author: Froessel, J.

text:
    In the Matter of the Claim of Max Kaplan, Respondent, against Wirth & Birnbaum, Employer, and Special Fund for Reopened Cases, Appellant. Workmen’s Compensation Board, Respondent. In the Matter of the Claim of John R. Houston, Respondent, against William L. Mantha Company, Inc., Employer, and Special Fund for Reopened Cases, Appellants. Workmen’s Compensation Board, Respondent.
    Argued May 15, 1950;
    decided June 1, 1950.

      John M. Cullen for appellants.
    Bach sentence of section 123 of the Workmen’s Compensation Law relates to all cases coming under the compensation law and includes claims or applications made for reopening against the Special Fund for Reopened Cases. (People v. Ryan, 274 N. Y. 149; Matter of Roder v. Northern Maytag Co., 297 N. Y. 196; Matter of Norcisco v. American Book Bindery, 268 App. Div. 837; Matter of Sager v. General Elec. Co., 269 App. Div. 801; Matter of Post v. Burger & Gohlke, 216 N. Y. 544; Matter of Kiriloff v. A. G. W. Wet Wash Laundry, 293 N. Y. 222.)

      Abraham Markhoff for Max Kaplan, claimant-respondent.
    The Workmen’s Compensation Board has jurisdiction to consider this claim as against the Special Fund for Reopened Cases. (Matter of Post v. Burger & Gohlke, 216 N. Y. 544; Matter of Watkins v. Cornwall Press, 270 App. Div. 615; Strand v. Harris Structural Steel Co., 209 App. Div. 310.)

      Nathaniel L. Goldstein, Attorney-General (Daniel Polansky, Wendell P. Brown and Roy Wiedersum of counsel), for Workmen’s Compensation Board, respondent.
    Sections 25-a and 123 of the Workmen’s Compensation Law vested jurisdiction in the Workmen’s Compensation Board to accept and determine claimants’ applications to reopen their claims against the Special Fund for Reopened Cases. (Matter of Watkins v. Cornwall Press, 270 App. Div. 615; Matter of Tipton v. Lang’s Bakery, 250 App. Div. 696, 275 N. Y. 572; Matter of Roder v. Northern Maytag Co., 271 App. Div. 452, 272 App. Div. 838, 297 N. Y. 196.)
   Froessel, J.

These companion appeals present a common question of law, certified to us by the Appellate Division in each case, as follows: ‘ ‘ Under the facts in this case, does the Board have the power and jurisdiction to reopen the claim against the Special Fund for Reopened Cases under the Compensation Law?”

The facts in each case are not in controversy. The Kaplan claim, based on an injury (hernia), which allegedly occurred on October 22,1934, as a result of claimant’s having picked up a sixteen-pound pressing iron, was originally disallowed by the Workmen’s Compensation Board on June 8, 1935, after a contested hearing at which it was determined that no causal relationship existed. No appeal was taken from that determination. Over thirteen years after the alleged accident, on January 27,1948, claimant filed an application to reopen his claim. The Houston claim, based on an injury (rupture), which allegedly occurred on October 10,1935, was closed on July 30, 1936, after four hearings were scheduled, of which claimant was given due notice, and he failed to appear or otherwise press his claim. Nearly eleven years later, on June 26, 1947, he filed application to reopen his claim.

In each case, respondent board determined that it had jurisdiction to entertain the application and to reopen the claim, discharged the employer and carrier from liability, and held that the Special Fund would be solely liable for any award of compensation which might thereafter "be made.

As is conceded by appellant, there is no question that, prior to 1940, the action of the board would have been entirely proper. In that year, however, sections 25-a and 123 of the Workmen’s Compensation Law were amended (L. 1940, ch. 686), and it is upon the construction of these concurrent amendments that the determination of these appeals depends.

Section 25-a, which is concerned with the liability of the Special Fund, provides as follows, so far as pertinent here:

1. Notwithstanding other provisions of this chapter, when an application for compensation is made by an employee * * * and the employer has secured the payment of compensation in accordance with section fifty of this chapter, (1) after a lapse of seven years from the date of the injury or death and claim for compensation previously has been disallowed or claim has been otherwise disposed of without an award of compensation * * * subject to the provisions of section one hundred and twenty-three of this chapter, testimony may be taken, either directly or through a referee and if an award is made it shall be against the special fund provided by this section.” (Emphasis supplied.)
6. Notwithstanding any other provision of this chapter, no award of compensation or death benefits shall be made against said special fund or against an employer or an insurance carrier where application therefor is made after a lapse of eighteen years from the date of the injury or death and also a lapse of eight years from the date of the last payment of compensation.”

The italicized portion of subdivision 1, and the whole of subdivision 6, were added by the 1940 amendment.

At the same time section 123, which deals with the power and jurisdiction of the board, was amended by the addition of all matter beginning with the word “ except ”, which I have italicized, and now reads as follows: “ The power and jurisdiction of the board over each case shall be continuing, and it may, from time to time, make such modification or change with respect to former findings, awards, decisions or orders relating thereto, as in its opinion may be just, except that, where the employer has secured the payment of compensation in accordance with the provisions of section fifty of this chapter, no claim for compensation or for death benefits that has been disallowed after a trial on the merits, or that has been otherwise disposed of without an award after the parties in interest have been given due notice of hearing or hearings and opportunity to be heard and for which no determination was made on the merits, shall be reopened after a lapse of seven years from the date of the accident or death. Nor shall any award of compensation or death benefits be made against the special fund provided in section twenty-five-a of this chapter or against an employer or an insurance carrier where application therefor is made after a lapse of eighteen years from the date of the injury or death and also a lapse of eight years from the date of the last payment of compensation.”

It will be observed from the foregoing that the 1940 amendments made subdivision 1 of section 25-a, empowering the board to make awards against the Special Fund, " subject to the provisions of ” section 123, and that the first sentence of that section imposes a new limitation on the power of the board with respect to the two classes of exceptions set forth therein. Appellant contends that respondent board and the court below erred in failing to give effect to this new limitation, and with this view we are in accord.

The Special Fund was created in 1933 (L. 1933, ch. 384), for the purpose of relieving the employer and carrier of liability for stale claims. The employer who complied with the law by securing compensation in accordance therewith was relieved from all liability, where no award had been made, after the lapse of seven years. Since this was so until 1940, it is obvious that the amendment of that year was pointless if its only effect was again to relieve such employers from a burden which they then did not bear. In our opinion, its manifest purpose was to benefit the Special Fund in two classes of exceptions set forth in section 123: (1) where the claim “ has been disallowed after a trial on the merits ”, e.g., as in the Kaplan case, where the issue of causal relationship was presented, contested and decided adversely to the claimant, and (2) where the claim has been otherwise disposed of without an award after the parties in interest have been given due notice of hearing or hearings and opportunity to be heard and for which no determination was made on the merits ”, as in the Houston case. It follows that, after the lapse of seven years, the Special Fund remains liable in all other cases where the claim has been disallowed or * * * otherwise disposed of without an award of compensation ” (Workmen’s Compensation Law, § 25-a, subd. 1), and such liability continues until the lapse of eighteen years from the date of the injury ’ ’ and also ‘ * eight years from the date of the last payment of compensation ” (Workmen’s Compensation Law, § 25-a, subd. 6; last sentence of § 123). By way of illustration, such cases might arise when a claim is closed out pending claimant’s request for an operation, or for some other reason a merely technical disposition is made.

We are led to the logical and inescapable conclusion that the Legislature intended to relieve the Special Fund of liability for, and to put at rest, stale claims attempted to be reasserted after seven years by claimants who had failed to make out a case in contested hearings or had failed even to attempt to assert their claims after due notice and an opportunity to be heard. To construe the amending language otherwise would be tantamount to holding it meaningless.

The orders appealed from should be reversed and the claims dismissed, without costs. The question certified in each case is answered in the negative. The appeal taken as of right in each case should be dismissed.

Loughran, Ch. J., Lewis, Conway, Desmond, Dye and Fuld, JJ., concur.

Orders reversed, etc.


source: Caselaw Access Project

author: Dye, J. Desmond, J.

license: Public Domain

text:
    In the Matter of Angela S. Morgan, as Guardian of the Person of Lewis McC. Herzog, Jr., an Infant, Appellant and Respondent. United States Trust Company of New York, Respondent. In the Matter of Angela S. Morgan, as Guardian of the Person of Angela R. Herzog, an Infant, Appellant and Respondent. United States Trust Company of New York, Respondent. Angela S. Morgan, Respondent and Appellant, v. Lewis McC. Herzog, Sr., Third-Party Appellant and Respondent, and Seymour Graubard, as Guardian ad Litem for Lewis McC. Herzog, Jr., and Another, Third-Party Respondent.
    Argued April 4, 1950;
    decided June 1, 1950.

      Sol Pottish and Harry L. Ettinger for Lewis McC. Herzog, Sr., third-party appellant and respondent.
    I. The separation agreement and the trust indentures expressly provide that the trust income is to be payable and used for the support of the children. For that purpose the income should he paid to either parent in direct proportion to the time he or she has actual custody of and supports the children. The lower court’s direction for suspension of the income injures the children. (City Bank Farmers Trust Co. v. De St. Aubin, 270 App. Div. 588; Blake v. Mattern, 186 App. Div. 488; Farmers’ Loan & Trust Co. v. Callan, 246 N. Y. 481; Matter of Buechner, 226 N. Y. 440; Robertson v. Ongley Elec. Co., 146 N. Y. 20; Matter of Bearns, 251 App. Div. 222; Rice v. Halsey, 156 App. Div. 802, 215 N. Y. 656.) II. The court is not foreclosed from ordering payment of the income to the father for the support of the children by virtue of the naked provision in the agreements that the income is payable to the mother. She is a mere subtrustee and an equity court is empowered to by-pass her and to direct payment of the income in such a way as will effectuate the purpose of the trusts. (Wood v. Duff-Gordon, 222 N. Y. 88; Oberndorf v. Farmers’ Loan & Trust Co., 208 N. Y. 367; Lawrence v. Lawrence, 220 App. Div. 307; Chase v. Chase, 84 Mass. 101; Noble’s Appeal, 39 Pa. 425; Allen v. Farmers’ Loan & Trust

      Co., 18 App. Div. 27.) III. The Florida decree is a binding adjudication of the father’s right to receive the trust income while the children are in his custody. IV. If the lower court correctly held that the trust income should be suspended and accumulated, there has been a failure of the express purpose of the trusts. Therefore a resulting trust would arise in favor of the father as settlor and the income would be payable to him. (4 Pomeroy’s Equity Jurisprudence [5th ed.], § 1031; 1 Perry on Trusts [7th ed.], § 160; Guaranty Trust Co. v. New York Trust Co., 297 N. Y. 45; Allen v. Farmers’ Loan & Trust Co., 18 App. Div. 27.)

      Ambrose V. McCall and Eugene L. Garey for Angela S. Morgan, respondent and appellant.
    I. Respondent trust company should be directed to pay income to petitioner as guardian of the persons of the beneficiaries thereof as required by the clearly expressed language of the trust indentures. (Matter of Taylor, 234 App. Div. 892, 260 N. Y. 527; Heller v. Pope, 250 N. Y. 132; Central Union Trust Co. v. Trimble, 255 N. Y. 88; Matter of Tamargo, 220 N. Y. 225; Manion v. Peoples Bank of Johnstown, 292 N. Y. 317; Matter of Lloyd, 292 N. Y. 280.) II. The Florida court was without jurisdiction and the provisions of the Florida decree both as to custody and trust income should not have affected the lower court’s construction of these instruments. (People ex rel. Kniffin v. Knight, 184 Misc. 545; Balais v. Brady & Gioe, 189 App. Div. 408, 228 N. Y. 507.)

      Seymour Graubard, third-party respondent in person.
    I. The trust income may be received only by the guardian of the persons of the children and may be applied solely for their benefit. (Matter of Farmers’ Loan & Trust Co., 123 Misc. 600; Garlock v. Vandevort, 128 N. Y. 374; 2 Warren’s Heaton on Surrogate’s Courts, § 209, par. 2[c]; Matter of Lee, 220 N. Y. 532; Matter of Thoemmes, 238 App. Div. 541.) II. The mother is not entitled to receive the trust income except to the extent that she is able to apply such income to the support and maintenance of the children. (Chase v. Chase, 84 Mass. 101; Industrial Trust Co. v. Nolan, 63 R. I. 156; 4 Bogert on Trusts & Trustees, § 812; Matter of Taylor, 252 N. Y. 218, 615.) III. Payment of the trust income to the father would be detrimental to the children’s interests. IV. Accumulation of the income for the benefit of the children meets the intent of the trust indentures. It does not constitute a failure of the express trust, and no resulting trust in the father’s favor arises thereon.

      James J. Mennis for United States Trust Company of New York, respondent.
   Dye, J.

In this proceeding, which is here on cross appeals, we are to construe the payment provisions of two trust indentures executed by the settlor, Lewis McComb Herzog, Sr., coincident with an agreement of separation entered into between him and his then wife, Angela Stevenson Morgan, petitioner-appellant. The trust indentures bear even date, are identical in terms and were created for the purpose of securing covenants for the separate support of the wife and infant issue of the marriage, as provided in the separation agreement. Before proceeding to a discussion of the controverted payment clause, certain undisputed facts should be mentioned.

Petitioner-appellant and respondent-appellant were married in New York City, June 7, 1928. The daughter, Angela, was born in 1930 and the son, Lewis, Jr., in 1932. Unhappy differences developed leading to a separation and the execution of the aforementioned agreement of separation under date of June 28,1933. This agreement made provision for a financial settlement which, briefly, provided the sum of $5,000 per annum payable monthly for the wife’s separate support until she remarried, and the sum of $2,500 payable in monthly installments to the wife for the maintenance, education and support of each of the infant children during minority except that, when the children were in the custody of the father, payments to the wife were to cease except for a proportionate rental value of the home maintained by her for herself and the children. To secure these payments three separate trusts in the principal sum of $125,000 each were established, one for the wife with which we are not concerned (for it terminated upon the remarriage of the wife in 1938, and its principal was added to the trusts for each of the children in equal shares) and two trusts equal in amount and identical in terms for the benefit of each of the children. It is these latter two trust deeds that have our attention. The United States Trust Company of New York was named trustee in each instrument.

Following the establishment of the trusts the wife was duly-appointed guardian of the person, and the trust company was appointed guardian of the property, of each of the infants. Such appointments continue in effect. In 1935, the wife instituted proceedings in Nevada for absolute divorce based on cruelty, in which the husband appeared by attorney. A valid decree of divorce was obtained which incorporated the terms of the prior separation agreement in haec verba.

Subsequently both parties remarried and are now living with their respective spouses, the petitioner in New York City, and the respondent in the State of Florida where he has established a legal residence and maintained his domicile since 1941. In 1940, the wife refused to allow the father custody of the children during the July-August vacation period, resulting in a habeas corpus proceeding instituted by the father which was eventually terminated in a ruling by this court to the effect that a modification of the custody provision of the prior agreement of separation was unwarranted (People ex rel. Herzog v. Morgan, 287 N. Y. 317). Prior to and subsequent to this ruling, from June 28,1933, and down to July 1,1945, the parties observed a condition of the separation agreement providing for income payments to the wife during the period she has custody of the children, approximately nine and one-half months of each year, and to the father for the vacation periods for the remainder of the time. In July, 1945, the children, then fourteen and twelve years of age, and at the time in the custody of the father at his home in Florida, pursuant to the separation agreement, decided not to return to the mother in New York, but elected to remain with the father in Florida. Because of the children’s expressed preference to remain with him, the father instituted proceeding's in the State of Florida for a modification of the custody arrangement and for payment of the trust income to him while he had custody. The wife, in various motions including a habeas corpus proceeding, attacked the jurisdiction of the Florida court and when all had been resolved against her, appeared generally in the action and controverted the issues at a trial. This resulted in a final judgment, modifying the custody provisions so that the position of the parties was reversed, the father being awarded the main custody for nine and one-half months and the mother for the vacation period of two and one-half months of each year. The Florida court also ordered the wife to pay the trust income received by her to the father during the period he had custody. In the meantime the bank stopped all payments to anyone and has accumulated the income. The father has provided for the children’s maintenance and support in what has been described as a lavish and extravagant manner.

The within separate proceedings were commenced by the wife as guardian of the person of each of the infant children, to construe the income payment provisions of the respective trust indentures for the benefit of each child and for other relief, including major custody. Her prayer for custody has been abandoned and only the payment provisions are now controverted on the ground that she is entitled to payments as guardian under the express terms of the trust indenture which may not be altered by any independent modification of the terms of the separation agreement, and on the further ground that it expressly provided that it was to be construed and administered under the laws of the State of New York. The husband, in his opposing answer, joins in the application for construction, urging that the payments should be made to him while the children are in his custody because the primary purpose of the trust indenture was to secure the financial settlement for the benefit of the children as provided in the separation agreement. The trust company, in its answer, also joins in the application for construction but remains otherwise neutral. The special guardian also filed an answer in which he too asked for a construction and incidental relief. The controverted provisions of the trust directed the trustee to hold, manage and collect the income and, after payment of all necessary expenses, to pay the net income thereof to the extent of Two thousand five hundred (2,500) Dollars per annum during the minority of the said Lewis McComb Herzog, Jr. to Angela Stevenson Herzog in equal monthly instalments to be applied by her as guardian of the person for the maintenance, education and support of said Lewis McComb Herzog, Jr.; provided, however, that if the Grantor shall at any time be called upon to pay and discharge any debt or liability created or incurred by said Angela Stevenson Herzog for account of the said Lewis McComb Herzog, Jr., the Trustee shall out of said net income of Two thousand five hundred (2,500) Dollars reimburse the Grantor for any payments so made as provided in said separation agreement, and so accumulate the balance of the said income until said Lewis McComb Herzog, Jr. attains the age of twenty-one years, and upon that event to pay over the said accumulated income to said Lewis McComb Herzog, Jr., provided, however, that there shall be paid by the Trustee out of said accumulated or surplus income, when sufficient for the purpose, all bills for school tuition, board and extras incurred in the education of the said Lewis McComb Herzog, Jr., which said bills shall be rendered to and paid by the Trustee and be subject to its supervision and control.

“ After the said Lewis McComb Herzog, Jr. attains the age of twenty-one years, the Trustee shall pay the net income to him during his life in equal monthly instalments.”

It is also provided that, upon the death of the son, Lewis, the corpus be paid over to whomever the son should appoint, or, if the power of appointment be not exercised, the corpus be paid to Angela (the daughter) in the event he leaves no issue or, if he leaves issue, then to the surviving issue per stirpes. The trust deed for the benefit of the daughter, Angela, uses identical language except for appropriate changes.

In the preamble of each trust indenture reference is made to the separation agreement “ bearing even date ” in which the grantor covenanted to make certain payments for the benefit of the infant (either Angela or Lewis, Jr.) and that he was desirous of securing said payments, etc. This, we believe, justifies reference thereto in our search for the answer to the construction problem. For convenience we turn to the separation agreement. It makes provision for the father’s visitation while the children are in the custody of the mother at certain designated times and places and then provides: ‘ ‘ During the months of July and August, or such parts thereof as he shall request, and during the period of the Easter school vacation if he shall so desire, the party of the first part [the father] shall have the right to have the care, custody and control of the said children and during the period of such custody, if requested by the party of the first part [the father], the fixed payments to be made to the party of the second part [the mother] for the support and maintenance of the said children shall cease except the proportionate part of the rental of the home maintained by the party of the second part as a home for herself and said children, and during such period the party of the first part [the father] shall be entitled to apply to their maintenance and support the balance of the fixed income for such period which would ordinarily be payable to the party of the second part from the trust funds created for the benefit of said children.”

It also provided that in the event the father was called upon to pay and discharge any debt or liability incurred by the mother for the account of the children, the father was to be paid out of the income of the trust fund for the benefit of the child for whom such payment is made.

The lower court has construed the controverted provision of the trust deed to mean that monthly payment of the income derived from each trust to the extent of $2,500 shall be paid to the mother as guardian, in proportion ‘ ‘ to such time of each year as petitioner actually has custody ” and that any excess shall be accumulated for the benefit of the ¿respective infant until he or she shall have attained his or her majority and tha no payments were to be made to the father.

The Appellate Division affirmed by a divided court, the dissenting Justices voting to modify so as to direct payment to the father of the sum of $2,500 for each of the minor children to be used by him for the support of the children, according to the separation agreement, for such time as he has their legal custody. We are in accord with the view expressed by the dissenting Justices below.

This is a construction problem. In resolving it primary attention must be given to the manifest purpose sought to be accomplished. When this is ascertained it will take precedence over all other canons of construction (Farmers’ Loan & Trust Co. v. Callan, 246 N. Y. 481; Matter of Buechner, 226 N. Y. 440; Robinson v. Martin, 200 N. Y. 159; Mullarky v. Sullivan, 136 N. Y. 227). In seeking such purpose and intent we are not limited under the circumstances of this case to the language of the trust indenture. It must be read in connection with the separation agreement executed under even date. Both such instruments made reference to the other and together constitute part of a single financial plan “ instinct with obligation ” to provide a fixed monthly income for the support of the infant children during minority, in lieu of and in complete satisfaction of the father’s obligation in the premises. These instruments, as we read them, are not mutually exclusive in terms and obligations but are interrelated and being interdependent must be read together. Neither can successfully stand alone. If either is to be considered separately and one accorded a position of precedence over the other that precedence must be accorded to the separation agreement. Until it was executed there was no need for the creation of a trust. When created its express purpose was to furnish security for the unconditional performance by the settlor of his covenant to provide support for his infant children. The provisions of both instruments must be examined and, if necessary, read as one to ascertain the purpose and intent (65 C. J., Trusts, § 247, p. 500). Manifestly, there was but a single purpose — security for the children’s support. This must be made effectual. Substance must not be destroyed in deference to the naked word (Wood v. Duff-Gordon, 222 N. Y. 88). The trust indenture directs the trustee to make income payments to the wife “ to be applied by her as guardian * * * for the * * * support ” of the infants. The wife had no individual interest in such payments. The husband’s obligation for her separate support, pending remarriage, had been fully discharged in a separately created trust. Her position then “ as guardian ” is but an extension of the trustee’s obligation to apply money for the benefit of the infant children. She was, for all intents and purposes, a subtrustee for the accomplishment of a single purpose. The word guardian ” under such circumstances need not be regarded as requiring unyielding obedience as the recipient of income payments. It is a mere word of designation of the person or party in position to carry out the primary cardinal purpose, which in either instance ostensibly means the support of the children while in the custody of either parent. The parties, as a matter of fact, have so construed the income payment provision from the date of execution of the separation, agreement and the implementing trust indenture of 1933 down to July 1, 1945, by payments to the father when he had custody during the two and one-half months of the vacation period. This was in recognition of the' income payment terms contained in the separation agreement — because a similar clause was not incorporated in the trust indenture is no reason for limiting its payment of income derived from the trust to the mother as guardian. The parties placed a practical construction on the arrangement which may not he ignored. To say that the language of the underlying instrument is paramount and controlling over the primary agreement it was designed to implement is to exalt language over substance and work an unwarranted forfeiture of a clearly discernible purpose. It is axiomatic that the law does not favor forfeiture or penalties but strives to effectuate the purpose and intent which may be gathered not only from the instrument itself but from the circumstances surrounding its making and its expressed purpose and intent. The mere naked provision in the trust indenture requiring the trustee to pay the income to the mother as guardian must yield in the light of actual circumstances and in this instance custody is a very compelling circumstance. It is true that the parties failed to anticipate a change in custody — and in particular that such change would come about by the modification order of a court of competent jurisdiction after a trial of the issues. Nonetheless such has happened and the parties are bound by the Florida decree. We cannot disturb it and accordingly we must take it as we find it — a modus operandi between the parties governing the custody of the children. The Florida decree, however, in this instance, cannot operate to change the trustee’s duties in the controverted trust indenture. Neither it nor the res were subject to the jurisdiction of the Florida court and its decree directing the mother to pay the father an appropriate amount of the trust income while he has custody of the children, insofar as the trustee is concerned, is without effect and it has so treated it by refusing to make payments to any one and, pending direction, has accumulated the income in both trusts. The valid modification of the custody provisions of the separation agreement has reversed the position of the parties — the father now having the major custody and that of the mother being limited to the vacation period. Obviously, the mother, as guardian, except for a limited period, cannot apply the trust income in the manner provided, nor does she claim that she is entitled to such payments on any basis except the single circumstance that the trust indenture designated payment to her as guardian and that her appointment as such has not been vacated. As we see it, the determinative factor is whether the income is to be available for the cestuis.

Authority is ample for the proposition that a court in the exercise of its equitable powers may control the administration of a trust so as to effectuate its avowed purpose, particularly when changing circumstances would otherwise defeat it (e.g., see authorities collected in 2 Scott on Trusts, § 167; 4 Pomeroy’s Equity Jurisprudence [5th ed.], § 1309.). This trust was created by the father, out of his personal funds, in fulfillment of his obligation in the premises. Under such circumstances even though the father has ample means, as is the case here, to support said children without any need for the income derived from the trust, it nevertheless should be made available to him during the period of his custody irrespective of any other consideration. This is particularly so when infant beneficiaries are involved and the named recipient of the trust income refuses to apply the income as intended, or is in a position where she is unable to so apply it. In either case the. .purpose of the trust is nullified or thwarted, which eventuality the court will prevent by appropriating the income to the declared objective (Oberndorf v. Farmers’ Loan & Trust Co., 208 N. Y. 367). It is the avowed purpose of the payments rather than the method that is controlling.

The orders should be modified in accordance with the opinion herein, and as so modified affirmed, with costs to the respondent-appellant, Lewis McComb Herzog, Sr., payable out of the funds and the matter remitted to the Special Term for further proceedings not inconsistent with this opinion.

Desmond, J.

(dissenting). One question only is before us: is the income of the two trusts hereafter described to be paid, by the terms of the indentures and under the existing facts, to the father, or to the mother, or is such income to be accumulated for the benefit of the two infant beneficiaries? Despite much discussion in the record and briefs, about a separation agreement, and past litigations between the parties in this State and Florida, we are not here construing or applying that separation agreement, nor are we determining questions of custody or support, nor are we passing on the effect of, or bound by, the Florida judgment hereafter mentioned. The parties agree, on this appeal, that the case is, in its present form, a proceeding to construe two inter vivos trusts, and nothing more.

Petitioner Angela Stevenson Morgan and respondent Lewis McComb Herzog, Jr., were married in 1928, had two children born, respectively, in 1930 and 1932, and then, in 1933, signed a separation agreement. By that agreement the father agreed to pay the mother $2,500 per year for the support and maintenance of each child, the income from a trust created by the father for the benefit of that child to be, to the extent of such income, in full discharge of that support obligation. In another paragraph of the separation agreement it was recited that the father had set up a $125,000 trust fund, with respondent United States Trust Company as trustee, for each child, the income from the trusts to be received, as directed in the trust indentures, in discharge of the father’s liabilities to his wife for the support of the children. Elsewhere in the separation agreement the mother accepted the foregoing arrangements in lieu of any other provision for the support of the children, and agreed to care for the children out of the income so provided for them, there being another direction as to payment of trust income to the father, in the event the mother should fail to pay any bills incurred by her for the children’s needs. Finally, the mother was, by the separation agreement, given the custody of both children, and it was agreed that she was to be appointed guardian of the person of the children, the United States Trust Company to be the guardian of their property (such guardianship appointments were so made, and are still in effect). The father was, by the separation agreement, to have certain rights as to visiting the children, and was to have their custody during summer and Easter school vacation periods. In that part of the separation agreement it was stipulated that, when the children were thus with their father during their school holidays, the father’s obligation to pay the mother for the children’s maintenance should cease (except for rent) and that during such periods the trust income should go to the father. However, no such provisions appear in either trust.

The trust indenture for the son’s benefit (that for the daughter is identical) contains a recital that under the separation agreement above summarized, the father had agreed to make certain payments to his wife for his son’s support, and that the father is “ desirous of securing the said payments ” by the creation of this trust fund. Having thus made it clear that the sole purpose of this trust was to guarantee the agreed annual payment, by father to mother, of $2,500 per year to be used by her for the boy’s care, the trust document gave the following directions to the trustee: “ to invest and reinvest the same, to collect and receive the income thereof and after the payment of all necessary expenses, to pay the net income thereof to the extent of Two thousand five hundred (2,500) Dollars per annum during the minority of the said Lewis McComb Herzog, Jr. to Angela Stevenson Herzog in equal monthly instalments to be applied by her as quardian of the person for the maintenance, education and support of said Lewis McComb Herzog, Jr.; provided, however, that if the Grantor shall at any time be called upon to pay and discharge, any debt or liability created or incurred by said Angela Stevenson Herzog for account of the said Lewis McComb Herzog, Jr., the Trustee shall out of said net income of Two thousand five hundred (2,500) Dollars reimburse the Grantor for any payments so made as provided in said separation agreement, and so accumulate the balance of the said income until said Lewis McComb Herzog, Jr. attains the age of twenty-one years, and upon that event to pay over the said accumulated income to said Lewis McComb Herzog, Jr., provided, however, that there shall be paid by the Trustee out of said accumulated or surplus income, when sufficient for the purpose, all bills for school tuition, board and extras incurred in the education of the said Lewis McComb Herzog, Jr., which said bills shall be rendered to and paid by the Trustee and be subject to its supervision and control.”

Other language in the indenture provides for the payment, to the son after he shall attain his majority, of the whole net income during his life, and for the disposition of the remainder, after the son’s death. The trust deed nowhere contains any direction for the payment of any of the income to the father (except when and if the mother fails to pay debts she has incurred on behalf of the infant, a situation' which has not arisen). In other words, the father made an absolute transfer, to the trustee, of $125,000, with the command that the income be paid by the trustee to the mother, as guardian of the son, for the latter’s support. By no conceivable method of construction or interpretation could such language be made to mean that the father himself, not the mother, was to have the trust income. Nevertheless, the father now insists that such is his legal right, because of occurrences since the creation of the trusts.

In 1945, while the two children were visiting their father in Florida whither he had moved his residence in 1941 (the father and mother have been divorced and both are remarried), the father brought a custody proceeding in a Florida court, in which the mother appeared, and which resulted, in 1947, in a decree awarding the custody of the children to the father for nine and one-half months each year, the mother to have them during the summer. The Florida decree ordered also that the mother pay to the father, so much of the trust income as should be proportionate to the time he has the children. The trustee was not a party to that Florida litigation and its directions as to turning over the income could not, of course, have any effect on the trustee, or on the trusts. The father, however, called the trustee’s attention to the Florida judgment, and the trustee refused thereafter to pay the income to either parent. The present proceeding was then begun by the mother. The courts below have made, and affirmed, an order which, so far as is here material, adjudges that it is the intent and meaning of the trusts that, during the minority of each child, the income derived from that child’s trust, to the extent of $2,500 per year, shall be paid to the petitioner mother, as guardian of the person of that child, but only " during and in proportion to such time of each year as petitioner actually has custody of said infant and to apply said sum for the maintenance, support and education of said infant, and, to the extent that it exceeds the amount so paid to petitioner, the same to be accumulated and applied by the trustee pursuant to the * * * trust indenture ”, such accumulations to be paid to each infant, on reaching the age of twenty-one. Both father and mother have appealed therefrom to this court.

The courts below, called upon to construe these trusts, each of which directed that the trust income up to $2,500 per year be paid to the mother as guardian, with no direction of any sort that such income be paid to the father (except in the event of default of the mother in paying the children’s bills), and faced with the fact that the child’s custody, for nine and one-half months each year, is now with the father, have, by the order here appealed from, held that, under such circumstances, the indentures give the mother the right to no more than two and one-half twelfths of the income, and give the father no corresponding right to the balance of income, which balance must, therefore, be accumulated for the children. We do not see how such an interpretation of the trusts could be held, as matter of law, to be erroneous.

To order payment of any part of the income to the father would be to write in something not found, expressly or impliedly in the deeds, and something the parties themselves, therefore, never intended. The language of the indentures, as to disposition of income, is clear and complete. So much for the father’s appeal.

The mother’s claim to the whole of the income is likewise untenable. The payments to her were for the children’s, not for her own, benefit, and she is accordingly entitled to those payments only when, and to the extent, that she is in a position to use the money for the benefit of the children (see Chase v. Chase, 84 Mass. 101, 104). From all this it follows that, since the father is entitled to none of the income, and the mother to only a part thereof, the balance should be accumulated for the children, just as other surplus income was so to be accumulated, by the express language of the .trusts.

The fact that the mother, in the years before the Florida litigation, paid over to the father part of the trust income, after she had received it from the trustee, could not operate to change, or add to, the plain language of the trust deeds.

It should be noted that this is not one of those cases, where, because of dire necessities of children, the courts may direct application of income to relieve those necessities, despite or beyond the provisions of trust instruments (see Matter of Bostwick, 4 Johns. Ch. 100; Personal Property Law, § 17).

The order should be affirmed, with costs to the third-party respondent (special guardian), and disbursements to the petitioner (mother) and respondent (father), payable out of the trust funds.

Conway, Fuld and Froessel, JJ., concur with Dye, J.; Desmond, J., dissents in opinion in which Loughran, Ch. J., and Lewis, J., concur.

Ordered accordingly.


author: Conway, J.

text:
    In the Matter of Michael Magnotta, Appellant and Respondent, against Herbert C. Gerlach et al., Constituting the Board of Acquisition and Contract of the County of Westchester, Respondents and Appellants, and Parkway Fleetwood Building, Inc., Third-Party Respondent and Appellant.
    Argued May 22, 1950;
    decided July 11, 1950.

      Malcolm Wilson and Edward J. Freeman for petitioner, appellant and respondent.
    I. Petitioner’s bid of $8,900 net was the highest bid and should have been accepted by the Board of Acquisition and Contract. II. The relief prayed for in the petition should be granted. (People ex rel. Mathews & Co. v. City of Buffalo, 5 Misc. 36; People ex rel. Lynch v. Lennon, 147 App. Div. 537; Arensmeyer, Warnock, Zarndt, Inc., v. Wray, 118 Misc. 619.)

      Harry G. Herman, County Attorney (Francis J. Morgan of counsel), for respondents and appellants.
    I. The sale was valid in every respect. (Brownell v. Town of Greenwich, 114 N. Y. 518; Mayor of City of N. Y. v. Sands, 105 N. Y. 210.) II. The terms of sale constituted a contract. III. The expenses incident to the sale of the parcel in question were not in any way related to the “ highest bid ”. (Brownell v. Town of Greenwich, 114 N. Y. 518; Mayor of City of N. Y. v. Sands, 105 N. Y. 210.) IV. Special Term properly dismissed the petition. (Matter of Firshein v. Reavy, 263 App. Div. 490; Matter of Colonial Beacon Oil Co. v. Finn, 245 App. Div. 459; People ex rel. Delaney v. Interborough R. T. Co., 192 App. Div. 450; Matter of Whitman, 225 N. Y. 1.)

      Sol Rubin for Parkway Fleetwood Building, Inc., respondent and appellant.
    I. The petition fails to state a cause of action. (Matter of Whitman, 225 N. Y. 1; Matter of Perpente v. Moss, 293 N. Y. 325; Matter of Fahey v. Wright, 256 App. Div. 474;
      Matter of Reynolds v. Valentine, 169 Misc. 631.) II. The action of the county officials represented a constitutional exercise of their public functions in keeping with the responsibility imposed upon them by law. (Brownell v. Town of Greenwich, 114 N. Y. 518; Mayor City of N. Y. v. Sands, 105 N. Y. 210; Picone v. City of New York, 176 Misc. 967; Nathan v. O’Brien, 117 App. Div. 664; Govers v. Board of Supervisors of Westchester Co., 171 N. Y. 403; Town of Irondequoit v. Monroe County, 171 Misc. 125; Talcott v. City of Buffalo, 125 N. Y. 280; Ziegler v. Chapin, 126 N. Y. 342; Dunning v. Elmore & Hamilton Contr. Co., 204 N. Y. 647; Bishop v. McTigue, 210 App. Div. 826.) III. Appellant Magnotta has not overcome the presumption of validity of the acts of the public officials involved. (Matter of Strand Billiard Academy v. Moss, 294 N. Y. 865; Matter of Whitman, 225 N. Y. 1; Hirshfield v. Craig, 239 N. Y. 98; People ex rel. Langdon v. Dalton, 46 App. Div. 264; Remington v. State of New York, 116 App. Div. 522; People ex rel. Melenbacher v. Hubbell, 82 Misc. 624; People ex rel. Chambers v. Shults, 166 App. Div. 868; Brennan Constr. Co. v. State of New York, 117 Misc. 816.)
   Conway, J.

In 1948, by means of a local law (No. 28-1948), the Board of Supervisors for Westchester County authorized and directed its Board of Acquisition and Contract to offer certain county-owned land in the city of Mount Vernon for sale at a price of not less than $6,000. The land was to be sold under the procedure previously established by the Board of Supervisors for the sale of county-owned real estate (local law No. 20-1946, as amended the same year by local law No. 36-1946). Pursuant thereto, the Board of Acquisition and Contract [hereinafter called the Board] advertised that the above-mentioned land would be sold at public auction on October 11,1948, at the Westchester County Office Building. The County Executive of Westchester County, who was also a member of the Board of Acquisition and Contract, presided at the special meeting of the Board called at that time and place and read the terms of sale which had been drafted by the Board. They provided in part: “ After the close of bidding on each plot, the party offering the highest bid for said particular plot shall be required to execute a memorandum of sale and at the same time to pay ten per cent (10%) of the amount bid either in cash, bank check or draft, or certified check * * (Emphasis supplied.)

“ A contract as hereinbefore provided for shall.be executed by the successful bidder on each plot within five (5) days after the acceptance of a bid * * * and title to close within sixty (60) days thereafter * * * at which time the balance of the purchase price shall be due and payable in the same manner as the amount deposited with the bid.” (Emphasis supplied.)

The terms of sale also contained the following provision concerning real estate brokers:

“ Any licensed real estate broker representing a prospective bidder must file with the Board of Acquisition and Contract, County Office Building, White Plains, New York, before commencement of bidding, a letter or other written authorization indicating that said broker is representing a specific prospective bidder, and in the event this provision is not complied with, no real estate brokerage shall be paid by the County.
“ In the event that a real estate broker offers a bid on behalf of a bidder at the public auction, The County of Westchester will pay the usual broker’s fee as provided by the Bules and Regulations of the Westchester County Realty Board provided said bid is accepted as herein mentioned. Any licensed real estate broker submitting a bid as herein provided for shall sign the broker’s clause accompanying the memorandum of sale, and a similar clause will be inserted in the contract. No brokerage will be deemed earned by the broker or payable by the County of Westchester unless the bid is accepted and the title closed by the delivery of the deed therefor. ’ ’

Authorization for this provision in the terms of sale concerning the use of brokers and the payment of brokerage fees is found in subdivision 2 (e) of the act establishing procedure for the sale of county-owned real estate (local law No. 20-1946, as amd. by.local law No. 36-1946) which reads as follows: “ Real estate brokerage fees shall be paid only where such fees are specifically earned under the recognized and accepted practice of the Westchester County Realty Board.”

On September 20, 1948, prior to the day of the sale, a New Rochélle firm addressed a letter to the Board advising that it had been designated by Parkway Fleetwood Building, Inc. (hereinafter called Parkway) as its authorized broker in connection with a bid that Parkway intended to make. No one filed such an authorization to act as a broker for petitioner. On the day of the auction, the County Executive, after reading the terms of sale, stated that the opening hid was by Parkway subject to brokerage of 5%. Petitioner, through his attorney, then bid $6,300 and said that Ms bid was “ ' net to the County — with no brokerage involved. ’ ” The bidding then continued with successive bids being made by petitioner and by the broker on behalf of Parkway. At one point during the bidding the County Executive conducting the" sale, stated “ that the property would be knocked down to the highest bidder, broker or no broker.” The bidding continued until petitioner offered $8,900. Parkway’s broker then bid $9,000, whereupon the County Executive knocked down the property to Parkway.

The minutes of this special meeting of the Board showed that the “ High Bidder ” was Parkway, that the amount of the bid was $9,000 with a $900 deposit being paid in cash and that the afore-mentioned firm had acted as broker. The minutes also showed that petitioner was the only other bidder and that his bid was $8,900. At a second meeting, immediately following, the Board resolved to accept the higher bid of Parkway and directed that letters of acceptance be sent to it and its broker.

Petitioner then commenced this article 78 proceeding in the nature of mandamus seeking to compel the Board (1) to declare his bid of $8,900, which was'not subject to brokerage fees, to be the highest bid, (2) to direct the county executive to enter into a contract of sale with him, and (3) upon payment of the consideration, to deliver a deed to Mm. Special Term dismissed the petition stating that the sale had been conducted in accordance with the terms of sale, that by those terms the property was to go to the highest bidder irrespective of whether or not the bid was subject to brokerage fees, that in the absence of any fraud or illegality, the duty of determining what terms and conditions were proper and for the best interests of the county was a matter resting solely within the peculiar province of the administrative body and the court should not intervene. The Appellate Division, however, reversed the order of Special Term upon the law and the facts upon the ground that the auction had not been conducted according to the provisions of local law No. 20-1946, as- amended by local law No. 36-1946, and of local law No. 28-1948. It was of the opinion that the words ‘ * highest bid ’ ’ in the terms of sale meant the bid that, would yield the largest net return to the county. The court decided further to annul the entire sale, instead of merely dismissing the petition, since it believed that the statement of the County Executive conducting the sale, as above quoted, was unauthorized and illegal and may have misled bidders at the sale and prevented a fair sale upon an equal basis to all bidders.

The Board and Parkway now appeal to this court from the order of the Appellate Division annulling the sale and seek reinstatement of the order of Special Term. The petitioner cross-appeals seeking the relief originally prayed for in his petition.

We think the sale was properly conducted by the Board in accordance with the procedure previously established by the Board of Supervisors for the sale of county-owned real estate. Both the local law establishing such procedure (No. 20-1946, as amd. by No. 36-1946) and the terms of sale drafted pursuant thereto, authorized the participation of brokers in the bidding and the payment of brokerage fees by the county. While we agree with the petitioner and the Appellate Division that the Board had the duty of obtaining the highest possible net return to the county for the property, we do not believe that there was any failure in that duty by the Board’s acceptance of Parkway’s bid, submitted through a broker. The duty of the county officials — the members of both the Board of Acquisition and Contract and the Board of Supervisors — to sell surplus county-owned real estate on the best possible terms was not limited merely to a calculation, at the time of the actual bidding, of which bid would yield the largest net return to the county. In 1946, when the Board of Supervisors adopted the above-mentioned act establishing procedure for the sale of county-owned real estate, it had the duty then, as well as at the time of the sale of any particular piece of property, to secure the highest possible return to the county. By charter, the Board of Supervisors was specifically empowered to sell certain county-owned property “ upon such terms and conditions as it may deem proper and for the best interests of the county.” (Westchester County Charter, § 3, subd. [2]; L. 1937, ch. 617, as amd. by L. 1944, ch. 323.) This grant of power conferred upon the Board of Supervisors the authority to do all things necessary to accomplish the object of the grant, and to enable the donee of the power to effect the purpose of the act.” (Mayor of City of New York v. Sands, 105 N. Y. 210, 218; Brownell v. Town of Greenwich, 114 N. Y. 518.) As we have seen, the Board of Supervisors, in 1946, pursuant to this grant of power, and exercising its good business judgment, specifically provided for the payment, under certain conditions, of brokerage fees by the county. It is not for the courts to engage in discussion of the relative merits of auction sales conducted with or without brokers. Experience may have proved, in that locality, that the participation of brokers, whose very business it is to procure buyers able to meet the requirements of the terms of sale, would in the greater number of cases raise the selling price of the property. The Board of Supervisors may have reasoned that brokers produce buyers and increase the probability of obtaining the highest net return possible. In short, there was a reasonable basis for the action of the Board of Supervisors in engaging to pay brokerage fees. Opposed to this, we find no prohibition against the payment of brokerage fees by a county when county-owned real estate is sold. (See Mayor of City of New York v. Sands, supra; Brownell v. Town of Greenwich, supra.)

Since the participation of brokers and the payment of brokerage fees was thus authorized by the local laws and the terms of sale drafted pursuant thereto, the Board of Acquisition and Contract acted properly and within its powers in treating the sum payable for brokerage as an expense of the sale and not as affecting the amount of the bid. The Board was not required, at each stage of the bidding, to make an arithmetical computation to determine whether a particular bid by a broker, less brokerage, would yield a greater or less net return to the county than another bid by a person without a broker. Apart from the administrative difficulty involved, such a course might discourage the attendance of brokers at such an auction sale and thereby vitiate the beneficial effects sought to be obtained by their efforts.

There is no showing that the Board of Supervisors in establishing the procedure, or the Board in drafting the terms of sale and conducting the auction, acted illegally, capriciously or fraudulently. The general presumption is that public officials, as well as boards, act honestly and in accordance with law. (Matter of Whitman, No. 1, 225 N. Y. 1, 9-10.) There is no claim that the $9,000 bid by Parkway was not regularly or properly made, or that it and its broker failed in any way to comply with the terms of sale. It must be concluded then, that the power and judgment thus exercised by the county officials was within their competency.

The order of the Appellate Division should be reversed and that of Special Term affirmed, with costs in this court and in the Appellate Division to the County Board of Westchester County.

Loughran, Ch. J., Lewis, Desmond, Dye, Fuld and Froessel, JJ., concur.

Ordered accordingly.


text:
    In the Matter of Avon Bar & Grill, Inc., Respondent, against John F. O’Connell et al., Constituting the State Liquor Authority, Appellants.
    Argued May 29, 1950;
    decided July 11, 1950.

      Alvin McKinley Sylvester for appellants.
    This case resolved itself into a clear-cut issue as to the veracity of the opposing witnesses. According to the testimony of the police officers the betting was done openly and in the immediate presence of the licensee. The licensee’s witnesses denied the illegal acts testified to by the officers. The question of credibility of the witnesses was for the board alone, and its finding is therefore supported by substantial evidence. (People ex rel. Price v. Sheffield Farms Co., 225 N. Y. 25; Matter of Kormann’s Hofbrau v. O’Connell, 275 App. Div. 930, 300 N. Y. 521; Matter of Huber v. O’Connell, 297 N. Y. 577; Matter of Bolani v. O’Connell, 296 N. Y. 871; Matter of Weinstein v. Board of Regents, 292 N. Y. 682; Matter of Menick v. Bruckman, 279 N. Y. 795; Matter of Miller v. Kling, 291 N. Y. 65; Matter of Stork Restaurant v. Boland, 282 N. Y. 256.)

      William J. O’Hara and Caesar L. Pitassy for respondent.
    The Appellate Division correctly annulled the suspension order. (Robertson v. Ongley Elec. Co., 82 Hun 585, 146 N. Y. 20; People ex rel. Price v. Sheffield Farms Co., 225 N. Y. 25; Matter of Abrams v. Bruckman, 263 App. Div. 593; Matter of Arnold Reuben, Inc., v. State Liquor Authority, 268 App. Div. 981, 294 N. Y. 730; Matter of Stevensville Lake Holding Corp. v. O’Connell, 269 App. Div. 804.)
   Conway, J.

The State Liquor Authority (hereinafter called the Authority) suspended petitioner’s restaurant liquor license for five days. The suspension order was based on the finding that petitioner had violated subdivision 6 of section 106 of the Alcoholic Beverage Control Law which provides in part: “ No person licensed to sell alcoholic beverages shall suffer or permit any gambling on the licensed premises * * The Appellate Division unanimously annulled the suspension order and the Authority has appealed to this court.

The Authority’s case rested upon the testimony of two police officers who entered petitioner’s premises on the afternoon of August 10, 1949. One of the officers stood at the front, while the other stood at the center of the bar. At the hearing there was testimony by one of the officers that a bartender, one Dunne, employed by petitioner and working at the front end of the bar, referred a customer to one Cavallo, who was standing at the rear end of the bar, for the purpose of placing a wager upon a horse race. Both officers testified that subsequently they observed three patrons consult scratch sheets and hand Cavallo money in bill form and that Cavallo made notations on a slip of paper each time, using the bar as a deslc, and then put the money and the slips of paper into his pockets. The officers also said that the money was passed over the bar and in an open manner. The officers thereupon searched Cavallo and found several slips of paper on his person. Two of the slips contained the names of race horses running on that day, the amounts wagered on each horse and the identity of the players. The third slip contained the names of players and the amounts due them.

One Dineen, the president of petitioner and the owner of 50% of its stock, was on duty at the rear end of the bar, working as a bartender, and was in charge of the premises on the afternoon in question. Neither Dineen nor Dunne apprised the officers of Dineen’s connection with petitioner nor of the fact that he was in charge. At the hearing, Dineen admitted that he had been standing near Cavallo during the time the officers observed the transactions taking place and he asserted that, from his position, he would have been able to see anyone approaching Cavallo. He insisted, however, that: “.Nobody approached Cavallo.” Cavallo also denied that anyone had approached him to place a bet.

In making its determination that the licensee “ suffered or permitted ” gambling on the premises, the Authority necessarily found that the licensee, through its officer, Dineen, had actual knowledge or had the opportunity through the exercise of reasonable diligence to acquire knowledge of the prohibited activities. See People ex rel. Price v. Sheffield Farms-Slawson Decker Co., 225 N. Y. 25, 30.) That finding was supported by substantial evidence. The testimony elicited at the hearing posed a clear-cut issue as to the veracity of the opposing witnesses. Where the evidence is conflicting, it is for the administrative board to pass upon the credibility of witnesses and to base its inferences on what it accepts as the truth. (Matter of Stork Restaurant v. Boland, 282 N. Y. 256, 267, 274.) The Authority, considering all the evidence, could properly credit the testimony of the two police officers and, find that Dineen had actual knowledge or should have had knowledge of the transactions that took place between Cavallo and the three patrons, particularly in view of Dineen’s own testimony that he was at the rear end of the bar, that he could observe any transactions that took place there between Cavallo and other persons and that no transactions had taken place. Since the determination of the Authority is supported by substantial evidence it may not be disturbed. (Matter of Kormann’s Hofbrau v. O’Connell, 300 N. Y. 521; Matter of Huber v. O’Connell, 297 N. Y. 577; Matter of Bolani v. O’Connell, 296 N. Y. 871; Matter of Menick v. Bruckman, 279 N. Y. 795; Matter of Miller v. Kling, 291 N. Y. 65.)

The order of the Appellate Division should be reversed and the determination of the State Liquor Authority confirmed, with costs in this court and in the Appellate Division.

Loughran, Ch. J., Lewis, Desmond, Dye, Fuld and Froessel, JJ., concur.

Order reversed, etc.


author: Loughran, Ch. J. Desmond, J.

text:
    Marianne J. Santos, as Administratrix De Bonis Non of the Estate of Ethel V. Flanagan, Deceased, Appellant, v. Unity Hospital, Respondent.
    Argued May 15, 1950;
    decided July 11, 1950.

      James G. Purdy, Robert H. Nix, Joseph Davis and George H. Fitzgerald for appellant.

    The Appellate Division erred in holding as a matter of law that defendant could not be held negligent in not guarding the windows of the labor room. The failure to guard the windows under the facts presented a question of fact for the jury to determine. (Maki v. Murray Hosp., 91 Mont. 251; Robertson v. Towns Hosp., 178 App. Div. 285; Bickford v. Peck Memorial Hosp., 266 App. Div. 875; Gallachicco v. State of New York, 43 N. Y. S. 2d 439; Dillon v. Rockaway Beach Hosp., 284 N. Y. 176; Mulliner v. Evangelischer, 144 Minn. 392; Texas & Pacific Ry. Co. v. Behymer, 189 U. S. 468; Shannahan v. Empire Eng. Corp., 204 N. Y. 543; Hill v. Winson, 118 Mass. 251.)

      Joseph J. Brophy, Desmond T. Barry and Edward A. Shandell for respondent.
    I. Plaintiff offered no proof of any violation of law or custom or usage requiring barred windows. The only evidence adduced on such issue was to the contrary, hence the trial court’s submission of the case to the jury on such theory was error and the Appellate Division reversal on such point was proper. (Sieniewicz v. Merusad Realty Corp., 291 N. Y. 806.) II. The accident was a remote and unforeseeable consequence for which liability does not attach. (Halverson v. 562 W. 149th St. Corp., 290 N. Y. 40; Fitzpatrick v. International Ry. Co., 252 N. Y. 127; Galbraith v. Busch, 267 N. Y. 230; Massa v. Nippon Yusin Kaisha, 264 N. Y. 283; Sandler v. Garrison, 249 N. Y. 236.)
   Loughran, Ch. J.

This is an action for wrongfully causing the death of the plaintiff’s decedent who was killed when she fell out of a window of a labor room in the maternity division of the defendant’s hospital. The decedent was in an advanced stage of labor at the time and was awaiting removal to a delivery room for the birth of her third child. The fatal fall was brought about by a mental derangement called intrapartum psychosis — a condition that is recognized by the medical profession as a hazard of childbirth, though the incidence of the disorder may not be high.

The decedent was alone in the labor room when her mind became disordered. “ She must have been alone [said the executive director of the defendant hospital] or else they would have stopped her. ’ ’ A nurse who had been in sole charge of the labor room had gone to an adjoining nurses’ station to answer calls on a telephone there, as she had been directed to do. While she was so engaged in the nurses’ station, the interior of the labor room was out of her sight. Consequently the disappearance of the decedent from that room went unwitnessed.

On the trial herein, the court said to the jury: “ It is charged [by the plaintiff] that the defendant was negligent in failing to provide guardrails or locks on the windows in the labor room to prevent temporarily deranged patients from going through the windows. It is also charged [by the plaintiff] that the failure of the defendant to provide constant supervision or uninterrupted attendance of the patient in the labor room was negligence; that the absence of the nurse from the labor room for whatever time you find she was absent therefrom, and the consequent leaving of the patient in the labor room unattended, was negligence.”

At the close of the trial court’s charge to the jury counsel for the defendant said: “ I have only one exception, and that is, I respectfully except to that portion of your Honor’s charge which left it to the jury to decide whether the hospital may he negligent for failure to provide bars on the windows. And so that it will properly follow, I respectfully ask your Honor to charge the jury to disregard the lack of bars on the windows as any evidence of negligence on the part of the defendant hospital or as having any bearing whatsoever on the issues. ’ ’ The trial court declined to alter its charge in the fashion so requested and the defendant’s counsel then noted another exception. Verdict and judgment for the plaintiff followed.

The Appellate Division, however, reversed on the law and ordered a new trial on the ground that the defendant’s exceptions were validly taken. From that reversal, the plaintiff has appealed to this court on a stipulation for judgment absolute.

The defendant’s exceptions, we think, present no error of law. The trial court did not tell the jury that the absence of safeguards from the windows of the labor room was in itself and without more enough to warrant a verdict against the defendant. On the contrary, the court posed this ultimate question to the jury: “ Do you, on all of the evidence in the case, find that the defendant failed to use reasonable care to avoid injury to the plaintiff’s intestate? ”

Thus there was left to the jury the question whether the defendant hospital was negligent when in the decedent’s exigency it withdrew from her all personal care without securing the window through which she then and there helplessly fell to her death. This submission of the issue was right, in our judgment.

The order of the Appellate Division should be reversed and the judgment of Trial Term affirmed, with costs in this court and in the Appellate Division.

Desmond, J.

(dissenting). Decedent, having had two previous normal pregnancies, was, without any abnormal symptoms, awaiting delivery of her third child in a labor room in defendant’s Brooklyn hospital, under the direction of her own physician and with a nurse employed by defendant in attendance only a few feet away, when decedent, apparently in the throes of a sudden and entirely unanticipated psychosis, threw open the window of the labor room, unhooked the window screen and jumped or fell to her death. The jury has been allowed by its verdict to say that the cause of this tragic occurrence was the failure of the hospital to have locks or barriers on the window so as to make egress impossible, and/or the failure of the hospital to provide what is referred to as constant and uninterrupted attendance on, and supervision of, the patient.

There was absolutely nothing in the history, condition or demeanor of Mrs. Flanagan to suggest that she was about to go insane or to attempt suicide, and the malady of “ intrapartum psychosis ”, with which, it is said, she was suddenly attacked, is so exceedingly rare that three Brooklyn obstetricians, in their combined experience of over 300,000 births, had never seen a case thereof, in any of the ten Brooklyn hospitals wherein they attended. At defendant hospital, where more than 25,000 babies had been delivered over a period of years this was the first case of intrapartum psychosis.

There was no proof whatever of any custom or requirement that such labor rooms in hospitals keep their windows barred or locked, and the three obstetricians above referred to all testified that there were no such protections on any such rooms in any of the thirteen large Brooklyn hospitals (defendant’s hospital would make a fourteenth) with which they were familiar. As to constant or uninterrupted attendance or supervision, it is undisputed that decedent was the only patient in the labor room, that on the orders of her own physician she was walking about the room, that there was a qualified nurse assigned to the labor room, and that the leap through the window came when the nurse was momentarily in a small adjoining “ nurses’ station ”, answering the telephone, a few (perhaps fifteen) feet away from the patient. Decedent’s physician, who was at the hospital at the time awaiting this birth, testified that such nursing attendance was adequate, and that it was entirely proper for the nurse to answer the telephone. It is undisputed that the nurse, although an employee of defendant, was bound to, and did, obey all the orders of decedent’s physician. That physician, as well as a nursing expert called by plaintiff, testified that it is adequate nursing attendance to a woman in labor, for the nurse to remain within calling distance, as this nurse did. Another obstetrician testified, for plaintiff, that, at several Manhattan hospitals which he visits, nursing attendance on patients in labor rooms is constant and uninterrupted; he questioned the wisdom of this decedent’s physician in allowing her to be ambulatory, but admitted that the attending physician was in full control, and that the nurse had to do as that physician commanded.

I am unable to see how, on this proof, a finding of a breach of duty by this hospital can be sustained.

The judgment should be affirmed, and judgment absolute ordered against plaintiff, on her stipulation, with costs.

Lewis, Conway, Dye and Froessel, JJ., concur with Loughran, Ch. J.; Desmond, J., dissents in opinion in which Fuld, J., concurs.

Ordered accordingly. [See 301 N. Y. 684.]


text:
    William Sauerzopf, Appellant, v. North American Cement Corporation, Respondent.
    Argued May 19, 1950;
    decided July 11, 1950.

      Thomas J. Delaney and James H. Hyer for appellant.
    The action was commenced within 120 days after the enactment of the act. (Semar v. Great Eastern Fuel Co., 191 Misc. 552; Snee v. Goldman, 192 Misc. 440; O’Neill v. New York Bd. of Fire Underwriters, 191 Misc. 485; Prudential Ins. Co. v. Stone, 270 N. Y. 154.)

      Howard C. Wilbur for respondent.
    I. So much of the causes of action alleged in the complaint as set forth claims for unpaid overtime compensation for periods prior to August 1, 1941, are barred by the Statute of Limitations. (Overnight Motor Transp. Co. v. Missell, 316 U. S. 572; Emerson v. Mary Lincoln Candies, Inc., 174 Misc. 353, 287 N. Y. 577; Goldstein v. TriContinental Corp., 282 N. Y. 21; Pollack v. Warner Bros. Pictures, 266 App. Div. 118; Gordon v. Pushkoff, 67 N. Y. S. 2d 873, 272 App. Div. 872; Smith v. Continental Oil Co., 59 F. Supp. 91; Rigopoulos v. Kervan, 140 F. 2d 506; Hitchcock v. Union & New Haven Trust Co., 56 A. 2d 655.) II. The causes of action set forth in the complaint are barred by the provisions of the Portal-to-Portal Act because this action was not commenced within 120 days after May 14, 1947. (Engel v. Davenport, 271 U. S. 33; Atlantic Coast Line R. R. v. Burnette, 239 U. S. 199; Gatti Paper Stock Corp. v. Erie R. R. Co., 247 App. Div. 45, 272 N. Y. 535; People v. Metropolitan Sur. Co., 211 N. Y. 107; Leppard v. O’Brien, 225 App. Div. 162, 252 N. Y. 563; O’Neill v. New York Bd. of Fire Underwriters, 191 Misc. 485; Snee v. Goldman, 192 Misc. 440; Semar v. Great Eastern Fuel Co., 191 Misc. 552. III. In enacting the Portal-to-Portal Act it was the intent of Congress to provide for a uniform period of limitation.
   Conway, J.

Plaintiff sued his former employer to recover unpaid overtime compensation and damages allegedly due for the period from October 24, 1938, to April 25, 1944, under the Fair Labor Standards Act of 1938 (U. S. Code, tit. 29, § 201 et seq.), as amended by the Portal-to-Portal Act of 1947 (U. S. Code, tit. 29, § 251 et seq.). The date of enactment of the latter act by Congress was May 14, 1947. Section 6 of the Portal-to-Portal Act provides in part (U. S. Code, tit. 29, § 255):

Any action commenced on or after May 14, 1947, to enforce any cause of action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages, under the Fair Labor Standards Act of 1938, as amended * * *
“ (b) if the cause of action accrued prior to May 14, 1947 — may be commenced within whichever of the following periods is the shorter: (1) two years after the cause of action accrued, or (2) the period prescribed by the applicable State statute of limitations; and, except as provided in paragraph (c), every such action shall be forever barred unless commenced within the shorter of such two periods;
“ (c) If the cause of action accrued prior to May 14,1947, the action shall not be barred by paragraph (b) if it is commenced within one hundred and twenty days after May 14, 1947 unless at the time commenced it is barred by an applicable State statute of limitations.” (Emphasis supplied.)

That portion of plaintiff’s causes of action seeking to recover unpaid overtime compensation and damages for the period prior to August 1,1941, is concededly barred by the six-year Statute of Limitations contained in section 48 of our Civil Practice Act. We are here concerned with that portion covering the period from August 1,1941, to April 25,1944, as to which plaintiff’s action under the above-quoted subdivision (c) of section 6 of the Portal-to-Portal Act, was required to be “ commenced within one hundred and twenty days after May 14,1947 ”.

On August 1, 1947, within the 120-day period, plaintiff served a summons upon defendant. That, of course, is normally sufficient to commence an action in the courts of this State and to stop the running of the State Statute of Limitations. Thus, section 218 of the Civil Practice Act provides: “ A civil action is commenced by the service of a summons, which is a mandate of the court.” (See Campbell v. New York Evening Post, 245 N. Y. 320, 326.) Section 16 of the Civil Practice Act provides that “ An action is commenced against a defendant, within the meaning of any provision,of this act which limits the time for commencing an action, when the summons is served on him * * *.” (See Erickson v. Macy, 236 N. Y. 412, 414-415.)

Defendant contends, however, and the courts below have held, that the mere service of the summons, which is normally effective to commence an action in this State, was not so effective here because of the provisions of section 7 of the Portal-to-Portal Act (U. S. Code, tit. 29, § 256), which reads in part as follows: “In determining when an action is commenced for the purposes of section 6 [§ 255], an action commenced on or after May 14,1947, under the Fair Labor Standards Act of 1938, as amended * * * shall he considered to he commenced on the date when the complaint is filed; * * * ” (emphasis supplied). It is undisputed that plaintiff here did not file his complaint within the 120-day period from May 14, 1947. Under our State practice, of course, there was no requirement that he do so unless and until he had received “ notice from the adverse party requiring such filing ”. (Civ. Prac. Act, § 100.) Thus, the provision that the filing of the complaint commences the action bears no practical or realistic relation to New York practice. Instead, the provision of section 7 of the Portal-to-Portal Act with respect to the filing of the complaint is an obvious reference to the Federal practice in civil actions. For example, rule 3 of the Federal Rules of Civil Procedure provides: “ Commencement of Action. A civil action is commenced by filing a complaint with the court. ’ ’ It is only after the complaint is filed in the Federal court that a summons is issued and served by a United States marshal by his deputy, or by some person specially appointed by the court for that purpose, upon the defendant. (Federal Rules of Civil Procedure, rule 4.)

These Federal Rules of Civil Procedure were adopted by the Supreme Court of the United States on the recommendation of an Advisory Committee appointed by that court and pursuant to the power granted by Congress. (48 U. S. Stat. 1064, now U. S. Code, tit. 28, § 2072.) The original act granting the power provided: “ Said rules shall neither abridge, enlarge, nor modify the substantive rights of any litigant.” The Advisory Committee did not wish to transgress this limitation and, being fearful that a statement of what constitutes the commencement of an action for the purposes of the Statute of Limitations would beyond the rule-making power of the Supreme Court, the committee made no express rule with reference to the problem. Thus, in its note 4 to rule 3, the committee said in part: * * * When a Federal or State statute of limitations is pleaded as a defense, a question may arise under this rule whether the mere filing of the complaint stops the running of the statute, or whether any further step is required, such as, service of the summons and complaint or their delivery to the marshal for service. The answer to this question may depend on whether it is competent for the Supreme Court, exercising the power to make rules of procedure without affecting substantive rights, to vary the operation of statutes of limitations. The requirement of Rule 4 (a) that the clerk shall forthwith issue the summons and deliver it to the marshal for service will reduce the chances of such a question arising.” Thus, there was doubt as to what act of the plaintiff in the Federal court should be deemed the commencement of the action. This uncertainty continued in some degree through 1947 when the Portal-to-Portal Act was passed. (See 17 Hughes on Federal Practice, §§ 18584-18586; 1 Moore’s Federal Practice, § 3.06.) We think that section 7 of the Portal-to-Portal Act, quoted in part, supra, pages 161-162, was intended to resolve the question as to what constitutes the commencement of the action m the Federal court — at least for the purposes of that act. In other words, Congress resolved the question posed by the Advisory Committee note to rule No. 3, just quoted, by providing that in the Federal court the filing of the complaint supplied the date on which the action was commenced rather than the service thereof or the delivery to a marshal. We do not believe that Congress thereby intended to establish a rule of procedure for State courts as to the method of commencing an action therein so as to toll the Statute of Limitations, but intended to leave the manner of commencement of an action to the common law or legislation of the State in which the action was brought. The Fair Labor Standards Act of 1938, as amended by the Portal-to-Portal Act, expressly permits an employee to maintain his action for unpaid overtime compensation and damages in any court of competent jurisdiction ”, State or Federal. (U. S. Code, tit, 29, § 216.) As applied to the Federal court, the provision of section 7 of the Portal-to-Portal Act prescribes the simplest conduct possible for the tolling of the statute by the employee. We think that it may not be said that Congress intended to make it more difficult, for those employees who elected to sue in State courts such as our own, hy disregarding State law and providing for the commencement of the action in a manner different from the conventional State-provided method. As noted above, the statement in section 7 that the action shall be considered to be commenced on the date when the complaint is filed bears no relation to our State practice since the filing of a complaint in a civil action in our courts has no operative effect whatsoever on the running of the Statute of Limitations. Accordingly, it seems to us that Congress in section 7 was referring only to an action brought under the act in the Federal District Courts, and, more specifically, that Congress was attempting to resolve for the purposes of the act any doubt which may have existed as to what conduct on the part of the plaintiff actually commenced his action in such courts and to make clear that a different rule in a local State court could not affect the determination as to when the action was commenced in the Federal court.

The judgments should be modified in accordance with the opinion herein, and, as so modified, affirmed, with costs to appellant in this court.

Loughran, Ch. J., Lewis, Desmond, Dye, Fuld and Froessel, JJ., concur.

Judgment accordingly.