southern Railway v. Ferguson, 59 S. W. Rep. 343; People v. Delaware & Hudson, 213 N. Y. 194; Village of Saratoga Springs v. Saratoga Gas Co., 191 N. Y. 132; Citizens’ Sav. Bank v. Town of Greenburgh, 173 N. Y. 215; People ex rel. Lehigh Valley Ry. Co. v. State Tax Comm., 247 N. Y. 9; Town of Southhold v. Parks, 41 Misc. Rep. 456; 97 App. Div. 636; 183 N. Y. 613; South Carolina v. Georgia, 93 U. S. 4; Gibson v. United States, 166 U. S. 269; Hill v. Supervisors, 12 N. Y. 52; People ex rel. Root v. Supervisors, 146 N. Y. 107; Southlands Co. v. City of San Diego, 211 Cal. 646; Denton v. Pulaski County, 170 Ky. 33; Aransas County v. Coleman-Fulton Pasture Co., 108 Tex. 216.) The creation of the county planning board by the county board of supervisors and the appointment by that board of three of its members to constitute the planning board, did not affect the composition of the appointing board, or the standing of the three appointees as town and county supervisors. (Queens County v. Petry, 54 App. Div. 115; Matter of Noble, 34 App. Div. 55; Ontario County v. Shepherd, 100 App. Div. 200; Village of Carthage v. Frederick, 122 N. Y. 268; Woods v. Madison County, 136 N. Y. 403; Kittinger v. Buffalo Traction Co., 160 N. Y. 377; People ex rel. Trustees of Village of Jamaica v. Queens County Board of Supervisors, 131 N. Y. 468; Govers v. Board of Supervisors, 171 N. Y. 403; Weston v. City of Syracuse, 158 N. Y. 274; People ex rel. O’Connor v. Supervisors, 143 N. Y. 370.) If membership in the planning board be considered public office, then the appointment of the three supervisors thereto was a nullity through the inability of the board of supervisors to appoint its own members. The original position of the three supervisors involved would not be affected by the attempted appointment. (Wood v. Town of Whitehall, 120 Misc. Rep. 124; 206 App. Div. 786; State v. Kearns, 47 Ohio St. 566; Meglemery v. Weissinger, 140 Ky. 353; People v. Purdy, 154 N. Y. 439; Burtis v. Haines, 91 N. J. L. 4; People ex rel. Sulzer v. Sohmer, 211 N. Y. 565; Metzger v. Swift, 258 N. Y. 440; Matter of Hulbert v. Craig, 124 Misc. Rep. 273; 213 App. Div. 865; 241 N. Y. 525.) Section 320-b, subdivision 2, of the Highway Law specifically authorizes county supervisors to issue county bonds to provide a county contribution to the county road fund to be applied to the construction, reconstruction or maintenance of a highway under the provisions of the section. (Southlands Co. v. City of San Diego, 211 Cal. 646; Robia Holding Co. v. Walker, 257 N Y. 431; Denton v. Pulaski County, 170 Ky. 33; Aransas County v. Coleman-Fulton Pasture Co., 108 Tex. 216; Robert v. Supervisors of Kings County, 3 App. Div. 366; 158 N. Y. 673; People v. Carpenter, 24 N. Y. 86; Smith v. Helmer, 7 Barb. 416.)
   Kellogg, J.

The board of supervisors of the county of Suffolk, consisting of ten members, on March 31, 1930, adopted a resolution establishing a county planning board, pursuant to the provisions of article 12-B of the General Municipal Law (Cons. Laws, ch. 24), an article newly added thereto by chapter 539, Laws of 1925. The resolution, adopted by a vote of nine to one, named three of the members of the board of supervisors, to wit, Supervisors Warta, Neville and Hildreth, to constitute the planning board. Prior to March 30, 1931, the three supervisors so named, acting as the planning board, having made their survey of county needs and determined upon plans to meet them, submitted their report to the board of supervisors. The report called for an expenditure by the county of $5,000,000, “ Upon a county wide improvement program.” The sum of $3,350,000 was proposed to be spent in the construction of bridges and connecting roadways; the sum of $950,000 in dredging certain harbors; the sum of $600,000 on parks and parkways; the sum of $100,000 upon an addition to a county tuberculosis hospital. On March- 30, 1931, the board of supervisors met and accepted the report of the planning board. At this meeting it was resolved that the improvements recommended should be made, and that bonds, in the sums and for the several purposes named, should be issued to provide moneys to execute them. Nine supervisors, including Warta, Neville and Hildreth, voted for the resolutions, and one supervisor voted against. Later, on April 27, 1931, the board of supervisors passed a resolution slightly modifying the amounts allotted to each of the four projects, but not diminishing the total expenditure or total bond issue below $5,000,000, as previously determined upon. Again the vote was nine in favor of the amended project and one against, each supervisor voting as he had before. The appellant taxpayer attacks the legality of the entire bond issue proposed on the ground that the county could not create “ a funded debt ” unless a resolution to that end were passed by “ a two-thirds vote of all the members elected to the board ” (Gen. Municipal Law, § 6), and that the resolutions now under attack were not so passed. In making this contention, it reasons that when Warta, Neville and Hildreth became members of the county planning board they accepted incompatible offices, thereby ceasing to be members of the board of supervisors, so that the resolutions to bond received a vote, not of nine to one, but of six to one, which is not two-thirds of a total membership of ten.

Article 12-B, as originally adopted, provided: “Any county or counties and the cities, towns and villages in such county or counties may establish a regional planning board to consist of representatives of such county or counties and of such cities, towns and villages. The members of the board shall receive no salary or compensation for their services as members of such board.” (§ 239-b.) The duties of the boards are thus described: Said boards are hereby empowered to and shall study the needs and conditions of regional and community planning in such county or counties and prepare plans adapted to meet such needs and conditions, and shall, through such agencies as it may designate, collect and distribute information relative to regional and community planning and zoning in such county or counties, and the exercise of such powers is hereby declared to be for a public purpose and all moneys expended for such purposes are declared to be for municipal use.” (§ 239-d.) The board is required to make a report, on or before January first in each year, to the Governor of the State, with its recommendations for legislation, if any. (§ 239-d, as amd. by Laws of 1927, ch. 314.) It was not until 1932 that the article was amended to provide, in section 239-d, subdivision 2, that after adoption of the plans of the planning board by the board of supervisors, the plans should be binding on the latter board, and “ no expenditure of public funds ” should be made except in accordance with such county plan.” (Laws of 1932, ch. 137.)

It will be seen that the members of the planning board were not required to take oaths of office or to file bonds; they were not to be appointed for definite terms; they were to receive no commission of office; they were provided with no official seal; they were to receive no pay for services rendered; they were to decide nothing; they were to perform no definite official act. Their only functions were to study needs and conditions,” to prepare plans to meet them, to collect and distribute information in regard to regional planning, and, finally, to make a report to the Governor of the State. The board of supervisors might have committed the same work of collecting information and reporting plans, required of a planning board, to a committee of its own membership, without establishing such a board. Surely the fact that the supervisors, instead of confiding the work to three of its members, as a committee of itself, chose to appoint the three to constitute a planning board under the statute, in order to do the identical work, did not make them independent public officers, whose functions, as such, were incompatible with the exercise of their functions as supervisors.

The argument that the three supervisors, when appointed to the planning board, accepted independent public offices, would defeat the very purpose sought to be attained. There are many authorities which hold that a member of a public board is not eligible to receive an appointment to an independent office at the hands of such public board. Thus members of a board of supervisors are not eligible to appointment by the board to the offices of drain commissioners: “Whether they voted for their own appointment does not affirmatively appear, but they had as much right to do so as the others had to vote for them.” (Kinyon v. Duchene, 21 Mich. 498, 499.) The members of a board of health may not appoint one of their own number to the office of quarantine physician: “ The first question is whether, under the ordinance, the board of health lawfully and properly could elect one of themselves to this office. We are of opinion that they could not.” (Gaw v. Ashley, 195 Mass. 173, 176.) The board of directors of a county infirmary may not appoint one of its members to the superintendency thereof; when the board of directors is given authority to appoint a superintendent this “ necessarily means that the person appointed shall be different from those who appoint.” (State of Ohio ex rel. Louthan v. Taylor, 12 Ohio St. 130, 134.) To the same effect are State v. Kearns (47 Ohio St. 566); Meglemery v. Weissinger (140 Ky. 353); Wood v. Town of Whitehall (120 Misc. Rep. 124; affd., on opinion below, 206 App. Div. 786). Granted that the three supervisors were not eligible for appointment to the planning board, and that no such board came into existence, the validity of the resolutions of the board of supervisors would not in the least be affected thereby, since their legality was in no wise conditional upon the adoption of plans made by the planning board.

One of the resolutions adopted by the supervisors on April 27, 1931, recited the fact that the board had previously designated for construction " with moneys from the State Aid Fund certain described roads. One of the roads is described as " No. 44. North Haven-Shelter Island Road from a point on County Highway No. 911 running northerly across Shelter Island Sound to a point on County Highway No. 910, a distance of 0.70 miles in the Town of Southampton and 0.80 miles in the Town of Shelter Island.” The other is described as No. 45. Shelter Island Road from a point on County Highway No. 910 running northerly along Manhasset Road to Hay Beach Point, thence northerly across Gardiners Bay to Shipyard Road at Cleaves Point, thence northerly along Shipyard Road to the Greenport-Orient Point Highway, a distance of 3 miles in the Town of Shelter Island and 0.90 miles in the Town of Southold.” A reference to the maps appearing in the record will show that road No. 44 was designed to connect Shelter Island, in Gardiners bay, at the easterly end of Long Island, with the mainland of Long Island on the south; that road No. 45 was designed to connect Shelter Island with the mainland on the north. This necessarily would involve, as the chief expense, the construction of two great bridges. Plans for these proposed bridges, which were adopted by the supervisors, are shown in the records. They indicate a bridge for road No. 44, which spans more than 2,000 feet of water, and is suspended from piers, 26 feet wide by 56 feet in height, set in 37 feet of water; for road No. 45, a bridge which spans more than 4,000 feet of water, suspended from piers 33 feet by 77 feet, set in 47 feet of water. The resolution also recites that the necessary .cost of constructing road No. 44, including the bridge, will be $1,100,000; that the necessary cost of road No. 45, including the bridge, will be $1,900,000. The resolution then proceeds as follows: “ Resolved, that in order to raise said amount of $3,000,000 for the above purposes, there shall be issued Three Million Dollars ($3,000,000) bonds of the County of Suffolk, designated ‘ County Road Bonds, Series of 1931.’ ”

It has been found that the waters designed to be crossed by these two bridges are navigable waters; that they are arms of the Atlantic ocean contained within the geographical boundaries of the State of New York; that they are subject to navigation by vessels engaged in international and interstate commerce; and by vessels not engaged in commerce. It has been conceded that some of the vessels accustomed to traverse these waters have masts higher than the elevation of the proposed bridges. It was found as follows: “ The piers which are to support the bridges approved by the Chief of Engineers and the Secretary of War of the United States, designed to be constructed by Suffolk County, diminish the navigable capacity of the waters which they are designed to cross.”

There can be no doubt that a State within its geographical borders is the owner of lands beneath tidal waters; that, within such borders, bays and arms of the sea, the headlands of which are not more than six geographical miles apart, are a part of the territory of the State; that these lands are held in trust for the People of the State; that navigable waters are of right public highways; that these rights may not be impaired or abridged except by .the authority of the Legislature of the State, through the act of any individual or corporation, municipal or private. (Manchester v. Massachusetts, 139 U. S. 240; People ex rel. Howell v. Jessup, 160 N. Y. 249; People ex rel. Palmer v. Travis, 223 N. Y. 150; People ex rel. Lehigh Valley Ry. Co. v. Tax Comm., 247 N. Y. 9; Little Falls Fibre Co. v. Ford & Son, Inc., 249 N. Y. 495; 2 Farnham on Water and Water Rights, § 327.) “ There are three cases in which authority from the Legislature is necessary to erect a bridge over a stream. One is when the stream is navigable; 2d, when the State owns the bed of the stream; and 3d, when the right- to take toll is desired.” (Fort Plain Bridge Co. v. Smith, 30 N. Y. 44, 63.) “ There is no question that the bridging of a navigable stream without legislative authority in such a way as to interfere with navigation is a public nuisance.” (Farnham, § 327.) Congress has provided that no bridge across navigable waters may be erected until the consent of Congress therefor has been obtained, provided that such structures may be built under authority of the Legislature of a State across rivers and other waterways the navigable portions of which lie wholly within the limits of a single State, provided the location and plans thereof are submitted to and approved by the Chief of Engineers and by the Secretary of War before construction is commenced.” (U. S. River and Harbor Act of 1899, 30 U. S. Stat. 1151, ch. 425.) Unless, therefore, the Legislature of the State of New York has given its consent, the bonds, proposed to be issued to raise moneys to erect the bridges in question, may not be issued, because not designed to effect a lawful purpose.

The State Constitution (Art. III, § 18) provides that the Legislature shall not pass a private or local bill, among other things, “ providing for building bridges, and chartering companies for such purposes, except on the Hudson river below Waterford, and on the East river, or over the waters forming a part of the boundaries of the State.” As these bridges do not come within the terms of the exception, legislative consent to their construction, if any, must be found in general laws.

The only general laws expressly empowering a county board of supervisors to erect bridges over navigable waters, to which our attention has been called, will be found in article 5 of the County Law (Cons. Laws, ch. 11). Section 61 empowers a county, on the application of twenty-five resident taxpayers, to construct, repair or abandon a county bridge therein.” This section does not apply, first, because admittedly the taxpayers’ application referred to was never presented, and, secondly, because it does not relate to navigable waters. Section 62 provides that the board of supervisors may authorize the location, change of location and construction of any bridge, applied for by any town or towns;” but if such bridge is to cross a navigable stream, provision shall be made in the resolution or permission authorizing the same, for the erection of a suitable draw, to prevent any obstruction of the navigation of such stream.” This section does not apply for the bridges resolved upon are not bridges to be provided with a draw.

The resolutions provide that the roads and bridges in question shall be constructed, as county roads, out of the county road fund, under new section 320-b, inserted in the Highway Law (Cons. Laws, ch. 25) by chapter 362, section 17, Laws of 1929, as amended by chapter 770, Laws of 1930. Both parties insist that this section is complete in itself; that it provides for county roads which must be distinguished from county highways provided for by section 320, and town highways to be constructed with county aid, provided for by section 320-a; that section 320-b is the sole authority under which the board of supervisors acted. Indeed, sections 320 and 320-a expressly provide that the provisions contained therein shall not apply to roads constructed under section 320-b.

It is provided in section 320-b that the board of supervisors of any county may appropriate and contribute to the county road fund an amount to be applied to the construction, improvement or maintenance of county roads; that such moneys may be raised by the county by tax or county obligations; that there shall annually be paid by the State to each county an amount equal to the amount paid by the county for such roads, except that the State shall not pay in any one year more than thirty dollars per mile for the total mileage of the highways within the county, other than State and county highways. The clerk of the board of supervisors, before the first of January in each year, shall transmit to the State Comptroller a statement of county moneys provided for roads under the section and the Comptroller shall draw his warrant upon the State Treasury in favor of the county treasurer for the amount due for the year. The moneys of the county and of the State, paid over for the purposes of the county roads, “ shall become a common fund for the purposes of this section ” and “ the moneys' which compose such common fund shall be deposited in a bank or banks to be designated by the county treasurer.” (Subd. 5.) Maps shall be drawn by the county superintendent of highways, showing the proposed county road system, to be approved by the supervisors and the Superintendent of Public Works, and no road shall thereafter be constructed or maintained from the county road fund moneys, except the roads set forth upon such maps as they may have been amended. It is provided in subdivision 13 as follows: “ Notwithstanding the provisions of sections nineteen and two hundred and sixty-two-a of this chapter, or any other statute, any bridge located on such county road system, when the same is to be constructed, reconstructed, maintained or repaired with county road fund moneys, shall be considered and deemed for such purposes a part of the road on which it is located; and all the provisions of this section relative to such road shall apply with equal force and effect to such bridge thereon for such purposes.” It is upon this provision of subdivision 13 of section 320-b, and this alone, that the supervisors rely for their authority to build the bridges in question.

It will be observed that the chief, if not the only purpose of section 320-b is to empower the board of supervisors to build county roads and receive State aid therefor. Properly to achieve this end power is given to establish a joint road fund, containing State and county moneys; to impose limitations and duties in respect to the use of such funds; and otherwise to govern the methods and manner of county road construction. It cannot be that the Legislature had any thought that by the enactment of the section it would delegate to boards of supervisors its own power to consent to the erection of bridges over navigable waters. True, it is provided that “ any bridge located on such county road system ” shall be deemed a part of the road on which it is located,” for the purposes of the section. However, it will be noted that “ any bridge ” to be treated as a road ” is not expressly defined to include a bridge designed to span navigable waters. Indeed, navigable waters or navigation are no where mentioned in the section. It would seem that the Legislature by so providing meant nothing more than that bridges, such as those spanning creeks, jaon-navigable waters, gulleys or ravines, which are necessarily incidental to the construction of roads, should be treated as parts of the roads which are proposed to be constructed. That it should intend by the section to make a delegation of its sovereignty over navigable waters, to the extent of authorizing a board of supervisors, without condition or restriction, to permit an impairment of the common right of navigation, possessed by the people, through the erection of any form of bridge over navigable waters, seems altogether incredible. If it had so intended, it should so have expressed itself.

There are many authorities, especially in other jurisdictions, where it has been held that if a Legislature intends to give its consent that a bridge over navigable waters may be built, that intention must be expressed in clear language. (Commonwealth v. Inhabitants of Charlestown, 18 Mass. 180; Inhabitants of Marblehead v. County Commissioners of Essex, 71 Mass. 451; Commissioners on Inland Fisheries v. Holyoke Water Power Co., 104 Mass. 446; State of Maine v. Anthoine, 40 Me. 435; Selman v. Wolfe, 27 Tex. 68; Barnes v. City of Racine, 4 Wis. 454; Hickok v. Hine, 23 Ohio St. 523.) In Commonwealth v. Inhabitants of Charlestown (supra) it was said: There can be no doubt, therefore, that, by the principles of the common law, as well as by the immemorial usage of this government, all navigable waters are public property for the use of all the citizens; and that there must be some act of the sovereign power, direct or derivative, to authorize any interruption of them. The legislature may, without doubt, by a general law, delegate to the magistrates of a county, or to any other body, the power of determining when public convenience requires that a bridge should be thrown over a creek or a cove, but, until they have made such delegation in express terms, it is a branch of sovereign power to be exercised by the legislature alone ” (pp. 184, 185). In Hickok v. Hine (supra) it was said: “ Where the legislature has power to require one public easement to yield to another more important, the intention to grant such power must appear by express words, or by necessary implication ” (p. 531). Farnham says: “A general statute giving authority to construct highways and bridges is not sufficient to authorize the construction of a bridge over a public, navigable water, the title to the bed of which is within the state.” (Waters and Watercourses, § 327.) Similar language has been used by the courts of this State. Thus in Sage v. Mayor (154 N. Y. 61, 81) the court said: The permanent control of navigable waters, if alienable at all, should only be so by an instrument showing a clear and undoubted intention to that end.” In City of Buffalo v. Delaware, L. & W. R. R. Co. (136 App. Div. 274, 280; affd., on opinion of Kruse, J., 204 N. Y. 562) it was said that where an encroachment upon public rights is threatened, the parties seeking to justify it must show that the statute authorized in express terms or by clear and unquestionable implication the doing of the very acts complained of.” True, in Robia Holding Corp. v. Walker (257 N. Y. 431, 438) this court did say: A power to construct and maintain a highway may by fair intendment include the right to build bridges as part of the highway.” However, in that case, express authority had been granted by a special act to construct bridges over the East river. The only question involved was whether power to charge tolls for using the bridge was conferred, and it was held that such power was implied since by no other means could the provisions of the statute be carried out.

We have already noted the act of Congress which provides that a bridge may be built “ under authority of the Legislature of a state across rivers and other waterways, the navigability of which lie wholly within the * * * state,” provided the location and plans thereof are approved by the Chief of Engineers and by the Secretary of War before construction is commenced.” It is true that the approval of these officers has been obtained for the building of the two bridges. However, the certificates of approval signed by them are conditioned upon the fact recited therein, that the bridges will be constructed “ under authority of the legislature of said state ” of New York. As such authority has never been given, the certificates are without effect. In any event, the certificates were merely permissive; they did not constitute authority to erect the bridges; for such authority must proceed either from Congress, or from a State Legislature; and in this case authority has been received from neither. (Little Falls Fibre Co. v. Ford & Son, Inc., 249 N. Y. 495.) We think that the board of supervisors is without power to construct the two bridges in question or to issue bonds to raise moneys for their construction.

On April 27, 1931, the board of supervisors likewise passed a resolution authorizing the construction of another road from the county road fund at an expense of $350,000. This road is described as Suffolk Boulevard from the Montauk Highway near Mastic southerly to the Atlantic Ocean, a distance of five miles in the Town of Brook-haven.” While the construction of this road would involve the erection of a bridge, we do not understand that any attack is made upon it on the ground that it would cross navigable waters. Consequently, the issue of bonds for $350,000, to provide moneys for the building of this road, will be for a legitimate purpose.

The board of supervisors, on April 27, 1931, approved certain projects for the dredging of certain harbors, inlets and waters in the various towns of the county of Suffolk, and to provide moneys for the work authorized an issue of bonds in the amount of $1,000,000. These resolutions are stated to have been passed pursuant to authority granted by chapter 401 of the Laws of 1931, a law which took effect on April 13, 1931, and now constitutes subdivision 51-a, section 12, of the County Law. That act provides as follows: The board of supervisors of the counties of Nassau and Suffolk may provide for widening, deepening or dredging any bay, harbor, inlet or channel within the respective boundaries and at the respective expense of such counties and may appropriate moneys available for general town improvements in aid of federal or state.projects for such purposes. If sufficient funds are not available therefor, the county may issue bonds to provide moneys to pay the costs of the improvements and the expenditures authorized by this subdivision, in the maimer authorized by law.” It is said that the act authorizes dredging by the two counties named, only in aid of federal or state projects for such purposes.” We do not so read the statute. It provides generally that the counties named may authorize dredging to be done at the respective expense of such counties.” It then provides for the method by which moneys may be obtained for the purpose. The supervisors may appropriate moneys available for general town improvements in aid of federal or state projects for such purposes;” or if sufficient funds are not available the county may issue bonds to provide moneys.” We do not think the methods prescribed for providing the moneys were intended to curtail the power given to the supervisors generally to provide for dredging. We think that the proposed bond issue was authorized by law.

The board of supervisors, on the same date, passed resolutions authorizing an issue of bonds in the sum of $550,000 for parkway purposes, and an issue of $100,000 for an addition to a county tuberculosis hospital. We find no objection made to the validity of such bond issues, except the general objection made to all the bonds that they were not authorized by a two-thirds vote of the board of supervisors, and with this argument we have already expressed our disagreement.

The judgments should be reversed and judgment granted in accordance with this opinion restraining the defendants from issuing or selling bonds to provide moneys for the construction of the two Shelter Island roads, with costs to the appellants in all the courts. (See 261 N. Y. 691.)

Pound, Ch. J., Crane, Lehman, O’Brien, Hubbs and Crouch, JJ., concur.

Judgment accordingly.


author: Lehman, J.

text:
    Simon Persky, Respondent, v. Bank of America National Association, Appellant.

      (Argued December 13, 1932;
    decided February 28, 1933.)

      Justus Sheffield, Carl A. Mead and Frank A. Severance for appellant.
    The note was non-negotiable. (Beadall v. Moore, 199 App. Div. 531; Bright v. Offield, 81 Wash. 442; Page v. Ford, 65 Ore. 450; Smith v. Myers, 207 Ill. 126; Walker v. Thompson, 108 Mich. 686; Des Moines Sav. Bank v. Arthur, 163 Iowa, 205; Farquhar v. Fidelity Ins. T. & S. D. Co., 8 Fed. Cas. No. 4676; Vancouver Nat. Bank v. Starr, 123 Wash. 58; Adams v. Leavens, 20 Conn. 73; Cushman v. Haynes, 37 Mass. 132; Dodge v. Emerson, 34 Me. 96; Marrett v. Equitable Ins. Co., 54 Me. 537; Bacon v. Bates, 53 Vt. 30.) Questions which involve the entire controversy, and the determination of which would entirely eliminate liability, may always be raised on appeal even though they were not specifically referred to even upon a trial, provided the facts upon which the question is raised appear in the record. (Oneida Bank v. Ontario Bank, 21 N. Y. 490; Cook v. Whipple, 55 N. Y. 150; Wright v. Wright, 226 N. Y. 578; Raible v. Hygienic Ice Co., 134 App. Div. 705.) Plaintiff as transferee of a non-negotiable instrument took it subject to all defenses and equities, not only those in favor of the maker, but also those in favor of all other prior indorsers against their indorsees. (Belmont Branch Bank v. Hoge, 35 N. Y. 65; Bush v. Lathrop, 22 N. Y. 535; Schafer v. Reilly, 50 N. Y. 61; Bacon v. Burnham, 37 N. Y. 614; Trustees of Williams College v. Wheeler, 61 N. Y. 88.) Plaintiff’s indorsee could not recover against his indorser, the trust company, upon its indorsement to him. (Palmer v. Hussey, 59 N. Y. 647; Messmore v. Meyer, 56 N. J. L. 31; First Nat. Bank v. Dorvall, 89 N. J. L. 298; Carr v. Wainwright, 43 Fed. Rep. [2d] 507.)

      Samuel M. Chapin and Monroe Chapin for respondent.
    The case having been submitted to the Supreme Court and the Appellate Division upon the theory that the note was a negotiable instrument, defendant may not now, for the first time, raise the question of its non-negotiability. (Mazurkiewicz v. Dawholonek, 111 Conn. 65; Schumacher v. Miller, 111 Conn. 568; Oatman v. Taylor, 29 N. Y. 649; Nod-Away Co. v. Carroll, 240 N. Y. 252; Martin v. Home Bank, 160 N. Y. 190; Dobbins v. Syracuse R. R. Co., 215 N. Y. 674; Ridall v. Courson, 252 N. Y. 592.) Even if the instrument is non-negotiable, defendant, an indorser thereof, is liable to a bona fide purchaser for value before maturity and without notice. (Seymour v. Van Slyck, 8 Wend. 403; 15 Wend. 19; Griswold v. Slocum, 10 Barb. 402; Richards v. Warring, 39 Barb. 42; 1 Keyes, 575; Cromwell v. Hewitt, 40 N. Y. 491; Newman v. Frost, 52 N. Y. 422; Paine v. Noelky, 53 How. Pr. 273; 54 How. Pr. 333; McMullen v. Rafferty, 89 N. Y. 456; Roe v. Hallett, 34 Hun, 128; New York Security & Trust Co. v. Manhattan Athletic Club, 81 Hun, 33; Nagel v. Lutz, 41 App. Div. 193; Strong v. Strong, 231 App. Div. 428.) Plaintiff is a transferee before maturity from a party who reacquired the instrument prior to maturity and he can enforce the instrument against any prior indorser, including defendant. (West Boston Bank v. Thompson, 124 Mass. 506; Eckert v. Cameron, 43 Penn. St. 120; Rogers v. Gallagher, 49 Ill. 182; National Bank v. Lindsey, 2 Boyce [Del.], 83; Haug v. Riley, 101 Ga. 372; Michler v. Reed, 76 Penn. St. 76;
      Morris v. Morton, 14 Neb. 358; Ervin & Lane v. Schaffer & Curtis, 9 Ohio St. 43; Adrian v. McCaskill, 103 N. C. 182; Cellers v. Meachem, 49 Ore. 186; Dunnington v. Bank of Crewe, 144 Va. 36; Bank v. Williams, 164 Ky. 143; Richards v. Market Exchange Bank, 81 Ohio St. 348; Clem v. Chapman, 262 S. W. Rep. 168; Hager v. Bank, 138 Md. 252; Vanderford v. Farmers & Mechanics Bank, 105 Md. 164.) Plaintiff is a transferee from a holder in due course and took free of all defenses between prior indorsers. (Neg. Inst. Law, §§ 91, 96, 98; Gruntal v. U. S. Fidelity & Guaranty Co., 254 N. Y. 468; Horan v. Mason, 141 App. Div. 89.)
   Lehman, J.

Summary judgment in the sum of forty-six thousand dollars, together with interest of over ten thousand dollars, has been entered in favor of the plaintiff for the unpaid balance of a promissory note made by one Maria di Francesco to the order of one Alexander Capasso. The note is annexed to the complaint. It is dated June 14th, 1926. It contains a promise to pay the sum of $50,000 " in successive semi-annual payments of not less than One Thousand Dollars each * * * for a period of eight years from date, and the balance then due to be payable on demand thereafter, with interest on the principal unpaid at the rate of six per cent, per annum, payable semi-annually, together with all taxes assessed upon said sum against said payee or the holder of this note.”

On the back of the note appear the following indorsements: New Haven, Conn. June 14th, 1926. Pay to the order of The Italian Discount and Trust Company, with recourse to me, Alexander Capasso. Alexander Capasso. New York, November 30th, 1926, Pay to the order of Alexander Capasso, Italian Discount and Trust Co., Mano Olivetti, Asst. Secy.” The defendant is the successor in interest of the Italian Discount and Trust Company which indorsed the note and is subject to all the obligations of that company.

The liability asserted by the plaintiff in this action is based upon that indorsement. The defendant does not dispute the validity of the-note or the amount due thereon. It disputes only that it is liable, as indorser, to the plaintiff. Upon motion of the plaintiff, the Appellate Division has ordered the answer to be stricken out and has granted summary judgment in favor of the plaintiff and against the defendant.

The answer alleges that the note in suit was secured by a mortgage; that the note and mortgage were indorsed and assigned by Alexander Capasso, the payee, to the Italian Discount and Trust Company as collateral security for money due from him to the trust company; that the debt was thereafter paid and the note and mortgage were then reindorsed and reassigned to Capasso and that the plaintiff took the note with full knowledge and notice of that transaction. The affidavits presented by the plaintiff show that he paid full value for the instrument and had no knowledge or notice of the transaction between the payee and the trust company beyond what is disclosed by the note itself and the indorsements upon it. The proof of these facts is not challenged by the affidavits interposed by the defendant. The question remains whether upon these facts the plaintiff is entitled to judgment. That is a question of law arising on undisputed facts.

There can be no doubt that Capasso, the payee of the note, who had indorsed. the note to the trust company “ with recourse,” could not have maintained an action against the Trust Company upon the subsequent reindorsement and redelivery of the note by the Trust Company to him, even if the note was a negotiable instrument. (Neg. Inst. Law; Cons. Laws, ch. 38, § 80.) The Appellate Division has said that this inhibition is leveled against the party who has reacquired the note and prevents him from enforcing payment against any intervening indorser to whom he was liable; * * * it is of no avail as against plaintiff, a bona fide holder for value before maturity.” (235 App. Div. 146, 150.) The appellant does not question the general rule so stated when applied to negotiable instruments; it contends that the instrument is not negotiable and that the plaintiff, as assignee, takes title to the instrument subject to every defense available against his assignor. We consider only that question.

The maker of the instrument promises to pay not only the sum of $50,000, with interest, which is a sum certain,” but also “ all taxes assessed upon said sum ” against the payee or holder of the note, and the amount of the taxes which may be assessed thereafter is not a sum certain. (Mechanics Bank of New Haven v. Johnson, 104 Conn. 696, and cases there cited.) For that reason, the promissory note is not a negotiable instrument. (Neg. Inst. Law, §§ 20 and 21.) That point was overlooked in the courts below, and the appellant frankly concedes that in the arguments presented in those courts there was a tacit assumption that the rights of the parties were governed by the law of negotiable instruments. Indeed, the description of the note in the plaintiff’s affidavit contains no reference to any promise to pay taxes and the defendant did not point out any error in the description. It was accepted by the courts below. The right of the appellants to change the theory, upon which the motion for judgment was argued below, is challenged now.

We have said that “ it is well settled that this court will not, for the purpose of reversing a 'judgment, entertain questions not raised or argued at the trial, or upon the intermediate appeal (citing cases).” (Martin v. Home Bank, 160 N. Y. 190, 199.) It is also true that as general rule a party who has obtained a judgment will not be allowed in this court to sustain that judgment upon grounds which were not considered in the courts below.” (Wright v. Wright, 226 N. Y. 578.) We do not intend to change or weaken these rules, but they are not applicable in this case. In our review we are confined to the questions raised or argued at the trial but not to the arguments there presented. “ Nor is it material whether the case was well presented to the court below, in the arguments addressed to it. It was the duty of the judges to ascertain and declare the whole law upon the undisputed facts spread before them; and it is our duty now to give such judgment as they ought to have given.” (Oneida Bank v. Ontario Bank, 21 N. Y. 490, 504.)

Here the note was spread before the courts below, though doubtless the assumption of both parties that the note was negotiable may have led the courts to refrain from examining the note or considering its legal effect. The question of law presented to the courts below was whether in a suit upon that note the defendant had the right to interpose a defense. Certainly it cannot be said the trial judge had no right to examine the note and consider its effect. Indeed, for all that appears, he may have done so. That was involved in the question presented to him. The same question is presented here, and we must review his decision upon that question as well as the contrary ruling of the Appellate Division. As argument that the ruling was wrong, the appellant has a right to urge here a proposition of law which appeared upon the face of the record and which could not have been avoided if brought to the attention of the respondent in the court below. (Wright v. Wright, supra. See, also, Murdock v. Ward, 178 U. S. 139.) The question might be different if there had been a trial of the action at which no ruling on that proposition was asked, and hence no erroneous ruling could be brought to this court for review by appropriate exception. A judgment can be rendered against a defendant only as the result of a conclusion of law from facts found or not disputed. Trials are held to enable parties to bring to the court for decision disputed questions of fact or law, and parties who fail to avail themselves of the opportunity offered them to present such questions of fact or law to a trial court cannot on appeal present them for decision in this court. Where, however, facts found or conclusively proven do not justify the conclusions of law upon which a judgment rests, it is not too late to point out the error in an appellate court, even though the original error was due in whole or in part to lack of timely care or wisdom on the part of counsel. Since our attention has been called to the fact, apparent on the face of the papers, that the note is not negotiable, the question of what would be the rights of the parties if the instrument were negotiable is irrelevant and academic. We express no opinion on such question, and pass to the question we must decide.

Ordinarily the indorsement of a note, which is not negotiable, evidences not merely an assignment of the note but a new contract by the indorser to pay the note as guarantor or as maker. (Seymour v. Van Slyck, 8 Wend. 403; Cromwell v. Hewitt, 40 N. Y. 491; McMullen v. Rafferty, 89 N. Y. 456.) That was clearly the intent of the payee here when he indorsed the note to the Trust Company with recourse ” against himself. The Trust Company could assign the note, and that contract, to a third party, and if it made the assignment by indorsement it could be held upon an independent contract of guaranty or to pay the note. The Trust Company did not assign to a third party; it merely reindorsed the note to the payee, from whom it had received the note, with a guaranty of payment. There must always be two parties to a contract and a promise to pay or a guaranty of a payment ceases to be a contract when the promisor becomes the owner of his own promise. Thus, the prior independent promise of guaranty or payment made by the payee to the Trust Company, lost all force when the note, together with the indorsements upon it, was reassigned by the Trust Company to the promisor. That was the purpose and effect of the reassignment. The promise could then be given renewed force only by some act of the promisor himself.

It is said that nevertheless the indorsement, by implication, created a new promise, by the indorsers, of guaranty or payment. To whom was such a promise made by implication? Certainly not to the indorsee who was also a prior indorser “ with recourse.” Not to subsequent holders of the note, for the note Was not negotiable, and any assignee of the note, together with the indorsements upon it, would receive only such rights or title as the assignor possessed.

It is too well established to require argument that ordinarily the assignee of an instrument which is not negotiable takes title subject to all equities and defenses which could be urged against his assignor. (Bush v. Lathrop, 22 N. Y. 535.) The limits of that rule have been defined in Merchants’ Bank v. Weill (163 N. Y. 486, 491). It is confined ordinarily to “ defenses arising out of matters inherent in the contract by which the chose in action is evidenced and existing before it is assigned.” It does not apply ordinarily to equities arising after assignment. This case falls plainly within the rule even though so limited.

At times, it is true, the doctrine of estoppel may preclude a defendant from asserting a defense against an assignee which he might have asserted against the assignor (See McNeil v. Tenth Nat. Bank, 46 N. Y. 325; Moore v. Metropolitan Nat. Bank, 55 N. Y. 41), but so far as now appears the defendant has done nothing upon which an estoppel can be based. Assuming that ordinarily an indorsement of a non-negotiable instrument is a promise of guaranty or payment, here the equities which would defeat an action to enforce the promise, if brought by the plaintiff’s assignor, appear on the face of the instrument. The law merchant facilitates the free circulation of negotiable instruments before maturity. Every promise embodied in such instruments is made with knowledge and intent that it may be transferred to holders for value free from equities arising between the original parties to the action. Every general indorser of a negotiable instrument gives a warranty and engagement to all subsequent holders in due course which is enforceable by a subsequent holder accordingly. (Neg. Inst. Law, § 116.) Not so a party to an instrument which is not negotiable. His promise is made to a particular person and any person accepting an assignment of the promise is bound to know that he acquires no greater rights or better title than his assignor possessed. The defendant never clothed the plaintiff’s assignor with apparent authority to assign more than his rights as they appeared on the instrument and subject to all equities which might be asserted against him.

The judgment of the Appellate Division should be reversed and the order of the Special Term affirmed.

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

Judgment accordingly.


text:
    Florindo S. Polo, Respondent, v. Joseph J. Lordi et al., Appellants.

      (Argued January 12, 1933;
    decided February 28, 1933.)

      John J. Curtin and Wesley S. Sawyer for appellants.
    Where the prospective purchaser, or lender, refuses to deal with plaintiff as broker, and makes the contract through another broker, the plaintiff is not the procuring cause and the complaint should be dismissed. (Sampson v. Ottinger, 93 App. Div. 226; Haase v. Ullman, 148 App. Div. 40; Lord v. U. S. Transportation Co., 143 App. Div. 437.) Where two brokers are involved in the same sale, or loan, that broker only is entitled to a commission who has actually procured the buyer or lender to make the contract, acting through him as broker. (Myers v. Batcheller, 177 App. Div. 47; Whitcomb v. Bacon, 170 Mass. 479; Loewenthal v. Klein, 159 App. Div. 334; Wylie v. Marine Bank, 61 N. Y. 415; Cole v. Kosch, 116 App. Div. 715; Faulkner v. Cornell, 80 App. Div. 161; Farber v. Cohn, 74 Misc. Rep. 396.) To be entitled to a commission the broker must procure the buyer to agree upon the contract in all its details, including the use of the plaintiff as broker. (Sibbald v. Bethlehem Iron Co., 83 N. Y. 378; Gallagher v. Dullea, 199 App. Div. 119; Applebaum v. Witbeck, 231 App. Div. 297; Boyd v. Improved Property Co., 135 App. Div. 623; Johnson v. Lord, 35 App. Div. 325; Simonson v. Bank, 231 App. Div. 868.)

      Melber Chambers for respondent.
    There is evidence upon every element of the plaintiff’s case. (Gallagher v. Nichols, 60 N. Y. 438; Patterson v. Meyerhofer, 204 N. Y. 96.) The evidence supports the verdict that the plaintiff procured the loan. (Smith v. McGovern, 65 N. Y. 574; Winans v. Jacques, 10 Daly, 487.) The decision that the plaintiff procured the loan sustains his recovery. (Stone v. Plaut, 96 N. Y. Supp. 1030; Faulkner v. Cornell, 80 App. Div. 161.)
   Lehman, J.

The plaintiff, a real estate broker, was employed to procure a building loan upon property owned by defendant corporation. If successful, his compensation would be one per cent of the amount of such loan. Before he was successful the parties entered into a written contract whereby the president of the owner authorized the plaintiff to represent me for the purpose of procuring bids, and consult with various contractors; also to represent me in procuring a loan,” and for such services agreed to pay the plaintiff the sum of $3,000. Thereafter the owner accepted a building loan for $950,000. The plaintiff, claiming that he procured such loan and performed the services stipulated in the written contract, has brought this action to recover one per cent commission on the amount of the loan and in addition the sum of $3,000 for services performed under the written contract, and has recovered a judgment for these amounts with interest.

The evidence is sufficient to sustain a recovery in the sum of $3,000 for services rendered under the written contract. The plaintiff shows that at the request of the defendants he had several interviews with the prospective lender, procured bids and consulted with various contractors. Assuming that the services, to be rendered under that contract, in representing the defendant in procuring a loan ” were not intended to include services as a real estate broker in procuring a lender, ready, able and willing to make the loan, the plaintiff can still recover, in addition to compensation for services rendered under the written contract, commissions as.a real estate broker only by proof that he was in fact the procuring cause of the loan. The record is barren of such evidence, if indeed it does not affirmatively show the contrary.

According to the testimony produced by the defendant, which is not denied by the plaintiff, other brokers submitted the application for the building loan together with plans for the building to the lender before the plaintiff began any negotiations with the lender, and the plaintiff was so informed. The plaintiff does not show that thereafter he was accepted as a broker in the negotiations by either party or that he induced the lender to make the loan on terms acceptable to the borrower. He was at that timé in the defendant’s employ to perform services which included acting as agent for the defendant in procuring the loan. A real estate broker is an agent, but an agent of a peculiar kind. He acts as intermediary between two parties in bringing about a contractual meeting of minds. Even though we accept the plaintiff’s construction of the written contract, all services rendered as agent for the defendant in procuring the loan other than services rendered as broker or intermediary, are part of the duties for which he was to receive compensation of $3,000. The plaintiff may have discussed with the prospective lender terms and conditions of a proposed loan, but all such discussions are referable to the written contract. There is nothing to show that the plaintiff acted as an intermediary or broker between the parties rather than as the owner’s representative or adviser — • certainly nothing to show that he procured the loan.

The judgment should be modified by reducing the amount of recovery to $3,000, with interest, and as so modified affirmed, without costs. (See 261 N. Y. 639.)

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

Judgment accordingly.


text:
    In the Matter of the Estate of Frank O. Burridge, Deceased. In the Matter of the Estate of Anna B. Burridge, Deceased. In the Matter of Harry C. Bassler, as Ancillary Administrator of the Estate of Anna B. Burridge, Deceased, Respondent. Herbert C. Smyth, as Temporary Administrator of the Estate of Frank O. Burridge, Deceased, Appellant.
    (Argued January 9, 1933;
    decided February 28, 1933.)

      Herbert C. Smyth, Jr., and Frederick W. Bisgood for appellant.
    The separation agreements operated as a° release and waiver of the widow’s exemption. (Matter of Williams, 31 App. Div. 617; Wilcox v. Hawley, 31 N. Y. 647; Johnson v. Corbett, 11 Paige Ch. 265; Woodward v. Murray, 18 Johns. 400; Kneetle v. Newcomb, 22 N. Y. 249; Becker v. Becker, 47 Barb. 497; Matter of Wylie, 187 App. Div. 841; Matter of Kiltz, 125 Misc. Rep. 475; Matter of Hagen, 119 Misc. Rep. 770; 206 App. Div. 682; Matter of Klein, 121 Misc. Rep. 568.)

      Isidor Lazarus and Albert Mintzer for respondent.
    The separation agreements did not operate as a release or waiver of the widow’s exemption. (Matter of Osborn, 220 N. Y. 595; Matter of Shulenberg, 114 Misc. Rep. 155; Matter of Shedd, 60 Hun, 367; 133 N. Y. 601; Obendorf v. Farmers’ Loan & Trust Co., 71 Misc. Rep. 64; Matter of Hulse, 41 Misc. Rep. 307; Matter of Belcher, 129 Misc. Rep. 218; Matter of Rosenthal, 141 Misc. Rep. 404; Matter of McClelland, 154 Misc. Rep. 166; Matter of Tangerman, 226 App. Div. 162; Matter of Mersereau, 38 Misc. Rep. 208; Matter of Crouse, 244 N. Y. 400.)
   Lehman, J.

Frank O. Burridge died on the 25th day of September, 1930. He left a widow him surviving, who died on November 26th in the same year. After her death her administrator brought this proceeding, claiming, on behalf of her estate, the exemptions allowed under section 200 of the Surrogate’s Court Act.

This section provides that “ if a person having a family die, leaving a widow or husband, or minor child or children, the following articles shall not be deemed assets, but must be included and stated in the inventory of the estate as property set off to such widow, husband minor child or children.” In the light of the history of the statute there can be no doubt that the exemptions were intended, primarily, to provide for the comfort and support of the family when the owner of the property, which has been used for family support and comfort, dies. (Wilcox v. Hawley, 31 N. Y. 648; Becker v. Becker, 47 Barb. 497.) However broad the definition we may give to the word family ” as used in the statute, yet by the terms of the statute itself, the exemption is granted where a person “ having a family ” dies. It is not enough that the decedent leaves a widow or husband or minor child or children. There must be a bond, however loose, which creates a collective family.”

Here the bond was certainly very loose. Husband and wife entered into a separation agreement in 1917. In that agreement the husband made provision for the support of his wife during his life and the wife accepted that provision “ in lieu of any and all other claim and provision for her support.” In 1929 the parties entered into a new separation agreement by which the husband promised to pay the wife a larger sum each year for her support during her life and provided that the promise should be binding upon his heirs, executors, administrators and assigns, and the wife agreed “ to accept all the provisions herein made in lieu of all other claim and provision for her support ” and, in a separate paragraph, renounced all rights of dower in his real estate.

Doubtless the marriage ceremony creates a family bond which can be severed only by judicial decree. In that sense husband and wife constitute a “ family ” so long as the marriage continues in existence. The law affixes to the marriage contract rights and obligations, both of property and person, and, in general, these rights and obligations constitute the foundation of the family. The parties may by agreement determine the manner in which the obligations of marriage shall be performed, but they cannot destroy the obligations which the law has affixed to the marriage contract. Even where husband and wife have lived apart for ten years without the husband contributing to the support of the wife, we have held that the family bond is not severed, and the wife is entitled to claim the statutory exemption from her husband’s estate. (Matter of Shedd, 60 Hun, 367, 368; affd. on opinion below, 133 N. Y. 601.) Even where the husband has formally agreed to live apart from his wife, at her death he may claim the same exemption. (Matter of Osborn, 220 N. Y. 595.) In those cases, however, there was no provision made as to the manner in which the husband should carry out his obligation to support his wife and no agreement, by either party, to renounce any claim against the estate of the other.

The situation here presented is different. The parties here have not only agreed to live apart but have determined the manner in which the husband shall meet his obhgation to support his wife, and in return the wife has accepted the stipulated provision for her support in lieu of " all other claim and provision for her support ” as well as in lieu of her dower right. Nevertheless the obligation to support in some form continued during-the husband’s life and the family bond was not entirely severed so long as mutual rights and obligations continued. The courts of this State have uniformly held that husband and wife constitute a family so long as the marital rights and obEgations continue, regardless of agreement, express or impEed, between the parties as to the manner in which those obEgations shaU be performed.

The question remains whether the wife has voluntarily relinquished her right to claim the exemption. We have held that a wife may do so effectuaEy where she accepts other provision for her support in Eeu of her right to claim personal property from his estate. (Matter of Young v. Hicks, 92 N. Y. 235.) Marital rights and obEgations end with the life of either party to the marriage, but the State may stiU determine the division of their property after death. An agreement of a wife that she shaU accept in Eeu of other provision for her support a sum fixed by agreement, to be paid while both parties Eve and the husband’s obhgation to support continues, is fairly open to the construction that the wife still intends to retain such rights against the husband’s estate after his death as the law has conferred upon her. The situation is different where provision for support of the wife, to continue after the husband’s obligation to support is at an end, and to be paid after the husband’s death out of his estate, is accepted in lieu of all other claim or provision for support. Then the stipulated provision for the support of the wife from her husband’s estate takes the place of the provision to which under the law of the State the wife would otherwise be entitled. Other construction of the language of the. contract would be forced and unreasonable. (Cf. Matter of Young v. Hicks, supra; Girard v. Girard, 29 N. M. 189.) The contract contemplates and provides for that situation after the husband’s death, and should be construed accordingly.

The order of the Appellate Division and the decree of the Surrogate’s Court should be reversed and the application denied, with costs in all courts to both parties payable out of the estate.

Pound, Ch. J., Crane, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., dissents.

Ordered accordingly.


author: Pound, Ch. J.

text:
    William A. Heaman, Respondent, v. E. N. Rowell Co., Inc., Appellant.

      (Argued January 26, 1933;
    decided March 1, 1933.)

      Bayard J. Stedman and George W. Watson for appellant.
    Contracts for lifetime employment are unusual. Except in rare instances they are held to be unreasonable. They should be specific and definite, even if not required to be in writing. (Arentz v. Morse D. D. & R. Co., 249 N. Y. 439; Greaves v. American Institute, 114 Misc. Rep. 413.) The complaint states specifically that the plaintiff entered into an oral contract with defendant, through its president. There was lack of power on the part of the president to make the contract. (Beers v. New York Life Ins. Co., 66 Hun, 75; Carney v. New York Life Ins. Co., 162 N. Y. 453; Davidson v. Library Bureau, 234 App. Div. 47; 259 N. Y. 654.)

      Everest A. Judd for respondent.
    The contract was not ultra vires. (Usher v. N. Y. C. R. R. Co., 76 App. Div. 422; Lienkauf v. Lombard, 137 N. Y. 417; Greaves v. American Institute, 114 Misc. Rep. 413; Schwartz v. Regensburg & Son, 227 N. Y. 521; Montwill v. American Locomotive Co., 159 N. Y. Supp. 21.) Where a corporation consists of a small number of persons, it may transact its business without the formality of resolutions by the board of directors. (Hall v. Herter Bros., 83 Hun, 19; 90 Hun, 280; 157 N. Y. 694; Barkin Constr. Co. v. Goodman, 221 N. Y. 156; Groh’s Sons v. Groh, 80 App. Div. 85; Young v. U. S. Mortgage & Trust Co., 214 N. Y. 279; Ætna Explosives Co. v. Bassick, 176 App. Div. 577; 220 N. Y. 767; Hoag v. Lamont, 60 N. Y. 96.)
   Pound, Ch. J.

The,action is one to recover damages for an alleged wrongful discharge of plaintiff from the employ of defendant.

The question is whether an allegation in the complaint ,that an oral contract of employment for life by a corporation was made through its president, can be upheld as sufficient in law. That a contract for employment for life if authorized by the corporation and based on an adequate consideration, will ordinarily be sustained admits of no dispute. (Riefkin v. DuPont DeNemours & Co., 290 Fed. Rep. 286; Arentz v. Morse Dry Dock & Repair Co., 249 N. Y. 439, 444.) Alleged contracts of life employment are, however, so unusual as to have been, with rare exceptions, condemned by the courts as unreasonable and unauthorized. The president or other executive officer of a corporation has no authority as such to make a contract that one should remain in the corporate employ for life even under a general power to appoint, remove and fix the compensation of employees.” That any board of directors or other persons responsible for .the management of a corporation should give such unusual power to an executive officer cannot be implied. Plain language of the managing board, clearly showing that such was the intention of the corporation, coupled with power actually or impliedly vested in the corporation itself, must be found to justify such a hiring. (Carney v. New York Life Ins. Co., 19 App. Div. 160, 161; affd., 162 N. Y. 453; Alexander v. Equitable Life Assur. Soc., 233 N. Y. 300; Clifford v. Firemen’s Mut. Benefit Assn., 232 App. Div. 260; affd., 259 N. Y. 547; Davidson v. Library Bureau, 234 App. Div. 47; modified, 259 N. Y. 654.)

The complaint does not suggest that the board of trustees of the defendant corporation ever authorized or ratified the contract set forth in the complaint. Plaintiff rests entirely on the affirmative allegation that the contract was made through the president.” If the plaintiff proved the facts alleged and nothing more he would fail to establish a cause of action. He would establish an unauthorized contract of hiring, not enforceable against the corporation.

It was not necessary to allege that the hiring was through the president.” Although it was unnecessary, it was not improper (Calvo v. Davies, 73 N. Y. 211), and the whole pleading must be considered in determining whether it states a cause of action.

The order should be reversed and the second cause of action set forth in the complaint dismissed, with costs in all courts, and the question certified answered in the negative.

Crane, Lehman, Kellogg, O’Brien, Hubbs and Croech, JJ., concur.

Ordered accordingly.