author: O’Brien, J.

text:
    In the Matter of the Application of the City of New York Relative to Widening Neptune Avenue in the Borough of Brooklyn. Florence H. Clark, Appellant; Thomas H. Wheeler et al., Respondents.
    (Argued May 18, 1936;
    decided July 8, 1936.)

      Leslie Clifford and Robert A. Young for appellant.

      Walter E. Warner, Jr., Louis Reck, Jr., R. O’Gorman and E. J. O’Gorman for The Emigrant Industrial Savings Bank, amicus curiae.

      Charles L. MacDonald for Thomas H. Wheeler et ah, respondents.

      Thomas J. Donovan, Emanuel L. Turberg and William A. Speckels for Louis C. Schwensen, as executor of Bertha Larson, deceased, and as administrator de bonis non of the estate of Walter Larson, deceased, respondent.

      Charles S. Rosenschein and Francis S. Levien for Fleet-wood Terrace, Inc., amicus curix.

   O’Brien, J.

Walter Larson executed a mortgage for $50,000 to John T. Clark, Jr. Several years later, title to a portion of the mortgaged premises vested in the city of New York in this condemnation proceeding and an award of $15,815 was made to Larson. Title to the untaken parcels of the real estate was conveyed to Berwal Corporation and the mortgage was assigned to this appellant Florence H. Clark. In a foreclosure action she entered judgment and at the sale she bid in the real estate for $20,000. After acquiring title, there remained due to her the sum of $28,082.48 but no deficiency judgment has been obtained. The balance of the award for that portion of the mortgaged premises which was condemned is $13,697.04 and is now on deposit with the City Chamberlain. The mortgagee’s motion for an order paying it over to her was granted at Special Term but the Appellate Division reversed and certified this question: When a portion of mortgaged premises has been taken by eminent domain and an award made to the mortgagor but not paid and thereafter the mortgage is foreclosed and the remaining property is purchased at the foreclosure sale by the mortgagee for a sum less than the amount found to be due in the judgment of foreclosure, must the mortgagee then obtain a deficiency judgment pursuant to the provisions of section 1083-a of the Civil Practice Act before being entitled to any payment out of the condemnation award? ”

The hen of the mortgage attached to the entire premises which included that portion subsequently acquired by the city in this condemnation proceeding. The entire property covered by the mortgage was not sold even in partial satisfaction of the mortgage debt. Part had been converted into cash. The award for that portion of the premises condemned and covered by the mortgage was not and could not be sold with the land, but this award remains as security in place of the property condemned and is subject to the lien. The lienor is entitled to satisfy the entire amount of his hen from the award. (Matter of City of New York [Houghton Ave.], 266 N. Y. 26, 29; Matter of City of New York [Cropsey Ave.], 268 N. Y. 183, 186.) Whether that provision in section 1083-a of the Civil Practice Act is unconstitutional (New York Life Ins. Co. v. Guttag Corp., 265 N. Y. 292, 296; Worthen Co. v. Kavanaugh, 295 U. S. 56, 60, 62; Louisville Joint Stock Land Bank v. Radford, 295 U. S. 555, 580, 581, 584) which declares, If no motion for a deficiency judgment shall be made as herein prescribed the proceeds of the sale regardless of amount shah be deemed to be in full satisfaction of the mortgage debt and no right to recover any deficiency in any action or proceeding shall exist,” need not be considered in this proceeding. We think that section 1083-a can have no application to the facts before us. It deals with, instances where the mortgaged property in its entirety is sold. That is not the case here.

The order of the Appellate Division should be reversed and that of the Special Term affirmed, with costs in the Appellate Division and in this court and the question certified answered in the negative.

Crane, Ch. J., Lehman, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Ordered accordingly.


source: Caselaw Access Project

author: Crane, Ch. J.

license: Public Domain

text:
    Louis Ciaccia, Appellant, v. The Board of Education of the City of New York et al., Respondents.
    (Argued May 19, 1936;
    decided July 8, 1936.)

      Harry A. Gordon and Eric C. Gordon for appellant.

      Paul Windels, Corporation Counsel (Seymour B. Quel and Paxton Blair of counsel), for Board of Education of City of New York, respondent.

      Austin B. Mandel for William C. Hanley, respondent.

      A. Spencer Feld for May V. McSweeney, respondent.

      A. Mark Levien for The New York Teachers Guild, amicus curiee.

      Joshua S. Chintz for The Teachers Union of the City of New York, amicus curiae.

   Crane, Ch. J.

In Hurley v. Board of Education of City of New York (270 N. Y. 275) we decided in March of this year that section 871-b of the Education Law (Cons. Laws, ch. 16), which extended the eligible fists in force May 15, 1932, for four years, was violative of section 6 of article V of the State Constitution and void. At the time of the enactment of the statute the lists in effect May 15, 1932, had been superseded by new lists based upon new examinations and we said that the Legislature was without power to command that appointments be made from the old eligible lists which were no longer in force. We expressed these conclusions in the following language: “ Preference among those qualified for a position must be determined solely by relative standing upon the eligible list then in force. Favor must be excluded. It is not excluded when without a new examination the Legislature commands that appointments must be made from an eligible list then not in force before appointments can be made from a list which is in force.” (p. 280.) In that case, after examination and the preparation of the new fist of those eligible for appointment or promotion, the Legislature attempted to extend the old list.

In the case now before us the old list had expired. Some months thereafter the Legislature extended the old fist, a new fist was then in the process of formation but was not completed until after the passage of the extending act. We are of the opinion that this difference in detail and dates does not take this case from under the principle enunciated in the Hurley case which was, that after a list had expired, had come to an end, ceased to exist, so that there were no persons capable of appointment, pursuant to the civil service provisions, the Legislature was without power to confer eligibility or give preference in appointment or promotion. The previous list, the result of competitive examination, being dead, could not be resurrected by legislative command.

We have not questioned the right of the Legislature to extend the lists before they expire for a limited and reasonable time. Most of these questions of legislative power center around the reasonableness or the degree and extent of its exercise. When the Constitution directs that appointments and promotions to office in the civil service of the State and in all the civil divisions thereof, including the cities and villages, shall be made according to merit and fitness, to be ascertained as far as practicable by examinations which, so far as practicable, shall be competitive, the duty rests upon this court to confine legislative action within the spirit and purpose of this enactment. However worthy the motives may be, lists could be extended for so long a time as to effectually nullify the aim of the civil service provision. As was said in the Hurley case: “A competitive examination may demonstrate merit and fitness, at the time of the examination. As time passes, its value as a test of merit and fitness diminishes. Others may, then, be better prepared and more fit to fill a position than those who are upon the list.” (p, 280.)

The quality of service demanded by the State must not be lost sight of in an endeavor to assist those who have passed an examination and are upon eligible fists.

The specific facts in this case are these: In February of 1932 a new competitive examination was held for Supervising Attendance Officers. The old fist, or the only one in existence, was to expire on June 20, 1932. The examination was held for the purpose of making up a new fist. Those who took the examination did so under this assurance and representation. In fact a new fist was made up and promulgated on December 27, 1933, containing the names of ten men and one woman, of which the plaintiff is number two of the men. In the meantime the old fist expired as the date came around, June 20, 1932, but the Legislature sought to revive it, and on April 8th of 1933 enacted the new section 871-b of the Education Law (Laws of 1933, ch. 146) which attempted to extend the old fist for a period of four years.

Irrespective of the orderly procedure in ordering examinations and preparing fists, which is none of our concern, we are of the opinion, for the reasons stated, both here and in the Hurley case, that this act was ineffectual to accomplish the purpose sought, and that the fist established on December 27, 1933, as the result of competitive examinations, is the legal list from which to appoint the Supervising Attendance Officers.

Briefs have been submitted in behalf' of teachers of the city of New York as amici curiae. We do not see what interest they can possibly have in this litigation as, by section 9 of the Civil Service Law (Cons. Laws ch. 7), principals and teachers in a public school or academy or in a State normal school or college are placed in the unclassified service. This case and the Hurley case relate solely to the classified service.

The judgment of the Special Term should be reversed, and the prayer for a permanent injunction granted in accordance with the stipulation of tbe attorneys herein, without costs.

Lehman, O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Ordered accordingly.


author: Loughran, J.

text:
    In the Matter of Boardwalk Amusement Company, Inc., Respondent. The City of New York, Appellant.

      (Argued May 18, 1936;
    decided July 8, 1936.)

      Paul Windels, Corporation Counsel (Paxton Blair and Lewis Or gel of counsel), for appellant.

      Nathan L. Goldstein for respondent.
   Loughran, J.

The city of New York resolved to acquire by condemnation property owned in part by the respondent. A proceeding instituted to that end was discontinued pursuant to section 992 of the charter of the city. (Laws of 1901, ch. 466, amd. by L.. 1915, ch. 606.) It is by that section provided: But in case of such discontinuance the reasonable actual cash disbursements, necessarily incurred and made in good faith by any party interested, shall be paid by the city of New York, after the same shall have been taxed * * An attorney retained by the respondent had represented it in the discontinued proceeding. It has here been found that services performed on this retainer were of the reasonable value of $4,500. The city appeals from a ruling that this item may be taxed by the respondent under the foregoing charter provision.

By the contract of retainer, the respondent made a written promise to its attorney as follows: “ We agree to pay and hereby assign to said attorney for his services, 33ff% of any award that may be made in connection with the acquiring of title by the City of New York in said proceeding. It is further understood that said attorney’s compensation is to be paid when said award is paid by the City of New York.” The courts below have held that the essential object of this provision having been frustrated by the discontinuance of the condemnation proceeding, the respondent is to pay for the services of its attorney on a quantum meruit. We construe the instrument of retainer differently.

It had been contended by the city that the property it proposed to take from the respondent was so incumbered by public easements as to have but nominal value. On the other hand, the respondent had claimed ownership in fee and substantial damages. This controversy was a reason for the respondent’s selection of its attorney as one who made a specialty of the law and practice of eminent domain. Any arrangement to be made between them would necessarily regulate in some way the assumption of the manifest risk of a discontinuance of the condemnation proceeding. They might have stipulated that in that event the respondent (although it would receive nothing) was nevertheless to pay the fair value of the services of the attorney. Instead the stipulation made was that the attorney was to have a share of any award that may be made * * * to be paid when said award is paid.”

We think these words and circumstances of the retainer predominately suggest the purpose to protect the respondent from the burden of liability to its attorney without the corresponding gain of an award. (Cf. Cutter v. Powell, 6 T. R. 320.) A different question is presented “ when the event which ends the service happens without the fault of either party, and is not expressly or impliedly insured against in the agreement which induced the labor.” (Parker v. Macomber, 17 R. I. 674, 676. So, Matter of Buccini v. Paterno Construction Co., 253 N. Y. 256, 258.) In that case it would be unjust not to compel a return for benefits received. 0Sargent v. McLeod, 209 N. Y. 360. See Woodward on The Law of Quasi Contracts, § 122.) We find no room here for such an implied or constructive obligation.

It is true that the respondent’s full title had been vindicated by its attorney before the condemnation proceeding was discontinued. That this was an important service is not to be denied. But there is also no denying that the achievement was one to which the attorney had pledged himself on terms of his own choosing and that the inference of ultimate advantage therefrom to the respondent is now remote and conjectural. “ The question to be determined is not the value of the work considered by itself and unrelated to the contract. The question to be determined is the benefit to the owner in advancement of the ends to be promoted by the contract.” (Matter of Buccini v. Paterno Construction Co., supra, p. 259.)

We conclude that the attorney took the chance that his right to look to the respondent for any compensation would be annulled by the contingency that has happened.

The order should be modified in accordance with this opinion, and so modified affirmed, with costs in this court and in the Appellate Division to the appellant.

Lehman, O’Brien, Crouch and Finch, JJ., concur; Crane, Ch. J. and Hubbs, J., dissent and vote to affirm.

Ordered accordingly.


author: Crouch, J. Lehman, J.

text:
    In the Matter of Elizabeth V. B. Slattery, Respondent, against The Board of Estimate and Apportionment of the City of New York, Appellant.
    (Argued April 27, 1936;
    decided July 8, 1936.)

      Paul Windels, Corporation Counsel (Seymour B. Quel, Paxton Blair and Henry J. Shields of counsel), for .appellant.

      Franklin Nevius, John F. Collins, Asa B. Kellogg and Robert B. Jarvis for respondent.
   Crouch, J.

The petitioner’s husband was Deputy Chief Engineer of the Board of Transportation of the City of New York, engaged in the construction and operation of its city-owned subway. He died September 23, 1932, of a heart ailment which, it is claimed, was the natural and proximate result of an accident sustained from manhandling by a crowd on the occasion of the opening of the subway, September 9, 1932.

Petitioner filed a claim with the Board of Estimate and Apportionment for an accidental death benefit under the provisions of the city charter relating to the Employees’ Retirement System, of which the deceased was a member. Section 1718 of the charter (Greater New York Charter, Laws of 1901, ch. 466, as amd.), authorizing such benefit, is as follows: Upon the accidental death of a member before retirement, provided that evidence shall be submitted to the board of estimate and apportionment proving that the death of such member was the natural and proximate result of an accident sustained while a member and while in the performance of duty at some definite time and place and that such death was not the result of willful negligence on his part, bis accumulated deductions shall be paid to his estate, or to such person as he has nominated or shall nominate by written designation, duly acknowledged and filed with the board of estimate and apportionment; and, upon application by or on behalf of the dependents of such deceased member, the board of estimate and apportionment shall grant a pension of one-half of the final compensation of such employee (a) to his widow, to continue during her widowhood,” etc.

Section 1719 provides that workmen’s compensation benefits to a member of the retirement system be subtracted from the amount otherwise payable for the same disability to members of the system. The Board of Estimate and Apportionment accordingly advised the petitioner to take the necessary proceedings before the Industrial Board, to establish her claim for workmen’s compensation. She did so, proceeding against the Board of Transportation as employer, and the city of New York as insurer. Hearings were had, in which the claim was contested by the Corporation Counsel, and an award was made in her favor, which was appealed and affirmed. The Industrial Board found, as necessary under the Workmen’s Compensation Law (Cons. Laws, ch. 67), that the death of the deceased was occasioned by accidental injuries arising out of and in the course of his employment.

The Medical Board, designated by section 1705 of the charter to report its conclusions and recommendations to the Board of Estimate and Apportionment, as head of the retirement system, disagreed with the conclusion as to accidental death. The Board of Estimate indorsed its recommendations, denied an accidental death benefit to petitioner, but awarded her an ordinary death benefit. The question, on this appeal is whether the determination of the Industrial Board in the compensation proceedings is conclusive on the Board of Estimate and Apportionment, as head of the retirement system, on principles of res adjudícala, or otherwise.

To a large degree the issues presented in proceedings under the Workmen’s Compensation Law and the retirement provisions are alike. There is no substantial difference to be perceived between accidental injury ” under the former, and “ the natural and proximate result of an accident ” under the latter. There are perhaps some technical differences; for example, the requirement under the Compensation Law that the injury arise “ out of and in the course of ” employment (§ 2, subd. 7), as contrasted with in the performance of duty,” under the retirement provision (Cf. Matter of Connelly v. Samaritan Hospital, 259 N. Y. 137; Fitzgerald v. Clarke & Son, [1908] 2 K. B. 796, 799), and the exception in the Compensation Law of injuries “ solely occasioned by intoxication * * * or by willful intention of the injured employee to bring about the injury or death of himself or another (§ 10), contrasted with the exception in the retirement provisions of injuries occurring through the willful negligence ” of the member.

■ The contrasted provisions, however, are in every instance narrower in the Compensation Law requirements than in the retirement provision. Cases may be postulated where injuries might not be covered by the compensation statute, and still be within the terms of the retirement provisions. No case can be put which falls within the requirements of the Compensation Law and not within the broader scope of the retirement provisions. While the statutory provisions are not identical, an adjudication in favor of a claimant in compensation proceedings, so far as we can see, includes an adjudication that all the factors are present in the case which go to make a valid claim for accidental death benefits under the retirement act.

The purpose of the two statutes, broadly speaking, is identical. That to the legislative mind there was also substantial identity of subject-matter and remedy appears clearly from the provisions of the Civil Service Law kindred to those in the city charter. (Civil Service Law, §§ 65-a, 67, Cons. Laws, ch. 7.) It seems apparent that in almost all instances of accidental injury, the same issues were deemed to be involved where an employee was covered by both the Compensation Law and the retirement system; and the Industrial Board was the forum specifically assigned in such cases to adjudicate them. (Civil Service Law, § 67.) The practice under the city charter seems to have been the same. All considerations of orderly administration and finality demand that there should be but one trial of the same issues, and we think that was the legislative intent. Conceivably, as we have said above, there may arise instances where an employee is covered by the broad provisions of the retirement law and not by those of the Compensation Law. In such instances the rule of finality would not apply. This is not one of those instances, and we think the rule does here apply.

Moreover, under the circumstances of the litigation, we might even go further. Petitioner was instructed by the Board of Estimate to initiate her claim by proceedings before the Industrial Board. The Board of Estimate thus had notice of this proceeding in its capacity as head of the retirement system, and was in a manner a party thereto and entitled to defend. Upon familiar principles the system is bound by the result. (Lovejoy v. Murray, 3 Wall. [U. S.] 1; Souffront v. La Compagnie des Sucreries, 217 U. S. 475.)

The order should be affirmed, with costs.

Lehman, J.

(dissenting). I cannot agree with the statement in the prevailing opinion that “ the contrasted provisions, however, are in every instance narrower in the Compensation Law requirements than in the retirement provision.” The contrary, indeed seems to me to be true. It is evident that every injury arising in the performance of duty ” would also be an injury arising out of and in the course of employment,” but the converse is not so evident, and certainly the exclusion from compensable injuries of those which are solely occasioned by intoxication * * * or by willful intention of the injured employee to bring about the injury or death of himself or another ” is narrower than the exception in the retirement act of injuries occurring through the “ willful negligence ” of the member.

In any event, the provisions of the two statutes are not identical and if the Legislature had intended that there should be but a single trial of the issues of right to an award under the Compensation Law and right to benefit under the retirement system, it would naturally have provided that the same issues would be determinative of both rights; nor can I find in the provisions of the Civil Service Law the slightest indication of such an intent.

The retirement system was not a party to the proceedings before the Industrial Board, though it may be that notice of the proceedings given to the Board of Estimate was notice to it. An adjudication does not bind a party who has notice of the proceedings unless, as in the cases cited by Judge Crouch, that party could prosecute or defend the proceedings to “ establish and protect his own right,” or, unless such party assisted in the prosecution or defense “ in aid of some interest of his own.” (Souffront v. La Compagnie des Sucreries, 217 U. S. 475, 487.) Here I can find no basis for any conclusion that the retirement system could have been heard in opposition to the claim for compensation. An award would reduce the amount payable from the retirement fund but would not be payable out of such fund. The retirement system, therefore, had no interest of its own to serve by opposing an award. The instruction of the Board of Estimate to the claimant to initiate her claim by proceedings before the Industrial Board amounted to no more than notice that even if the claimant was entitled to additional retirement benefits she should first establish the amount which would in such event be deductible from such benefits. It is difficult to see how by such instruction the retirement system gained or lost any rights. The Board of Estimate could not remit to another tribunal determination of any question which the statute required the Board of Estimate to decide. If the Legislature had provided that an adjudication of the issues in the compensation proceedings should finally determine also the right to a retirement award, then it might be said that the Legislature also intended that when the retirement system had notice of these proceedings it might oppose them. In the absence of such provision there can be no ground for holding the adjudication binding upon the retirement system.

The order of Appellate Division should be reversed and the determination affirmed.

Grane, Ch. J., O’Brien, Hubbs and Loughran, JJ.; concur with Crouch, J.; Lehman, J., dissents in opinion, in which Finch, 'J., concurs.

Order affirmed.


text:
    The People of the State of New York ex rel. Annie Cohn, Respondent, against Mark Graves et al., Constituting the State Tax Commission, Appellants.
    (Argued May 20, 1936;
    decided July 8, 1936.)

      John J. Bennett, Jr., Attorney-General (Joseph M. Mes-nig of counsel), for appellants.

      Maurice Cohn for respondent.
   Crane, Ch. J.

Rents from real property located in New Jersey, as well as interest from mortgages on similar property is, in my opinion, taxable income when received by a resident of this State. The tax upon such income is not a tax on the New Jersey real estate. The Pollock case (Pollock v. Farmers’ Loan & Trust Co., 157 U. S. 429) has not decided otherwise and should not be pushed to cover this point. Many cases have gone through the courts since that decision explaining and clarifying its limitations. What may be a direct ” tax under the Federal Constitution may be income (as it really is) for other purposes.

The order of the Appellate Division should be reversed and the determination of the State Tax Commission affirmed, with costs in this court and in the Appellate Division. A question under the Federal Constitution was presented and necessarily passed upon by this court, viz.: Is section 359 of the Tax Law of the State of New York, as amended by chapter 933, Laws of 1935, in so far as it imposes an income tax upon rents received by a resident of this State from real property located in a foreign State repugnant to, and violative of any provision of the Constitution of the United States. This court held the sections of said Tax Law herein involved to be a valid exercise of legislative power.

Hubbs, J. (dissenting). The relator, Annie Cohn, during the years 1931 and 1932, while a resident of this State, received, as the beneficiary of a life estate created by the will of her deceased husband, certain income, part of which was derived from rents from real estate located in the State of New Jersey and part from interest on bonds and mortgages upon real property located in that State. There were three executors of the will, two of whom resided in New Jersey and relator who resided in this State. The executors qualified in the State of New Jersey. Since 1913 they have been functioning in that State and the office of the estate is and always has been in the city of Paterson, where the securities are kept in a bank. The executors have managed the estate property, collected rents and income from bonds and mortgages, and made repairs to the real property.

The relator filed a State income tax return showing income received from the estate, consisting of rents from certain specified real properties located in New Jersey and interest on mortgages covering real property in that State. She paid an income tax on such income. Thereafter she made application for refund of the taxes paid, as erroneously paid or illegally collected, her contention being that this State was without power to tax either the rental income derived from real property located without the State or the income from bonds and mortgages upon real property located without the State, where the situs of such intangibles was likewise without the State. In making the application for refund, the appellant relied upon Matter of Pierson v. Lynch (237 App. Div. 763; affd., 263 N. Y. 533). The appeal in that case was dismissed by the United States Supreme Court.

The Legislature amended the Tax Law (Cons. Laws, ch. 60) by chapter 933 of the Laws of 1935, and provided that the rental income derived by a resident of New York State from real property located without the State constituted taxable income. The law was made retroactive to January 1, 1919.

The relator’s claims for refund were denied. This proceeding was thereupon instituted. The Appellate Division decided that the identical question presented had been decided in Matter of Pierson v. Lynch (supra); that the fact that the statute which authorized the tax, section 359 of the Tax Law, has been amended since the decision in the Pierson case is without significance as that case was decided solely upon the ground that under the Fourteenth Amendment to the Federal Constitution it was not within the power of a State to tax a resident of the State on account of rentals or income received from land located beyond its borders. Reference was also made to the determination of the Supreme Court of the United States in Senior v. Braden (295 U. S. 422).

Upon this appeal the State Tax Commission contends, despite the determination of this court in the Pierson case and despite the decision of the United States Supreme Court in Pollock v. Farmers' Loan & Trust Co. (157 U. S. 429), which latter case held in effect that a tax upon the income from real property was the same in substance as a tax on the real property, that the rents and mortgage interest derived from real property located without the State received by a resident of this State are properly subject to the New York personal income tax law.

It would be impossible, without squarely receding from the position taken in the Pierson case, to hold that income represented by rentals from real property located in another State may be included as part of the owner’s income for the purpose of computing the owner’s income tax in this State. We believe that case was correctly decided. The only difference in the facts of the two cases is that in the Pierson case title to the real property appears to have been in the recipient of the income' in her individual name, whereas in the present case the recipient of the income had only a life interest in the property. This slight difference in the facts of the two cases is not urged as a ground for the application of a different rule and, of course, could not be urged as such a ground, since the question involved is based upon the broad ground of whether the income tax is such a tax as may not be imposed by one State upon real property and tangible personal property located in another. The argument of the Tax Commission is, in substance, that the decision in Matter of Pierson v. Lynch (supra) was based upon the decision of the Supreme Court of the United States in the Pollock case and that, as a matter of fact, the decision in the Pollock case has no bearing upon the point at issue here. The tax involved in the Pollock case was an annual tax levied by the Congress of the United States on the income of persons and corporations. It was decided that a tax on the rents or income of real estate is a direct tax within the meaning of the Constitution of the United States which, by the third clause of section 2, article I, requires that direct taxes shall be apportioned among the several States, and that since the income tax law under consideration did not provide apportionment of the tax collected and the tax was a direct tax, the act was in violation of the United States Constitution and to the extent that it levied a tax on the rents or income of real estate was invalid. The determination in the Pollock case has been repeatedly stated to have amounted to a holding upon the constitutional meaning of the word direct ” — • that is, that a tax on income from real property amounts in effect to a direct tax upon the property. (Knowlton v. Moore, 178 U. S. 41; Flint v. Stone Tracy Co., 220 U. S. 107; McCoach v. Minehill Ry. Co., 228 U. S. 295.)

In the Pollock case the question involved was as to the validity of the act of Congress as construed in the light of the Federal Constitution, whereas in the instant case we are concerned with the effect of a tax imposed by the State in view of the provision of the Federal Constitution. There seems to be nothing in the late decisions of the United States Supreme Court which detracts from the effect of its decision in the Pollock case that a tax upon the income from real property is a direct tax and equivalent to a tax upon the property itself.

In Senior v. Braden (supra) the State of Ohio taxed transferable certificates under declarations of trust entitling the holders to a portion of rents from specific parcels of real estate, some within the State of Ohio, some in other States. It was conceded that under the Fourteenth Amendment the State had no power to tax land or interests in land beyond its borders, and that if the certificates constituted interests in land, the tax would be unconstitutional and void. It was decided that a tax in Ohio on the certificates was void. It appeared that each parcel of land covered by the certificates was taxed in the State where located. In each the trustee held and managed the property for the use and benefit of the certificate holders and distributed the rents and proceeds of sales. Each certificate holder was said to hold a beneficial interest in the trust of each parcel, and the trustee was free from the control of the certificate holders. The State contended that the interest of a certificate holder was a species of intangible personal property entitling the holder to a pro rata distribution of income and proceeds of sales; that the certificate was the evidence of the holder’s interest in land, legal title of which the trustee held. The court held the certificate holders had interests in and to the property which were more than a bare right and much more than a chose in action, citing and quoting from Brown v. Fletcher (235 U. S. 589). The dissenting opinion of Mr. Justice Stone indicates that he understood the prevailing opinion to hold that a State could not tax the income from real property located in another State. The court decided that the same rule applied under the State statute as under the United States statute, thereby extending the rule of the Pollock case and making it applicable under a State statute. Although that case did not involve an income tax statute, it did involve a tax upon the investments measured by the income.

As land in another State cannot be taxed against the owner in this State, and a tax upon the income from real property is a tax upon the real property itself, it follows that the tax assessed in the case at bar on the rents received was illegal. It was also illegal as constituting double taxation for the reasons hereinafter stated.'

There remains the question as to whether the income from bonds and mortgages is likewise entitled to be exempted from the application of the State income tax. In considering that question, it is to be borne in mind that the property upon which the mortgages exist is wholly without the State of New York, and, further, that the evidences of the indebtedness, that is, the bonds and mortgages, are likewise without the State. Furthermore, they are a part of an estate administered by the executors in a measure as a business in the State of New Jérsey. The income results from the investment cf funds of the estate, the supervision of those investments, and the activity of the executors in collecting the income. The court below seems to have treated the income from mortgages on the real property under the same category as rentals. That type of income was not involved in Matter of Pierson v. Lynch (supra). Mortgage interest is not compensation for the use of real property but rather compensation for the use of money. That is, it constitutes compensation for a loan of money or forbearance on an indebtedness. The debt is not tangible and the mortgage upon the real property is only collateral security for the intangible. If it were necessary to construe the decision in this case as a determination that a tax upon mortgage interest is a direct tax on the land, there would be difficulty in sustaining the decision in so far as that type of income is concerned. However, the courts have gone much further and have held that where intangible as well as tangible property has acquired a business situs in another State, taxation thereof by the State other than the State in which it had acquired a business situs would violate the due process clause of the Fourteenth Amendment of the United States Constitution and constitute double taxation. In New Orleans v. Stempel (175 U. S. 309) the defendant in error, domiciled in New York, was the owner of credits evidenced by notes largely secured by mortgages on real property in New Orleans. The notes and mortgages were in the city of New Orleans in the possession of an agent of the defendant in error. The agent collected the interest and principal as it became due and deposited the same in a bank in New Orleans. The question involved in that case was as to whether the property in the hands of the agent was subject to taxation in New Orleans. It was held that such taxation did not infringe any rights secured by the Federal Constitution. It was said that when an indebtedness has taken a concrete form and become evidenced by note, bill, mortgage or other written instrument, and the written instrument evidencing the indebtedness is left within the State in the hands of an agent of the nonresident owner to be by the agent used for the collection and deposit or reinvestment within the State, its taxable situs is in the State. (DeGanay v. Lederer, 250 U. S. 376.)

It seems to be quite clear that property, consisting of bonds, mortgages and similar evidences of indebtedness, is taxable in the State where they are physically located if they are there, as in this case, for the purpose of collection of principal and interest and for management by an agent within the State. For the purposes of taxation, the intangible debt, when represented by something of a concrete nature such as a bond or mortgage, becomes in the nature of a tangible item of property at the business situs. (DeGanay v. Lederer, supra; Hill v. Carter, 47 Fed. Rep. [2d] 869; Opinion of the Justices, 84 N. H. 559; Harrison v. Commissioner of Corporations & Taxation, 272 Mass. 422.)

The same principle applies to tangible personal property. (Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 194; Frick v. Pennsylvania, 268 U. S. 473. See, also, Senior v. Braden, supra.)

Maguire v. Trefry (253 U. S. 12) was at one time direct authority for holding that the income from the bonds and mortgages on real property situate in New Jersey is taxable in this State. The United States Supreme Court has, however, departed from the rule stated in that case. (Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204.)

In Senior v. Braden (supra, p. 432) the court said that the views expressed in the Maguire case are not in harmony with Safe Deposit & Trust Co. v. Virginia, 280 U. S. 83, and views now accepted here in respect of double taxation.”

If the decision in the Maguire case is in conflict with the present views of the United States Supreme Court, it necessarily follows that under the decision of that court, the income from the New Jersey bonds and mortgages is not subject to the payment of an income tax in this State. In the case of Union R. T. Co. v. Kentucky (supra) it was definitely decided that a State could not tax tangible property permanently situated outside of the State or domicile of the owner and used there in the owner’s business. Later the court extended the principle to intangibles in order to eliminate unjust double taxation, stating in effect that it is no more possible for an intangible to have a legal status in two places at the same time than it was possible for a tangible to be in two places at the same time. (First Nat. Bank v. Maine, 284 U. S. 312; Baldwin v. Missouri, 281 U. S. 586; Safe Deposit & Trust Co. v. Virginia, 280 U. S. 83.)

While there has been a sharp conflict among the members of the United States Supreme Court on the subject, and its earlier decisions are, in certain instances, in conflict with its later decisions, still we understand the late decisions to mean that double taxation is illegal and that the income from securities which have a taxable situs in one State cannot be legally taxed in another State. The decisions of that court are binding upon us on the questions here involved and should be strictly followed.

As the property from which the relator’s income was derived had a business situs in New Jersey and was taxable there, the income therefrom cannot be taxed in this State. The order of the Appellate Division should be affirmed, with costs.

Lehman, Crouch and Finch, JJ., concur with Crane, Ch. J.; Hubbs, J., dissents in opinion, in which O’Brien and Loughran, JJ., concur.

Ordered accordingly.


text:
    In the Matter of Bronx Gas and Electric Company, Respondent, against Milo R. Maltbie et al., Constituting the Public Service Commission of the State of New York, et al., Appellants. In the Matter of the Yonkers Electric Light and Power Company, Respondent, against Milo R. Maltbie et al., Constituting the Public Service Commission of the State of New York, et al., Appellants.
    (Argued May 21, 1936;
    decided July 8, 1936.)

      M. Maldwin Fertig, John J. Donohue and Sherman C. Ward for Public Service Commission, appellant.

      Paul Windels, Corporation Counsel (Joseph L. Weiner, Herman Horowitz and Harry Hertzoff of counsel), for The City of New York, amicus curise.

      John J. Bennett, Jr., Attorney-General (Timothy F. Cohan and Henry Epstein of counsel), intervener.

      Harry Lesser for United Civic Associations of the East Bronx, appellant.

      William L. Ransom, Colley E. Williams and Richard Joyce Smith for respondents.
   Crane, Ch. J.

These two cases have been argued together as they present the same question of law. "While this opinion will consider the facts in the Bronx Gas and Electric Company case, the decision is applicable to both cases.

Petitioner, Bronx Gas and Electric Company, supplies both electric and gas service to consumers in the borough of the Bronx in the city of New York. This proceeding relates solely to the electric rates of that company. On May 2, 1934, the Public Service Commission, on its own •motion, instituted the proceeding under review, wherein it undertook'an investigation as to the rates and charges of the petitioner for electricity. The hearings for the taking of testimony were opened on May 9,1934, and have continued up to the present time. On October 16, 1934, the Commission ordered the Bronx Company to put into effect, not later than November 1, 1934, temporary rates for electricity, pending a determination of final rates, which would reduce all rates in effect for metered electric service to general consumers by not less than twenty per cent. The Commission- prepared a memorandum setting forth the facts upon which it based its temporary rates. It determined that the original cost of the physical property, less accrued depreciation, used by the petitioner in the rendition of electric service as of August 31,1934, did not exceed $6,698,428; that a twenty per cent reduction in the rates for metered electricity to general consumers would reduce the company’s annual operating income by $426,000; and that the amount the petitioner would receive under its rates so reduced would be sufficient to yield a return in excess of six per cent on the original cost.

The Yonkers Electric Light and Power Company proceeding was instituted October 11, 1932. Hearings began June 19, 1933, and have continued, so it is stated, as rapidly as possible. On May 9, 1934, the Corporation Counsel of Yonkers moved the Commission to fix temporary rates pursuant to section 114 of the Public Service Law (Cons. Laws, ch. 48), which was ordered October 23, 1934, the rates being reduced by an amount equal to six per cent of the charge then applicable under the provisions of its schedule of rates and charges. The Commission determined the original cost of the physical property, less accrued depreciation of the petitioner as of December 31, 1933, to be 114,373,000, estimated its net revenue for the year ending August 31, 1934, at $988,000, and allowed a return of slightly over six per cent on this value, amounting to $872,000. The estimated revenue which the petitioner was receiving under its then rates exceeded this amount by $116,000.

The Appellate Division annulled this action of the Public Service Commission on the ground that the fixing of the temporary or intermediate rate was illegal; and that section 114 of the Public Service Law, enacted by chapter 287 of the Laws of 1934, which permitted such procedure, was unconstitutional.

That the Commission in both of these proceedings has fairly complied with this new section of the law is conceded, so that the sole question for this court to determine is whether the Public Service Commission can legally provide a temporary rate for electric service, pending the determination of the final rate.

To sustain the ruling of the court below, reliance is placed upon Prendergast v. New York Tel. Co. (262 U. S. 43), in which Mr. Justice Sanford wrote the opinion. Under the law as it then existed, the Commission of this State had fixed a temporary rate, pending final determination of the fair and reasonable rate. This was held to be confiscatory and the temporary injunction issued by the United States District Court was upheld on appeal. Mr. Justice Sanford in his opinion said: Nor did the fact that the orders' of the Commission merely prescribed temporary rates to be effective until its final determination, deprive the company of its right to relief at the hands of the court. The orders required the new reduced rates to be put into effect on a given date. They were final legislative acts as to the period during which they should remain in effect pending the final determination; and if the rates prescribed were confiscatory the Company would be deprived of a reasonable return upon its property during such period, without remedy, unless their enforcement should be enjoined. Upon a showing that such reduced rates were confiscatory the Company was entitled to have their enforcement enjoined pending the continuance and completion of the rate making process ” (p. 49).

Certain things were established by this decision: (1) The temporary rate is confiscatory if it denies a fair return upon the Company’s investment, that is, the temporary rate must give a fair return upon all those elements of capital value which must be considered in fixing the final rate. Of course this means that no temporary rate can ever be fixed, for, having all the elements upon which to fix a final rate, there is no necessity of calling it a temporary one. (2) The temporary rate, as fixed by the Commission in this Prendergast case, was a final rate, as the law had provided no means by which the company could be repaid its loss, should it finally be determined that the temporary rate was too low. (3) The court recognized that the public was entitled to a remedy and that the company could not profit through delays in legal procedure. It, therefore, recognized the practice of requiring the company, upon obtaining a preliminary injunction, to give a large bond, conditioned upon the repayment to consumers of the overcharges, if it should finally be determined that the Public Service Commission was right.

After this decision the Legislature of the State of New York was confronted with this qusere: Was it ever possible to compel public service corporations to charge reasonable rates, pending the long drawn-out and interminable proceedings to establish a fair return? The establishment of the proper base rate, or the present capital investment, upon which a company is entitled to a fair return, has become an intricate, involved, tedious proceeding, extending into months and years. Much of the evidence produced is expert testimony, varying in worth and uncertainty, presenting a maze of detail and figures. (City of Louisville v. Cumberland Tel. & Tel. Co., 225 U. S. 430.) Without suggesting in any way that the public service corporations have not acted with utmost good faith, we can see the opportunity, as did the Legislature, for the intentional delay in these proceedings whereby unwarranted profits may be obtained. The fixing of a reasonable rate by these public service corporations, who enjoy from the public such valuable franchises, to be of any value should be a matter of speedy regulation. The courts should not encourage such finesse in figuring as to make these hearings upon rate questions an obstruction instead of a relief. Of course caution must be used on both sides, for the desire for improper gain is oftentimes as eager with the consumer, or his spokesman, as with the corporation.

Recognizing the present-day conditions surrounding the difficulty in determining the proper rate, we come back to the question: Is it possible for the law, Legislature or Congress to provide for a temporary rate, pending these lengthy hearings? The Legislature evidently had in mind all that I have here said regarding the Prendergast case and the difficulties there pointed out when in 1934, by chapter 287 of the laws of that year, it added section 114 to the Public Service Law. This section reads:

“ § 114. Temporary rates. To facilitate prompt action by the commission in proceedings involving the reasonableness of the rates of any public utility and to avoid delay in any such rate proceeding, the commission is hereby authorized to require any public utility company to establish, provide and maintain continuing property records, including a list or inventory of all of the physical property actually used in the public service, and to require any public utility company to keep its books, accounts and records in such manner as to show currently the original cost of said physical property and the reserves accumulated to provide for the retirement or replacement of said physical property.

“ The commission may, in any such proceeding, brought either on its own motion or upon complaint, upon notice and after hearing, if it be of opinion that the public interest so requires, immediately fix, determine and prescribe temporary rates to be charged by said utility company pending the final determination of said rate proceeding. Said temporary rates so fixed, determined and prescribed shall be sufficient to provide a return of not less than five per centum upon the original cost, less accrued depreciation, of the physical property of said public utility company used and useful in the public service, and if the duly verified reports of said utility company to the commission do not show the original cost, less accrued depreciation, of said property, the commission may estimate said cost less depreciation and fix, determine and prescribe rates as hereinbefore provided.

Temporary rates so fixed, determined and prescribed under this section shall be effective until the rates to be charged, received and collected by said utility company shall finally have been fixed, determined and prescribed. The commission is hereby authorized in any proceeding in which temporary rates are fixed, determined and prescribed under this section, to consider the effect of such rates in fixing, determining and prescribing rates to be thereafter charged and collected by said public utility company on final determination of the rate proceeding.” .

We note at once that the temporary rate shall be sufficient to provide a return of not less than five per centum upon the original cost, less accrued depreciation of the physical property of the utility company used and useful in the public service. At least there is some accuracy in these figures; they can be fixed with some certainty and are not dependent altogether upon speculative expert opinion. (Clark’s Ferry Bridge Co. v. Public Service Com., 291 U. S. 227.)

These are not all the factors, however, which must be taken into consideration in fixing finally a fair return or rate, or any rate for that matter, which has the effect of being final. According to Smyth v. Ames (169 U. S. 466) other elements must be considered in order to ascertain capital value — the original cost of construction, the amount expended in permanent improvements, the amount and market value of its bonds and stock, the present as compared with the original cost of construction, the probable earning capacity of the property, and the particular rates prescribed by statute, and the sum required to meet operating expenses, are all matters of consideration and are to be given such weight as may be just and right in each case. Other elements besides these may enter into the problem, according to circumstances. (West v. Chesapeake & Potomac Tel. Co., 295 U. S. 662.) Therefore, we must conclude, in fact it is apparent and conceded that if this temporary rate, fixed according to this added section, is to be final, or has any element of finality, it is unconstitutional and void.

We cannot imagine the Legislature, in the face of the Prendergast case, doing such a foolish thing as re-enacting, though in different language, a law giving the Public Service Commission power to do that which the United States Supreme Court had determined it could not do. The Legislature, evidently by section 114, intended to meet the criticism in the Prendergast case and to follow the way impliedly pointed out for a proper law. If the courts required the public utility company to put up a bond to pay back to the consumers the overcharges which it had exacted, pending a hearing, why was it not just as feasible and legal to turn the remedy about and provide that the consumers or the public should make good to the company the loss which it may have sustained in temporarily exacting too little? This is what our Legislature has done, and this we think is the meaning which we must give to its language, if it is to have any sense at all in the light of the past.

The Commission fixes a temporary rate pending the hearing. It is based upon the elements stated, which are not all of those required to fix a permanent rate. As before stated, this would be impossible, if we must consider in fixing a temporary rate all the elements required for the final rate: no temporary rate could ever be fixed. This also is self evident. Therefore, to meet these conditions the temporary rate is fixed, within reasonable limits, upon figures which can be with some exactness obtained from the books of the company, showing original cost or investment; and if finally, when the proceeding ends, the temporary rate is proved to have been too low, the utility must be permitted and authorized to charge enough for its service to make up the loss. The consumer must pay what he should have paid, and the only way to do it is to fix a rate high enough to make up this loss.

True it is that all the consumers paying the final rate, including the take-up, may not be the same as those who paid the temporary rate. A few consumers may be new customers paying what the old consumer should have paid. Such instances are of minor importance; the percentage must be very small. We can never work our institutions of government if we refine matters to such an extent that we have to consider all these little details. The Constitution expresses fundamental principles, and if in the main these have been observed, this is all that can be required. Besides, when we speak of the consumer — the customer — we mean the public, not individuals. (San Diego Land & Town Co. v. Jasper, 189 U. S. 439.)

Anyhow, this is no concern of the company, for its complaint here is that because of the temporary rate it will suffer loss. If the loss is made up to it in the final rate the objection is obviated. That the Commission is authorized, in fact compelled, to make up this loss, if any, through the fina rate, is the meaning and must be the meaning of these words in section 114: “ The commission is hereby authorized in any proceeding in which temporary rates are fixed, * *' * to consider the effect of such rates in fixing, * * * rates * * * on final determination * * Experience ”— how much better this is than expert testimony, whether dealing in history or prophecy. (Willcox v. Consolidated Gas Co., 212 U. S. 19; City of Knoxville v. Knoxville Water Co., 212 U. S. 1; Cedar Rapids Gas Light Co. v. Cedar Rapids, 223 U. S. 655, 669.)

This section, as we have said, forces the Public Service Commission to consider the returns from the temporary rate and to establish the permanent rate, or the final rate, accordingly; that is, if the temporary rate has proved to be too low the final rate must make it up to the company. Over what time it is necessary to provide a rate sufficient to make up the loss, or to include the take-up, is a matter of adjustment, machinery and method. These matters are all in the hands of the Public Service Commission, which may increase or modify a rate to meet the circumstances at any time. Here is no nunc pro tunc rate as in Oklahoma Natural Gas Co. v. Russell (261 U. S. 290).

We, therefore, are of the opinion that this law is not unconstitutional; that it meets the defects in prior procedure, and affords the company ample protection as well as the consumer. It is a fair attempt to meet the time element, which is necessary to be considered in rate-fixing hearings.

Giving .tbe respondents all the elements of value which they say should be considered, the companies then would have a return at the temporary rates, the Yonkers Company 4.89 per cent, and the Bronx Company 4.84 per cent.

For these reasons, in each proceeding the order of the Appellate Division should be reversed, and the determination of the Public Service Commission affirmed, with costs in all courts.

Lehman, O’Brien, Crouch, Loughran and Finch, JJ., concur; Hubbs, J., dissents.

Ordered accordingly.


text:
    Klin Co., Inc., Respondent, v. New York Rapid Transit Corporation, Appellant.
    (Argued May 20, 1936;
    decided July 8, 1936.)

      Trabue Carswell and George D. Yeomans for appellant.

      Paul Windels, Corporation Counsel (Paxton Blair and Charles Blandy of counsel), for City of New York, amicus curias.

      H. H. Nordlinger and Jacob I. Charney for respondent.
   Loughran, J.

This suit is brought to recover for damages to easements of light, air and access appurtenant to premises of the plaintiff abutting on Jamaica avenue, Queens, city of New York.

The gist of the complaint is that the maintenance and operation by the defendant of an elevated railroad structure erected in Jamaica avenue “ constitute a continuing trespass and nuisance, and thereby plaintiff’s interest and property in said premises have depreciated in value.”

We are concerned only with the question of the validity of two defenses iii substance stated as follows: (1) “ The defendant and its grantors and predecessors have been in the actual visible, continued occupation and possession of so much of said easements as have been interfered with, obstructed or destroyed, holding the same under claim of right, and of title in fee simple, exclusive of any oth&r right, adversely to the pretended title of the plaintiff fo£ fifteen yearc^last before the commencement of this action.” (2) “ The alleged cause or causes of action attempted to be set forth in the complaint herein did not, nor did any of them, accrue to the plaintiff herein or to its predecessor or predecessors in title /within fifteen years next preceding the commencement oithis action.^)

These defenses have been stricken out on the authority of Felberose Holding Corp. v. New York Rapid Transit Corp. 1244 App. Div. 427). Defendant appeals, by leave of the Appellate Division upon this certified question: Is the fifteen year Statute of Limitations set up in the first and second affirmative defenses herein, applicable to the subject matter of this action? ”

We are not to be detained by such refined inquiries as whether there may be possession ” of an easement, or whether the defendant could acquire ” an integral part of the plaintiff’s property indissolubly annexed thereto.” (Kernochan v. New York Elevated R. R. Co., 128 N. Y. 559.) For the purposes of this appeal, it is conceded that the existence of the defendant’s railroad in the street for the applicable period of prescription would bar the plaintiff’s right of action. (Hindley v. Manhattan Ry. Co., 185 N. Y. 335, 355.)

This action was commenced in July, 1935. By amendments effective September 1, 1932, the period of our statutory limitations upon actions to recover real property or the possession thereof was reduced from twenty years to fifteen. (Civ. Prac. Act, §§ 34-37, as amd. by Laws, of 1932, chs. 261-264.) The sole question now before! us is whether this change in the Statutes of Limitations 7 should be extended to reduce to fifteen years the period I of twenty years theretofore necessary for acquiring^ incorporeal hereditaments by prescription.

That this result is dictated on principle and would have the sanction of the general attitude of the courts is not to be doubted. (22 Am. & Eng. Ency. of Law [2d ed.], p. 1212; Jones on the Law of Easements, § 160; 2 Tiffany on the Law of Real Property [2d ed.], pp. 2028-2030.) We turn to the reasons for a contrary view assigned in the opinion of the Appellate Division in Felberose Holding Corp. v. New York Rapid Transit Corp. (supra).

It was said that differences between corporeal heredita-.. ments and easements prevent full application of the same rule in both cases. This must be admitted, but it is not a reason for refusing to follow the analogy of the Statutes of Limitations as far as that analogy goes. “ There is no reason for affording greater protection to incorporeal rights than to the land to which those rights are appurtenant.” (Scallon v. Manhattan Ry. Co., 185 N. Y. 359, 363.)

It was said that the term of twenty years formerly requisite to raise a right by prescription has acquired so fixed a status that failure of the Legislature to reduce it must be taken to leave that term unabridged. We cannot make this assumption of a, legislative purpose to have the courts follow the analogy of a period of limitations that was no longer to be the law.

It was also said that the presumption of lost grant (a fiction on which the doctrine of prescription was reared) may be rebutted by slight evidence. This does not mean that evidence is admissible to show no grant was made. The presumption is a rule of property. (Ward v. Warren, 82 N. Y. 265, 268. See Thayer, Preliminary Treatise on Evidence, p. 317.)

This court is committed, to the view that the doctrine of prescription is to be treated as the application to incor- - poreal rights of the Statutes of Limitations within the limits of the strong analogy between the two rules. (See, also, Lewis v. New York & Harlem R. R. Co., 162 N. Y. 202.) It follows, we think, that the period of prescription must be deemed to be changed in accordance with changes in the statutory period of limitations.

The orders should be reversed, with costs in all courts, and the motion to strike out the first and second " affirmative defenses denied. The question certified is answered in the affirmative.

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

Orders reversed, etc.


author: Crouch, J.

text:
    In the Matter of the Application of The People of the State of New York, by George S. Van Schaick, as Superintendent of Insurance, Respondent, for Orders to Take Possession of the Property and Conserve the Assets of the International Reinsurance Corporation, Independence Indemnity Company and Public Indemnity Company. George de B. Keim et al., as Receivers of the International Reinsurance Corporation, Appellants.

      (Argued May 21, 1936;
    decided July 8, 1936.)

      Francis R. Stoddard for appellants.

      Irvin Waldman and Alfred C. Bennett for respondent.

      Robert J. Sykes and William C. Morris for Metropolitan Casualty Insurance Company of New York, amicus curise.

      Jeremiah F. Connor and Everett F. Warrington for Columbia Casualty Company, amicus curise.

   Crouch, J.

Determination of the controversy here hangs primarily upon a construction of section 54, subdivision 7, of the Workmen’s Compensation Law (Cons. Laws, ch. 67), and of a bond and deposit of securities made pursuant thereto. So far as material, the text of the statute is as follows;

7. Limitation of the issuance of policies by a foreign insurance company. No policy or contract of insurance issued by a foreign stock corporation or mutual association authorized to transact the business of workmen’s compensation insurance in this state * * * shall be accepted * * * unless such foreign stock corporation or mutual association shall have filed with the superintendent of insurance a bond or undertaking with good and sufficient sureties to the people of the state of New York, and conditioned upon the payment in full of any and all compensation and benefits as provided in this chapter to any and all persons entitled thereto under any such policy or contract of insurance. * * * The amount of such bond shall be such sum as may reasonably represent twenty-five percentum of the outstanding reserves for compensation losses on policies issued by such foreign stock corporation or mutual association upon risks located in the state of New York. * * * Such bond shall be renewed annually. * * * In lieu of the bond * * * any such foreign stock corporation or mutual association may deposit with the superintendent of insurance securities of the kind prescribed in section thirteen of the insurance law in an amount equal to twenty-five percentum of the outstanding reserves for compensation losses on policies issued * * * upon risks located in the state of New York, * * *. Such securities shall be held by the superintendent of insurance as a special deposit and as express security for the payment of such compensation or benefits.”

Subdivision 7 was added to section 54 by chapter 305 of the Laws of 1929. Its legislative background (Legislative Document No. 87, 1928; Legislative Document No. 75, 1929) discloses a purpose to protect, in the event of the insolvency of a foreign insurance carrier, all workmen and their dependents then or thereafter to be entitled to any compensation and benefits under policies issued by it. Prior to its enactment, no such protection was afforded. For lack of it unfortunate losses had been sustained.

International Reinsurance Company, prior to January 5, 1933, had absorbed Independence Indemnity Company and Public Indemnity Company, corporations which had for some years engaged in the business of issuing workmen’s compensation policies in the State of New York. Following the enactment of subdivision 7, those companies had complied annually with its provisions by filing bonds underwritten by various surety companies in varying amounts as determined according to the provisions of the statute. Having taken over the business of the other two companies, it became necessary for the International to furnish the statutory security. Accordingly, as of January 5, 1933, International filed a bond for $112,000 upon which General Indemnity Corporation of America was surety. Upon the statutory basis the security required amounted to $260,000. The bond was, therefore, supplemented by a deposit of certain securities and first mortgages having a par or face value of $385,000.

In April, 1933, International was declared insolvent and three receivers were appointed in chancery proceedings in Delaware. Immediately thereafter upon the application of the Superintendent of Insurance of this State, an order was made pursuant to article XI of the Insurance Law (Cons. Laws, ch. 28), directing him to take possession of and to conserve the property of International within this State. In due course of administration, the Superintendent of Insurance, as conservator, filed a report, audit and petition which proposed alternative plans relating to the manner in which the rights of the New York compensation creditors of International and its subsidiary companies should be enforced as against the various sureties on the respective qualifying bonds, and against the special deposit of securities and mortgages. The Delaware receivers appeared in the proceeding and filed objections to both plans.

The issues raised by the objections were sent to a referee for determination. One of the alternative plans contemplated a ratable distribution among all compensation creditors of a fund to be made up of the proceeds of the deposited securities and mortgages, augmented by the proceeds of any recovery which might be obtained on the bond against the General Indemnity Corporation in liquidation. This plan was based upon a decision at Special Term in the case of People v. Columbia Casualty Co. (155 Misc. Rep. 91), which held that each annual bond filed pursuant to subdivision 7, superseded all previous bonds as to all future defaults, regardless of the time when the particular policy covering the loss was issued, and regardless also of the bond which was current when the policy was issued. The objection of the Delaware receivers to that plan rested upon the contention that there was no supersession of prior bonds; but that, on the contrary, each bond continued in full force and effect and constituted security for any and all losses incurred upon policies issued during its currency, regardless of when the losses and defaults might occur. According to that contention, International would be responsible for only $971.78, since that was the total liability arising out of the policies issued after January 5, 1933. On the other hand, under the theory of the proposed plan, International would be responsible for all unpaid compensation and benefits, since defaults in the payment thereof occurred by reason of insolvency during the currency of its bond and deposit.

The report of the referee overruled the objections of the Delaware receivers and sanctioned the proposed plan. It was held that when a new bond is given pursuant to the requirement of subdivision 7 for an annual renewal, the former one is superseded as to future defaults by the renewal bond; and that, since the deposit of securities is in lieu of a bond, the same rule applies to the deposit. The report was confirmed and the order entered thereon was affirmed by the Appellate Division. We see no reason for disagreeing with the decision below.

We assume that the deposited securities and mortgages are held upon the same condition specified in the bond. That condition is as follows:

Now, therefore, the condition of this bond is such that if the Principal shall pay in full any and all compensation and benefits accruing subsequent to January 5th, 1933, as provided in the Workmen’s Compensation Law to any and all persons entitled thereto under any policy or contract of insurance issued by the Principal, then this obligation shall be void; otherwise to remain in full force and virtue.
“ Provided further, that upon the certificate of the Superintendent of Insurance that there has been default in the payment of compensation for thirty days or that the Principal has become insolvent, the Attorney General of the state of New York may enforce this bond in the name of The People of The State of New York for the benefit of any and all persons entitled to the compensation assured by any policy issued by the Principal or otherwise entitled to any benefits under such policy.”

The words “ accruing subsequent to January 5th, 1933,” need a passing explanation. No words of like import are in any of the prior bonds; neither are they required or provided for in the statute. It happened that this particular bond was actually executed on January 28, 1933, as its date shows. It replaced in part a bond, dated January 5, 1933, the surety upon which went into liquidation. The words in question were obviously inserted, not as a limitation, but merely to cover the gap. We have, then, a bond complying with the statute, conditioned upon payment in full of any and all compensation and benefits to any and all persons entitled thereto under any policy or contract of insurance issued by the Principal,” coupled with a provision that upon default for thirty days or in the event of insolvency, the Attorney-General might enforce the bond for the benefit of any and all persons entitled to the compensation assured by any policy issued by the Principal.” This language leaves little room for construction. Read in the light of the purpose underlying the statute and of the statutory requirement for annual renewal in an amount fixed with reference to outstanding reserves for losses on all policies issued, it seems clear enough that it was intended as indemnity against any default in payment during its currency —■ exactly as it says — under any policy or contract of insurance issued by the Principal.” The construction urged by the appellants would restrict the broad language of the statute and bond, and would lead to unnecessary and undesirable complexities in practical operation. The fund, therefore, is subject to distribution in the manner proposed by the conservator.

Having reached this conclusion upon the question of construction, it becomes unnecessary to consider the further question arising under a contention by the conservator to the effect that even though the other construction was adopted, the same result could be achieved by aid of the preference granted by section 34 of the Workmen’s Compensation Law. This involves an approach from a somewhat different angle to the question which was before us in Matter of People (Southern Surety Co.) (266 N. Y. 589).

The order should be affirmed, with costs.

Crane, Ch. J., Lehman, O’Brien, Hubbs, Loughran and Finch, JJ., concur.

Order affirmed.


text:
    Louis H. Pink, Superintendent of Insurance of the State of New York, as Liquidator of Lloyds Insurance Company of America, Appellant, v. Isle Theatrical Corporation, Respondent.
    (Argued May 27, 1936;
    decided July 8, 1936.)

      Irvin Waldman and Alfred C. Bennett for appellant.

      Lawrence S. Timen, Anthony K. Miller and Nathan J. Hellerbach for respondent.

      J. M. Richardson Lyeth and Frederick H. Van Houten for Vincent Astor, amicus curias.

   Crane, Ch. J.

We agree with the decision of the Appellate Division and modify it merely as to the amount of the setoff. The case came to the Appellate Division upon a stipulation of admitted facts. The court cannot consider matters not included within this stipulation.

We agree that the defendant may set off against the amount of premiums due the sums which it has been obliged to pay upon the award. Such was our holding in Matter of People (Empire State Surety Co.) (214 N. Y. 553). By the stipulation the amounts paid by the defendant were $144 on December 12, 1933; $60 paid after December 12, 1933, and $372 after February 16, 1934. These sums, with interest, may be offset against the premium, the balance only being due.

The litigation is to determine the right to setoff. As stated, in this we agree with the Appellate Division. Confined as we are, however, to the statements contained in the stipulation of facts, we are obliged to modify the determination of the Appellate Division which directed judgment for the defendant, and award judgment to the plaintiff for the balance due over and above the setoffs, as stated in the submitted questions of fact — no costs.

The parties in their stipulation of admitted facts submitted six questions for the courts to answer. While there is no objection to this form of presenting the controversy, the courts are not obliged to answer the questions so long as they decide the case presented. The Appellate Division, however, in its opinion has answered the first five questions in the affirmative and we shall add an answer in the negative to the sixth question.

The judgment should be modified in accordance with this opinion and as so modified affirmed, without costs.

Lehman, O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Judgment accordingly.


author: Finch, J.

text:
    In the Matter of Eugenia Quinlan, Respondent. Comptroller of the City of New York et al., Appellants.

      (Argued May 18, 1936;
    decided July 8, 1936.)

      Paul Windels, Corporation Counsel {Lewis Orgel, Pax-ton Blair and Daniel M. Cohen of counsel), for appellants.

      Grover C. Sniffen for respondent.
   Finch, J.

Francis J. Quinlan died in 1904, while domiciled in Louisiana, leaving surviving an illegitimate child, Frances J. Quinlan, and a daughter-in-law, Eugenia Quinlan, the petitioner herein. At the time of his death Francis J. Quinlan owned several parcels of property in the Bronx. He left a holographic will giving a life interest in his property to his illegitimate daughter and the fee ownership to the daughter-in-law. The will was not witnessed in accordance with the law of New York and, therefore, was invalid in this State and could not operate to pass title to the land. Nor were there any heirs who could take by intestacy since the daughter was illegitimate. As a result the property escheated to the State of New York. (Matter of People [Melrose Ave.], 234 N. Y. 48.)

The illegitimate daughter died in, 1912. In 1915 the city of New York commenced proceedings to condemn various parcels of property including one which had been owned by Francis J. Quinlan at the time of his death. Pursuant to this proceeding title to the parcel was supposedly vested in the city in 1916. In June, 1919, an award for one of the Quinlan parcels of approximately 13,700 was made to unknown owners and in the same decree an assessment for benefit of about $2,700 was levied against the remainder of the property.

In 1918 the Legislature passed a special act (Laws of 1918, ch. 575) authorizing the Commissioners of the Land Office to release to Eugenia Quinlan, the petitioner, all the property of Francis J. Quinlan which escheated to the State upon his death. Not until 1933, however, did the petitioner make application pursuant to this special act and then the Board of Commissioners of the Land Office quitclaimed to her the land of Francis J. Quinlan still held by the State.

An order made and entered in the Supreme Court in 1924 had adjudicated that the State of New York by virtue of the special act of 1918 had released its interest in the property of Francis J. Quinlan to Eugenia Quinlan and that she individually was entitled to receive payment of the funds received for such property. It was held that although the language of the statute was permissive in form it should be construed as imperative. Hence the delay by petitioner in making application to the Commissioners of the Land Office was not a bar to the relief which she sought. (Public Lands Law [Cons. Laws, ch. 46], § 40, now § 39.) Thereafter the petitioner made application for the award in condemnation involved herein. The matter was referred to a referee who reported that the award be paid to the petitioner upon a tender to the city by her of a deed to the condemned property. The Special Term modified so as to require that there be deducted from the award the assessment for benefit and all other taxes and assessments which were outstanding liens against the condemned property prior to its acquisition by the city. The Appellate Division further modified and held that the assessment for benefit was not deductible from the award and that only such taxes and assessments should be deducted as were liens on the property prior to 1904, the date of the escheat.

On this appeal the city, as appellant, raises only the question whether the assessment for benefit may be deducted from the award.

The city of New York urges with force that when the assessment was levied against the remaining property, after a portion had been condemned, the title to this remaining property was in the petitioner having been vested by the special act (Laws of 1918, ch. 575). This was adjudicated by the proceedings in the Supreme Court commenced in 1922 to which the petitioner here was a party which held that there had been an escheat to the State upon the death of Francis J. Quinlan, but by the special act enacted in 1918 the State fiad thereupon released all its interest to Eugenia Quinlan. Referring to that statute the referee stated in his report that it specifically and unequivocally authorizes the commissioners of the land office to release the title of the State, if any, to the property in question to Eugenia Quinlan. The language used though merely permissive in form will be construed as imperative.”

This holding, confirmed by the Supreme Court and never appealed from, adjudicates that Eugenia Quinlan became the owner of the escheated property of Francis J. Quinlan on May 9, 1918, the date when the special act took effect (Laws of 1918, ch. 575). That determination, therefore, is binding in this proceeding as to the date when Eugenia Quinlan acquired title to the property affected by the assessment in this proceeding. Consequently the petitioner and not the State was the owner at the time the assessment was levied. Moreover, unless the petitioner can rely on possessing title at the time the special act took effect she is debarred from ever obtaining title by section 39 of the Public Lands Law. The Public Lands Law then and now (§ 40, now § 39) specifically provides that an application for a grant under special law must be made within one year after the passage of such law. An assessment for benefit becomes a hen ten days after the filing of the final decree in the office of the Comptroller. (Greater New York Charter, § 1017; Laws of 1901, ch. 466, as ami) In this case the final decree, dated June 19, 1919, was filed in the office of the Clerk of Bronx county on October 6, 1919, and thereafter in the Comptroller’s office. Since the title to the property was in the respondent at the time of the levying of the assessment, the latter was validity imposed. It was error, therefore, to hold that the property belonged to the State at the time of the final decree and hence that the assessment was invalid for failure to give the State the notice required by the Public Lands Law (§ 19).

There is also another reason which sustains the deduction of the assessment from the award. The city of New York lacks the power to condemn property, title to which is in the State, unless such power is expressly conferred upon the city by the Legislature. (Matter of City of New York [Cruger Ave], 238 N. Y. 84.) The State having acquired title to the Quinlan property, the condemnation proceedings in 1915 were ineffectual. The petitioner, however, after acquiring title to the property, had the right to adopt and ratify the condemnation proceedings to the extent, at least, of estopping her from taking a contrary position. To adopt and ratify the condemnation proceedings was what she attempted to do when she made application for the award.

The question presented, therefore, is whether when the petitioner based her right to obtain the award upon the condemnation proceedings, she could at the same time repudiate the assessment for the cost of the condemnation award and prevent the city from deducting from the award this assessment for benefit levied against the uncondemned property. The Appellate Division and the referee in adjudging that the city could not deduct the assessment, felt bound by the construction which they placed upon a decision of this court (Matter of People [Melrose Ave.], supra). In the Melrose case it was held that an attempt to levy an assessment against property owned by the State was ineffectual unless notice was given to the State pursuant to the Public Lands Law (§ 21, now § 19). For the purpose of this point we may assume that title to the property was in the State at the time the assessment for benefit was levied. Even assuming, therefore, that the assessment was ineffectual as against the State it does not follow that such assessment cannot be deducted from an award by the city when the petitioner, an individual to whom the State has conveyed its interest in the property and award, seeks to collect the award. It is true that the power of eminent domain and the levying of assessments under the taxing power are proceedings independent of each other even though for various reasons they are often grouped together. (Dyker Meadow Land & Improvement Co. v. Cook, 3 App. Div. 164, 168; affd., 169 N. Y. 6; Genet v. City of Brooklyn, 99 N. Y. 296, 307; Roosevelt Hospital v. Mayor, 84 N. Y. 108, 111.) At the same time the award and the assessment for benefit are so interlinked that the award makes necessary the levying of the reciprocal assessment for benefit. True the State with its sovereign immunity from the exercise against it by the city of the power of eminent domain and the power of taxation might have affirmed the condemnation proceedings and claimed the award without subjecting itself to the assessment. The transfer to the petitioner of the interest of the State in the property and the award does not, however, entitle her to the same position as that occupied by the State. Immunity due to sovereignty is personal to the sovereign. The assessment measuring the cost of the award and out of which it grew, while an independent proceeding, is nevertheless so connected with the award that an individual could not claim the award without being subject to the obligation of paying the assessment.

It follows that the order of the Appellate Division should be modified to the extent of providing that the assessment for benefit should also be deducted from the award, and as so modified affirmed, with costs in this court to the appellants.

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

Ordered accordingly.