text:
    Assir M. Lewine, Respondent and Appellant, v. National City Bank of New York, Appellant and Respondent, Impleaded with Another.
    Banks and banking — principal and agent — foreign exchange — evidence — interest — transmission during war by Russian government of sum of money to defendant “ at disposal ” of a Petrograd bank ' ‘ by order ” of one of its citizens — knowledge by defendant that Russian citizens were required to obtain credit in that way in order to make purchases in this country — payment of portion of money upon instructions of Russian bank leaving balance, on its nationalization after fall of Russian government, with defendant — citizen, at whose request credit was transmitted, entitled to balance- — testimony to show what other banks did properly excluded ■— interest runs from date of demand.
    1. During the late war the defendant received a letter from another New York banker, which it knew was frequently used by the Russian government through which to establish credit for its subjects in banks in this country, to the effect that it inclosed its check for a sum stated, “ disposal Ban que Commerce Azoff Don, Petrograd, by order Engineer A. Levine, Petrograd,” upon which it cabled the Russian bank, which was one of its correspondents, that it had received the amount “ order Engineer A. Levine and credited it to the general account that existed between them. Thereafter a portion of the money was expended upon instructions from the Russian bank, leaving a balance on deposit with defendant at the time of the fall of the Russian government and nationalization of its banks. In an action to recover this balance, where it appears that the defendant was entirely familiar with the course of business in Russia during war time and knew that it was necessary for its citizens, who desired to purchase merchandise here, to obtain credit through its government and then buy and pay for goods upon orders through a Russian bank named for that purpose, plaintiff is entitled to recover. The letter meant to the defendant that it should credit the amount stated to the order of the person named, paying it out only on his order transmitted through the Russian bank. The deposit, therefore, was his and the bank simply an agent to transmit his orders as to its disposal. He may, therefore, demand the balance.
    2. Testimony offered to show what other banks did under like circumstances and as to whether there was a custom as to the disposition of funds made by banks under similar orders, was properly excluded. It did not answer the question whether banks and customers attached a particular meaning to particular words.
    3. Interest runs from the date of the demand which was made by the commencement of the action. There is no sufficient proof of demand at an earlier time.

      Lewine v. National City Bank, 222 App. Div. 74, affirmed.
    (Argued May 8, 1928;
    decided May 29, 1928.)
    Cross-appeals from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered December 14, 1927, modifying and affirming as modified a judgment in favor of plaintiff entered upon a verdict directed by the court.

      Carl A. Mead, John A. Garver, Chauncey B. Garver and Harold Franklin Hopper for National City Bank, appellant and respondent.
    The words “ by order of ” plaintiff do not mean “ upon order of ” plaintiff. (Little v. Wilcox, 119 Penn. St. 439; Scott v. Parker, 1 A. & E. [Q. B., N. S.] 809.) The trial court erred in excluding evidence of the meaning of words “ by order of.” (Walls v. Bailey, 49 N. Y. 464; Shoyer v. Wright-Ginsberg Co., 240 N. Y. 223; Merchants Bank v. State Bank, 10 Wall. 604; Nicoll v. Pittsvein Coal Co., 269 Fed. Rep. 968; Humfrey v. Dale, 7 E. & B. 266; Mazukiewicz v. Hanover Nat. Bank, 240 N. Y. 317; Equitable Trust Co. v. Rochling, 48 Sup. Ct. Rep. 58; Ellis v. Albany City Fire Ins. Co., 50 N. Y. 402; Robertson v. National S. S. Co., 139 N. Y. 416; Lowenstein v. Lombard, 164 N. Y. 324; Peterson v. City of New York, 194 N. Y. 437; Pan-American Bank & Trust Co. v. National City Bank, 6 Fed. Rep. [2d] 762.) Title to the deposit was vested by plaintiff in the Azoff Don Bank. (Wheeler v. Newbould, 16 N. Y. 392; Simson v. Satterlee, 64 N. Y. 657; Selleck v. Manhattan Fire Alarm Co., 121 N. Y. Supp. 587.)

      David L. Podell, Philip Adler and Irvine J. Shubert for Assir M. Lewine, respondent and appellant.
    The City Bank knew or had reason to know that the Foreign Section sent the $200,000 for plaintiff’s exclusive use. (Fidelity & Deposit Co. v. Queens Co. Trust Co., 226 N. Y. 225; Rochester & C. T. Road Co. v. Paviour, 164 N. Y. 281; Gerard v. McCormick, 130 N. Y. 261; Squire v. Ordemann, 194 N. Y. 394; Wagner Trading Co. v. P. B. Nat. Bank, 228 N. Y. 37; Anderson v. Kissam, 35 Fed. Rep. 699; Oklahoma State Bank v. Galion Iron Works, 4 Fed. Rep. [2d] 337; Hill Syrup Co. v. National City Bank, 224 Pac. Rep. 578; Cutler v. American Exchange Nat. Bank, 113 N. Y. 593; Drovers Nat. Bank v. O’Hare, 119 Ill. 646; American Exchange Bank v. Mining Co., 165 Ill. 103.) There was no error in the exclusion of the so-called banking custom. (Hodell v. Tower’s Stores, 218 App. Div. 572; Walls v. Bailey, 49 N. Y. 464; Farmers M. N. Bank v. Sprague, 52 N. Y. 605; Rawson v. Holland, 59 N. Y. 611; Rickerson v. Hartford Fire Ins. Co., 149 N. Y. 307; Schlanger v. Heyman, 185 App. Div. 599; Albert v. State Bank, 78 Misc. Rep. 56; Irvin v. Williar, 110 U. S. 499; Hermann v. Niagara Fire Ins. Co., 100 N. Y. 411; Higgins v. Moore, 34 N. Y. 417; Stoney v. Farmers Transport Co., 17 Hun, 579; Griscom v. Bank, 87 Tenn. 350; Citizens Bank v. Chambers, 129 Iowa, 414.) The Appellate Division erred in reducing the amount of interest. There was sufficient evidence of a demand in February, 1921. (Shepherd v. City of New York, 216 N. Y. 251; Delehunty v. Central Bank, 37 App. Div. 434; Sokoloff v. National City Bank, 130 Misc. Rep. 166; Praeger v. N. J. Ins. Co., 245 N. Y. 1; Faber v. New York, 222 N. Y. 255.)

      William A. Onderdonk and Paul E. Mead for American Exchange Irving Trust Company, amicus curiæ.

    The instructions accompanying the fund authorized the disposition thereof made by defendant. (Hanlon v. Union Bank of Medina, 247 N. Y. 389.)

      Hersey Egginton for Central Union Trust Company, amicus curiæ.

    There was no express contract relation between plaintiff and the appellant National City Bank, such as banker and depositor, or otherwise. Any contract relation evidenced by the record was had by appellant bank exclusively with the Azoff Don Banque. (Thatcher v. Bank of the State of New York, 5 Sandf. 121; 1 Morse on Banks & Banking [5th ed.], 408, § 178; Wilson v. First Nat. Bank, 176 Mo. App. 73; Jaselli v. Riggs National Bank, 36 App. Cas. [D. C.] 159; Heath v. New Bedford Safe Dep. Co., 184 Mass. 481; Carthage Tissue Paper Mills v. Carthage, 200 N. Y. 1; New York v. N. Y. City R. Co., 193 N. Y. 543; Woolsey v. Funke, 121 N. Y. 87; Wilson v. Randall, 67 N. Y. 338; Geneva Mineral Spring Co. v. Coursey, 45 App. Div. 268; Tanenbaum v. Levy, 83 App. Div. 319.)

      William C. Cannon and Ralph M. Carson for Guaranty Trust Company, amicus curiæ.

    The plaintiff having given his direction of payment in the manner in which he did and the defendant National City Bank having paid out the money for the account of the bank to whose account the money was by Lewine’s orders credited, the plaintiff should not now be heard to contradict this disposition. (Gibson v. Nat. Park Bank of New York, 98 N. Y. 87.) Evidence of the usage and practice of New York and foreign banks in employing and interpreting these particular words was improperly excluded. (Walls v. Bailey, 49 N. Y. 464; Smith v. Clews, 114 N. Y. 190; Newhall v. Appleton, 114 N. Y. 140; Atkinson v. Truesdell, 127 N. Y. 230; Shoyer v. Wright-Ginsberg Co., 240 N. Y. 223; Humfrey v. Dale, 7 E. & B. 266; Farmers’ Bank v.
      Butchers' & Drovers' Bank, 28 N. Y. 425; Merchants’ Nat. Bank v. Hall, 83 N. Y. 338; Hanlon v. Union Bank of Medina, 247 N. Y. 389.)

      George Welwood Murray and Otey McClellan for Equitable Trust Company, amicus curiæ.

   Andrews, J.

During the war ordinary commercial transactions between the United States and Russia were interrupted. No Russian citizen might at will convert rubles into dollars to be expended here. And what might be bought was limited to those things likely to aid in the conflict. If such purchases were to be made, permission of the government was required. Application was to a bureau of the Ministry of Finance — called here the Chancellery — for the creation of a dollar fund in New York. It stated the amount required, the bank where it was to be deposited, the kind of goods to be bought, and often, at least, the Russian bank through whom orders were to be transmitted. If approval came the applicant paid the requisite amount of rubles to the Chancellery. It, acting through its own agencies, usually Baring Brothers in London and Kidder, Peabody & Co. in New York, made the deposit in the designated bank here. Often this happened to be the defendant, the National City Bank. Then goods were bought and paid for upon orders received through the Russian bank named for that purpose. This seems to have served two purposes. The New York bank was not acquainted with the merchant in Russia nor did it know his signature. Yet under war conditions speed was essential, and it could easily verify the authenticity of orders given by a bank in Petrograd. Too, the Chancellery wished to keep track of purchasers, wished to see that its permit was not abused and that the dollars furnished by it at a low rate of exchange were not diverted to unauthorized uses. It could most easily do so by its control over its own local banks. But with all these limitations and all these various agencies, the money when finally deposited in New York was the property of the merchant who had purchased it of the Chancellery. The credit was his. Such was the regular course of business and with it all the defendant was entirely familiar. It had been engaged in many such transactions.

Under these peculiar circumstances and with this peculiar knowledge the defendant on May 12, 1916, received a letter from Kidder, Peabody & Co. The plaintiff, it appears, was a Russian merchant. In 1915 he had applied to the Chancellery for permission to deposit $200,000 in the City Bank. He described the goods to be bought and stated that orders would be transmitted through the Azoff Don Bank of Petrograd as to the disposal of the deposit. This bank was a large institution with which he had done business and was a correspondent of the defendant. The Chancellery gave its approval and Lewine thereupon paid it 400,000 rubles. The next he heard was a letter from the Azoff Don Bank informing him that the Chancellery had deposited $200,000 to his credit with the defendant. Of these details of the transaction the City Bank had no notice.

The Kidder, Peabody letter stated that at the cable request of Messrs. Baring Bros. & Co., Ltd., London, sent us in accordance instructions Foreign Section, Ministry Finance, Petrograd,’ ” they sent their check for $451,211.27, to be applied as follows.” Then came instructions as to the disposal of various amounts some to ■ be held “ at disposal ” of named persons, without more, but most “ at disposal ” of some one by order ” of others named. Among the latter is $200,000 disposal Banque Commerce Azoff Don, Petrograd, by order Engineer A. Levine, Petrograd.” As has been said the Azoff Don Bank was a correspondent of the City Bank. A general account existed between them. Involving large transactions as it apparently. did, it must have fluctuated from day to day. At this particular time there was against the Azoff Don Bank ai debit balance of over $1,400,000. This seems of no great significance. What the City Bank did was to credit the $200,000 on this account and to cable and write the Azoff Don Bank that it had done so, saying that the amount had been received by order Engineer A. Levine, Petrograd,” from Kidder, Peabody & Co. at the request of Baring Bros. sent in accordance with instructions Minister of Finance, Section Strangers, Petrograd.” But this the plaintiff did not know. He supposed the $200,000 stood to his credit with the defendant.

Then came some purchases. They were financed by letters of credit issued by the City Bank upon instructions from the Azoff Don Bank saying they were ordered by “A. M. Lewine ” or by “A. Lewine,” whom the defendant may or may not have understood to be the Engineer A. Levine ” referred to in the Kidder, Peabody letter. Probably it did, for they were to be in favor of Lewine’s brother in Brooklyn, and with him the bank had communication. Discovery of the fact could hardly be avoided, but whether discovered or not it is not very material. In any event they totalled over $60,000. One hundred thousand dollars was also properly expended, leaving $39,945 of the $200,000 still unused.

It is unused, for the Russian government fell. No further importations of merchandise into Russia was possible. Lewine fled. The Azoff Don Bank was nationalized, at the time having a credit balance on the books of the defendant of $63,060.58. This sum, however, involved a credit of moneys not in fact belonging to the Russian bank. In reality it was a debtor in about $20,000. (Friede v. National City Bank, 222 App. Div. 644.)

The courts below have held that Lewine may recover this balance of $200,000 from the City Bank. Whether he may or not depends upon the instructions accompanying the receipt of the $200,000. If they mean that the City Bank is to credit that sum to the Azoff Don Bank and that the reference to Lewine is merely to inform the latter as to the customer who is to receive credit on its books, then the defendant has done all it was required to do. If, on the contrary, it was to credit this deposit to Lewine, paying it out only on his order transmitted through the Azoff Don Bank as intermediary, then it should still have that balance in its possession. It should perhaps be said that if the second hypothesis is correct Lewine would be bound by any orders for payment given by the Azoff Don Bank.

We come back then to the meaning of the words used in the letter of instructions, "At the request of * * * Baring Bros. * * * sent us in accordance instructions Foreign Section Ministry Finance ’ * * * we beg to enclose our check * * * to be applied as follows * * * $200,000 disposal Bank * * * Azoff Don * * * by order Engineer A. Levine, Petrograd,” and signed “ Kidder, Peabody & Co.” In fixing the proper interpretation two matters are to be considered. We have not a letter written in ordinary times and under ordinary conditions. The situation was unusual as the defendant knew. Nor are we informed of any general or even of any local custom, existing which places any particular meaning upon the words used. We must give the language its ordinary meaning in view of all the circumstances surrounding the transaction.

When the City Bank received this letter it knew certain things as did the writer. It knew, as has been said, the course of business in Russia during war time, and the rules as to the purchase and importation of merchandise. It knew that Baring Bros, and Kidder, Peabody & Co. were often used by the Chancellery in such transactions. It knew that the merchant, whoever he might be, on whose behalf the money was transmitted, wished something more than a mere credit with the Azoff Don Bank. That he might obtain by a deposit made in Petrograd. It knew no merchant might obtain dollars except to buy merchandise needed for war uses. It knew that funds sent here were earmarked for' that purpose. It knew the Chancellery watched their disbursements. It was told that these special funds had been sent by order of the Chancellery and knew they had been sent for the use of some merchant to whom they belonged. It knew that such merchant was to do the buying and that payments were to be made either on his order received directly or given through some Russian bank.

What then could the words disposal Azoff Don Bank by order A. Levine ” mean, or what could the City Bank have supposed they meant other’ than that $200,000,’ which belonged to Lewine was deposited with it. It was to be used by him to pay for goods purchased by him under his orders received through the Azoff Don Bank. It was at the disposal ” of the Azoff Don Bank for this purpose by order ” of Lewine. An indication that the City Bank so understood is the language of the telegram sent by it to Petrograd. Received Kidder, Peabody * * * $200,000, order Engineer A. Levine.” If it chose to receive a deposit under these conditions, it might not depart from them. Lewine may hold it to the letter of the contract.

Holding that this deposit was Lewine’s and that the Azoff Don Bank was simply an agent to transmit his orders as to its disposal, he may demand the balance. To it the agent now dissolved never obtained title. That was and is still in Lewine.

It has been said that there is no proof before the court of any custom giving a peculiar or technical meaning to the words used in the letter of instruction. Had there been, the evidence would have been competent, and under ordinary circumstances might have been most material. Some efforts were made to give testimony supposed to bear on this subject. The testimony offered was properly excluded. What is to be shown is a custom supposed to be known to bankers and depositors and in the light of which their contracts are made. This is not shown by proof of what another bank did under like circumstances. Nor whether there was a custom as to the disposition of funds made by banks under similar orders. What one or all chose to do is unimportant. It does not answer the question as to whether banks and customers attached a particular meaning to particular words.

The last important question on this appeal is as to the date from which interest should be calculated. It runs from the date of the demand. The Appellate Division says this was made by the commencement of the action. This is right. There is no sufficient proof of demand at an earlier time.

The judgment should be affirmed, without costs.

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

Judgment affirmed.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    Maurice Engelhardt, Respondent, v. Alvino Realty Co., Inc., Appellant.
    Tax — franchise tax — real property — lien of unpaid franchise tax upon real property of corporation — sale of property by corporation with covenant against incumbrances — purchaser who thereafter paid tax entitled to recover from vendor amount paid.
    Under section 197 of the Tax Law, as it read during the years from 1912 to 1919, the tax imposed by section 182 of that law upon a domestic corporation for the privilege of exercising its corporate franchise became payable, by the corporation, on or before the fifteenth day of January in each year and was made a lien upon its real and personal property until it was paid in full. The annual tax due from defendant, a domestic corporation, in each of those years and unpaid, therefore, became a lien upon its real property upon the fifteenth day of January in each year, notwithstanding that it had neglected, during those years, to make annual reports to the Tax Commission and that no account of the taxes due had been stated or served by the Commission, and, where it thereafter conveyed its real property, with a covenant that it was free from incumbrance, the purchaser upon payment of the taxes as subsequently stated by the Tax Commission, is entitled to recover the amount paid.

      Engelhardt v. Alvino Realty Co., 222 App. Div. 815, affirmed,
    (Submitted May 10, 1928;
    decided May 29, 1928.)

      Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered January 16, 1928, in favor of plaintiff upon the submission of a controversy under sections 546-548 of the Civil Practice Act.

      I. J. Ginsberg and Frederick C. Lawyer for appellant.
    An unaudited, unstated, undetermined, unascertained and unfixed franchise tax is not a lien on real property nor is such a tax a lien until a warrant shall have been issued to the sheriff of the county wherein such real property is situate and levied thereon after an account of such tax shall have been stated, even though the time limited for the payment of such tax, if due, shall have expired. (Dowdney v. Mayor, etc., 54 N. Y. 186; Kern v. Towsley, 45 Barb. 150; Manice v. Milien, 26 Barb. 41; Buckhout v. City of New York, 176 N. Y. 363; Lewis v. Petersen, 241 N. Y. 268; Wall v. Hess, 232 N. Y. 472; Coudert v. Huerstel, 60 App. Div. 83; New York Terminal Co. v. Gaus, 204 N. Y. 512; State v. United Jersey & Canal Co., 68 Atl. Rep. 796.) As the franchise taxes which were audited, stated and fixed and paid in 1926 were inchoate and unmatured when the déed was delivered to plaintiff by defendant in 1925, there was no breach of the covenant against incumbrances contained in said deed by reason thereof. (Doonan v. Killilea, 222 N. Y. 399; Buckhout v. City of New York, 176 N. Y. 363; Lathers v. Keogh, 109 N. Y. 583.)

      Douglas Newman and Clarence G. Bachrach for respondent.
    The franchise tax is a hen whether or not a report has been filed. (New York Terminal Co. v. Gans, 204 N. Y. 512; Feldman v. Barshay, 246 N. Y. 130; Rodgers v. Bertha Development Co., Inc., 214 App. Div. 822; 242 N. Y. 503.)
   Per Curiam.

The plaintiff is the owner of land conveyed to him by the defendant. The property had been owned, during the years from 1912 to 1919, by a domestic corporation which, for the privilege of exercising its corporate franchises, was liable to pay an annual tax to the State. (Tax Law [Cons. Laws, ch. 60], sec. 182.) The corporation had neglected, during these years, to make annual reports to the Tax Commission, stating the condition of its business. Moreover, during these years, the Tax Commission had stated no account of the taxes due and had served upon the corporation no notice of the audit and statement of a tax. It was then provided by the Tax Law as follows: A tax imposed by section one hundred and eighty-two * * * shall be due and payable into the state treasury on or before the fifteenth day of January in each year.” (Tax Law, sec. 197.) It was further provided: “ Such tax shall be a hen upon and bind all the real and personal property of the corporation, joint-stock company or association hable to pay the same from the time when it is payable until the same is paid in full.” (Id.) Thus, it was “ a tax imposed by section one hundred and eighty-two,” rather than a tax imposed by process taken under the provisions of the section, which became payable, by the corporation, on or before the fifteenth day of January in each year. Such being the case, the annual tax due and payable in each of the years from 1912 to 1919 became a hen upon the real estate of the corporation upon the fifteenth day of January in each year. Consequently, when the real estate in question was purchased by the plaintiff it was incumbered by hens for unpaid taxes. Therefore, when the plaintiff paid the taxes, subsequently stated by the Tax Commission, he became entitled to recover the disbursements, so made, from the defendant, which had covenanted that the premises were free from incumbrances.

The judgment should be affirmed, with costs.

Cardozo, Ch. J., Pound, Crane, Andrews, Lehman, Kellogg and O'Brien, JJ., concur.

Judgment affirmed.


author: Andrews, J.

text:
    Maudella M. Cahill, as Executrix of William P. W. Haff, Deceased, Respondent, v. Harmon B. W. Haff, Appellant.
    Partnership — accounting — surviving partner may be required to account — representatives of deceased partner entitled to profits attributable to continued use of assets of estate in the business — either party to partnership may repudiate it at any time — partnership between father and son under agreement that on death of father business should be continued by his estate and the son — partnership terminated on death of father where by his last will he had destroyed provisions for continuance of business — partnership also terminated by refusal of son to continue business for benefit of estate — son charged only with duties of surviving partner — must account for firm transactions during period there had been no accounting between partners — also for period after father’s death during which existing contracts were completed and assets collected — also for profits attributable to use of capital belonging to father’s estate in business thereafter continued by son — father not chargeable with bad accounts turned over by him as part of capital on admitting son to partnership — not chargeable with sums drawn by him unless shown that amounts were for his personal ends — son entitled to reasonable compensation for winding up firm — cost of audit and litigation proper firm expenses.
    1. A surviving partner may be required to account for the firm transactions and for transactions requisite to wind up the firm business and if he continues the partnership business, with no accounting, retaining and using therein capital belonging to the estate of the deceased partner with the consent, express or implied of his representatives, the latter are entitled at their option to receive the profits attributable to the use of his rights in the property of the dissolved partnership.
    2. Notwithstanding a provision in a partnership agreement for notice of intention to terminate the relation, either party may repudiate it at any time. No one can be forced to continue as partner against his will though he may be hable for breach of contract.
    3. Where a father admitted his son to partnership and agreed in writing that in the event of his death his capital should remain in the business, which should be carried on by the son and his estate, and on the same day made a will with similar provisions, naming his wife and the son as executors, but thereafter made another will destroying the provisions of the earlier one and the agreement as to the continuance of the business, the partnership terminated upon the death of the father and upon the son was imposed only the duties of a surviving partner.
    4. Even assuming the provisions of the earlier will to be still in force, the partnership was terminated where, after his father’s death, the son wrote to a trustee under the will of his father, who was attorney for the executrix, plainly indicating that he would not continue the business for the benefit of the estate. All the son may be required to do, therefore, is to fulfill his obligations as a partner during his father’s life and as a surviving partner after his death.
    5. Where it appears that during the existence of the original firm there had been no accounting between the parties, the executrix is entitled to an accounting, of the firm transactions during that period, and where the son, after his father’s death, took control of the business completing all contracts and collecting assets, so far as possible, until the end of the business year, he should account for these transactions, charging himself with one-half the value of uncollected assets. And if the father at the date of his death had any capital in the firm, which remained there with the implied consent of the executors and trustees and was used in the business, the executrix is entitled to receive the profits attributable to the use of this capital and for it also the son must account at least to the date of any new trial.
    6. Where the books of the business at the time the son was admitted to partnership showed that certain customers were heavily indebted to the father and a few years later more than half of this indebtedness was charged off by the firm, which reported it as a deduction in its income tax report for that year and it appears that on taking his son into partnership the father contributed, as the only capital of the new firm, “ the capital and moneys that shall stand to his credit on the books of the present firm,” a contention that the entire loss should be charged to him cannot be sustained. There was no guaranty that the accounts standing on those books were valid and it must be held that the son took all accounts “ as is.”
    7. It appearing that large sums of money were drawn from the business by the father in his lifetime, it was firoperly held on an accounting between his estate and his son, as surviving partner, that it was for the son to show that the amounts were not used for business purposes, where from the evidence a presumption was warranted that many of the amounts drawn were so used and the son, having the principal management of the business, must have known what was the truth.

      8. The referee properly disallowed the claim of the son for salary at the rate of $50,000 a year. He is entitled, however, to reasonable compensation for winding up the affairs of the firm.
    9. The cost of an audit and expense of certain litigation were proper firm expenses.

      Cahill v. Haff, 222 App. Div. 764, reversed.
    (Argued May 3, 1928;
    decided June 5, 1928.)
    Appeal from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered January 10, 1928, modifying and affirming as modified a judgment in favor of plaintiff entered upon the report of a referee.

      Abel E. Blackmar and Pierre M. Brown for appellant.
    One-half of the sum lost by the plaintiff’s testator in his own business before the partnership was formed was improperly charged to defendant. (Boyd v. Foot, 5 Bosw. 110; Schulte v. Anderson, 13 J. & S. 489; Partnership Law, § 40, subd. 1, § 71; Livingston v. Blanchard, 130 Mass. 341.) The court erred in holding that the defendant had the burden of proving that an amount drawn from the business by decedent during his lifetime was not used for business purposes. (Rowley’s Modern Law of Partnership, § 729; Bates on Partnership, § 765; Sweatt v. Johnson, 97 Vt. 177; Webb v. Fordyce, 55 Iowa, 11; Laswell v. Robbins, 39 Ill. 209; Johnson v. Garrett, 23 Minn. 565; Costa v. Costa, 222 Mass. 280.) The defendant is entitled to reasonable compensation for his services in carrying on the business since the death of plaintiff’s testator. (Story on Partnership [7th ed.], § 343; Meyer v. Meyer, 201 App. Div. 596; Ongley v. Marcin, 214 App. Div. 455; McGibbon v. Tarbox, 144 App. Div. 837; Griggs v. Clark, 23 Cal. 427; Robinson v. Simmons, 146 Mass. 167; Condon v. Callahan, 115 Tenn. 285; Willett v. Blanford, 1 Hare, 253; Brown v. De Tastet, Jacob’s Rep. 284; Moore v. Rawson, 185 Mass. 264.) The court erred in not stating the accounts so as to show each partner’s capital account and computing interest thereon in accordance with the partnership articles. (Masters v. Brooks, 132 App. Div. 874; Caldwell v. Leiber, 7 Paige, 483; Burke v. Fuller, 41 La. Ann. 740.)

      Henry M. Earle for respondent.
   Andrews, J.

Before 1913, William P. W. Half was engaged in the wholesale coal business. In that year Harmon B. W. Haff, a son, became his partner. The father died in 1919. Until that date the partnership continued. It is clear that the surviving partner may be required to account for the firm transactions and for transactions requisite to wind up the firm business. That at least he must do. Whether he must do more depends upon the agreement made between father and son in 1913, and upon various other considerations. If the son, for example, continues the partnership business, with no accounting, retaining and using therein capital belonging to the estate of the father, with the consent express or implied of his representatives, the latter are entitled at their option to receive the profits attributable to the use of his rights in the property of the dissolved partnership. (Partnership Law (Cons. Laws, ch. 39), sec. 73 — merely a statement of the pre-existing law; Pollock on Partnership, p. 133.) Probably the same thing is true if there be no consent.

Conceding that there should be an accounting in this case, the first question for us to consider is its extent. In other words, between what dates is it to be required?

As we have said, the partnership agreement was executed in 1913. It is a long document. The father admits the son to partnership in an existing business. The partnership is to begin on September 17, 1913, and to continue until sixty days after notice in writing of dissolution given by one party to the other. The capital consisting of “ the capital and moneys standing to his credit ” on the books of the business was to be contributed by Haff, Sr., but Haff, Jr., was to contribute thereto all of his share of the profits exceeding $5,200 annually. Upon dissolution the son was to receive the amount so contributed by him, and the father the balance, and the business.” At no time and under no circumstances is good will to be considered an asset. Profits and losses are to be shared equally. Upon the death of Haff, Sr., his entire interest in the firm shall be disposed of in accordance with the provisions of his last will and testament read in connection with this agreement.” This collateral agreement is not important. If he subsequently-changed his will, as happened, the son’s remedy, if he has one, is an independent proceeding. Another provision, however, is more material. “ In the event,” it says, of the death of Haff, Sr., the capital and moneys standing at that time to his credit upon the books of said firm shall remain in the business, which shall be conducted by the son and the estate ” of the father “ equally, as provided in the will of ” the father to which reference is hereby made.” The son shall then be and become entitled in his own right to one-half of the joint capital of said firm * * * and to one-half of the profits from the date of such death and the estate ” of the father shall be entitled to the other half of said capital and the other half of said profits.” Again any partnership ” between son and estate may be terminated on sixty days’ notice and either son or estate may liquidate the partnership. A will, so referred to and made a part of the agreement in so far as it refers to the conduct of the business after the father’s death, was executed the same day. Its provisions are not unlike the agreement. The son is to have half the assets and capital of the firm. The executors —■ the son and testator’s wife — are to be guided by the agreement as to the conduct of the business. The intent of the testator is that his estate and his son shall be equal partners in the business which shall be continued as long “ as it shall be advisable and profitable,” and “ shall share equally in profits and losses.” But he directs his son to defer to the wishes of his wife on any question connected with the management of the estate, it being my intention that her desires and judgment shall control as to the interest of my estate in said business.”

So the partnership started off. Under the agreement it could be terminated upon sixty days’ written notice. After the death of Haff, Sr., the arrangement, whatever it was, could be ended in sixty days by any notice. Notwithstanding this clause, however, either party might repudiate it at any time. Then it ended. No agreement can prevent this result. No one can be forced to continue as partner against his will. He may be liable for breach of contract. Nothing more. (Partnership Law, sec. 62.) Or the court may decree a dissolution where one partner has willfully and persistently breached the partnership agreement. (Sec. 63.) In the absence of such a decree, however, where one partner, in violation of the agreement, has ended the partnership, material violation of the agreement by the other would be a defense were damages asked of the former for breach of contract.

For some years the business continued without dispute. In 1917, however, when trouble between father and son seems to have arisen, Haff, Sr., revoked his will of 1913, and made a new one. By it he bequeathed his property “ including my interest in the coal business ” to trustees for the benefit of life tenants and remaindermen named therein. He authorizes the trustees also to sell or exchange any of the property held in trust. This must include my interest in the coal business.” The trustees named are a Mr. Brown and a Mr. Felton.

It is difficult to see why this does not destroy the provisions of the earlier will and the agreement as to the continuance of the business after the death of Haff, Sr. They contemplated its continuance under the direction of the son individually, and the son and the wife as executors, until a sixty days’ notice given by the son or by the executors at the request of the wife — the son and the executors having each a half interest. Now a half interest passes to trustees. They have no authority to continue the business. What they get is my interest in the coal business ”— Mr. Haff’s equity in capital and profits. It is their duty to liquidate it promptly. It would seem that under these circumstances the arrangement as to what was to happen after Mr. Haff’s death was ended. It was that the business was to be continued under the control of the son and the executors. We need not determine the relation of the parties had it been done. As the trial court finds without objection, the original partnership ended when Mr. Haff died. He might have provided that the survivor retain his capital in and manage the business for a period. Doubtless then the amount so retained would be at the risk of the business, but the estate would be hable for nothing more. He and his son might also agree that at his death a new partnership should arise between his son and his executors and the business be conducted at the general risk of his estate. (Stewart v. Robinson, 115 N. Y. 328.) The first supposition is not borne out by the language used. Both the agreement and the will assume that the executors are to share in the control of the business. It is to be conducted by the son and the estate ” of the father equally as provided in the will.” The result is spoken of as a partnership.” In the will he charges his executors in the conduct of the business to be guided entirely by the provisions of the partnership agreement,” and he says one of them, his son, shall defer entirely to the wishes of the other, his wife, “ it being my intention that her desires and judgment shall control as to the interest of my estate in the business.”

At any rate, whatever legal results follow, it is clear that the agreement of the parties was, not that the son, as sole survivor, should carry on the business for the benefit of himself Smd the estate, but that he and two persons named should do so. When by executing the second will Mr. Haff made this impossible the whole provision fell. If so the partnership terminated by the father’s death. Upon the son were imposed only the ordinary duties of a surviving partner. As to this later will the son had no knowledge.

Passing this for the present, however, it appears that disputes continued. So in June, 1918, the father served on the son notice that he elected to terminate the partnership in sixty days. Negotiations followed. On August 30 the notice was withdrawn by mutual consent. The parties signed a new agreement, annexing and referring to the original contract, stating that there should be an audit of the firm’s affairs and that when this was done they will make a new partnership contract for the future conduct of the business which shall provide that upon the death of Haff, Sr., the uncontrolled management of the business should be in the hands of Haff, Jr. This, however, because of the death of Haff, Sr., was never done. The whole matter, therefore, seems immaterial. The withdrawal of the notice of dissolution left the original contract in force until or unless it was superseded by the new contract which was contemplated.

The elder Haff died, as has been said, on February 22, 1919. Even assuming that the provisions of the will of 1913 were still in force the business was to be continued and controlled by Haff, Jr., individually and by him as executor and Mrs. Haff, the son’s actions as executor to be under the direction of the latter. Haff and the executors were each entitled to one-half of capita,! and assets. Both were to continue the business for the benefit of the estate until the sixty days’ notice was given. If the executors assented to the arrangement, then, at least, they became partners. But whether so or not it seems that either party could terminate the arrangement with or without the lapse of sixty days, subject to some claim for damages for breach of contract. And that the son did. On April 8, 1919, he wrote a letter to Mr. Earle, the attorney for the plaintiff. He says anything he sends Mrs. Haff, sole life beneficiary under the trust created by the later will, is a loan, whether any one likes it or lumps it, notwithstanding she is the executrix.” And he indicates plainly that he will not continue the business for the benefit of those claiming under the will. It is a clear denial that he has any obligation to go on for the benefit of the estate and a refusal to do so.

So we have reached the conclusion that all the defendant may be required to do is to fulfill his obligations as a partner during his father’s life and as a surviving partner after his death.

The trial court has found and the findings have the support of some evidence that never during the existence of the original firm did the parties ever have any accounting. To that plaintiff is entitled. The son, after the father’s death, took control of the business. That it was his duty to do. He completed the business of the partnership until the end of the coal year on March 31, 1919, finishing all contracts and collecting assets so far as possible. He has not accounted for these transactions. He should do so, charging himself with one-half the value of the uncollected assets. Finally, if the father at the date of his death had any capital in the firm, this capital remained there with at least the implied consent of the executors and trustees. It was used in the business. The executrix, therefore, at her election is entitled to receive the profits attributable to the use of this capital and for it also the son must account at least to the date of any new trial. At the time of his death, therefore, did the deceased have capital therein?

We are told that we may determine this question for ourselves upon the finding of the referee. If this be true, it is better to do so.

As appears by the referee’s report, on February 22, 1919, the assets of the firm amounted to $265,160.90. Its liabilities were $241,076.25. The balance is $24,084.65. If this were all it would seem that the father at his death still had invested therein $12,042.33. It is said this result does not follow. The father it is claimed drew-out all the capital contributed to the firm and so much more than one-half of the earnings that when he died the son was entitled to more than the balance of $24,000.

1. On the books of the business in 1913 when the partnership was formed five coal companies appear to have been indebted to Haff, Sr., in the total of $224,544.71. In 1917, of this indebtedness $105,915.85 was charged off by the firm; and the firm reported this sum as a deduction in the income tax report for that year — the year when the loss was determined. It is said the entire amount should be charged to Haff, Sr. If so, his entire interest in the assets would be wiped out.

We cannot see it in that light. In 1913, Mr. Haff, taking his son into partnership, contributed as the only capital of the new firm, the capital and moneys that shall stand to his credit on the books of the present firm.” That was no guaranty that the accounts standing on those books were valid. We think the son took all accounts as is.”

2. One hundred and forty-one thousand and fifty-eight dollars and twelve cents was. drawn by Haff, Sr., from the business in his lifetime. If this whole amount should be charged to him again the $24,000 disappears. Whether it should be so charged depends upon the burden of proof. The referee held that it was for the defendant to show that the sum was not used for business purposes. The ruling may be sustained. It is to be remembered the question arises not between two members of a fina, each presumptively acquainted with the details of the business, but between a surviving partner and those who have no such information.

The firm apparently, purely as a token of respect and affection, were accustomed to make large gifts to friends and acquaintances. The custom was continued by Haff, Jr., after his father’s death. As a fortunate coincidence these friends happened to be in a position where they could influence purchases of coal by large corporations. Between 1913 and his death a large number of checks — aggregating $250,390.34 — were drawn by Haff, Sr., to his own order or to cash or in some similar form. Of this total, notation on the stub books showed that $109,332.22 was used by him personally. Nothing appears as to the balance of $141,058.12, except that they were made payable to cash ” or to Ed. Moore ” (a friend), or in some similar form. The totals ranged from $12,000 to $32,000 annually. Apparently Moore and the firm were engaged in kiting checks. Under the partnership contract, Haff, Sr., had the sole right to sign checks on the firm account. Much of the time, however, in the later years, he was ill and absent. On such occasions at least he left in the office checks signed in blank which were filled in as occasion arose. In fact he was never at the office after October, 1917, and only there irregularly in the early part of that year. Yet in 1917 there were checks of the class in dispute amounting to $31,000 and in 1918 $12,328.45. Some were drawn and cashed in California or Florida where Haff, Sr., was at the time. The referee said the defendant must show that these checks were not used in the firm business. “ The character of the accounting is to be determined * * * by the interpretation placed upon the partnership agreement by the partners * * also because Moore appears to have been an agent, used or employed in some form, in the transaction of the Haff business, and as such, he enters into the system and the burden is on the surviving partner to separate the items which make up the personal from those which on their face seem to belong to the system.” He adds that for years Haff, Sr., had made such a separation by notation on the stub books with the knowledge of the son. He evidently by leaving the other stubs blank was following the precept not to allow one hand to know what the other did.

We think the presumption in the present case is that a check on the firm account, payable to cash ” or to A, B or C was drawn for firm purposes. Especially in an accounting between a surviving partner and the estate of one deceased, and where the survivor knows, as Haff, Jr., must have known, having as he did the principal management of the business, what the truth was. We then come to a question of fact, which the referee has decided against the defendant.

Even more difficult is a subordinate detail of this subject. Forty thousand dollars of these $140,000 checks were drawn after January 1, 1917. It is said no objection was made to charging these to the father. This was not so originally. The objection was to charging against Haff, Sr., “ a large amount of checks totalling over $100,000.” But there is some concession made by the plaintiff. We think, however, the objection was never withdrawn and that the referee was correct in considering the whole subject.

Certain other questions arise, not touched upon in the appellant’s brief, as to transactions before February 22, 1919. The referee properly disallowed the claim of the son for salary at the rate of $50,000 a year. He is entitled, however, to reasonable compensation for winding up the affairs of the firm. The cost of an audit agreed upon in August, 1918, is clearly a proper firm expense. So were the expenses of certain litigation with the Susquehanna Coal Company.

Then what are we to do with this judgment? The referee states that on February 22, 1919, the capital of the firm was $24,084.65. Where this came from we do not know. The original capital he says was... $24,825 05

Earnings from boats.................... 16,089 72

Earnings to February 22, 1919........... 116,851 14

Earnings to end of coal year, March 31. .. 7,473 40

Total............................. $166,239 31

Add to this various items, which perhaps should be so added................... 72,326 43

And subtracting certain items........... 10,035 98

We have a grand total of.. $62,290 45 228,529 76

From this subtract Personal drawings of Haff, Sr..................... $109,332 22

Bonds retained by him..... 91,778 42

201,110 64

We find nowhere a statement as to what the son drew. In 1916, apparently $24,126.70. In 1917, $35,196.07. The objections state that between 1913 and 1919 he drew in addition to $5,200 a year, over $125,000. The result is so extraordinary, we are unwilling to attempt to state an account showing whether or not Haff, Sr., had any interest in this capital. The defendant claims he owed the firm over $60,000. Perhaps he is right. We do not know.

Therefore, the judgment must be reversed and a new accounting had on the basis indicated. (1) Haff, Jr., is to account for the operations of the firm to March 31, 1919, the end of the coal year. In that account Haff, Sr., is not to be charged individually either with the sum of $105,915.85 of bad accounts turned over by him to the firm or with the $141,058.12 of “ cash ” or “ Moore ” checks unless evidence is produced that the same were used for his personal ends. If after March 31, transactions occurred, attributable to the partnership, they may also be considered. (2) If it appears upon such accounting that Haff, Sr., was entitled to the whole or any part of the remaining assets the amount to which he is so entitled shall be fixed. Haff, Jr., shall then account for the profits attributable to the use of such amount in the business conducted by the defendant unless the plaintiff prefers to accept interest thereon. Such an accounting is to be conducted on equitable principles. It is not a question of punishing the defendant. How important a part did such a sum as capital used in the business contribute to its success? How much of the profits resulted from the purely personal ability and action of the defendant? Such and similar questions are important. And if the business continues the accounting should be continued to the date of the trial.

As there is to be a new trial questions of costs and the expenses of the accounting may then be considered anew.

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

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

Judgments reversed, etc.


text:
    Gussie Lichtenstein et al., Plaintiffs, v. Grossman Construction Corporation et al., Defendants. Globe Tile Co., Inc., et al., Appellants and Respondents; Samuel Malefsky et al., Copartners, under the Firm Name of S. Malefsky & Son et al., Respondents and Appellants.
    Liens — surplus money proceedings — labor and materials going into two buildings only one of which produced surplus on foreclosure of mortgage — apportionment between lienors.
    1. Where both the debtor and creditor have failed to direct the application of a payment it is the duty of the court to apply it according to equitable principles. A referee in surplus money proceedings, therefore, who has made an apportionment of the labor and materials that went into two buildings, only one of which had produced a surplus on foreclosure of a mortgage, should have also apportioned the credits in like proportion.
    2. Mechanics’ hens filed against more than one building in the process of erection must be apportioned under section 13 of the Lien Law according to the work and materials going into each building.

      Lichtenstein v. Grossman Construction Co., 221 App. Div. 527, modified.
    (Argued May 29, 1928;
    decided June 5, 1928.)
    Cross-appeals, by permission, from an order of the Appellate Division of the Supreme Court in the second judicial department, entered October 28, 1927, which modified and affirmed as modified an order of the City Court of the city of New York confirming the report of a referee in surplus money proceedings.

      Herman G. Bachrach and Clarence G. Bachrach for Globe Tile Co., Inc., et al., appellants and respondents.
    The labor and material of the claimants, Globe Tile Co., Inc., and Grand Marble Works, Inc., were furnished ■under entire contracts and give rise to mechanics’ liens covering all of the property improved. (Clark on New York Law of Contracts, § 861; Ming v. Corbin, 142 N. Y. 334; Moran v. Chase, 52 N. Y. 346; Lyon v. Logan, 68 Tex. 521; Deegan v. Kilpatrick, 54 App. Div. 371; Paine v. Bonney, 4 E. D. Smith, 734; Livingston v. Miller, 16 Abb. Pr. 371; Farmers L. & T. Co. v. Winthrop, 238 N. Y. 477; Giant Portland Cement Co. v. State of New York, 232 N. Y. 395.) There is due to Globe Tile Co., Inc., the sum of $2,701, with interest from March 11, 1925, and to Grand Marble Works, Inc., the sum of $1,000, with interest from January 13, 1925, which sums are payable out of the surplus after the payment of the referee’s fees.

      Samuel A. Morrison for S. Malefsky & Son, respondents and appellants.
    A mechanic’s lien covering two buildings, when cut off as to one, is a lien on the remaining building to the extent only of the value of the labor and material that went into that building. (Schaghticoke Powder Co. v. Greenwich & J. Ry. Co., 183 N. Y. 360; Whritenour Co. v. Colonial Homes Co., 209 App. Div. 676; Hunter v. Blanchard, 18 Ill. 318; Foster v. Cox, 123 Mass. 45; Stevens v. Inhabitants of Lincoln, 114 Mass. 476; Albro v. Blume, 5 App. Div. 309; Davison v. MacDonald, 124 Misc. Rep. 726.) As among mechanic’s lienors, each complete building and the real property upon which it stands, is the unit to which the liens attach. (Livingston v. Miller, 16 Abb. Pr. 371; Burchell v. Osborne, 119 N. Y. 486; Davison v. MacDonald, 124 Misc. Rep. 726.)

      Bertram Sommer for J. Rose & Co., respondent and appellant.
    A materialman who furnishes material for the improvement of real property with the consent of the owner thereof, has a hen for the principal and interest of the value or the agreed price of such materials upon the whole of the real property improved, or to be improved, and upon such improvement. (Giant Portland Cement Co. v. State of New York, 232 N. Y. 395; Upson v. United Engineering & Contracting Co., 72 Misc. Rep. 541; Sears v. Wise, 52 App. Div. 118; Dempsey v. Mt. Sinai Hospital, 186 App. Div. 334.) The foreclosure and loss of part of the property affected by the hen did not diminish the claim of this henor as against the balance of the property covered by said hen. (Hall v. Sheehan, 69 N. Y. 618; Moran v. Chase, 52 N. Y. 346; Livingston v. Mildrum, 19 N. Y. 440; Livingston v. Miller, 16 Abb. Pr. 631; Palmer v. Van Santvoord, 153 N. Y. 612; Allen v. Stevens, 161 N. Y. 122; People v. Angle, 109 N. Y. 564; Rochester v. Coe, 25 App. Div. 300; Binninger v. New York, 80 App. Div. 300.)
   Per Curiam.

We agree with the Appellate Division that section 13 of the Lien Law (Cons. Laws, ch. 33) applies to these hens and that they are vahd to the amount of the labor and material put into each building. The apportionment as made by the referee has been properly affirmed except in one particular. The Globe Tile Co., Inc., furnished labor and material for both buildings in the amount of $9,201. There has been paid to it $6,500, leaving a balance unpaid of $2,701. All of this unpaid balance cannot be charged up against the corner building which has produced a surplus in mortgage foreclosure proceedings sufficient to pay the mechanics’ liens in part. The lien of the Globe Tile Co., Inc., therefore, with the other liens which have been filed against both buildings must be limited to the amount of labor and material put into the corner building.

The referee found that amount to be $5,321 which left $3,880 going into the inner or other building. The payment of $6,500, however, he divided equally between the two' buildings, deducting from $5,321, $3,250 and thus arriving at his figure of $2,071, which he found to be the amount of the lien of the Globe Tile Co., Inc., on the corner building payable out of the surplus.

Having made an apportionment of the amount of the labor and material as added to each building he also should have apportioned the credits in like proportion. This is the rule in equity. Where both the debtor and creditor have failed to direct the application of a payment it is the duty of the court to apply it according to equitable principles (Orleans Co. Nat. Bank v. Moore, 112 N. Y. 543; Field v. Holland, 10 U. S. [6 Cranch] 7, at page 28; Union School District of Guilford v. Bishop, 76 Conn. 695; Robie v. Briggs, 59 Vt. 443.)

The $6,500 payment, therefore, should be applied in the proportion which $3,880, the amount going into one building, bears to $5,321, the amount going into the corner building, which is as $2,741 to $3,759. This means that the amount of the payment to be applied on the lien of the corner house is this larger amount of $3,759. Deducting this from the amount of the lien, $5,321, as found by the referee, leaves a balance due to the Globe Tile Co., Inc., of $1,562, instead of $2,071 found by the referee.

The order of the Appellate Division should, therefore, be modified by fixing the hen of the Globe Tile Co., Inc., at this amount of $1,562 with interest, and as thus modified affirmed, without costs.

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

Ordered accordingly.


author: Pound, J.

text:
    In the Matter of Charles J. Dodd, as District Attorney of Kings County, Respondent, against George W. Martin, Individually and as County Judge of Kings County, et al., Appellants, Impleaded with Another.
    Crimes — second offense — sentence — jurisdiction — court without power to permit change of plea of guilty after sentence and commencement of imprisonment — plea of guilty to felony as first offense, sentence and commencement of imprisonment— information charging prisoner with former conviction of felony — improper to permit prisoner to change plea to that of guilty of petit larceny — mandamus directing court to reinstate plea, to try prisoner on the information and resentence him, proper — original sentence illegal where prisoner had admitted his former conviction.
    1. After judgment on a plea of guilty and the beginning of a term of imprisonment the court is without jurisdiction to permit the defendant to change his plea.
    2. Where a prisoner, who had pleaded guilty to the crime of burglary in the third degree as a first offense, been sentenced and commenced to serve his term, is brought into court for resentence, under section 1943 of the Penal Law, on an information charging him with having been formerly convicted of a felony, it is improper for the trial judge to direct the original plea of guilty to be set aside, accept a plea of guilty to the crime of petit larceny and sentence the prisoner to a term of imprisonment in the county jail. A peremptory order of mandamus requiring him to reinstate the plea of guilty and proceed under section 1943 of the Penal Law to try the issue, if any, presented by the information and to resentence the prisoner is, therefore, properly issued.
    3. The original sentence for felony as a first ofíense on a plea of guilty was illegal where the prisoner had admitted to the court his previous conviction of another felony. Under sections 1942 and 1943 of the Penal Law all discretion is withdrawn from the court in such a case and it is powerless to disregard the record in passing sentence. (People v. Sickles, 156 1ST. Y. 541, explained.)

      Matter of Dodd v. Martin, 224 App. Div. 179, affirmed.
    (Argued May 31, 1928;
    decided June 12, 1928.)
    Appeal from an order of the Appellate Division of the Supreme Court in the second judicial department, entered May 15, 1928, which affirmed an order of Special Term granting a motion for a peremptory order of mandamus to compel the county judge and court of Kings county to vacate an order setting aside a plea of guilty of burglary in the second degree and accepting a plea of guilty of petit larceny and to cause the accused to be resentenced under Penal Law, section 1943.

      Harry G. Anderson and Ralph E. Hemstreet for appellants.
    The sentence pronounced by the court upon the defendant on November 16, 1926, was a legal sentence. (Graham v. West Virginia, 224 U. S. 615; People v. Keeler, 17 N. Y. 370; Hankins v. New York, 64 N. Y. 18; Matter of Central Park Comrs., 50 N. Y. 493; Matter of Washington Street R. Co., 115 N. Y. 442; People v. Ahearn, 196 N. Y. 221; People v. Dwyer, 215 N. Y. 46; People v. Koenig, 9 App. Div. 436; People v. Jensen, 99 App. Div. 355; People v. Hatter, 22 N. Y. Supp. 688; American Society v. Glover smile, 78 Hun, 40; People v. Gallagher, 58 Misc. Rep. 512.)

      Charles J. Dodd, District Attorney (Henry J. Walsh of counsel), for respondent.
    The acceptance of defendant’s plea as a first offender does not bar him from prosecution as a second offender. (People v. Rosen, 208 N. Y. 169; People v. Bretton, 144 App. Div. 282; People v. Cucchiara,
      209 App. Div. 326; Graham v. West Virginia, 224 U. S. 616.)
   Pound, J.

On an indictment charging Fred Taglerine with the crimes of burglary, third degree, and attempted grand larceny in the second degree as a second offense, the Kings County Court on October 21, 1926, accepted a plea of guilty to the crime of burglary in the third degree as a first offense. The defendant was convicted on this plea. The increased punishment for a second offender is indicated by Penal Law, section 1941. Before sentence was pronounced, the court was informed by the defendant that he had been previously convicted of a felony. He was sentenced as a first offender to a term of imprisonment in Sing Sing Prison for two years and six months. He began to serve his term. When it became known to the warden of Clinton Prison, to which defendant had been transferred, that the prisoner had been previously convicted of a felony, he reported the fact to the District Attorney of Kings county as required by section 1943 of the Penal Law as added, as a part of the Baumes Laws, by chapter 457, Laws of 1926. The District Attorney thereupon filed an information accusing the prisoner of such previous conviction. The prisoner was then brought before the court under the provisions of section 1943 of the Penal Law relative to resentencing. The County Judge ordered the original plea of guilty set aside, accepted a plea of guilty to the crime of petit larceny and sentenced the prisoner to a term of imprisonment in the county jail for nine months.

After judgment on a plea of guilty and the beginning of the term of imprisonment the court was without jurisdiction to permit the defendant to change his plea. (Code Crim. Pro. § 337; Penal Law, § 2188; People ex rel. Woodin v. Ottaway, 247 N. Y. 493.) This rule is not challenged in this proceeding.

The District Attorney has obtained an order of peremptory mandamus requiring the County Judge and the County Court of Kings county to reinstate the plea of guilty and to proceed under section 1943 of the Penal Law to try the issue if any presented on the information and to resentence the prisoner.

The question is whether the original sentence was legal. The Baumes Laws were carefully considered in great detail in People v. Gowasky (244 N. Y. 451). Previous convictions need no longer, as previously, be alleged in the indictment. (Penal Law, § 1942.) When the defendant is convicted, he may be for the first time confronted with his record. If it then appears that he is a second offender he is sentenced to the severer punishment. The old practice,” said Crane, J., in the Qowasky case (p. 460), is still permissible.” But the prisoner was not tried on the indictment charging him as a second offender. He pleaded guilty to burglary, third degree, as a first offense. The plea is separable. It contains two elements, a plea of guilty and a denial of a prior conviction. The guilt is of the crime of burglary in the third degree, the remainder of the plea is descriptive of the character of the offender.

There are three kinds of plea to an indictment: guilty, not guilty and former conviction or acquital. (Code Crim. Pro. § 332.) A plea may be accepted of guilty to any lesser crime than that charged in the indictment. (Code Crim. Pro. § 334.) The crime charged in the indictment is not lesser or greater because the punishment is lesser or greater by reason of the presence or absence of prior convictions. It remains the same without regard to the past criminal record of the defendant. The crime, when committed by a first offender, is not a lesser crime than that charged in the indictment ” when the indictment charges a second offense. (Code Crim. Pro. § 334, 2.) I find nothing in People v. Sickles (156 N. Y. 541) which necessarily holds the contrary. The case goes no further than to say that under the old law: first, “ the indictment of the person accused of being a second offender must bring the case within the statute, by setting forth the facts depended upon for the imposition of the severer punishment prescribed by the Penal Code,” and, secondly, that the question for the jury to determine is whether the defendant is guilty of the present crime described in the indictment and whether he is the person charged therein as having been formerly convicted.” The criminality of the defendant who is a second offender or the grade of his guilt, may be greater so as to affect the degree of liability to punishment, but the crime charged in the indictment must be established independently of his former conviction. The rule was deemed to be one of fair play. It rested on no other foundation. No question of the implied repeal of section 334, paragraph 2. in contravention of Penal Law, section 2500, can arise in this connection.

In any event, Penal Law, sections 1942 and 1943, provides a new method of dealing with prior offenders. The crime charged is separated from the prior convictions unless the District Attorney follows the old practice in drawing the indictment, and the question is submitted to the trial jury. How can the defendant be sentenced for felony as a first offense on a plea of guilty when he admits to the court before sentence that he is a second offender? The trial jury doubtless has power to render an anomalous verdict if the issue of identity is presented to it, but the court had no such issue before it and was powerless to disregard the defendant’s record in passing sentence. The Baumes Laws withdraw all discretion • from the court in such cases. In this view of the law, the fact that the former conviction was known at the time sentence was imposed is immaterial. (Graham v. West Virginia., 224 U. S. 616.) The sentence was illegal and proceedings for resentence the inevitable sequence.

The effect of the new law was doubtless misunderstood by the court, District Attorney and defendant when sentence was passed. This fact is to be regretted as an unfortunate but unavoidable result of the interpretation of a new law by the lower courts. I am unable to see hów the court can restore to defendant the right of having the issue of prior convictions tried by the trial jury on a plea of not guilty which he forfeited by pleading guilty. The Legislature has provided a mechanistic rule to take the place of the discretionary powers of the judge in passing sentence on second offenders. The Executive may relieve from the hardship of a particular case. We cannot.

The order should be affirmed.

Crane, Andrews and O’Brien, JJ., concur; Cardozo, Ch. J., Lehman and Kellogg, JJ., dissent.

Order affirmed.


text:
    In the Matter of William J. Kennedy, Individually and as Executor of and Trustee under the Will of John E. Kennedy, Deceased, Appellant. Susan V. Tuohy, Individually and as Administratrix of the Estate of Katherine T. Kennedy, Deceased, et al., Respondents.
    Will — construction — trust to pay income to wife and upon her death divide remainder amongst specified charities and relatives — direction that provision for wife was in lieu of “ dower, thirds and all other interests” — gift of residue of estate to specified residuary legatees if wife elects to take “ her dower and thirds as allowed by law” — no intent to give to wife, at her election, what she would have received had testator died intestate.
    A provision in a will whereby testator bequeathed the residue of his estate to trustees to pay the income to his wife for life and upon her death gave the remainder, in specified proportions, to charities and to relatives, and directed that the provisions for his wife were “ in lieu of dower, thirds and all other interest in my estate, real, personal or mixed,” and that, if she elected to take “ her dower and thirds as allowed by law,” then he gave the residue of his estate, “ which may remain after allotment of my said wife’s dower and thirds,” to the residuary legatees, evidences no intent to give to the wife, at her election, what she would have received had he died intestate. The provision should be construed merely as a gift of the principal of the trust estate to charities or to relatives in ease the wife prefers to take that to which she may have a legal claim.

      Matter of Kennedy, 223 App. Div. ^ 22, reversed.
    (Argued May 28, 1928;
    decided June 12, 1928.)
    Appeal from an order of the Appellate Division of the Supreme Court in the second judicial department, entered March 21, 1928, which reversed as matter of law a decree of the Kings County Surrogate’s Court construing the will of John E. Kennedy, deceased.

      Samuel J. Fisher and Joseph A. Kennedy for appellant.
    The language of the will shows clearly that the testator did not intend that his wife, by renouncing the provisions of bis will for her benefit, should take any share in his estate over and above that which the law would allow her upon renunciation. (Bond v. Moore, 236 Ill. 576; Brown v. Quintard, 177 N. Y. 75; Bradhurst v. Field, 135 N. Y. 564; Adams v. Adams, 1 Hare, 537; Matter of Hodgman, 140 N. Y. 421; Matter of Bloodgood, 222 N. Y. Supp. 345; Matter of Benson, 96 N. Y. 499; Matter of Silsby, 229 N. Y. 396; Chamberlain v. Chamberlain, 43 N. Y. 424; Hennessy v. Patterson, 22 Hun, 145; 85 N. Y. 91; Matter of Lawrence, 37 Misc. Rep. 702; Sarles v. Sarles, 19 Abb. N. C. 322; Taylor v. Wendel, 4 Bradf. 324.)

      James F. McNaboe for respondents.
    The construction of the seventh clause of the decedent’s will by the Appellate Division as giving to the widow her dower in the real property and one-half of the personal estate plus the sum of $2,000 (the share the widow would take in case of her husband’s intestacy) is in accord with the' evident intent of the testator and should be affirmed. (Matter of White, 219 App. Div. 502; 245 N. Y. 587; Taggart v. Murray, 53 N. Y. 233; Van Vechten v. Keaton,
      63 N. Y. 52; Hard v. Ashley, 117 N. Y. 606; Mee v. Gordon, 187 N. Y. 400; Mulcahy v. Johnson, 80 Colo. 508; Shipley v. Mercantile Trust, etc., Co., 102 Md. 649; Yeomans v. Stevens, 2 Allen, 349; Gail v. Gail, 127 App. Div. 892.)
   Andrews, J.

By his will, after a legacy of $3,000 to his wife, Mr. Kennedy bequeathed the residue of his estate to trustees. They were told to invest this fund and to pay the income to Mrs. Kennedy for life. He made most careful provision that she should herself receive this income unimpaired by any claims of others and he added that the provisions in her favor are in lieu of dower, thirds and all other interest in my estate, real, personal or mixed.”

He evidently expected her to receive the bequest as a satisfaction of any legal claims she might assert. These in fact were slight. There was little or no real property, although he apparently believed he had some title to his residence. In truth, on his death, it passed to the wife as tenant by the • entirety. His personal property amounted to about $85,000. He apparently believed also that the wife did or might have some claim to a part of this sum. But he desired her to take what he gave as he gave it. He wished himself to make final disposition of the principal. If she asserted any legal rights it was to be at the expense of forfeiting any provisions he had made for her benefit. Then he gives the remainder in specified proportions to charities and to relatives.

He knew his wife might refuse to accept what he had given. If so he makes no alternative bequest to her. She may take what the law will give her. That he cannot prevent. But if she does so, and elects to take “ her dower and thirds as allowed by law ” then he gives the residue of his estate which may remain after allotment of my said wife’s dower and thirds ” to others.

We see here no intent to give her anything but an interest in the trust fund, no intent to give her that, or if she so desires to give her what she would have received had he died intestate. Had he so died she would have received not dower and a third of his personalty but a half. We construe the provision merely as a gift of the principal of the trust estate to charities or relatives in case the wife prefers to take that to which she may have a legal claim. If, believing otherwise, she renounced the provisions made for her, if she, too, thought she had a claim to a third of her husband’s personalty, it may be unfortunate for her surviving relatives. They, however, lose little they would not have lost had she decided otherwise. Clearly the testator did not desire that they should share in the principal of his estate, certainly not beyond the legacy of $3,000 which he gave her absolutely.

The order of the Appellate Division should be reversed and the decree of the surrogate affirmed, without costs in the Appellate Division and in this court.

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

Ordered accordingly.


text:
    In the Matter of General Linen Supply and Laundry Company, Inc., Respondent, against New York Linen Supply and Laundry Company, Inc., Appellant.
    Practice — arbitration — objectionable questions.
    Questions submitted for arbitration which tend to decide in part the points in controversy are objectionable.

      Matter of General Linen Supply & Laundry Co. v. N. Y. Linen Supply & Laundry Co., 219 App. Div. 791, modified.
    (Argued May 28, 1928;
    decided June 12, 1928.)
    Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the second judicial department, entered February 2,1927, which unanimously affirmed an order of Special Term directing that the parties hereto proceed to arbitration.

      Howard Thayer Kingsbury and Walter R. Barry for appellant.
    The proposed submissions to arbitration do not come within the purview of the Arbitration Law. (Webster v. Van Allen, 217 App. Div. 219; Manice v. Hudson River R. R. Co., 3 Duer, 426.)

      Ralph Weller and Milton M. Eisenberg for respondent.
    The proposed form of submission should be retained as provided for in the order forming the subject-matter of this appeal. (People v. Davis, 231 N. Y. 60.)
   Per Curiam.

The contract has been properly construed as providing generally for arbitration of any question arising thereunder.

The questions submitted are, however, subject to the objection that they tend to decide in part the points in controversy.

The order appealed from should be modified by striking out the questions submitted and substituting in place thereof the following, viz.:

(a) Whether or not the accounting and other expenses, if any, of arbitrations already had between the parties are necessary and incidental to the fulfillment thereof, and whether or not such expenses shall be charged to the net assets of the New York Linen Supply & Laundry Company, Inc.
(b) Whether or not the bleaching plant located at Long Island City together with all its contents is to be valued at more than $6,000.
(c) Whether or not the petitioner’s assignors (the withdrawing stockholders) were wrongfully charged with approximately $6,000 for boilers and fixtures of Star Steam Laundry located at 553 West Forty-second street, New York city.
(d) Whether the proportionate share of the General Linen Supply & Laundry Company, Inc., shall or shall not be increased by reason of the facts with reference to the 1,283 shares of common stock held by I. N. Thurman.

The order as so modified should be affirmed, without costs.

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

Ordered accordingly.


text:
    Samuel Mattikow, Appellant, v. Ephraim Sudarsky et al., as Executors of Eleazer Cedar, Deceased, Respondents.
    Partnership — contract — Statute of Frauds — accounting — oral contract for partnership in lands enforceable — erroneous dismissal of complaint in action to compel accounting on ground contract was void under Statute of Frauds — lands acquired by defendant for joint adventure held as trustee for benefit of himself and partner after payment of debts and adjustment of equities — accounting should, be directed accordingly.
    1. An oral contract for a partnership in lands is enforceable under the Statute of Frauds.
    2. In an action to dissolve a joint adventure, to compel an accounting and the execution of a deed, where the trial court found that plaintiff and defendant had made an oral agreement to form a partnership for the purchase of real estate, plaintiff contributing his knowledge and defendant the necessary cash, the profits to be equally divided after paying defendant his advances with interest and the plaintiff having the right at any time to receive a conveyance of one-half interest in lands so purchased upon payment of one-half of the advances made thereon by the defendant, it is error to dismiss the complaint on the ground that the agreement is void under the Statute of Frauds. The court should have decided that defendant held lands, acquired for the benefit of the joint adventure, as personal property, as trustee to pay debts and adjust equities, and then became a trustee of the remainder, as real estate, for the benefit of plaintiff and defendant equally, and have directed an accounting accordingly. (Pounds v. Egbert, 117 App. Div. 756, distinguished.)

      Mattikow v. Sudarsky, 222 App. Div. 833, reversed.
    (Argued June 7, 1928;
    decided June 19, 1928.)

      Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered February 23, 1928, unanimously affirming a judgment in favor of defendant entered upon a dismissal of the complaint on the merits by the court on trial at Special Term.

      David T. Smith, Meier Steinbrink and Harold M. Kennedy for appellant.
    The contract is severable; hence the Statute of Frauds is not a complete defense. (Chester v. Dickerson, 54 N. Y. 1; Traphagen v. Burt, 67 N. Y. 30; Burkhardt v. Walsh, 49 App. Div. 634; Howell v. Garrett & Co., 218 App. Div. 322; The Wellsville v. Geisse, 3 Ohio St. 333; Strauss v. Yeager, 48 Ind. App. 488; Wooten v. Walters, 110 N. C. 251; Pierson v. Crooks, 115 N. Y. 528; Stokes v. Foote, 172 N. Y. 327.) Defendant occupied a fiduciary position with respect to the plaintiff. (Wood v. Rabe, 96 N. Y. 414; Goldsmith v. Goldsmith, 145 N. Y. 313.)

      Albert Conway, Meyer Kreeger and Dennis M. Hurley for respondent.
    The claimed agreement is one indivisible and inseparable contract. (Gorse v. Lynch, 36 Misc. Rep. 150; Central N. Y. Tel. Co. v. Averill, 58 Misc. Rep. 59.) No trust element is involved in the instant case. (Wood v. Rabe, 96 N. Y. 414; Ryan v. Dox, 34 N. Y. 307; Angel v. Smith, 6 App. Div. 251; Barnes v. Court-wright, 31 Misc. Rep. 60; Goldsmith v. Goldsmith, 145 N. Y. 313; Burkhardt v. Walsh, 49 App. Div. 634.)
   Pound, J.

Since the trial of this case the original defendant Eleazer Cedar died, and his personal representatives have been substituted as defendants. He is referred to herein as defendant. The trial court has found that plaintiff and defendant made an oral agreement to form a partnership for the purchase of real estate, plaintiff contributing his knowledge, and defendant the necessary cash, the profits to be equally divided after paying defendant his advances with interest, and the plaintiff having the right at any time to receive a conveyance of one-half interest in lands so purchased upon payment of one-half of the advances made thereon by the defendant.

In this action to dissolve the joint adventure, to compel the defendant to account, and to compel him also to execute a deed, the complaint has been dismissed, without hearing the evidence for the defense, on the ground that the agreement is void under the Statute of Frauds. Not only has there been a refusal to compel the execution of a deed; there has been a refusal even to compel an accounting as to profits or to charge the defendant with any obligations as to the lands said to have been acquired for the benefit of the joint adventure.

The question whether an oral contract for a partnership in lands is enforceable under the Statute of Frauds has been repeatedly answered in the affirmative by the decisions of this court.

“ It is established, by abundant authority in this State, that a partnership may exist in reference to the purchase, sale and ownership of lands, and that it may be created by a parol agreement.” (Traphagen v. Burt, 67 N. Y. 30, 33, citing Chester v. Dickerson, 54 N. Y. 1, where the rule was stated but as dictum only.)

Real estate purchased as partnership property is not within the prohibition of the statute. In the first place, it is not the case where the consideration is paid by one person and a conveyance taken in the name of another. The consideration is paid by all. It is not, therefore, within the letter of the statute. But a more substantial reason is, that property thus held is regarded as personal property, for the purpose of paying debts and adjusting the equities between the partners; and the individual member holding the legal title is a trustee for the partnership in respect to the property as personalty; and when the debts are paid and the claims of the several members as between themselves paid, the trust for partnership is discharged and a trust results to the other members of the firm, and the heirs of such as have died, in the remainder, by operation of law, which is saved by section 50 of the statute, and the holder of the legal title then becomes a trustee of such remainder, as real estate for the benefit of persons interested. Such a trust is not prohibited, nor is it necessary for parties claiming the benefit of it to bring themselves within the exception in section 53.” (Fairchild v. Fairchild, 64 N. Y. 471, at pp. 479, 480.)

It was sought in Pounds v. Egbert (117 App. Div. 756) to distinguish this case from the authorities cited. The case is not in point. It came up on an appeal from a judgment which did not adjudge that the premises in question were partnership property but on the contrary decreed specific performance of the agreement to convey land and as incidental to that relief directed an accounting to ascertain the contributions of each party. While the court held that specific performance could not be had, it granted a new trial to determine the question whether a partnership was ever formed between the parties. Here the contract of partnership was established and the question is whether plaintiff is entitled to any relief. While the complaint demands relief by way of specific performance it also demands dissolution of the partnership, an accounting and such other or further relief as may be proper.

The equitable jurisdiction over partnerships is a necessary outgrowth of the jurisdiction over accounting. (King v. Barnes, 109 N. Y. 267, 286.) No question of the indivisibility of contracts presents itself in this ease. The question is altogether one of the proper relief to be granted in an action for accounting between partners. If the relief asked for goes too far, it does not follow that no relief can be granted. The court should have decided, on the evidence before it, that defendant held the land as personal property as trustee to pay debts and adjust equities, and then became a trustee of the remainder as real estate for the benefit of plaintiff and defendant equally, and should have directed an accounting accordingly.

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

Cardozo, Ch. J., Crane, Andrews, Lehman, Kellogg and O’Brien, JJ., concur.

Judgments reversed.


text:
    Frank P. Walsh, as Substituted Trustee of the Atlantic Insurance Company, Respondent, v. The State of New York, Appellant.
    Corporations — receivers — insurance companies — liquidation — purpose of statute directing transfer by Superintendent of Insurance to Comptroller of funds derived from old receiver-ships of defunct insurance companies and providing that claims to funds shall be filed with Court of Claims within limited time — substitute successive receiver of defunct insurance company, not a person entitled to fund within meaning of statute — not intended that Court of Claims turn fund over to receiver for liquidation in Supreme Court.
    1. The purpose of chapter 225 of the Laws of 1925, directing the transfer by the Superintendent of Insurance to- the State Comptroller of funds derived from “ old receiverships of defunct insurance companies,’’ liquidated prior to the enactment of section 63 of the Insurance Law (Cons. Laws, ch. 28), and providing that between July 1, 1925, and July 1, 1926, “ any person, persons, firm, association or corporation ” may file a claim with the Court of Claims for any part thereof to which they may claim to be entitled, but that after July 1, 1926, the Comptroller shall pay into the State Treasury all funds not affected by claims theretofore filed with the Court of Claims, was to foreclose all claimants of these funds, or any portion thereof coming within its terms, who did not present their claims within the time limited, and to turn all unclaimed balances into the State Treasury to the credit of the general fund. It was also the purpose of the act to enable the State, through the Court of Claims, to liquidate claims of individuals directly interested in the funds, and it plainly contemplated that the class of claimants entitled to its benefits should be those ultimately entitled to receive the money in their capacity as stockholders or creditors.
    2. The substitute successive receiver of a defunct insurance company, which had been practically liquidated prior to the enactment of section 63 of the Insurance Law, a balance of the assets of which had, by order of the Supreme Court, been paid to the Superintendent of Insurance and by him, pursuant to the act of 1925, paid to the Comptroller, is not, therefore, a person entitled to the fund within the meaning of the statute and the Court of Claims properly dismissed a claim of the receiver on the ground that he was not a proper claimant to the fund. It was not the purpose of the act to permit the Court of Claims to turn the fund over to a receiver for liquidation in the Supreme Court.

      Walsh v. State of New York, 223 App. Div. 319, reversed.
    (Argued June 8, 1928;
    decided June 19, 1928.)
    Appeal from a judgment, entered April 26, 1928, upon an order of the Appellate Division of the Supreme Court in the third judicial department, which reversed a judgment of the Court of Claims directing a dismissal of the claim and directed that certain funds, on deposit with the State Comptroller, be transferred to the claimant for distribution under direction of the Supreme Court.

      Albert Ottinger, Attorney-General (Frederick D. Colson of counsel), for appellant.
    Chapter 184 of the Laws of 1924 and chapter 225 of the Laws of 1925 contemplate a complete liquidation of the funds referred to therein by or through proceedings in the Court of Claims — they do not contemplate any further action to distribute these funds by any other court. (Masters v. Eclectic Life Ins. Co., 215 App. Div. 424.) If chapter 223 of the Laws of 1828 is still in force, claimant’s remedy is in the Supreme Court; if that statute has been superseded by chapter 225 of the Laws of 1925, the claim herein must be dismissed. (Matter of Knickerbocker Life Ins. Co., 199 App. Div. 503; Matter of Casualty Co. of America, 217 App. Div. 681; Matter of Russian Reinsurance Co., 223 App. Div. 378.)

      Bernard Cowen for respondent.
    The Supreme Court ■ possessed jurisdiction to appoint the trustee as its agent to carry out the unexecuted trust.' (Matter of Tousey, 2 App. Div. 569; Jewett v. Schmidt, 83 App. Div. 276.) The trustee possesses all the rights of the original liquidating trustees, and is vested with legal title to the fund. (Matter of Tousey, 2 App. Div. 569; Matter of Jensen Co., 128 N. Y. 550; Matter of Schuyler, 136 N. Y. 169; Pratt v. Prentice, 166 App. Div. 907; Mt. Vernon v. County Trust Co., 199 N. Y. Supp. 500; Matter of Union Bank, 176 App. Div. 477; Cunningham v. Glauber, 133 App. Div. 10; Continental Securities Co. v. Belmont, 206 N. Y. 16; Wilson v. Kings County El. R. Co., 114 N. Y. 487; People ex rel. Manice v. Powell, 201 N. Y. 194.) The trustee as agent of the Supreme Court is the only one entitled to distribute the funds among the beneficiaries of the trust. (Matter of Attorney-General v. North American Life Ins. Co., 80 N. Y. 152; Matter of Empire Surety Co., 150 N. Y. Supp. 569.) Sole jurisdiction to hear and determine the trustee’s claim was vested in the Court of Claims when the Insurance Department transferred the fund to the State Comptroller.

      (Masters v. Eclectic Life Ins. Co., 215 App. Div. 424.)
   Pound, J.

Chapter 225, Laws of 1925, is entitled:

“ An Act to provide for the disposition of money and securities in the hands of the superintendent of insurance derived from old receiverships of defunct insurance companies, and maiding an appropriation for advertising.”

It provides for the transfer by the Superintendent of Insurance to the State Comptroller of the funds in the hands of such Superintendent consisting of money and securities heretofore derived from “ old receiverships of defunct insurance companies, which companies were liquidated prior to the enactment of section 63 of the insurance law.”

Section 63 of the Insurance Law (Cons. Laws, ch. 28) provides for the liquidation of delinquent insurance companies by the Superintendent of Insurance instead of receivers appointed by the courts. It Was added by Laws of 1909, chapter 300.

The act of 1925 provides that between July 1, 1925, and July 1, 1926, “ any person, persons, firm, association or corporation entitled or claiming to be entitled to any part of the said fund or any portion thereof ” may file a claim with the Court of Claims which shall have sole jurisdiction to hear, audit and determine and render judgment on all claims so filed. After July 1, 1926, the Comptroller shall pay into the State treasury, to the credit of the general fund, all moneys and proceeds of all securities in such special fund not affected by claims theretofore filed with the Court of Claims, and ultimately all balances remaining in such fund, not allowed to claimants by the Court of Claims.

The purpose of the act was to foreclose all claimants of these funds or any portion thereof, coming within its terms, who did not present their claims to the Court of Claims before July 1, 1926, and to trun all unclaimed balances into the State treasury to the credit of the general fund.

The Atlantic Insurance Company was incorporated by chapter 59 of the Laws of 1824 as a marine insurance company. Its business proved to be -unprofitable. The Legislature passed chapter 223, Laws of 1828, to enable it to close up its business. The act provided for a petition to the Chancellor or to the circuit judge of the first district for an order winding up the affairs of the company. The company was solvent at the time. The petition was presented to the court and on July 14, 1828, an order was made directing the payment of debts and the distribution of assets among the stockholders by five stockholders, chosen by the board of directors for that purpose. All the debts of the company were then paid and the surplus distributed among the stockholders with the exceptions hereinafter specified.

On or about February 17, 1862, two of the original stockholders petitioned the Supreme Court for further relief. They alleged that all the liquidating stockholders were dead, and that the survivor had at the time of his death about $2,000, and a claim against the government of New Granada. They asked that John D. Jones be appointed as a trustee or receiver of these remaining assets to preserve the rights of those interested in them. The court granted the order and directed the substituted receiver or trustee to hold the moneys received by him subject to the further order of the court. The trustee or receiver collected the claim and died September 22, 1895, holding $31,182.20 collected by him- as assets of the Atlantic Insurance Company. The trustees named under his will took possession of the fund. Charles M. Bleecker was appointed as a successor trustee by the will of Jones, by order of the court dated March 10, 1917. On or about June 23, 1921, he obtained an order directing him to pay the balance of the money to the State Superintendent of Insurance. The money was paid over accordingly.

In September, 1924, the personal representative of another deceased stockholder petitioned the court for an order for the appointment of a successor trustee to John D. Jones, deceased, and the court appointed by order dated October 22, 1924, Frank P. Walsh as successor , trustee. The order provided:

III. That pending the further order of this court to be entered on notice to the Superintendent of Insurance and the Attorney-General of the State of New York,- all assets of the Atlantic Insurance Company now in the custody of the Superintendent of Insurance pursuant to the order herein of July 18, 1921, and all sums which may be hereafter collected or recovered by the trustee herein appointed and deposited with the Superintendent of Insurance shall be held and kept invested by said Superintendent of Insurance for the benefit of the Atlantic Insurance Company.”

Thereafter chapter 225, Laws of 1925, became law; the Superintendent of Insurance paid over to the Comptroller $35,787.10, the balance of the fund remaining in his possession to the credit of Atlantic Insurance Company. Frank P. Walsh as substituted trustee duly filed a claim in the Court of Claims for the entire balance of this fund, that he may distribute the same under the power vested in him by chapter 223, Laws of 1828.”

The State moved to dismiss the claim on the ground that the successor receiver was not a proper party claimant under chapter 225, Laws of 1925. The Court of Claims dismissed the claim. The Appellate Division reversed and gave judgment in favor of the claimant. The prevailing opinion states:

This is an unexecuted trust, and upon the death of the trustee the trust estate vests in the Supreme Court and shall be executed by some person appointed by the court, whom the court may invest with all or any of the powers and duties of the original trustee or trustees.’ (Pers. Prop. Law, § 20, as amd. by Laws 1911, chap. 217.) This claimant trustee was a ' person ’ within the meaning of the 1925 statute. * * * This act [referring to chapter 225 of the Laws of 1925, pursuant to which the claim herein was filed] authorizes claims to be made by those ' entitled ’ to any of the funds. Entitled ’ fittingly describes the relation of the Supreme Court to this fund.”

A dissenting opinion states:

“ The fund did not come into the hands of the Superintendent of Insurance from any receivership, nor from any defunct insurance corporation. It was not‘ derived ’ from them or either of them. Therefore, the act of 1925 [Chapter 225] has no application to this particular fund, and the Court of Claims has no jurisdiction thereof.”

The only question before the court is whether the substitute successor receiver of Atlantic Insurance Company is a “ person entitled to the fund ” within the meaning of chapter 225, Laws of 1925.

The fund in the hands of the Superintendent of Insurance and by him transferred to the Comptroller pursuant to the act was derived from an old receivership of a “ defunct insurance company ” which had been practically “ liquidated prior to the enactment of section sixty-three of the Insurance Law.”

Obviously the purpose of the act of 1925 was to enable the State, through the Court of Claims, to liquidate the claims of the individuals directly interested in the funds of a defunct insurance company no longer in the process of liquidation in the court, and to cover into the State Treasury the unclaimed balance for general State purposes. It was not the purpose of the act to permit the Court of Claims to turn the fund over to the receiver for liquidation in the Supreme Court.

While the Court of Claims had jurisdiction over proper claims to this fund under the act, the Legislature will not be deemed to have done such an unreasonable thing as to permit a receiver, appointed by the Supreme Court, to obtain the judgment of the Court of Claims, directing the payment of the fund to him. The act plainly contemplates that the class of claimants entitled to its benefits should be the persons, etc., ultimately entitled to receive the money in their capacity as stockholders or creditors. The Court of Claims properly dismissed the claim of the receiver on the ground that he was not a proper claimant to the fund. No other question is before the court for determination.

The judgment of the Appellate Division should be reversed and that of the Court of Claims affirmed, with costs in this court and in the Appellate Division.

Cardozo, Ch. J., Crane, Andrews, Lehman, Kellogg and O’Brien, JJ., concur.

Judgment accordingly.