text:
    M. Salimoff & Company et al., Appellants, v. Standard Oil Company of New York, Respondent. M. Salimoff & Company et al., Appellants, v. Vacuum Oil Company, Respondent.
    (Argued June 8, 1933;
    decided July 11, 1933.)

      Joseph M. Proskauer, J. Alvin Van Bergh and Eugene Eisenmann for appellants.

      Harrison Tweed, William Dean Embree, A. Donald MacKinnon and John E. Lockwood for respondents.
   Pound, Ch. J.

The Soviet government, by a nationalization decree, confiscated all oil lands in Russia and sold oil extracted therefrom to defendants. The former owners of the property, Russian nationals, join in an equitable action for an accounting on the ground that the confiscatory decrees of the unrecognized Soviet government and the seizure of oil lands thereunder have no other effect in law on the rights of the parties than seizure by bandits. (Luther v. Sagor & Co., [1921] 1 K. B. 456; s. c., 3 K. B. 532; cited in Sokoloff v. National City Bank, 239 N. Y. 158, 164.) The complaints have been dismissed.

The question is as to the effect on the title of a purchaser from the unrecognized confiscating Soviet Russian government. Does title pass or is the Soviet government no better than a thief, stealing the property of its nationals and giving only a robber’s title to stolen property? Plaintiffs contend that the Soviet decrees of confiscation did not divest them of title.

When a government which originates in revolution is recognized by the political department of our government as the de jure government of the country in which it is established, such recognition is retroactive in effect and validates all the actions of the government so recognized from the commencement of its existence. (Oetjen v. Central Leather Co., 246 U. S. 297; Terrazas v. Holmes, 115 Tex. 32.) The courts of one independent government will not sit in judgment upon the validity of the acts of another done within its own territory, even when such government seizes and sells the property of an American citizen within its boundaries. If the Soviet government were a de jure government, it would follow that title to the property in this case must be determined by the result of the confiscatory Soviet decrees.

The status of the Soviet government is defined by the Secretary of State’s office as follows:

“1. The Government of the United States accorded recognition to the Provisional Government of Russia as the successor of the Russian Imperial Government, and has not accorded recognition to any government in Russia since the overthrow of the Provisional Government of Russia.
“ 2. The Department of State is cognizant of the fact that the Soviet regime is exercising control and power in territory of the former Russian Empire and the Department of State has no disposition to ignore that fact.
3. The refusal of the Government of the United States to accord recognition to the Soviet regime is not based on the ground that that regime does not exercise control and authority in territory of the former Russian Empire, but on other facts.”

It follows that the question as to the validity of acts and decrees of a regime, not the subject of diplomatic recognition, becomes a matter to be decided by the courts in an appropriate case. Thus it was held that out of respect for the political departments of the United States government only a recognized government may be a plaintiff in the courts of this State. (Russian Socialist Federated Soviet Republic v. Cibrario, 235 N. Y. 255.)

It has been held by the Appellate Division: “ Whatever may be said of the propriety or justice of the nationalizing decrees promulgated by the Soviet government of Russia, those decrees were made by the defacto government of that country and are there in full force and effect and binding upon all Russian nationals. * * *

“ Under well-established principles of international law and in accordance with the decisions of our courts, the Soviet law and decrees must be given internal effect in that country.” (237 App. Div. 686, 689, 690.)

Writers have been inclined to the view that where a de facto government reigns supreme within its own territory, the courts should give full effect to its decrees, in so far as they affect private rights. (Borchard, “ The Unrecognized Government in American Courts,” [1932] 26 Am. J. Int. Law, 261; Fraenkel, “Juristic Status of Foreign States,” [1925] 25 Columbia Law Rev. 544; Connick, “ Effect of Soviet Decrees in American Courts,” [1925] 34 Yale Law Journal, 499; Dickinson, “ The Unrecognized Government or State in English and American Law,” 22 Mich. Law Rev. 29, 118.)

The courts of this State have not gone so far. The question with us is whether, within Russia, the Soviet decrees have actually attainéd such effect as to alter the rights and obligations of parties in a manner we may not in justice disregard, even though they do not emanate from a lawfully established authority, recognized politically by the government of the United States. (Russian Reinsurance Co. v. Stoddard, 240 N. Y. 149, 157.) We have considered the extraterritorial effect of Soviet decrees which liquidated Russian banks (Petrogradsky M. K. Bank v. National City Bank, 253 N. Y. 23) and insurance companies (First Russian Ins. Co. v. Beha, 240 N. Y. 601). We have reached the conclusion in those and similar cases that such decrees had no extraterritorial effect and that the continued existence of such companies, wherever they were found to function outside of Russia, would be recognized. The consequence has been that corporations non-existent in Soviet Russia have been, like fugitive ghosts endowed with extraterritorial immortality, recognized as existing outside its boundaries. The juristic person, the Russian corporation, dead in the country which created it, has received juridical vivification elsewhere.

In this case another situation is presented. The oil property confiscated was taken in Russia from Russian nationals. A recovery in conversion is dependent upon the laws of Russia. (Riley v. Pierce Oil Corp., 245 N. Y. 152,154.) When no right of action is created at the place of wrong, no recovery in tort can be had in any other State on. account of the wrong. The United States government recognizes that the Soviet government has functioned as a de jacto or quasi government since 1917, ruling within its borders. It has recognized its existence as a fact although it has refused diplomatic recognition as one might refuse to recognize an objectionable relative although-his actual existence could not be denied. It tells us that it has no disposition to ignore the fact that such government is exercising control and power in territory of the former Russian empire. As was said by this court in Sokoloff v. National City Bank (supra, p. 165): Juridically, a government that is unrecognized may be viewed as no government at all, if the power withholding recognition chooses thus to view it. In practice, however, since juridical conceptions are seldom, if ever, carried to the limit of their logic, the equivalence is not absolute, but is subject to self-imposed limitations of common sense and fairness, as we learned in litigations following our Civil War.”

As a juristic conception, what is Soviet Russia? A band of robbers or a government? We all know that it is a government. The State Department knows it, the courts, the nations and the man on the street.. If it is a government in fact, its decrees have force within its borders and over its nationals. Recognition does not create the state.” (Wulfsohn v. Russian S. F. S. Republic, 234 N. Y. 372, 375.) It simply gives to a de facto state international status. Must the courts say that Soviet Russia is an outlaw and that the Provisional government of Russia as the successor of the Russian Imperial government is still the lawful government of Russia although it is long since dead? (See Nankivel v. Omsk All Russian Government, 237 N. Y. 150, 156.) The courts may not recognize the Soviet government as the de jure government until the State Department gives the word. They may, however, say that it is a government, maintaining internal peace and order, providing for national defense and the general welfare, carrying on relations with our own government and others. To refuse to recognize that Soviet Russia is a government regulating the internal affairs of the country, is to give to fictions an air of reality which they do not deserve.

The courts cannot create a foreign wrong contrary to the law of the place of the act. (Slater v. Mexican Nat. R. R. Co., 194 U. S. 120; American Banana Co. v. United Fruit Co. 213 U. S. 347.) The cause of action herein arose where the act of confiscation occurred and it must be governed by the law of Soviet Russia. According to the law of nations it did no legal wrong when it confiscated the oil of its own nationals and sold it in Russia to the defendants. Such conduct may lead to governmental refusal to recognize Russia as a country with which the United States may have diplomatic dealings. The confiscation is none the less effective. The government may be objectionable in a political sense. It is not unrecognizable as a real governmental power which can give title to property within its limits.

A careful examination of the New York cases reveals some expressions from which it might be inferred that the Soviet government is still to be regarded as a band of thieves, exercising power without authority, but the basic fact of all the cases is stated as follows: “ The State of Russia is now governed by the Russian Socialist Federated Soviet Republic. Such government there exists, clothed with power to enforce its authority within its own territory, obeyed by the people over whom it rules, capable of performing the duties and fulfilling the obligations of an independent power and able to enforce its claims by military force.” (Russian Reinsurance Co. v. Stoddard, 240 N. Y. 149, 157.)

The legitimate conclusion is that the existing government cannot be ignored by the courts of this State, so far as the validity of its acts in Russia is concerned, although the attempt is here made to nullify such acts and create a cause of action in tort in favor of Russian nationals against American corporations, purchasers for value from the Soviet government of property in Russia in accordance with Soviet law.

Our own government thus looked on the acts of the States lately in rebellion. Although the legal status of the Confederate States and of their legislation during the war was held to be simply an armed resistance to the rightful authority of the sovereign ” (Hickman v. Jones, 9 Wall. [U. S.] 197, 200), the acts of the confederacy were nevertheless treated as valid and binding where considerations of public policy did not otherwise require. ( United States v. Insurance Companies, 89 U. S. [22 Wall.] 99.)

Non-recognition is no answer to defendant’s contention, no reason for regarding as of no legal effect the laws of an unrecognized government ruling by force, as the Soviet government in Russia concededly was. “ Within its own territory the Soviet was a sovereign power.” (W. S. Andrews, J., in 12 Cornell Law Quarterly, 441.)

The order in each case should be affirmed, with costs; the first question certified answered in the negative and the other questions not answered.

Crane, Lehman, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not sitting.

Orders affirmed, etc.


source: Caselaw Access Project

author: Crane, J.

license: Public Domain

text:
    Anthony Farago, Respondent, v. Thomas C. Burke, Defendant, and James McTiernan, Appellant.
    (Argued June 12, 1933;
    decided July 11, 1933.)

      Louis Susman, William Levin and Knowlton Durham for appellant.

      Osborne A. McKegney for respondent.
   Crane, J.

The error in this case has been in thinking that there was a contract — a meeting of the minds on the sale of real property which had been reduced to writing. Bor instance, the respondent in his brief says, “ the record disclosed ample evidence to support the finding that the parties had entered into a contract.” Here we differ with him and with the lower courts. There was no contract binding on both parties before the grantor withdrew from the bargain.

James McTiernan agreed to sell to Anthony Barago certain premises known as lots Nos. 577 and 578 of the Van Cortlandt estate, in the Bronx, New York city, for $15,000 — $5,000 payable in cash on the delivery of the deed and $10,000 by giving a second mortgage.

On the 4th of September, 1931, the parties met at the office of Thomas C. Burke, the grantor’s lawyer, where copies of the contract of sale were drawn up and the original signed by McTiernan. This was handed to Farago, or his representative, a real estate dealer, named McKegney, to examine, but was not signed or executed by Farago. He wanted the advice of a lawyer and asked the privilege of taking a copy for that purpose. The arrangement was then made that Farago would come back Tuesday of the next week to exchange contracts. Mr. McKegney testified that he handed the contract back to Mr. Burke, saying, “ I am handing this contract to you in escrow and I will be here and we will exchange contracts on Tuesday morning.” The plaintiff gave as his reason for refusing to sign the contract, I says to him. ‘ everything is 0. K. in the contract but will there be any objection there to have one of his contracts looked over by an attorney? ’ ” By the following Tuesday McTiernan had changed his mind, and tore up the contract.

This action for specific performance is founded upon the claim of a completed contract of sale to be held in escrow by Burke until Tuesday, from which the grantor could not withdraw.

One cannot enforce a contract not binding upon himself. (Kohart v. Boyle, 140 App. Div. 856.)

“ No one will contend that a contract for the sale of land, executed by the vendor, is binding upon the purchaser unless the contract is delivered to and accepted by the purchaser as a valid subsisting contract. A delivery in escrow cannot bind the purchaser, although he verbally promises to perform the condition. Until performance and acceptance by the purchaser, he is at liberty to abandon the contract.” (Cagger v. Lansing, 43 N. Y. 550, p. 553.)

There was no contract, no meeting of the minds upon the agreement as set forth in the instrument signed by McTiernan. Farago was apparently satisfied with it, but he was not sure, he wanted to inquire further. The main features he no doubt understood and agreed to, nevertheless he was not ready to sign and desired time for a lawyer’s advice. That he was not bound by anything which took place in Burke’s office is granted. He was not under any legal obligations to appear the following Tuesday and exchange contracts. Had the lawyer found objections, Farago could have refused to make the contract or he could have dropped the matter without any reason or objection. Therefore, it is a misnomer to say that a contract to sell this property was delivered to Burke in escrow. There was no contract, oral or in writing. A contract assumes an agreement, a meeting of the minds, on the thing to be done. McTiernan had given his consent, but not Farago, so that the writing was not a contract itself, nor the evidence of any oral agreement of the parties. They would agree perhaps on the Tuesday following, but had not done so up to the time McTiernan withdrew his offer.

The plaintiff, no doubt in perfect good faith, desired to | hold the defendant, while he would be free to do as he ¡ pleased, in the few following days. Such facts do not! make contracts. Had Farago accepted the contract signed by McTiernan, thus evidencing a completed agreement (Worrall v. Munn, 5 N. Y. 229; 300 West End Ave. Corp. v. Warner, 250 N. Y. 221), or tendered his signed copy, or in any other effectual way signified his acceptance and consent, before the withdrawal of the offer by ¡ McTiernan, the latter would have been obligated to sell i on the terms and conditions stated in the paper signed by him. (Dietz v. Farish, 79 N. Y. 520; Mechanics’ Nat. Bank v. Jones, 76 App. Div. 534; affd., 175 N. Y. 518; Petterson v. Pattberg, 248 N. Y. 86; Cagger v. Lansing, 43 N. Y. 550; Kohart v. Boyle, 140 App. Div. 856.) The court said in the Mechanics’ National Bank case: “ If the deposit is made under and upon conditions to be fulfilled by another and without original consideration, it is doubtless true that the person making the same may revoke his proposition at any time before the opposite party has complied with the conditions to be by him performed” (p. 545).

The use of the word escrow ” by Mr. McKegney, when he handed the proposed contract back to Burke, did not transform the facts. Calling an act an escrow does not necessarily make it such. Whether the holding of a document be under an escrow agreement depends upon that agreement. The word is often used for a holding which has none of the effects which the law attributes to it. The law makes the depositary a trustee for both parties (Stanton v. Miller, 58 N. Y. 192); it imposes upon him a duty not to deliver the escrow to any one except upon strict compliance with the conditions imposed, and even subjects him to damages for his failure; it makes the deed or other instrument irrevocable. (Mechanics’ Nat. Bank v. Jones, supra.) The facts of this case do not show that Burke, the grantor’s lawyer, undertook any such obligations. He took the contract back when McKegney handed it to him and gave Farago a few days to make up bis mind whether he would agree to it. In our opinion this constituted an offer on stated terms which could be withdrawn before acceptance. Had a contract actually been made by these parties, and then delivered in escrow for the performance of some condition stated in the contract, we might have a case where the grantor could not back out before the time given for performance (Stanton v. Miller, supra), but in this case a contract is lacking.

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

Pound, Ch. J., Lehman, Kellogg, O’Bbien and Cbouch, JJ., concur; Hubbs, J., not sitting.

Judgments reversed, etc.


text:
    Morgan Lake Company, Respondent, v. The New York, New Haven and Hartford Railroad Company, Appellant.
    (Argued June 5, 1933;
    decided July 11, 1933.)

      Madison G. Gonterman and Gilbert N. Reed for appellant.

      Elijah T. Russell for respondent.
   Crane, J.

This action is brought by the Morgan Lake Company to recover damages caused by the operation of trains over Morgan lake, situated in Dutchess county. The smoke and cinders from the locomotives, it is claimed, damaged the crop of ice, from the year 1908 to 1928. The referee, to whom the action was referred, allowed damages for the years 1913 to 1916 and from 1920 to 1928, in the sum of $63,377.90, and interest from the commencement of the action, $16,266.99, amount in all, $79,644.89.

The basis of the cause of action is a covenant in the two deeds from the owner of the lake conveying to the railroad company and its predecessors the right of way over the lake. The first deed is dated October 13, 1888, made by Julia A. Morgan to the Poughkeepsie Bridge Railroad Company, wherein she conveyed a strip of land over the lake for the purposes of a railroad, the grantee covenanting and agreeing to make and maintain good and sufficient farm crossings over and under the railroad built upon the strip, for the use of the adjoining lands of the grantor, and covenanting further as follows: The said Company further covenants to pay for any damages by sparks, ashes, cinder or coal dust from said Railroad or its use, to the ice on said Morgan Lake beyond fifty feet on each side of the strip above conveyed, any judgment recovered for such damage to be a lien upon the premises above conveyed prior to any mortgage thereon.- And further that should any judgment for such damage remain unpaid for three months from the final determination thereof, then all rights of the said company, in the lands above conveyed to cease and the parties to be restored to their original rights before this deed was given.

These covenants on the part of said Railroad Company to run with the land as against the successors and grantees of the said Railroad Company.”

This deed was executed by both the grantor and the grantee. The property of the Poughkeepsie Bridge Railroad Company was thereafter and in 1899 conveyed through mesne conveyances to the Central New England Railroad Company, which continued to operate the railroad and use the property conveyed for railroad purposes. Julia A. Morgan, the original grantor, by deed dated February 15, 1902, sold and conveyed all her property here in question, together with the appurtenances and all her estate, title and interest therein to the Morgan Lake Company, the plaintiff herein, which company, by deed dated May 31, 1910, sold and conveyed to the Central New England Railway Company a small parcel of land immediately adjoining on the south of the parcel conveyed by the deed of 1888. It contained about .27 acres, more or less. By this deed, the Central New England Railway Company made additional covenants affecting the railroad property over the lake, and assumed the covenants and agreements of its predecessor in title, the Poughkeepsie Bridge Railroad Company, as contained in the original deed of 1888. The words of the covenant are repeated in the deed of May 31, 1910, executed by the Central New England Railway Company, and are as follows:

The said Company further covenants to pay for any damages by sparks, ashes, cinder or coal dust from said railroad or its use to the ice in said Morgan Lake beyond fifty feet on each side of the strip above conveyed, any judgment for such damage to be a hen upon the premises above conveyed prior to any mortgage thereon, and further should any judgment for such damage remain unpaid for three months from the final determination thereof, then ah rights of the said Company in the lands above conveyed to cease, and the parties to be restored to their original rights before this deed was given. These covenants on the part of said railroad company to run with the land as against the successors and grantees of the said Railroad Company.
“ The party of the second part hereto, covenants and agrees that all of the above covenants and agreements shall apply to the premises hereby conveyed, for the benefit of the party of the first part hereto, to the same extent and effect as though the premises hereby conveyed were included in the deed from Julia A. Morgan to the Poughkeepsie Bridge Railroad Company above described and entitled to the benefits of the covenants and agreements in said deed contained and the party of the second part hereto assumes all of said covenants and agrees to carry out said covenants in full, with relation to the premises hereby conveyed.”

The defendant in this case, The New York, New Haven and Hartford Railroad Company, absorbed the Central New England Railway Company, by an act of merger, the certificate bearing the date October 23, 1926, and by virtue of such merger became vested with all the property and railroad rights and bound by all the obligations of the said company. Article 8, section 85 of the Stock Corporation Law (Cons. Laws, ch. 59) provides that upon such merger, “the possessor corporation shall be deemed to have assumed all the liabilities and obligations of the merged corporation and shall be liable in the same manner as if it had itself incurred such liabilities and obligations.”

This action was thereupon commenced March 31, 1928, against this merging defendant to recover damages for .injuries to the ice crop in the various years above specified. In my judgment these covenants in the deeds of 1888 and of 1910 ran with the land and were binding upon subsequent grantees of the land conveyed. The railroad, knowing that Morgan lake was used for raising and selling of ice, accepted a strip of land over the lake for the operation of a railroad, covenanting to repair the damage caused by such operation. Although the deeds in question contained a provision to the effect that the covenants ran with the land, such provision in the absence of the other legal requirements is insufficient to accomplish such a purpose. (Mygatt v. Coe, 147 N. Y. 456; Sebald v. Mulholland, 155 N. Y. 455; Crawford v. Krollpfeiffer, 195 N., Y. 185.) The intention, however, is very clear, to charge the property granted, so long as it was used for railroad pm-poses, with the duty of saving the adjoining property harmless from the effects of such operation. It was in the nature of a covenant not to injure, only it was expressed in the affirmative by agreeing to make good the injury and repair the loss by the payment of damages which, when ascertained, were to be a lien upon the property before other incumbrances. It seems to me as though this covenant was in the nature of a covenant to build fences along boundary lines or covenants relating to party walls or to repair buildings. Thus, a covenant to maintain a driveway and keep it in repair in front of premises conveyed abutting on such driveway has been held by this court to be a covenant running with the land. (Levy v. Schnurmacher Construction Corp., 255 N. Y. 83.) Such a covenant by express words might even attach to land and run with it, although that land did not abut upon such a driveway, but received some benefit from it. This subject has recently been treated quite fully in Guaranty Trust Co. v. New York & Queens County Ry. Co. (253 N. Y. 190) and Greenfarb v. R. S. K. Realty Corp. (256 N. Y. 130), where the leading cases have been collected.

Some of my associates are inclined to a different view, considering this covenant as one coming within the settled rule of law that a covenant to do an affirmative act, as distinguished from a covenant merely negative in effect, does not run with the land so as to charge the burden of performance on subsequent grantees. They reason that the agreement or covenant to pay damage for destroyed ice was affirmative in nature, pertaining to the estate of the grantor, not binding upon or affecting the estate conveyed. While not sharing this view myself, for the reasons I have above stated, we will pass the point without deciding it, as we are in agreement that the plaintiff nevertheless may maintain this action upon the later covenant personal in nature, made by the Central New England Railway Company in the deed of 1910, and assumed under operation of law by the defendant, the New York, New Haven and Hartford Railroad Company. By this deed the defendant in effect agreed with the plaintiff to pay for all damage caused by sparks, ashes, cinders or coal dust to the ice in Morgan lake beyond fifty feet on each side of the strip conveyed to the railroad company. The referee has found that the earliest date from which to compute the plaintiff’s loss was the year 1913, which is subsequent to this covenant between the parties to this litigation.

The only question remaining, therefore, on this appeal is the rule applied by the courts below and adopted by the plaintiff in arriving at its damage. On a previous trial, the Appellate Division reversed a judgment for the plaintiff because of the wrong measure of damage and sent the case back for a new trial, stating in its per curiam opinion the following: It appears from the record that plaintiff was able, upon the trial, from books in its possession, to determine just how much ice it sold during the period mentioned and the actual prices obtained therefor. Plaintiff, however, did not prove its actual damages by showing the difference between the value of the ice it sold, if the same was good ice, and the actual amount received for the ice as sold. This would represent the actual loss sustained by plaintiff and it can recover no more.” (230 App. Div. 356, 357.)

• Acting upon this suggestion the plaintiff apparently proceeded before the referee on this hearing, to measure its damage by the difference between the price it received for its peppered ” ice and the market value of clear ice. In his brief upon this appeal the learned counsel for the respondent says: “ The Appellate Division of the second department, upon appeal, reversed (230 App. Div. 356), solely upon the ground that we had adopted the wrong measure of damage, holding that we should take the quantity of ice sold from our books, together with the price received, and offset that against the value of the same quantity of ice in a clear and clean condition.” A reading of the evidence shows that this was the method pursued before the referee. The books of the plaintiff had been examined by an expert and caldilations made to show the sales of the dirty ice and the price received therefor, and the market value of clean, unspotted ice. No objection was made by the defendant to the use of the plaintiff’s books for the purposes of proving these sales, the quantity sold and the amount received. Objection was raised, however, by proper exception, to the failure of the plaintiff to prove that the amounts thus received were a fair, reasonable price for the plaintiff’s ice, such as it was. The spotted ice had some market value. Much of the evidence shows that the ice in its peppered or dirty condition was sold along with other ice obtained elsewhere for the market value of clear ice. During all this period, the price of ice fluctuated considerably, due to shortage in natural ice, weather conditions and the thickness of the crop. There was no regular standard price from season to season. No difficulty was found in proving for all of these respective years the market price for clear ice. Little or no attempt was made to show the value, the fair market value, of the plaintiff’s ice. We have a summary and statement in the evidence of the price at which it sold, as taken from the books, but whether this was the fair, reasonable market value of such ice, in its present condition, did not appear except in the manner I shall presently state. It is fair to the plaintiff’s lawyer to state that following the rule laid down by the Appellate Division, he adopted the difference between the market value of clear ice and the price as shown by the books received for the plaintiff’s peppered ice, without clearly and sufficiently showing that such book value was also the fair market value for such ice. Had this defective ice no market value, or had it appeared in the evidence that the plaintiff could only dispose of it as so much waste material for what it would bring, a different case would be presented. All through the evidence, however, it appears that such spotted ice had a market value, that it was sold in large quantities, had a use in the various industries and could be and was disposed of to the dealers and the trade. We must assume, therefore, that there was a market value for clean, clear ice and also a market value for ice of a different grade, ice, for instance, which had in it soot or dirt or cinders in more or less quantities. For refrigerating purposes such ice may be as good as clear ice.

We state these facts in order to emphasize the rule that the price at which an article is sold is not always evidence of its market value. The statement in the Appellate Division opinion did not go quite far enough. The plaintiff was bound to prove not only the amount which it had received for its low grade ice, but also that this was the fair market value. The price for which property is sold by a party is not always admissible in its favor as evidence of its market value. (Latimer v. Burrows, 163 N. Y. 7.) It is in effect admitting in his favor proof of his own act or an act to which he is an essential party amounting to self-serving declarations in his own behalf. (Groves v. Warren, 233 N. Y. 160.) When property has a market value which can be proved by witnesses who can then and there speak of it, it must be proved by such witnesses. (Jones v. Morgan, 90 N. Y. 4, 10.)

The importance of this rule becomes apparent in this case. The plaintiff’s director, president and general manager was George Morgan, its principal witness upon this trial. During the years here in question he conducted an ice business on bis own account and bought at the flat rate of two dollars per ton a large amount of the plaintiff’s ice. The sixty-fourth finding of the referee is: “ That the plaintiff’s books indicate that during the period from 1921 to 1928, inclusive, about 38,731,407 pounds of Morgan Lake ice were sold to George Morgan, which constituted approximately seventy-two per cent of the total amount of Morgan Lake ice sold by the plaintiff during said period, as shown by the plaintiff’s books.” The sixty-fifth finding is: The plaintiff’s books indicate that during the period from 1913 to 1918, inclusive, about 3,092,065 pounds of Morgan Lake ice were sold to George Morgan.” The referee also found that this price of two dollars per ton was a fair value, but the evidence is very confusing. Morgan subsequently sold this ice for a much larger amount. In the first bill of particulars, or estimate of damage, furnished by the plaintiff, setting forth its claim, the following prices were given as having been received by the plaintiff for its defective ice at retail for the various years, as follows: 1913, 1914 and 1915, three dollars per ton; 1916, two dollars per ton; 1917, two dollars twenty-five cents per ton; 1918; four dollars per ton; 1920, three dollars fifty cents per ton; 1921, four dollars fifty cents per ton; 1922, 1924, 1925, three dollars and fifty cents per ton; 1923, three dollars per ton; 1926, 1927 and 1928, three dollars and forty cents per ton. Morgan swore repeatedly in affidavits and upon the trial under cross-examination that these figures were the fair market value of the ice which was sold during the years stated. Yet the referee found there was no unfairness in selling ice to Morgan at two dollars per ton. He also found that the value of clear ice from 1913 to 1917 was three dollars and twenty-five cents per ton and from 1921 to 1928 was three dollars and seventy-five cents per ton. If the plaintiff’s first figures were correct, it had suffered little or no damage. On the first trial Morgan had testified: We have always done fairly well on the ice business. We made a living. That’s about what the majority of the people are doing.” And on this trial he was asked: Q. You mean by that to say that during all of that time the Morgan Lake Ice Company did fairly well in the ice business? A. Yes, sir.”

An amended bill of particulars or information was given because of a re-examination of the books by a Mr. Abell, an expert who found that the amount received per ton during the various years was less than that stated in this first bill of particulars. It is upon this latter book examination that the referee bases his finding of the amount received by the plaintiff and a difference of $63,377.90 between that amount and the value of clear ice. But there is no evidence, may we say, no evidence of any probative value, that these subsequent corrected figures represent the market value of the damaged ice.

Let me make clear what we have in mind, as we do not intend to review the weight of the evidence. The first figures given in the bill of particulars as the amount received by the plaintiff shows little or no damage. The very last thing testified to by Mr. Morgan is this:

Q. Then your testimony as set forth in your bill of particulars as to the market price for which the ice sold during these same periods, is true, isn’t it? A. Yes.
“ Q. Then how can you change it or do you want to change it? A. I am not changing it.
“ Q. Then I understand your testimony as set forth in your original bill of particulars as to the market value of the ice as specified in the bill of particulars as sold during that period, is true, as to the market value of that ice? A. Yes, sir.”

Abell, in examining the books, found the plaintiff had received less than these figures given in the bill of particulars, and Morgan does then one of two things: he either swears to the original bill as stating the trite market value from which the plaintiff would have received little or no damage, or else he changes the estimate of market value simply and solely because on a reauditing of the books the company was found to have received less. There is no independent testimony either by Morgan or any of his witnesses that these amended or supplemental figures show the fair reasonable market value, except as the figures speak for themselves.

Q. Then you change your testimony in regard to the market value of the ice sold by Morgan Lake during the period in question solely because of the audit of the books and the report made to you by Mr. Abell? A. I naturally admitted that was more perfect and more in detail than ours was.

Q. Will you answer it yes or no? A. Yes.”

What we have in mind in forming our conclusion is this: The plaintiff may recover from the defendant the damage which it has sustained by reason of the damage done to its ice during the years in question; the measure of the damage for this case is the difference between the market value of clear ice and the fair, reasonable value in the market for the plaintiff’s damaged ice. It is quite apparent that the plaintiff, acting upon the suggestion in the opinion of the Appellate Division, adopted the price received for the damaged ice according to the books, as the basic figure, and failed to prove that this price was the fair, reasonable market value. The referee adopted this measure of damage, as can be seen from his report, and made no finding as to the reasonable value of the damaged ice or that the price received by the plaintiff was the only available means of disposing of the product. Proceeding upon the wrong assumption and theory, it is difficult now for the plaintiff to sustain this judgment under a different rule of damage. That the referee had no difficulty in finding the market value of clear ice is quite apparent. The proper measure of damage would suggest that he should also have found the market value of the damaged ice, whereas all he has given us is the sales price. This is insufficient.

We hesitate very much to reverse this case and send it back for another — the third — hearing, and yet it seems right and just so to do. No doubt the plaintiff has suffered damage and is entitled to recover it. We mean to cast no reflections either upon the merits of its claim or upon the amount of its damage, and what we have said must not be taken as any indication bearing upon its right to establish its claim to the full. What we do hold, however, is, that it is equally fair to the defendant that if it is obliged to pay damage according to its covenant, that damage should be proved by clear and substantial evidence. If there be difficulty in arriving at the fair value of damaged ice twenty years ago, it is due entirely to the plaintiff’s del ay in presenting its claim. Men do not readily submit to a loss year after year without making some effort to collect it. While this may not bp a suspicious circumstance in view of the nature and financial responsibility of the various railroads operating the property, yet it is no excuse for the plaintiff’s inability to furnish legal evidence. Its loss must be measured by legal standards, not left to surmise; it must prove upon the rehearing the fair value of the damaged ice which it sold which we think it has failed to do on this trial.

As to the question of interest, our decision in Preston Co. v. Funkhouser (261 N. Y. 140) justifies its allowance, as decided by the referee.

For the reasons here stated, the judgment should be reversed and a new trial granted, with costs to abide the event.

Pound, Ch. J., Lehman, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not sitting.

Judgment reversed, etc.


author: O’Brien, J.

text:
    In the Matter of Louis Waldman, Appellant, against Thomas W. Churchill, a Justice of the Supreme Court of the State of New York, Respondent.

      (Argued May 22, 1933;
    decided July 11, 1933.)

      I. Maurice Wormser and Louis Waldman for appellant.

      Caruthers Ewing for respondent.
   O’Brien, J.

Petitioner, who is a member of the bar, represented several defendants in an action wherein a motion for an injunction appeared upon the calendar of that part of the Supreme Court in New York county over which respondent presided.' Upon petitioner’s application for an adjournment occurred events which resulted in an order adjudging him guilty of criminal contempt. A court of record has power to punish for a criminal contempt a person who is guilty of “ disorderly, contemptuous, or insolent behavior, committed during its sitting, in its immediate view and presence, and directly ten'ding to interrupt its proceedings, or to impair the respect due to its authority.” (Judiciary Law; Cons. Laws, ch. 30, § 750, subd. 1.) The parties differ in their versions concerning the affair but in a certiorari proceeding the hearing is limited to the order and return and the papers upon which the order was granted. (Civ. Prac. Act, § 1300.) The allegations in the return must be taken as true (Matter of Reed v. Board of Standards & Appeals, 255 N. Y. 126, 133), but the particular circumstances of the offense must be set forth in the mandate of commitment. (Judiciary Law, § 752; People ex rel. Barnes v. Court of Sessions, 147 N. Y. 290; People ex rel. Bernstein v. LaFetra, 171 App. Div. 269; affd., 219 N. Y. 591; Briddon v. Briddon, 229 N. Y. 452.)

The mandate of commitment is incorporated in the return and respondent therein states that petitioner interrupted the court’s remarks with a loud and boisterous declamation, that he ignored the court’s admonition to desist but kept on with his rash and heedless demeanor, that he persisted in his contemptuous conduct and paid no attention to the court’s warning but went on. In another part of the return respondent alleges that he told petitioner five or six times to keep still and that he finally told him that if he did not stop he would be fined for contempt. He describes petitioner’s voice as high pitched, loud and assertive and his manner as rude and offensive.

By this narration of events included within the mandate of commitment respondent set forth, as we think, the particular circumstances of the offense. It rises higher than a conclusion, it is a declaration of fact. It recites an interruption, several warnings and several repetitions of that occurrence. When section 752 uses the expression particular circumstances ” it requires more than the statement of a bare fact. A mere conclusion certainly is not enough. A fact must be stated but something more than the slenderest outline must appear before we can know whether conduct falls within the definition of section 750, subdivision 1. An interruption in itself, or even its frequent repetition, does not necessarily constitute disorderly, contemptuous, or insolent behavior.” In a court room it may and usually does grow out of an ardent enthusiasm and an excessive zeal and rarely indicates an attitude of studied insolence, defiance, contempt or a fixed tendency toward disorder. The manner of the interruption may, however, illustrate the motive, and the motive can be discerned and described only by one who saw and heard. The offense of a criminal contempt is defined in the statute by the use of adjectives, and the descriptive characterization by respondent concerning petitioner’s acts, instead of causing a fact to degenerate into a conclusion, develops it into a particular circumstance and carries it within the statutory definition. Taking the return as true, our conclusion follows that the offense was committed and that the particular circumstances were set forth in the mandate of commitment.

In the administration of justice, both the authority of the court and the independence of the bar are essential. Maintenance of that mutual respect and courtesy which ought to exist between the trial courts and members of the bar who practice before them must necessarily be intrusted in the first instance to the control of the justices there presiding. Appellate courts are far removed from the scene of events which may unfortunately constitute a breach of those relations. Under the power conferred upon us by the statutes, we can do no more than conscientiously review the record as presented and, with no right to exercise discretion, decide the sheer issue of law whether, on the allegations of the return, the acts constitute the offense and whether the form of the mandate is regular.

The order should be affirmed, with costs.

Pound, Ch. J., Crane, Lehman, Kellogg and Crouch, JJ., concur; Hubbs, J., not sitting.

Order affirmed.


text:
    Joseph A. L. Blek, Respondent, v. Frank Wilson, as President of Local Union No. 3 of the International Brotherhood of Electrical Workers, Appellant.
    (Argued June 6, 1933;
    decided July 11, 1933.)

      Harold Stern for appellant.

      Maximillian L. Blek for respondent.
   O’Brien, J.

Plaintiff was a member in good standing of a local union of the International Brotherhood of Electrical Workers and was fined and indefinitely suspended by the executive board of his union. In this action he has obtained judgment declaring void the imposition of the fine, reinstating him in his membership and awarding him the sum of $3,960 as damages for loss of wages due to bis inability, without a working card from the union, to obtain employment. We agree that, except for the award of damages, the judgment is correct.

Plaintiff gave evidence that his suspension extended from February 21, 1931, to April 19, 1932, that without a union card he could not obtain employment And that during this continuance of sixty weeks the union rate of wages was $66 per week. From these facts he argues that he proved prima facie bis right to a judgment for $3,960. He is entitled only to such compensatory damages as are shown to result from the illegal acts of defendant-union. He may not be allowed to reap a profit from his misfortune and to secure a position superior to that of his fellows who retained their membership. We can take judicial notice of the fact that during the time of plaintiff’s suspension, unemployment in all branches of industry throughout this country was widespread. Whether any considerable proportion of the other members of plaintiff’s union were able to obtain work does not appear. We have no evidence from which the inference can be drawn that even with possession of a union card, plaintiff would have been so fortunate as to find employment during all or even any part of these sixty weeks. We are not told of the amount of his average earnings prior to his suspension. The lack of evidence in this record sharply contrasts with the proof in Polin v. Kaplan (257 N. Y. 277), where that plaintiff testified concerning his wages immediately preceding bis expulsion. and the fact that during his suspension most of the members of his union were employed all the time. The inferences permissible from the evidence in that case have no basis in the present record. Only speculation is warranted.

The judgments should be reversed and a new trial granted, with costs to the appellant. (See 262 N. Y. 636, 694.)

Pound, Ch. J., Crane, Lehman, Kellogg and Crouch, JJ., concur; Hubbs, J., not sitting.

Judgments reversed, etc.


author: Per Curiam.

text:
    The People of the State of New York, Respondent, v. Giuseppe Leonti, Appellant.
    (Argued June 5, 1933;
    decided July 11, 1933.)

      Joseph S. Gersham, Samuel Stark, Joseph Pascocello and George H. Combs, Jr., for appellant.

      Thomas C. T. Crain, District Attorney (Robert C. Taylor of counsel), for respondent.
   Per Curiam.

Defendant has been convicted of murder in the first degree for the killing of his daughter. He raised the issue of fact that the homicide was committed not by him but by his son-in-law, the husband of the slain woman. The verdict, based as it is upon conflicting testimony in which the question of defendant’s credibility was a predominant element, is not contrary to the weight of evidence.

Many incidents occurring during the course of the trial form the ground work for the argument that defendant did not have a fair trial. The chief point bearing upon this question is the alleged disqualification of a juror. On this motion for a new trial, these affidavits, in the absence of denials, stand as conclusive proof of disqualification. No opposing affidavit was submitted nor did the trial judge cause to appear before him for oral examination the juror whose status was assailed.'

If the testimony of defendant, who is a Sicilian, was worthy of belief, his innocence was established. On the examination of talesmen, one who was later accepted as a juror in answer to inquiries by defendant’s counsel replied that he had no prejudice against Italians of foreign birth, that he could be impartial and could accord to defendant the same deal that he could accord anybody.

On this statement he was accepted as qualified. The moving affidavits set forth that after the rendition of the verdict this juror stated: I wouldn’t believe a Sicilian under oath, and none of the jurors would. * * * Until the defendant took the stand I had some doubts, but when he took the stand and I found out that he was a Sicilian, I no longer had any doubts.” These affidavits may be untrue but their contents are not denied nor was any effort made by the trial court to discover their truth or falsity.

This is not a case of refusal to receive evidence of misconduct of a juror for the purpose of impeaching a verdict. (People v. Sprague, 217 N. Y. 373.) As the affidavits stand undenied, they constitute convincing proof that this talesman never was eligible to become a member of the jury, that from the beginning he was disqualified on the ground of prejudice and that his vote for conviction was, therefore, a nullity. (Cf. Clark v. United States, 289 U. S. 1.) The trial judge, therefore, was not deprived by the rule in the Sprague case of the power to summon the juror before him and to take testimony relating to the grave charge embodied in the moving affidavits. Even now we have power to remit the case for that purpose (People v. Arata, 254 N. Y. 565), but upon an examination of the entire record we are convinced that in the interest of justice we should order a new trial.

The judgment of conviction should be reversed and a new trial ordered.

Pound, Ch. J., Crane, Lehman, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not sitting.

Judgment of conviction reversed, etc.


author: Pound, Ch. J. O’Bbien, J. (dissenting).

text:
    The People of the State of New York, Respondent, v. Leo Nebbia, Appellant.
    (Argued June 13, 1933;
    decided July 11, 1933.)

      Arthur E. Sutherland, Jr., for appellant.

      John J. Bennett, Jr., Attorney-General (Henry S. Manley, Henry Epstein and Smith O’Brien of counsel), for respondent.
   Pound, Ch. J.

This case comes before the Court of Appeals on appeal from a judgment of the Monroe County Court which affirmed a conviction of the defendant-appellant, Leo Nebbia, in the City Court of Rochester, Criminal Branch. (Code Grim. Pro. § 520.) The offense charged in the information was a sale by Mr. Nebbia of two one-quart bottles of milk and a loaf of Italian bread ” for eighteen cents, which is conceded to be a violation of section 312, subdivision (e), of the Agriculture and Markets Law (Cons. Laws, ch. 69), inasmuch as the Milk Control Board had fixed a minimum price for milk of nine cents per quart.

This act (Laws of 1933, ch. 158) was adopted after a thorough legislative investigation of the conditions under which milk was produced in this State. It begins with a statement to the effect that the milk business is one affecting the public health and interest, and that an emergency exists. It provides as follows:

§ 300. Legislative finding; statement of policy. This article is enacted in the exercise of the police power of the state, and its purposes generally are to protect the public health and public welfare. It is hereby declared that unhealthful, unfair, unjust, destructive, demoralizing and uneconomic trade practices have been and are now carried on in the production, sale and distribution of milk and milk products in this state, whereby the dairy industry in the state and the constant supply of pure milk to inhabitants of the state are imperiled. That such conditions constitute a menace to the health, welfare and reasonable comfort of the inhabitants of the state. That in order to protect the well-being of our citizens and promote the public welfare, and in order to preserve the strength and vigor of the race, the production, transportation, manufacture, storage, distribution and sale of milk in the state of New York is hereby declared to be a business affecting the public health and interest. That the production and distribution of milk is a paramount industry upon which the prosperity of the state in large measure depends. That the present acute economic emergency, being in part the consequence of a severe and increasing disparity between the prices of milk and other commodities, which disparity has largely destroyed the purchasing power of milk producers for industrial products, has broken down the orderly production and marketing of milk and has seriously impaired the agricultural assets supporting the credit structure of the state and its local governmental subdivisions. That the danger to the public health and welfare is immediate and impending, the necessity urgent and such as will not admit of delay in public supervision and control in accord with proper standards of production, sanitation and marketing. The foregoing statements of fact, policy and application of this article are hereby declared as a matter of legislative determination.”.

The act then (§ 301) defines the classes of persons with whose conduct it deals; principally as follows:

“ ‘ Milk dealer ’ means any person who purchases or handles milk within the state, for sale in this state, or sells milk within the state except when consumed on the premises where sold.
“ ‘ Producer ’ means a person producing milk within the State of New York.”

Section 302 of the act then creates a Milk Control Board of three members, the Commissioner of Agriculture and Markets, the Commissioner of Health, and the Director of the Milk Control Board. Of these, the first two may designate deputies to perform their functions. A majority of the members of the Board carries the power to decide any question before the Board.

This Board is granted great powers by the act, which ends, however (§ 319), on March 31, 1934, and is avowedly a mere temporary measure to meet an existing emergency.

(§ 312) The Board must fix by order the minimum wholesale and retail prices for milk handled within the State for fluid consumption, including the prices on sales by milk dealers to consumers; this includes dealers who run stores (unless the milk is consumed on the premises). In fixing the prices it must take into consideration the amount necessary to yield a “ reasonable return ” to the producer and the milk dealer.

It may similarly fix maximum prices if it sees fit. Section 304 gives rulings of the Board the force and effect of law.

(§ 308) The Board has power to issue or withhold a license, as a condition of continuance in business, to or from any milk dealer in the State. Certain classes it may or may not exempt from the license requirements — such as small dealers and “ carry away ” stores. No unlicensed dealer (unless exempted) may sell or buy milk, or handle milk previously handled in violation of the act.

(§ 308, subd. 3) The Milk Control Board may refuse, suspend or revoke a license (thereby putting the dealer out of business) if a dealer

(a) has been receiving from a producer shipments of milk in a course of dealing and then rejects a shipment “ without reasonable cause;”

(b) has failed “ without reasonable cause ” to pay a milk bill to a producer;

(c) where the dealer has done an act in demoralization . of the price structure of pure milk;”

(d) where the dealer assigns for creditors, goes through bankruptcy, or has an execution returned unsatisfied against him;

(h) where the dealer fails to furnish information or keep records required by the board;

(k) where the licensee has violated any of the provisions of this article.

Section 306 gives the Board sweeping powers to examine all books and records to enable the Board to administer the act.

Besides the power given to the Board (by § 308) to enforce the act by barring from the milk business any person who fails to comply, there is provided by section 307 an additional criminal sanction. A violation of the article, or of a rule or order of the Board lawfully made, is made a misdemeanor, punishable by not more than a year’s imprisonment, or not more than one hundred dollars fine or both. The Board may also proceed civilly at law, or may enjoin, without proof that a remedy at law does not exist.

The appellant not unfairly summarizes this law by saying that it first declares that milk has been selling too cheaply in the State of New York, and has thus created a temporary emergency; this emergency is remedied by making the sale of milk at a low price a crime; the question of what is a low price is determined by the majority vote of three officials. As an aid in enforcing the rate regulation, the milk industry in the State of New York is made a business affecting the public health and interest until March 31, 1934, and the Board can exclude from the milk business any violator of the statute or the Board’s orders.

The fixing of minimum prices is one of the main features of the act. The question is whether the act, so far as it provides for fixing minimum prices for milk, is unconstitutional under New York Constitution, article 1, section 6, and United States Constitution, Fourteenth Amendment, in that it interferes with the right of the milk dealer to carry on his business in such manner as suits his convenience, without State interference as to the price at which he shall sell his milk. The power thus to regulate private business can be invoked only under special circumstances. It may be so invoked when the Legislature is dealing with a paramount industry upon which the prosperity of the entire State in large measure depends. It may not be invoked when we are dealing with an ordinary business, essentially private in its nature. This is the vital distinction pointed out in New State Ice Co. v. Liebmann (285 U. S. 262, 277).

It is argued that the Supreme Court of the United States has definitely excluded the production and sale of food from the field of price regulation. This is not so. (Wolff Packing Co. v. Court of Industrial Relations, 262 U. S. 522, 538.) Even if it were true under normal conditions, the same might have been said of the regulation by law of rents. Yet when an emergency arose after the war, resulting in burdensome rental conditions, emergency rent laws, temporary in their nature, were upheld. (Block v. Hirsh, 256 U. S. 135.) The court in regard thereto held:

1. That the legislative declaration of facts affording the ground for the regulation was entitled to great respect and was confirmed by common knowledge.

2. That the exigency existing clothed the letting of buildings with a public interest so great as to justify regulation by law, while such exigency lasted.

3. That such regulation was justified as a temporary measure, even though it might not be a permanent change.

4. That, the end being legitimate and the means reasonably related to it, the wisdom of the means was not for the courts to pass upon.

As is conceded in the Liebmann Case (supra), all businesses are subject to some measure of public regulation. This is true in an exceptional degree of the milk business. (People v. Teuscher, 248 N. Y. 454.) The question is as to whether the business justifies the particular restriction, or whether the nature of the business is such that any competent person may, conformably to reasonable regulation, engage therein.

The production of milk is, on account of its great importance as human food, a chief industry of the State of New York. (Manley, Constitutionality of Regulating Milk as a Public Utility/’ 18 Cornell Law Quarterly, 410; Cross, Milk Control Law,” N. Y. State Bar Assn. Bulletin, May, 1933; “ Legislative Regulation of the New York Dairy Industry,” 42 Yale Law Journal, 1259.) It is of such paramount importance as to justify the assertion that the general welfare and prosperity of the State in a very large and real sense depend upon it. The entire milk product cannot be sold locally. It must be sold to milk gatherers to be shipped to centers of population. Distributors buy the milk from the farmer. The purchaser is compelled to take what the shipper offers. The shipper offers a low rate at which milk cannot profitably be produced. The State seeks to protect the producer by fixing a minimum price for his milk to keep open the stream of milk flowing from the farm to the city and to guard the farmer from substantial loss. (People v. Perretta, 253 N. Y. 305.) Price is regulated to protect the farmer from the exactions of purchasers against which he cannot protect himself.

These conditions called for the appointment by the Legislature on March 10, 1932, of a special joint legislative committee known as the Pitcher Committee, * * * to investigate the causes of the decline of the price of milk to producers and the resultant effect of the. low prices upon the dairy industry and the future supply of milk to the cities of the State * *

This committee held public hearings, took testimony and made a report. It found that price-cutting had reduced the price to the producer below two cents the quart and below the cost of production. It said: “ The production and distribution of milk in this state is a paramount industry and affects in a large measure the health and prosperity of the people of the state. It is the duty of the state to take such measures as are necessary and reasonable to preserve this vital industry.

“ The financial situation of dairy farmers in the state is very serious and has grown increasingly critical during the period of the committee’s investigation.

“ The principal causes of the extremely low prices for milk are the unprecedented recession in business and the periodic increase in the number of dairy cows.

“ The fluid milk industry is affected by factors of instability peculiar to itself which call for special methods of control.

“ A State Milk Control Board with broad powers is required to deal with the present emergency in the fluid milk industry of the state.”

Among the causes of low milk prices mentioned in this prehminary report were the following: “ Unsettled market conditions have led to price wars among distributors which have caused reductions in retail and wholesale prices below the point justified by the supply and demand situation. Unfair and destructive trade practices have been more prevalent and more serious than usual in their effect upon the price structure.”

It also found: “The fact that the larger distributors find it necessary to carry large quantities of surplus milk while the smaller distributors do not, leads to price-cutting and other forms of destructive competition, especially when the surplus is abnormally large. The small distributor can contract for his minimum requirements and depend upon emergency purchases when threatened with a shortage. The larger distributors can not do this since the same percentage deficiency in volume would involve quantities too great to be obtained on short notice. The result of this situation is that the smaller distributors who take no responsibility for the surplus, by purchasing their milk on the basis of the blended returns by the larger organizations, are in a position to undersell the larger distributors in the cities.

“ Most of the surplus in the New York milk shed is carried by the Dairymen’s League and the Sheffield Farms Company. Other dealers by selling all or nearly all their supply as fluid milk have been able to engage very generally in price-cutting which has repeatedly forced the large retail distributors (Borden’s and Sheffield Farms) to lower their prices so as to protect their business. Some means of control is urgently needed which will place all buyers of milk on an equal basis as to the cost of their milk which they purchase for sale in fluid form. Only in this way can prices be stabilized above the ruinous level of returns from butter and cheese, or the public be assured that the most efficient methods of distribution will prevail.”

In one of the final conclusions of this preliminary report the committee found: “ It is clear that the economic law of supply and demand cannot be relied upon either to insure the consumers of a continuous and adequate supply of pure and wholesome milk, or to prevent grave injury to this important industry and its possible disintegration.”

It found as a remedy that a Board should have authority “ to fix the prices to be paid by dealers for milk classified according to its use with proper differentials, and the retail and wholesale prices to be charged for fluid milk and cream.”

The condition has given rise to scenes of violence and disorder in the attempt to organize so-called milk strikes as a protest against the low prices paid for milk. The result was the enactment of the law now under consideration. Concededly the Legislature cannot decide the question of emergency and regulation, free from judicial review, but this court should consider only the legitimacy of the conclusions drawn from the facts found.

We are accustomed to rate regulation in cases of public utilities and other analogous cases and to the extension of such regulative power into similar fields. Rents have been regulated to prevent the exactions of greedy landlords who would contend that their property was taken from them when they were deprived of the right to do what they would with their own. (Block v. Hirsh, supra; Brown Holding Co. v. Feldman, 256 U. S. 170.) Compensation has been provided for workmen injured by the necessary risks of their employment although the common law cast the burden of such risks on the workman. (Arizona Employers’ Liability Cases, 250 U. S. 400.) Preference to citizens in employment of laborers on public works has been upheld. (Heim v. McCall, 239 U. S. 175.) Prevailing rate of wages laws for workmen on municipal contracts have been upheld. (Atkin v. Kansas, 191 U. S. 207; Austin v. City of New York, 258 N. Y. 113.) Usury laws are of an ancient house. Tariffs for the protection of home industries are upheld. Sugar bounties have not been declared unconstitutional. (United States v. Realty Co., 163 U. S. 427.) The rates of grain elevators (Munn v. Illinois, 94 U. S. 113) and cotton gins may be regulated. (Frost v. Corporation Commission of Oklahoma, 278 U. S. 515.) Rate fixing in the business of insurance has been upheld. (German Alliance Ins. Co. v. Kansas, 233 U. S. 389; O’Gorman & Young, Inc., v. Hartford Fire Ins. Co., 282 U. S. 251.) The regulation of wages of railroad employees has been sustained. (Wilson v. New, 243 U. S. 332.) The business of dealing in milk has been regulated so as to protect producers who must sell their produce on credit. (People v. Perretta, supra.) Commission merchants have been required to give bonds for honest accounting to prevent evils incident to the business of dealing in farm products. (Payne v. Kansas, 248 U. S. 112.)

Doubtless distinctions may be drawn, holdings to the contrary cited and false analogies pointed out. The right of private bargaining has been upheld to defeat child labor laws (Adkins v. Children’s Hospital, 261 U. S. 525); to prevent the fixing of wages in industry by an arbitration board (Wolff Packing Co. v. Court of Industrial Relations, 262 U. S. 522); to invalidate a State law fixing the price of gasoline (Williams v. Standard Oil Co., 278 U. S. 235); to prohibit the regulation of the price of theatre tickets by speculators (Tyson v. Banton, 273 U. S. 418); to invalidate a law to equalize prices of milk throughout the State (Fairmont Creamery Co. v. Minnesota, 274 U. S. 1; cf. Central Lumber Co. v. State of South Dakota, 226 U. S. 157), and a statute to regulate the fees of an employment agent (Ribnik v. McBride, 277 U. S. 350, 356).

All these decisions are to be read in the light of surrounding circumstances. This case, for example, may be distinguished from the Oklahoma ice case (New State Ice Co. v. Liebmann, supra), holding that the business of manufacturing and selling ice cannot be made a public business, to which it bears a general resemblance. The New York law creates no monopoly; does not restrict production; was adopted to meet an emergency; milk is a- greater family necessity than ice.

Classifications, however sharply defined, appear on closer study to be separated only by imaginary lines. Sentences in judicial opinions are misleading if taken out of their context and read as if they were the gist of the decision. Mechanical concepts of jurisprudence make easy a decision on the strength of seeming authority.

The United States Supreme Court has said that although the abuses which grow up in connection with a business may afford a reason for regulating it, this is not enough to justify the “ destruction of one’s right to follow a distinctly useful calling in an upright way.” (Adams v. Tanner, 244 U. S. 590, 594.).

Doubtless the statute before us would be condemned by an earlier generation as a temerarious interference with the rights of property and contract (Matter of Jacobs, 98 N. Y. 98; Lochner v. New York, 198 U. S. 45); with the natural law of supply and demand. But we must not fail to consider that the police power is the least limitable of the powers of government and that it extends to all the great public needs; that constitutional law is a progressive science; that statutes aiming to establish a standard of social justice, to conform the law to the accepted standards of the community, to stimulate the production of a vital food product by fixing living standards of prices for the producer, are to be interpreted with that degree of liberality which is essential to the attainment of the end in view (Austin v. City of New York, supra, p. 117); and that mere novelty is no objection to legislation (People ex rel. Durham, Realty Corp. v. LaFetra, 230 N. Y. 429).

The State courts should uphold State regulation whenever possible. They should be clearly convinced that a statute is unconstitutional before they declare it invalid. (Cf. Ives v. South Buffalo Ry. Co., 201 N. Y. 271, with Arizona Employers’ Liability Cases, supra; also cf. People ex rel. Rodgers v. Coler, 166 N. Y. 1, with Atkin v. Kansas, supra.)

With full respect for the Constitution as an efficient frame of government in peace and war, under normal conditions or in emergencies; with cheerful submission to the rule of the Supreme Court that legislative authority to abridge property rights and freedom of contract can be justified only by exceptional circumstances and, even then, by reasonable regulation only, and that legislative conclusions based on findings of fact are subject to judicial review, we do not feel compelled to hold that the due process ” clause of the Constitution has left milk producers unprotected from oppression and to place the stamp of invalidity on the measure before us.

With the wisdom of the legislation we have naught to do. It may be vain to hope by laws to oppose the general course of trade. The English Parliament, unhampered by the limitations of a written constitution,' adopted statutes which directly fixed, or empowered certain persons to fix, the prices of wine and coal. (6 Holdsworth’s History of English Law, p. 346.) Yet it is said that The growth of the capitalistic organization of all branches of industry will strengthen the tendency to allow prices to be determined simply by the relation of supply to demand.” (Holdsworth, supra.)

We are unable to say that the Legislature is lacking in power, not only to regulate and encourage the production of milk, but also, when conditions require, to regulate the prices to be paid for it, so that a fair return may be obtained by the producer and a vital industry preserved from destruction. (Hamilton, ‘‘ Affectation with Public Interest,” 39 Yale Law Journal, 1089-1101.) The policy of non-interference with individual freedom must at times give way to the policy of compulsion for the general welfare.

The judgment should be affirmed.

O’Bbien, J. (dissenting).

Pursuant to the provisions of section 312, subdivision (b) of the Agriculture and Markets Law (Laws of 1933, chap. 158) the Milk Control Board, established under this statute, by order fixed the minimum price to be charged for milk by stores to consumers at nine cents a quart in bottles. By subdivision (e) of this section, sale at less than the minimum price so fixed is declared to be unlawful and no method or device, by combining the price of milk with another commodity, whereby milk is sold at a price less than the price fixed by the Board, shall be lawful.

Defendant, a retail grocer in Rochester, sold to a consumer for eighteen cents two bottles of milk and a loaf of bread. This device whereby the milk was sold at less than nine cents a quart constitutes a plain violation of the statute and the Board’s order. No problem, except the validity of that part of the statute authorizing price-fixing and the order issued in pursuance thereof is before us.

Disregarding for the moment this legislation as founded upon an assumed emergency as that term is recognized by this court and the Supreme Court of the United States, and viewing it merely as if it were an enactment adopted during a time of normal prosperity, its conflict with section 6 of article I of the New York Constitution and with the Fourteenth Amendment of the Federal Constitution is scarcely open to doubt. Of course the production, distribution and exchange of milk, in so far as public health may be protected and fraud prevented, are subject to the operation of the police power (Polinsky v. People, 73 N. Y. 65; Fischer v. St. Louis, 194 U. S. 361; People ex rel. Lieberman v. Van De Carr, 199 U. S. 552; Bellows v. Raynor, 207 N. Y. 389; People v. Beakes Dairy Co., 222 N. Y. 416, 427; People v. Perretta, 253 N. Y. 305), but legislative authority in respect to sanitary regulation as an exertion of the police power may be and is quite distinct from the power to fix prices.” (Tyson v. Banton, 273 U. S. 418, 430.) A Minnesota statute similar in its nature to the one before us and branding as a crime the purchase for manufacture or sale of milk, cream or butter fat at a higher price in one locality than the price paid in another has been held to infringe the liberty of contract guaranteed by the Fourteenth Amendment. (Fairmont Creamery Co. v. Minnesota, 274 U. S. 1, 7.) In that case the opinion of the State court declared that dairying was perhaps the largest productive industry in Minnesota and held that the police power extended not only to public health and morals but also to guarding the welfare of a great industry. The Supreme Court, however, conceding that the real evil at which the statute was aimed was the payment of excessive prices by powerful buyers for the purpose of destroying competition and that the statute undertook to require every buyer to adhere to a uniform price fixed by a single transaction, reversed the State court and decided that such legislation was a clear infringement of private rights. Although milk production is a very important industry, the business" of the grocer, u the dairyman,” the butcher, the baker, the shoemaker and the tailor, as stated by the Supreme Court in New State Ice Co. v. Liebmann (285 U. S. 262, 277), bears no such relation to the public as to warrant its inclusion in the category of businesses charged with a public use. Conceding that in New York as well as in Minnesota dairying is a business in which the prosperity of the entire State in large measure is involved, nevertheless it is a private business and the Supreme Court has decided that the production or sale of food cannot be subjected to legislative regulation on the basis of a public use. (New State Ice Case, supra; Wolff Packing Co. v. Court of Industrial Relations, 262 U. S. 522.) These decisions are founded upon interpretations of State statutes in times of peace and of course do not profess to construe the war power of Congress. Natural monopolies by which exorbitant charges might be inflicted upon the public and which, without governmental regulation, would be subject to arbitrary control by their owners are undoubtedly affected by a public use. However, neither in New York nor elsewhere can the milk business be so classified. The reasons for the enactment of this statute are not that charges are too high or that a monopoly exists but that they are too low and competition is too keen. The purpose is not to reduce the price but to raise it. This policy constitutes an inversion of all recognized methods of constitutional regulation of private business. Such a business may not be converted into public business by legislative fiat. (Producers Transp. Co. v. Railroad Comm., 251 U. S. 228, 230; People ex rel. Durham Realty Corp. v. LaFetra, 230 N. Y. 429,442.)

The points tendered in support of the validity of this enactment emphasize its transient duration and the legislative declaration of the existence of an emergency. Section 300 recites that the law is enacted in the exercise of the police power of the State and that its purposes generally are to protect the public health and public welfare. This legislative declaration is entitled to great respect but it is not conclusive on the courts. (Block v. Hirsch, 256 U. S. 135, 154.) “ Happily for all, the fundamental guaranties of the Constitution can not be freely submerged if and whenever some ostensible jústification is advanced and the police power invoked.” (Adams v. Tanner, 244 U. S. 590, 594, 595.) In so far as any parts of this statute may fairly tend to promote public health, they should and will be sustained, but the mere recitation to .the effect that uneconomic trade practices as conducted at the time of the passage of the act imperil the supply of pure milk and constitute a menace to health and that the danger is immediate and impending does not justify price-fixing. Because the statute rehearses that the present acute economic emergency has broken down the orderly production and marketing of milk, courts are not foreclosed from drawing on common knowledge and common experience. The markets are and, prior to the passage of this act, were flooded with a plethora of wholesome milk. In People ex rel. Durham, Realty Corp. v. LaFetra (supra) the existence of danger to public health, safety and morals was within the knowledge of every one. The legislative declaration narrated notorious facts. When the rent legislation was enacted, the housing emergency created by the absence of construction was so acute and the extortion and oppression by landlords taking advantage of a dense population’s necessities were so brutal that more than one hundred thousand dispossess proceedings which affected nearly a half million human beings in the city of New York were then pending. Profiteering and oppression had become general. Public safety was imperiled by probable riots growing out of resistance to evictions, public health was endangered both by exposure to the elements and by congestion in crowded tenements by those who would be forced from more spacious habitations. Thus was presented, as truly described by Judge Pound in his opinion in that case, “ a problem of the utmost gravity, calamitous in its possibilities ” (p. 438). Inadequacy of housing facilities in cities had become a matter of world wide concern and of world wide knowledge.

In relation to the dairy industry, common knowledge compels the courts to conclude that, instead of imminent danger of impairment of public health, safety or morals, the real emergency is a commercial one arising in part from those factors which have contributed to the widespread business depression from which few if any of our inhabitants have been immune. To correct these conditions, resort to the drastic remedy of fining or imprisoning small retail storekeepers who insist upon their property right to contract for the sale of milk at a price satisfactory to themselves and their customers is not a valid exercise of the police power. To bargain for the exchange of goods is no less a property right than the lawful power to contract for the rendition of services (Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260), and is protected by the Fourteenth Amendment. (Fairmont Creamery Co. v. Minnesota, supra.) If in fact the public health were endangered, a more rigid inspection of dairies and the revocation of licenses of those who failed to supply milk of the required standard of purity would constitute the obvious remedy. The special privilege conferred by this statute upon members of a particular class by increasing the price of their product at the expense of laborers, mechanics and all other members of society cannot be regarded as such a necessary or even fairly reasonable substitute remedy as to lie within legislative discretion and to warrant its sanction by the courts. The financial condition of the dairy farmer is and has been most distressing. The same is true respecting artisans, professional men and women, traders, laborers and members of every calling and occupation. Yet every one is aware that those who can afford to buy milk obtain a wholesome quality.

The police power, although “ a dynamic agency, vague and undefined in its scope ” (People ex rel. Durham, Realty Corp. v. LaFetra, supra, p. 442), cannot rise superior to the Constitution. This great instrument of government is not a thing merely to be extolled in academic halls, to be the subject of juvenile orations and to be tolerated as innocuous only so long as its prohibitions are unnecessary in practical ways. It is not quiescent, it is vibrant. It cannot become obsolete until the States vote to amend or repeal it. It was designed to safeguard not only life and liberty but also property rights in times of stress and suffering when dispairing and desperate majorities in good faith seek by forbidden methods to correct temporary evils which, serious and distressing as they are, will prove less harmful and enduring than would the subversion of our fundamental principles of government. If the effort manifested by this statute to regulate private contract by fixation of prices on a product which does not constitute a public use be sustained, then the police power is not only undefined but it is boundless. Its operation will extend to every trade and every occupation. Each citizen will become enmeshed in an inextricable tangle of bureaucracies such as are now so prevalent in foreign countries but utterly alien to our institutions. Liberty will cease to exist. Since the warning was sounded in Matter of Jacobs (98 N. Y. 98, 114, 115), the Constitution, which of course was never intended as a document of perfect rigidity, has yielded to reasonably flexible and prudent interpretations by conservatively progressive judges, but the time has not yet come when the courts of this State ought to surrender to the doctrine that governmental prefects, in times of peace and plenty, may supervise the rearing of cattle or the price of milk. Until the people, in whom reside all political power, decide to amend their constitutions, the provisions of section 6 of article I of the New York Constitution and the Fourteenth Amendment of the Federal Constitution prevent, as valid, the recognition of the price-fixing element of this statute.

The judgment of conviction should be reversed and the information dismissed.

Crane, Lehman, Hubbs and Crouch, JJ., concur with Pound, Ch. J.; O’Brien, J., dissents in opinion; Kellogg, J., not sitting.

Judgment affirmed.


author: Kellogg, J.

text:
    Rose Appel, an Infant, by Yetta Appel, Her Guardian ad Litem, Respondent, v. Etta M. Muller, Appellant, Impleaded with Another.
    (Argued April 20, 1933;
    decided July 11, 1933.)

      Jay Leo Rothschild, Louis Rivkin and Harold M. Phillips for appellant.

      Isidor Enselman, Abraham N. Levy and A. Welles Stump for respondent.
   Kellogg, J.

The plaintiff, in the course of a walk upon a city street, passed a tenement building, adjoining the sidewalk, which was owned by the defendant Muller. While she was passing, a plate glass window, occupying the front of a store on the ground floor of the building, which the defendant Feldman had leased and then occupied, broke from its fastenings and fell upon the plaintiff, causing her injury. The plaintiff brought this action against the owner of the building, and the occupant of the store, to recover damages. Evidence was given upon the trial that the window had broken a week before its fall upon the plaintiff; that the glass had dropped from the lower part of the window, leaving a large hole; that the occupant and the owner were immediately advised of the break; that neither, in the course of a full week, took any steps to replace the window, or to guard the broken glass from falling upon a passer-by, except that the owner had placed a board at the foot of the window, in order to retain broken glass which might subsequently fall. It also appeared that the lease between Muller, the owner, and Feldman, the tenant, required the latter, in case any window pane broke, to replace the same and to make all other necessary repairs. The plaintiff had a verdict against both the owner and the tenant, and the judgment entered thereupon has been affirmed. The owner appeals.

It is the duty of the owner of a building, abutting upon a public street, to maintain it in such a condition that it shall not become dangerous to the traveling public. (Trustees of Canandaigua v. Foster, 156 N. Y. 354; Klepper v. Seymour House Corp., 246 N. Y. 85.) The owner may absolve himself from this duty by nothing less than “ alienation of the entire property, either permanently, as by deed, or temporarily, as by lease.” (Per Vann, J., in Trustees of Canandaigua v. Foster, supra, at p. 362.) If, by lease, he vests a tenant with exclusive possession, thereby depriving himself of the power of entry to make repairs, he is not liable to a passer-by, if the building or a part thereof, due to a condition of disrepair arising in the course of the tenant’s occupancy, fall upon and injure him. (Am. L. Inst., Restatement of Law of Torts [Tent. Draft No. 4], § 247.) However, if he has covenanted with the tenant to make repairs, he is liable to the passer-by for the injuries inflicted. (Nelson v. Liverpool Brewery Co., 2 C. P. [Law Div. 1877] 311; Ahern v. Steele, 115 N. Y. 203; Halsbury, Laws of England, vol. 18, p. 504; Am. L. Inst., Restatement of Law of Torts [Tent. Draft No. 4], § 248.)

The contract by the landlord to repair does not operate directly to make him liable to the passer-by. In the first place the recovery sought is in tort for an injury done; not in contract for a breach thereof. In the second, the contract runs to the tenant and no other person. The covenant of the landlord to repair does not inure to the benefit of a stranger sustaining injury because of its breach.” (Sterger v. Van Sicklen, 132 N. Y. 499, 501.) While the landlord owes a duty to the tenant to repair he owes no such duty to a stranger to the covenant.” (Odel v. Solomon, 99 N. Y. 635.) The landlord’s duty is not contractual but is a tort duty based on the fact that the contract gives the [lessor] ability to make the repairs and control over them.” (Am. L. Inst., Restatement of Law of Torts [Tent. Draft No. 4], § 248.)

Obviously, the retention of the ability to make repairs does not impose a duty to make them. Accordingly, we have held that a landlord, who covenants to repair, never becomes hable for injuries received by a visitor upon the premises, who is present thereupon at the invitation or with the permission of the tenant. (Cullings v. Goetz, 256 N. Y. 287.) No relationship between the landlord and such a visitor would exist, without the covenant, to bind the former to the use of care in respect to the latter. No new duty is created by the covenant. (Potter v. N. Y., O. & W. Ry. Co., 261 N. Y. 489.) “ The power of control necessary to raise the duty * * * implies something more than the right or liability to repair the premises. It implies the power and the right to admit people to the premises and to exclude people from them.” (Cavalier v. Pope, [1906] A. C. 428, 433.) The effect of a covenant by the landlord to repair, in the case of a passer-by on the public street, is wholly different. In such a case there is no need that a duty be newly created by the covenant. The duty, that of using care towards a member of the public, was established when the landlord came into ownership of the property. It might have been suspended during the exclusive occupancy of the tenant, for the power of entry to make repairs would have been lost. If, however, there is a covenant to repair, the landlord’s original duty to the public to maintain the structure in safe condition, and his retention of the power to perform the duty, combine to make him liable.

That the reservation of a right to enter to make repairs, continues the duty of the landlord to the traveling public to maintain the premises in a safe condition, has been asserted in many cases. Thus in Heaven v. Pender (9 Q. B. D. [L. R. 1881-1882] 302, 306) it was said: “ A landlord who reserves to himself, under his contract with the tenant, the duty of repairing walls is in a different position, because he has the control over them, and a right of entry, for the purpose of repairing.” In Ingwersen v. Rankin (47 N. J. L. 18, 23) it was said: The test of his liability in such case is his power to have remedied the wrong. If he has, but fails to exercise such power, his liability remains.” In Sterger v. Van Sicklen (supra, at p. 501) it was said: But when the occasion of the injury constitutes a nuisance as to the party complaining, then a landlord may be chargeable in damages on the ground that he maintains a nuisance, where the contract of letting contains a covenant authorizing him to re-enter for the purpose of making repairs.” In Burdick v. Cheadle (26 Ohio St. 393, 396) it was said: But in case a landlord undertakes with his tenant to keep the premises in repair, having thus reserved the control to the extent necessary for making repairs, his duty to the public in relation to the property is not affected by the lease.”

Professor Bohlen states the principle thus: “ But the owner has, as such, a duty to maintain his property in such a condition that it shall not be dangerous to the public, whether as travelers on a highway upon which it abuts, or as owners of adjacent property, or as persons upon such property in the owner’s right quite independent of his or the occupier’s consent. His duty may be suspended, when in a legally permissible way, as by leasing the premises, he parts with his right to enter it and so loses his power to perform his duty to maintain it in safe condition; ‘but when by a covenant to repair he retains the right of entry and the power for performance, the reason for the suspension of his duty fails. This is similar to the difference in the liability which a landlord incurs to the public and those injured while within premises which he leases in a patently ruinous condition, both external and internal.” (Studies in the Law of Torts, note, p. 210.)

In this instance the lease contained no covenant by the landlord to make repairs for the tenant. It did contain a provision, however, reserving to the landlord the right to enter into and upon said premises, or any part thereof, at all reasonable hours for the purpose of examining the same, or making such repairs or alterations therein as may be necessary for the safety and preservation thereof.” As we have seen, the only force which a covenant to repair has in such a case, arises from the implication that what the landlord has covenanted to do, he has reserved the power to do. In this case a resort to implication is unnecessary, for the power to enter and make necessary repairs was expressly reserved. The reservation, therefore, has accomplished, by express words, all that the covenant to repair might have done through implication. The landlord, therefore, had never parted so completely with possession and control that he had disabled himself from performing his duty of care towards the travelers upon the street. He continued under the duty to keep his building in a safe condition; he reserved the power to perform this duty; therefore, he was liable.

The judgment should be affirmed, with costs.

Pound, Ch. J., Crane, O’Brien and Crouch, JJ., concur; Lehman, J., concurs in result on the ground that the owner of the building resumed control of the window and then was under a duty to exercise reasonable care for the protection <?f persons using the street; Hubbs, J., not sitting.

Judgment affirmed.