text:
    Jefferson Title and Mortgage Corporation, Respondent, v. Elizabeth B. Dempsey et al., Appellants, Impleaded with Others.

      (Argued January 9, 1935;
    decided January 22, 1935.)

      John B. Doyle, Harold Swain and William A. Jones, Jr., for appellants.
    Usury was indisputably established. (London v. Toney, 263 N. Y. 439; Sabine v. Paine, 223 N. Y. 401; Salvin v. Myles Realty Co., 227 N. Y. 51; Woodard v, Madsen, 127 Misc. Rep. 19; 218 App. Div. 832; Fiedler v. Darrin, 50 N. Y. 437; Schanz v. Sotscheck, 160 App. Div. 798; Bank of Salina v. Alvord, 31 N. Y. 473; New York Firemen’s Ins. Co. v. Ely, 2 Cow. 678; Heidenheimer v. Mayer, 42 N. Y. Super. Ct. 506; 74 N. Y. 607; Mortgage Guarantee Co. v. Patch, 116 Cal. App. 584; Haynes v. Commercial Mortgage Corp., 254 Pac. Rep. 956.) Plaintiff’s written tender and offer to return certain moneys out of the amount reserved and received on making the loan was an admission, acknowledgment and confession that the transaction was tainted with usury and, therefore, void. (Jackson v. Packard, 6 Wend. 415; Bell v. Lent, 24 Wend. 230; People ex rel. Cossey v. Grout, 179 N. Y. 417; London Realty Co. v. Riordon, 207 N. Y. 264; Sabine v. Paine, 223 N. Y. 401; London v, Toney, 263 N. Y. 439; Roosevelt v. N. Y. & H. R. R. R. Co., 45 Barb. 554; Eaton v. Wells, 82 N. Y. 576; Mann v. Sprout, 185 N. Y. 109; Jacobson v. Brooklyn Lumber Co., 184 N. Y. 152.) Plaintiff’s tender under section 376 of the General Business Law (Cons. Laws, ch. 20) was ineffective to avoid the defense of usury. (Matter of Baker, 77 Misc. Rep. 90; People v. Young, 153 App. Div. 567; 207 N. Y. 522; Curtiss v. Teller, 157 App. Div. 804; 217 N. Y. 649; Claflin v. Boorum, 122 N. Y. 385; Sabine v. Paine, 223 N. Y. 401; Schlesinger v. Lehmaier, 191 N. Y. 69.) The findings of the trial court are without support in the evidence and the conclusions of law erroneous. (Utica Ins. Co. v. Tilman, 1 Wend. 555; Utica Bank v. Smalley, 2 Cow. 770; 8 Cow. 389; Utica Bank v. Wager, 2 Cow. 712; 8 Cow. 398; New York Firemen’s Ins. Co. v. Ely, 2 Cow. 678; Dunham v. Gould, 16 Johns. 367; Dunham v. Dey, 13 Johns. 40; Gore v. Lewis, 109 N. C. 539.)

      Clinton T. Taylor and Harry J. Hill for respondent.
    No usury exists or is involved in the present transaction as a matter of law and fact. (Brown v. Robinson, 224 N. Y. 301; Hartley v. Eagle Ins. Co., 222 N. Y. 178; Morton v. Thurber, 85 N. Y. 550; Eldridge v. Reed, 32 N. Y. Super. Ct. 155; Seaman’s Bank v. McCollough, 166 App. Div. 271; 221 N. Y. 692; Thurston v. Cornell, 38 N. Y. 281; Harger v. McCullough, 2 Den. 119; Bennett v. Ginsberg, 141 App. Div. 66; London Realty Co. v. Riordan, 207 N. Y. 264; Guggenheimer v. Geiszler, 81 N. Y. 293; Houghton v. Burden, 228 U. S. 161; Matter of Mesibovsky, 200 Fed. Rep. 562; Cowenhoven v. Pfluger, 22 App. Div. 464.) The tender made under section 376 of the General Business Law is not prejudicial to plaintiff’s rights and avoids the defense even though usury were present. (People v. Young, 207 N. Y. 522; Matter of Baker, 77 Misc. Rep. 90; People v. O’Brien, 111 N. Y. 1.) The defendants-appellants have waived any benefits accruing to them under the tender by their refusal to accept plaintiff’s offer on the trial. (Browne v. Vredenburgh, 43 N. Y. 195.)
   Per Curiam.

The finding that “ there was no usury involved in this transaction ” is supported by the evidence. The tender, made in writing before the trial and renewed at the trial, “ of this balance of the premium claimed to be usurious, with interest thereon ” was not a conclusive or unequivocal admission that the transaction was usurious. The common law rule that a plea of tender constituted an admission of a cause of action to the extent of the sum tendered, would have no application here even if the rule itself had not been in some respects changed by statute. (Civ. Prac. Act, §§ 171, 173. Cf. Revisers’ notes.) The tender here was not made as an acknowledgment of a cause of action or for the purpose of satisfying a cause of action. It was made for the purpose of sustaining the plaintiff’s cause of action and the plaintiff expressly stated in writing that the “ balance of the premium claimed to be usurious, with interest thereon, is hereby offered under section 376 of the General Business Law * * * to avoid forfeiture ” for usury. The defendants to whom the tender was made do not assert any cause of action for the moneys tendered and they refused the tender because in this action they were not seeking to enforce any forfeiture which under section 376 of the General Business Law (Cons. Laws, ch. 20) could, be discharged by payment of a usurious exaction.

It does not follow that after such tender the plaintiff is entitled to recover the full amount of its bond without deduction of the amount so tendered. Though the plaintiff has denied any wrong it has consistently urged that repayment of the sum tendered affords protection against any wrong which the court may find that it has done. Repayment of usurious interest received is the condition winch the statute exacts for a discharge of forfeiture which would otherwise be the result of usury. Tender alone is insufficient. The tender may not be coupled with a condition that a defendant withdraws the defense of usury and the tender must be good in order to constitute the equivalent of payment. Perhaps the discharge of “forfeiture” within the meaning of the statute because of usury would not avoid the defense of usury. We assume that the statute would not have such effect. That questian is not before the court since here there is a finding that there was no usury.

If a party demands affirmative relief based upon a tender of unconditional payment of a sum of money, he cannot retain the money subject to his own use, but must devote it to . the specific purpose of payment and put it within the power of the ” person to whom, the payment must be made to receive it at any time.” (Nelson v. Loder, 132 N. Y. 288, 292.) That rule has been often applied where the tender has been made in payment of a. debt. It should not be so limited. It must apply where-ever there is a demand for relief which can be granted only upon some payment made or its equivalent. It matters not whether demand for affirmative relief proves in the event unnecessary or unjustified. Only a tender kept good is in equity the equivalent of actual payment; and when, in this case, the plaintiff renewed in court its tender of the money claimed by the defendants to constitute a greater sum than is prescribed by law for a loan of money and, based on such tender, the plaintiff asserted a right to a discharge from any forfeiture arising from the taking of the money, the sum so tendered was not retained subject to the plaintiff’s use, but was devoted to the specific purpose of unconditional payment to the defendants. The amount of the loan which the plaintiff can recover in this action is reduced to the extent of the payment which the plaintiff unconditionally tendered.

The judgments should be modified by deducting the amount of such tender and as so modified affirmed, without costs.

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

Judgment accordingly.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    The People of the State of New York ex rel. Rye Country Day School, Respondent, v. Frederick G. Schmidt et al., Constituting the Town Board of the Town of Rye, Appellants.
    (Submitted January 14, 1935;
    decided January 24, 1935.)

      John Coward, Munn Brewer and J. Henry Esser for appellants.
    The relator was not a corporation the real property of which is exempt from taxation. (Cons. Laws, ch. 60, § 4, subd. 6; People ex rel. Mizpah Lodge v. Burke, 228 N. Y. 245; People ex rel. D. K. E. Society v. Lawler, 74 App. Div. 553; 179 N. Y. 535; People ex rel. Andrews v. Cameron, 140 App. Div. 76; 200 N. Y. 585; People ex rel. Young Men’s Assn. v. Sayles, 32 App. Div. 197; People ex rel. N. Y. Lodge v. Purdy, 179 App. Div. 805; 224 N. Y. 710; People ex rel. Savings Bank v. Coleman, 135 N. Y. 231; People ex rel. Manlius School v. Adams, 143 Misc. Rep. 459.)

      Paul Windels, Corporation Counsel (Isaac Phillips of counsel), for the City of New York, amicus curiœ.

    The petitioner’s real property is not exempt from taxation. (Cons. Laws, ch. 60, § 4, subd. 6.)

      Richard Ely for respondent.
    The real property of the petitioner is and was exempt from taxation. (Y.W.C.A. v. City of New York, 217 App. Div. 406; 245 N. Y. 562; Y. W. C. A. of Brooklyn v. City of New York, 254 N. Y. 558; People ex rel. Trustees of Mt. Pleasant School v. Metzger, 98 App. Div. 237; Matter of Mary Immaculate School, 188 App. Div. 5; People ex rel. Masters School v. Keys, 178 App. Div. 677; People ex rel. Manlius School v. Adams, 143 Misc. Rep. 459.)

      James Marshall, as amicus curiœ.

   Per Curiam.

The corporate operation of the respondent may lawfully entitle some of its members to receive pecuniary profit other than reasonable compensation for services in effecting any of its educational purposes.

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

Ceane, Ch. J., O’Bbien, Hubbs, Cbottch, Loughban and Finch, JJ., concur; Lehman, J., not voting.

Ordered accordingly.


text:
    In the Matter of John J. McCarthy, Respondent, against Joseph D. McGoldrick, as Comptroller of the City of New York, Appellant.
    (Argued January 4, 1935;
    decided January 24, 1935.)

      Paul Windels, Corporation Counsel (Paxton Blair and Edmund L. Palmieri of counsel), for appellant.
    The waiver which the petitioner signed was legally valid, and should have been held a bar to the claim for additional compensation. (Ryan v. City of New York, 177 N. Y. 271; People v. Fitzgerald, 180 N. Y. 269; Hendrickson v. City of New York, 160 N. Y. 144.)

      Alfred J. Talley and Edmund J. Delany for respondent.
   Per Curiam.

By a written instrument dated March 1, 1933, petitioner, for a consideration, agreed that he waived the salary of deputy chief of the fire department of the city of New York during the emergency declared to exist by chapter 637 of the Laws of 1932, and that he accepted pay at the lower rate of a battalion chief’s salary, “ said rate of pay to continue during the period of the emergency or unless and until the Board of Estimate and Apportionment shall provide otherwise.” It was not until October 30, 1933, that the Board of Estimate and Apportionment provided otherwise, but, in this proceeding, petitioner has recovered the difference between the salaries of the two ranks -from March 1, 1933, to October 31, 1933. We think that this result is contrary to the terms and intent of the waiver which was executed by petitioner as an inducement to bis appointment to the rank of deputy chief.

The orders should be reversed, with costs in all courts, and the motion denied.

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

Orders reversed, etc.


text:
    The People of the State of New York, Appellant, v. Eugene J. Shields, Respondent.
    (Argued January 8, 1935;
    decided January 24, 1935.)

      William F. X. Geoghan, District Attorney (Ralph K. Jacobs and Henry J. Walsh of counsel), for appellant.
    The defendant being engaged in the commission of a felony, the purpose of which was to defraud the company insuring the stock and fixtures in the building set on fire, the law presumes that he intended the natural consequences of his acts which resulted in prejudice to the insurer of the building. (People v. Chiaro, 200 N. Y. 316; People v. Meadows, 136 App. Div. 226; 199 N. Y. 1; People v. Orcutt, 1 Park. Crim. Rep. 252; People v. Long, 2 Edm. 129; Rex v. Pinney, 5 C. & P. 263; Reg. v. Davies, 1 F. & F. 69; Aikman v. Commonwealth, 18 S. W. Rep. 937; Lusk v. State, 64 Miss. 845; Woodford v. People, 62 N. Y. 117; People v. Fanshawe, 137 N. Y. 68.)

      Irwin N. Wilpon and Burton B. Turkus for respondent.
    The court below correctly decided that the People failed to establish the most essential element of the crime charged in the indictment; the record is barren of proof of intent on the part of the defendant to prejudice or defraud the insurer of the building. (State v. Greer, 243 Mo. 599.)
   Per Curiam.

The question whether defendant willfully burned or set on fire the building or structure described in the indictment, with intent to prejudice or defraud the insurer of the tenant’s insurable interest in improvements and betterments to the building, may be submitted to the jury upon the new trial.

The order should be affirmed.

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

Order affirmed.


author: Lehman, J.

text:
    President and Directors of The Manhattan Company, as Trustee, Appellant, v. The Prudence Company, Inc., et al., Respondents.

      (Argued January 7, 1935;
    decided January 24, 1935.)

      J. M. Richardson Lyeth and John P. Allee for appellant.
    Defendants may not collect, and hold as their own, interest upon securities to which they have no legal title which has been collected by them as agents, after the conditions upon which the agency was predicated have been defeated by law. (Matter of People [Lawyers Title & Guaranty Co.], 265 N. Y. 20; Matter of People [New York Title & Mortgage Co.], 265 N. Y. 30.)

      Ralph W. Crolly for Brooklyn Trust Company et al., amici curiœ.

    The judgment should be reversed and the plaintiff’s motion for judgment on the pleadings granted. (.Matter of People [Lawyers Title & Guaranty Co.], 265 N. Y. 20; Matter of People [New York Title & Mortgage Co.], 265 N. Y. 30.)

      Alexander B. Siegel for Prudence-Bonds Corporation, respondent.
    The plaintiff trustee has no right to demand that moneys collected and earmarked by the defendant guarantor for a particular purpose pursuant to regulations made by the State Banking Department should be devoted to a different purpose. (Moses v. Guaranteed Mortgage Co., 264 N. Y. 476; Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69; Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398; People v. Nebbia, 262 N. Y. 259; 291 U. S. 502; Metcalfe v. Union Trust Co., 181 N. Y. 39; Hoskin v. Long Island Loan Co., 139 App. Div. 258; 203 N. Y. 588; Long Island Water Supply Co. v. Brooklyn, 166 U. S. 685.) The guarantor is not legally in default in the payment of principal or interest and the trustee may not exercise rights based solely upon an alleged default in the payment of principal or interest. (Moses v. Guaranteed Mortgage Co., 264 N. Y. 476.)

      Godfrey P. Schmidt, Raymond D. Thurber and James T. Heenehan for Joseph A. Broderick, Superintendent of Banks, as liquidator of The Prudence Company, Inc., respondent.
    The questions raised by plaintiff became academic when the Superintendent of Banks was exclusively invested with the very powers claimed by plaintiff. (Metcalfe v. Union Trust Co., 181 N. Y. 39.)
   Lehman, J.

The Prudence-Bonds Corporation, hereinafter referred to as the obligor, executed a deed of trust for the purpose of securing a series of mortgage bonds. The plaintiff is the trustee named in the deed of trust. The trust agreement recites that the obligor has assigned to the trustee bonds, mortgages and other securities and cash set forth in the agreement and that the trustee shall have and hold such bonds, mortgages and other securities and cash upon the trusts hereby created for the equal and pro rata benefit and security of the holders of Prudence-Bonds, Fifth Series, issued and to be issued hereunder and to secure the payment of the principal and the interest of said bonds, and for all the other uses and purposes and upon the terms and conditions herein declared and expressed.” The bonds issued pursuant to the trust agreement and sold to the public were guaranteed by Prudence Company, Inc., hereinafter referred to as the guarantor. Until March, 1933, there was no default by the obligor or guarantor of any of the terms of the trust agreement. Until default the obligor retained definite rights specified in the agreement in connection with the bonds and mortgages which constituted the trust fund. Amongst other things it was provided that at any time when the aggregate principal amount of the Trust Fund is not less than the principal of all Prudence-Bonds then issued and outstanding hereunder, and so long as there shall not exist any event of default under which the Trustee may take action as hereinafter provided, the Corporation or The Prudence Company, Inc., shall col-led and retain all payments of interest and principal on the securities constituting the Trust Fund subject to the provisions of paragraph (i), Section 1, Article III hereof.” That paragraph provides for the payment to the trustee of an amount equal to the aggregate amount of all payments collected on account of principal of any securities in the trust fund during the preceding calendar month.” It thus appears that at least until March, 1933, the obligor or the guarantor had the right not only to collect interest on the securities in the trust fund, but to retain such interest.

The events of default ” under which the trustee may take action (enumerated in article IV), include: “ Default in payment of any installment of interest upon any Prudence-Bond issued hereunder.” Mere failure to pay interest does not, however, give immediate right or remedy to the trustee or any bondholder or deprive the obligor or guarantor of any rights conferred by the agreement for it is provided: “ Inasmuch as The Prudence Company, Inc., has assigned to the Corporation various bonds, mortgages and other securities, and has received or is to receive in exchange therefor Prudence-Bonds of an equal aggregate principal amount, and has determined to guarantee to the holders of all Prudence-Bonds at any time issued and outstanding hereunder for their better protection, the payment of the interest thereon when due and the payment of the principal thereof within eighteen months after the same shall have become due according to their terms, it is distinctly understood and agreed by and between the parties hereto that no rights or remedies under this Article shall be exercised by the Trustee or by any bondholder, nor shall the Corporation or The Prudence Company, Inc., be prevented from exercising any of the rights conferred upon them or either of them by this Agreement, unless and until said The Prudence Company, Inc., shall have failed to fulfill some obligation in said guarantee contained, anything in this Agreement or in said Prudence-Bonds contained to the contrary notwithstanding.”

On April 1, 1933, and October 1, 1933, semi-annual installments of interest became due and payable upon bonds outstanding on those dates. The obligor and guarantor failed to pay the whole of the said semi-annual installment of interest on the bonds due and payable on April 1, 1933, and failed to pay any part of said semiannual installment of interest on the bonds due and payable on October 1, 1933. Because of such failure, the trustee, on January 31, 1934, served notice on the obligor and guarantor terminating their right to collect or retain payments on account of principal and interest on securities constituting the trust fund and made certain demands upon these defendants including a demand that they turn over to the plaintiff all moneys collected by them after March 31, 1933, on the securities constituting the trust fund. The trustee has now brought this action to compel compliance with these demands.

The answer of the defendants substantially admits the allegations, contained in the complaint, of the facts hereinbefore set forth, but the defendants plead, as an affirmative defense and counterclaim, certain regulations of the Banldng Department which, they claim, preclude them from complying with the plaintiff’s demands and which, they claim, permit them to continue to disburse and distribute the net income from the securities deposited only in accordance with such regulations. Both parties have moved for judgment on the pleadings. The defendants’ motion has been granted and judgment entered dismissing the complaint and establishing the counterclaim of the defendants that they be permitted to continue to disburse and distribute net income from securities constituting the trust fund pursuant to the regulations of the State Banldng Board and of the Superintendent of Banks during the continuance of the emergency declared by Chapter 41 of the Laws of New York of 1933 and the acts amendatory thereof as such continuance of the emergency is defined and limited in such acts.”

The guarantor is a corporation organized under the Banking Law (Cons. Laws, ch. 2) and subject to the jurisdiction of the Banking Department. It was closed by proclamation of the President in March, 1933, before there was any default in payment of principal or interest of the bonds issued pursuant to the trust agreement. In April, 1933, it was permitted to reopen, but subject to the regulations promulgated by the Banking Department. These regulations provide, among other things, that “ Payments of interest and principal due under guarantees and collateral trust bonds shall be made to the holders of such guarantees and collateral trust bonds only as thus provided; to wit: From such sums of principal and interest as shall have been received from mortgagors to and including the 15th and 30th days of each month upon the respective mortgages securing such guarantees or collateral trust bonds there shall be paid on such semi-monthly dates the interest and principal so collected less the reasonable incidental cost of the collection and disbursement of such monies and reserves for the payment of taxes if necessary for the protection of the interests of the holders of guarantees or collateral trust bonds.

“ These provisions with regard to the payment of interest and principal to holders of guarantees and collateral trust bonds shall continue -until modified or rescinded by the Superintendent of Banks * * *
“ Otherwise than as provided in these regulations, no company shall transfer any assets or make any loans or disbursements for other than operating costs without first obtaining the approval of the Superintendent of Banks. This prohibition shall not apply to partially executed transactions.”

Supplementary and amendatory regulations have thereafter been promulgated, but the prohibition remains which precludes guaranty companies from making payments of interest and principal due under guaranties and collateral trust bonds except in accordance with these regulations. We must pass upon the effect of these regulations on the rights of the parties to the trust agreement.

We have held that to meet the extraordinary conditions created by the general economic difficulties of the community, the Legislature has power to postpone enforcement of contractual obligations and even to impair, in some respects, such obligations by measures which are reasonably calculated to obviate a threatened danger to the economic welfare of the community. We have also held that the regulation of the Banking Department, which provides that payments by banking corporations of interest and principal due under guaranties and collateral trust bonds, shall be made only from such sums of principal and interest as shall have been received from mortgagors, is a reasonable regulation and that while such regulation is in effect no action may be maintained against a banking corporation to recover a stated sum pursuant to a guaranty. (Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69; Moses v. Guaranteed Mortgage Co., 264 N. Y. 476.) The question here is different. The plaintiff is not seeking to recover a stated sum from the guarantor. It is not even seeking to enforce the guaranty. It is seeking only to obtain moneys which the guarantor has collected pursuant to an agency created by the trust agreement to which the guarantor was not even a direct party.

The primary question presented is whether the agency to collect interest and principal on securities constituting the trust fund was terminated by the failure to pay interest on the bonds in accordance with the terms of the trust agreement. We may assume that the guarantor would have paid such interest if the Banking Department had permitted it to do so. Its failure is, then, not due to its own fault and gives rise to no present cause of action against it upon its guaranty. None the less, the conditions for the continuance of its agency to collect interest and principal on the securities in the trust fund have failed. The principal obligation has not been complied with and the guarantor failed to fulfill its obligation in said guaranty. Title to the securities in the trust fund is in the trustee for the benefit of the bondholders. So long as interest on the bonds was paid by obligor or guarantor the trustee and bondholders were willing and agreed to permit the obligor or guarantor to collect and retain the interest on the securities which constitute collateral security for the payment of the bonds. To permit the obligor or guarantor to continue to collect and retain this interest, accruing upon the mortgage or the trust fund, when payment of interest on the bonds, secured by the trust fund, has not been made would be contrary to the intent of the parties; contrary to the language of the agreement and contrary to the dictates of justice and equity even though the guarantor is not at fault. Though, perhaps, the defendants should not be penalized for act or omission dictated by the law of the State, id is, nevertheless, clear that they may not collect, and hold as their own, interest upon securities to which they have no legal title which has been collected by them as agents, after the conditions upon which the agency was predicated have been defeated by law. So we held in Matter of People (Lawyers Title & Guaranty Co.) (265 N. Y. 20) and Matter of People (New York Title & Mortgage Co.) (265 N. Y. 30). The defendants do not even contend otherwise.

They concede frankly that the interest which they collect upon the underlying securities belongs and must be distributed to the bondholders. They maintain only that they have not lost the right to collect as agents for the trustee or- bondholders and that the moneys when collected must be applied to payment of interest on the bonds in accordance with the regulations of the Banking Department though the trust agreement provides that such moneys shall, after default, be otherwise applied. The plaintiff maintains, on the other hand, that right to collect has been lost and that the moneys already collected must be paid over to it without any conditions.

The trust agreement provides that “moneys collected or held by the Trustee after an event of default under which the Trustee may take action as provided in this Article, shall be applied as follows: Out of such moneys, the reasonable compensation, costs and expenses of the Trustee, its attorneys and counsel shall be paid, and all taxes, assessments or liens, * * * an¿ the surplus shall be applied to the payment of the principal indebtedness of all the Prudence-Bonds issued hereunder then outstanding and the interest accrued thereon pro rata without priority of principal over interest or of interest over principal or of one bond over another bond, whether such principal and interest shall at the time have become due and payable according to the terms of the bonds and coupons or not.” The Superintendent of Banks has interpreted the regulation of the Banking Department as requiring apphcation of interest received by a guaranty company to the payment of interest on the guaranteed bonds. For the purposes of this appeal we accept such interpretation. It is said that such application would be of greater benefit to the bondholders than a pro rata apphcation to principal and interest. That may be true. The question, nevertheless, remains whether the bondholders have the right to require collection and distribution of interest and principal of underlying securities in accordance with the agreement made by the parties.

In this case we deal, as we have said, with interest accruing upon securities which do not belong to these defendants and which they have collected under an agency created upon conditions which have failed. Since the money in the hands of the defendants does not belong to them it must be paid to the real owners. We are not now called upon to determine whether in the present emergency some pubhc interest may exist which would justify a legislative fiat that all moneys .collected as principal or interest upon the mortgages in a trust fund which constitutes collateral security for a bond issue shall be distributed to the bondholders in manner prescribed by the Legislature rather than the manner prescribed by the trust agreement and the contract of the parties. Here the Legislature has not so decreed and no public interest has been suggested to us which would justify so extraordinary an exercise of power. The regulation upon which these defendants rely is applicable only to certain mortgage loan companies whose business consists of the investment in, sale and purchase of, real estate mortgages and mortgage certificates guaranteed by such companies. It deals only with payments of interest and principal due under guaranty and collateral trust bonds and transfer of assets of such companies. Since the moneys collected by the defendants in this case do not belong to them, payment to the owners of the moneys is not a transfer of any assets of the defendants nor is it a payment of interest and principal due under a guaranty or collateral trust bond. To give to the regulation a construction broad enough to include within its scope payment of moneys not constituting an asset of a mortgage loan company, but collected and held either without right, or, at best, as agent of the trustee and bondholders, would not be justified by the language of the regulation and might make such regulation of doubtful constitutionality. When the question here is analyzed its solution becomes simple. The defendants were permitted to collect moneys on the mortgages in the trust fund only so long as interest was paid on the bonds. When interest ceased to be paid the agency ceased. It had no right to retain as its own the moneys collected thereafter, and, at least, from the date of notice to cease collecting, it had no right to continue to collect. The moneys then in the hands of the defendants, collected after failure to pay interest on the bonds, were held for the real owners. The regulations of the Banking Department precluding certain companies from transfer of assets or payment of interest in principal due under guaranties does not apply either by its terms, fair intendment or underlying policy to moneys held by a guaranty company as agent for another. Therefore, the plaintiff, which as trustee holds title to these moneys, has a right to demand payment to it. Its disbursement of the money must be in accordance with the provisions of the trust agreement, so far, at least, as the law of this State permits.

We are told that since the judgment was entered in this action, the Superintendent of Panics has taken possession of the business and property of the guarantor pursuant to section 57 of the Banking Law of the State and that as a public officer vested with power to collect the interest and principal of the underlying securities bis right is paramount to the rights created by contract. The Superintendent points to no section of the law which even purports to vest him, as liquidator or rehabilitator of a banking corporation, with any power to receive or collect interest and principal on bonds or mortgages where such collection does not constitute part of the business of the corporation and where the bonds and mortgages do not belong to the corporation. He may exercise the rights and functions of the corporation, but he cannot claim the right to collect mortgages where the corporation of which he has taken possession had no such function or right.

The judgment of the Appellate Division and that of the Special Term should be reversed and the plaintiff’s motion for judgment granted, with costs in all courts to appellant payable out of the trust estate.

O’Brien, Hubbs, Crouch and Loughran, JJ., concur; Crane, Ch. J., and Finch, J., not sitting.

Judgment accordingly.


author: Crane, Ch. J.

text:
    In the Matter of James Barmonde, Respondent, against Abraham Kaplan et al., Constituting the Municipal Civil Service Commission of the City of New York et al., Appellants.
    (Argued January 3, 1935;
    decided February 26, 1935.)

      Paul Windels, Corporation Counsel (Paxton Blair, Seymour B. Quel and Edmund L. Palmieri of counsel), for appellants.
    Since the suspension of the petitioner was made in good faith and since another person has been paid by the city for the services which would have been performed by the petitioner had he been retained, the petitioner should not have been allowed to compel a double payment by the city. (Nichols v. MacLean, 101 N. Y. 526; Stemmier v. Mayor, 179 N. Y. 473; Martin v. City of New York, 176 N. Y. 371; Higgins v. Mayor, 131 N. Y. 128; Terhune v. Mayor, 88 N. Y. 247; People ex rel. Walker v. McAneny, 139 App. Div. 88; 202 N. Y. 551; Jones v. City of Buffalo, 178 N. Y. 45; Matter of Domschke v. Cukor, 194 App. Div. 755; Connor v. County of Erie, 172 App. Div. 934; Prowler v. City of New York, 216 App. Div. 824; 243 N. Y. 607.)

      H. Eliot Kaplan for respondent.
    It is proper to incorporate in the final order provision for payment of back salary if the payment of such salary is warranted by the circumstances of the case. (Thoma v. City of New York, 263 N. Y. 402; Matter of Arnow, 241 App. Div. 861; People ex rel. Goring v. Wappinger Falls, 151 N. Y. 386; Matter of Kelly v. Board of Education, 234 App. Div. 239; 259 N. Y. 518; Matter of Spivak, 264 N. Y. 491; Bradshaw v. City of Schenectady, 240 App. Div. 746; 262 N. Y. 703; Kearney v. Brearton, 263 N. Y. 610; Burgey v. Brearton, 263 N. Y. 609.)
   Crane, Ch. J.

The petitioner formerly occupied a civil service position as an inspector of painting with the Board of Transportation of the city of New York. He had been in the employ of the city for over fifteen years. On June 30, 1933, the petitioner was suspended from his position for reasons of economy. Preference in retention was granted to two disabled war veterans occupying positions similar to the petitioner’s, but who had been with the city for only a year or more. On October 20, 1933, the- petitioner commenced this proceeding for a mandamus order to compel his reinstatement and the payment of all back salary to him on the ground that the preferences granted to the alleged veterans, his juniors in service, were a violation of the Civil Service Law (Cons. Laws, ch. 7).

After the decision of this court in Matter of Clancy v. Halleran (263 N. Y. 258), the petitioner’s application was granted and he was reinstated, the order directing that he should receive full pay from July 1, 1933, the date of his suspension, to the date of his reinstatement. This peremptory mandamus order was entered February 24, 1934.

The Corporation Counsel concedes the correctness of the petitioner’s claim to reinstatement, and has appealed solely for the purpose of testing the propriety of that portion of the order which directed the payment of bis full salary from the date of his suspension to the date of his reinstatement. When the city illegally removed the petitioner, the veteran or veterans, younger in service,. received the compensation which should have gone to him. By the order below the city is required to pay twice for the same work; it has paid the veteran who was retained and it must now pay the petitioner who was dismissed. The authorities do not justify such a result. In Thoma v. City of New York (263 N. Y. 402) this court said that where the incumbent has been removed from his position either by a change in grade or removal from office, his remedy is at least in the first instance by a mandamus for his restoration wherein, if successful, suit for compensation becomes unnecessary, and we further intimated that a mandamus for reinstatement requires action without delay. The circuity of proceeding, first by mandamus and then by action, was said by us to be unnecessary where the claimant was entitled to his pay. When and under what circumstances a reinstated employee should receive compensation for the period of his removal was not decided or in question. Where the position has not been filled, is left vacant and the city has paid no one for the work, it may very well be that the incumbent, illegally removed, should get his compensation. Whether even then deduction should be made for what he has earned in the meantime we need not now consider. Where, however, the city has put another person to do the petitioner’s work and paid him for it, the petitioner — the removed employee — is not entitled to his back pay; the nature of the procedure, whether by mandamus or action, is entirely immaterial; the right does not exist, whatever the procedure may be. The Thoma case was not a case of removal, but a reduction in salary, and the city was out no money by paying another.

Matter of Kelly v. Board of Education (234 App. Div. 239; affd., 259 N. Y. 518) had reference to a suspension of a civil service employee by the Board of Education, under section 1569-a of the Greater New York Charter (Laws 1901, ch. 466; added by Laws 1913, ch. 694), or section 868, subdivisions 9 and 10 of the Education Law (Cons. Laws, ch. 16). The petitioner was suspended, pending charges, and the courts decided that, granting that the Board had power to suspend without pay, the suspension should have been limited, as provided in the sections referred to, either to one month or to the next meeting of the Board. The right to back pay, as distinguished from the remedy to be pursued to get it, was not involved.

This court, in Martin v. City of New York (176 N. Y. 371); Stemmler v. Mayor (179 N. Y. 473); and the Appellate Division, in Sutliffe v. City of New York (132 App. Div. 831), have passed upon the right of an employee illegally removed to recover his salary, whether the right is sought to be enforced by mandamus or by action. This court said in the Martin case:

It is well settled in this State that { payment to a de facto public officer of the salary of the office, made while he is in possession, is a good defense to an action brought by the de jure officer to recover the same salary after he has acquired or regained possession,’ and that the remedy of the latter is by action against the former. * * * These decisions rest upon the principle that the public cannot be compelled to pay twice for the same services, and that the officer charged with the duty of paying salaries is not required to go behind the commission or the certificate of election and, at bis peril, decide difficult questions of fact or law, but may make payment to the person who occupies the office and performs its duties.
“ It is, however, insisted that the rule does not apply to this case, because the plaintiff was not a public officer but an employee holding a contractual relation to the city. * * * The rule governing payments to a defacto officer is founded in public policy and applies with the same force to payments made to a de facto occupant of a position of public employment although not an officer ” (p. 373).

The other two cases repeat the same rule.

That part of the order, therefore, from which the city has appealed, giving to the petitioner his back salary, from the time of removal to the time of his reinstatement, must be reversed, without costs.

The order, in so far as appealed from by the city, should be reversed, and the application for payment of salary during the period of suspension denied, without costs.

Lehman, O’Brien, Hubbs, Crouch and Loughran, JJ., concur; Finch, J., not sitting.

Ordered accordingly.


author: O’Brien, J.

text:
    In the Matter of the Petition of Frederick M. Nielson et al., Respondents, to Compel an Accounting by Frederick M. Nielson et al., as Executors of Nellie Lyon, Deceased, of Her Proceedings as Trustee. Arthur B. Van Loon et al., as Executors of Nellie Lyon, Deceased, et al., Appellants.
    (Argued January 3, 1935;
    decided February 26, 1935.)

      Raymond A. Knowles for Arthur B. Van Loon et al., as executors of Nellie Lyon, deceased, appellants.
    The petition alleges an unexecuted inter vivas trust over which the Supreme Court has sole jurisdiction. (Matter of Runk, 200 N. Y. 447; Surr. Ct. Act, §§ 40, subd. 3, 171; Matter of Crosby, 136 Misc. Rep. 688; Matter of Rosenblum, 146 Misc. Rep. 537; Matter of Meehan, 104 Misc. Rep. 219; Matter of Miller, 257 N. Y. 349.)

      John T. Norton for Franklin V. Canning et al., appellants.
    The Surrogate’s Court was without jurisdiction to entertain the proceeding. (Surr. Ct. Act, § 171; Matter of Crosby, 136 Misc. Rep. 688; Matter of Meehan,
      104 Misc. Rep. 219; Matter of Rosenblum, 147 Misc. Rep. 537; Matter of Miller, 257 N. Y. 349; Matter of Higgins, 264 N. Y. 226; Cons. Laws, ch. 41, § 20; Cons. Laws, ch. 50, § 111.)

      Frederick E. Draper, as special guardian for Cora M. Canning et al., infants, appellants.
    The alleged trust is a non-testamentary trust. Upon the death of the alleged trustee, the trust, if unexecuted, vested in the Supreme Court. The Surrogate’s Court has jurisdiction neither to appoint successor trustees thereof, nor to compel or entertain an accounting thereon. (Hascall v. King, 162 N. Y. 134; Matter of Meehan, 104 Misc. Rep. 219; Matter of Miller, 257 N. Y. 349; Cons. Laws, ch. 41, § 20; Cons. Laws, ch. 50, § 111; Matter of Runk, 200 N. Y. 447; Matter of Crosby, 136 Misc. Rep. 688; Matter of Rosenblum, 146 Misc. Rep. 537; Matter of Higgins, 264 N. Y. 226.)

      Frank L. Wiswall and A. Kendall Roberts for respondents.
    The Surrogate’s Court has full jurisdiction to hear and determine the issues herein. (Matter of Haigh, 125 Misc. Rep. 365; Surr. Ct. Act, § 40, subd. 3; Matter of Raymond v. Davis, 248 N. Y. 67; Matter of Enright, 149 Misc. Rep. 353; Matter of Heinze, 224 N. Y. 1; Matter of Hyams, 237 N. Y. 211; Matter of Akin 248 N. Y. 202; Matter of Wilson, 252 N. Y. 155; Matter of Seaman, 205 App. Div. 681; Matter of Van Buren v. Estate of Decker, 204 App. Div. 138.)
   O’Brien, J.

In July, 1911, Alice Lafffin and her daughter, Nellie Lyon, entered into a written agreement which they declared binding upon and applicable to the heirs, executors, administrators and assigns of both parties. By this instrument Mrs. Lafflin agreed to convey to Mrs. Lyon all her real property. Mrs. Lyon agreed to advance the sum of $10,000 in order to relieve her mother’s financial pressure and to effect a discontinuance of foreclosure actions then pending, and to execute a declaration of trust to the effect that she would take title to this realty for the use and benefit of her mother. She also agreed to retransfer to her mother such of the properties as remained unsold as soon as the mortgages should be reduced to a certain sum.

Mrs. Lafflin died intestate in 1916, a resident of Niagara county, leaving as her only heirs at law and next of kin her daughter, Nellie Lyon, her son, William H. Moran, and her grandson, Frederick M. Nielson. The petitioners, respondents herein, are Frederick M. Nielson and Mary E. Moran, widow of and sole devisee and legatee of William H. Moran. Mrs. Lyon died in 1933, a resident of Rensselaer county, and two of her executors and others are the appellants.

The respondents in their petition allege that certain specified parcels of real estate were conveyed by Alice Lafflin to Nellie Lyon and held by her in trust for Alice Lafflin and her heirs; that all except one parcel were sold by Nellie Lyon to various purchasers for net proceeds amounting to more than $250,000, and that Nellie Lyon neither as trustee nor individually has ever rendered an account for the property held in trust except the sum of $15,000 paid by her to William H. Moran. The petitioners also demand that the executors of Nellie Lyon show cause why they should not render and settle their accounts of the proceedings of Nellie Lyon as trustee and pay over and distribute the corpus of the trust in the proportion of onedhird to the estate of Nellie Lyon, one-third to Frederick M. Nielson and one-third, less the sum of $15,000, to Mary E. Moran. The Surrogate decreed that he is without jurisdiction to hear and determine the claims of the petitioners, but, by a divided court, the Appellate Division reversed the decree and remitted the proceeding to the Surrogate.

Since the trust is not testamentary, the sole issue of law presented on this appeal relates to the jurisdiction of the Surrogate’s Court respecting a trust inter vivas. The essential point is whether the transactions concerning the property in the possession of Nellie Lyon during her life as trustee constitute matters relating to the affairs of a decedent.” If they do, the provisions of section 40 of the Surrogate’s Court Act, as amended by Laws of 1921, chapter 439, and Laws of 1924, chapter 100, confer the broadest jurisdiction upon the Surrogate. (Matter of Raymond v. Davis, 248 N. Y. 67.) The trust agreement annexed to the petition is alleged to be and is proved by its own terms to be a trust inter vivas. The theory of the petitioners is that the corpus was not the property of the decedent and that the executors of Nellie Lyon have no equitable title to it. The necessary inference to be drawn from petitioners’ pleading is that decedent herself never had any equitable title, held the property merely as trustee and that it never formed any part of her estate. Whatever title she may have had, according to the allegations of the petition, was not derived from a will or through intestacy of any person whose estate can be administered by the Surrogate’s Court of Rensselaer county and, as an individual, she never had any title. The transactions between Nellie Lyon and Alice Lafflin consisted of affairs concerning a trustee and a cestui que trust and cannot be regarded as affairs of decedent Nellie Lyon. (See Matter of Haedrich, 256 N. Y. 608.) They are, according to the petition, affairs of a trust inter vivas. After the trustee died, the only forum in which her successor could be appointed was the Supreme Court. (Pers. Prop. Law, § 20 [Cons. Laws, ch. 41]; Real Prop. Law, § 111 [Cons. Laws, ch. 50].) Although appellants deny the existence of a trust and allege an outright gift of the property by the mother to the daughter, the allegations on the face of the petition respecting the creation of a trust inter vivas may, for the purpose at least of deciding the question of jurisdiction in the Surrogate to hear and determine, be taken as true. Conceding that the specific powers conferred by section 40 of the Surrogate’s Court Act are in addition to and without hmitation or restriction on the powers that are general (Matter of Raymond v. Davis, supra), the provisions of section 257 of the Surrogate’s Court Act (amd.. Laws of 1926, ch. 669) and section 171 of the Surrogate’s Court Act (amd. Laws of 1930, ch. 174; Laws of 1934, ch. 172), expressly vesting the Surrogate’s Court with jurisdiction over testamentary trusts and trustees and preserving silence in respect to trusts inter vivas, when read in connection with the general powers granted by section 40 relating to the limited subject of “ affairs of decedents ” and the restrictive powers over “ testamentary trustees ” (Subd. 3), must be taken as clear evidence of a legislative purpose to exclude jurisdiction in the Surrogate to determine the effect of a trust agreement between living persons. Forceful reasoning by judicial officers, learned in matters within their jurisdiction, delivered subsequent to our decision in Matter of Raymond v. Davis (supra) and in harmony with it, lends strong support to this conclusion and merits approval. (Matter of Crosby, 136 Misc. Rep. 688; Matter of Rosenblum, 146 Misc. Rep. 537.) Mere possession of the fund derived from a trust agreement inter vivas by executors of one of the parties to that instrument cannot lead to an inference of a legislative intent to confer jurisdiction upon the Surrogate to adjudge the rights of persons claiming to be beneficiaries under it. The different sections of this statute must be read together in order to ascertain its purpose. (Matter of Higgins, 264 N. Y. 226.) Here we have the case of a person who is alleged by the petitioners to have held property only in an official and representative capacity. The affairs of this person as trustee were never subject to the supervision of a Surrogate but always, before and after her death, they were within the jurisdiction of the Supreme Court. During the fife of the trustee that tribunal alone exercised control and at her death the trust vested solely in it.

Concluding, as we must, that the allegations of the petition negative the idea of the existence of any affairs of a decedent in respect to this trust which the petitioners expressly set forth, the conclusion follows that the order of the Appellate Division should be reversed and the decree of the Surrogate’s Court affirmed, with costs in the Appellate Division and in this court payable out of the estate. The certified questions should be answered in the negative.

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

Ordered accordingly.


author: Finch, J.

text:
    In the Matter of Elizabeth Schmidt, Appellant, against The Chamberlain of the City of New York, Respondent.

      (Argued January 3, 1935;
    decided February 26, 1935.)

      Andrew F. Van Thun, Jr., for appellant.

      Chester Bordean for White & Case, amici curiœ.

    The Chamberlain has no authority to invest funds deposited in court without a court order. (Civ. Prac. Act, § 136.)

      Eugene L. Garey, Earl J. Garey, Milton I. Hauser and Mitchel J. Valicenti for Garey & Garey, amici curiœ.

    Moneys paid into court may not be invested by the Chamberlain without an order or decree of court made only after proper and sufficient proof, satisfactory to the court, that it is for the best interests of the owners of the fund to direct such investment. (Civ. Prac. Act, art. 14; Howard v. United States, 184 U. S. 676; People v. Keenan, 110 App. Div. 537; 185 N. Y. 600; Matter of City of New York, 200 N. Y. 138; Matter of People v. Maltbie 102 Misc. Rep. 575; 184 App. Div. 743; 226 N. Y. 641.)

      Paul Windels, Corporation Counsel (Alvin McKinley Sylvester, Paxton Blair, Seymour B. Quel and Sherman S. Rogers of counsel), for respondent.
    Section 44-c of the Finance Law is not in conflict with section 136 of the Civil Practice Act. It merely supplements section 136 in a field where the court had refrained from exercising its power. (Matter of Stillwell, 139 N. Y. 337; Chesterman v. Eyland, 81 N. Y. 398; People ex rel. Ryan v. Green, 58 N. Y. 295.)
   Finch, J.

The question presented for decision is whether the Chamberlain of the city of New' York had authority under section 44-c of the State Finance Law (Cons. Laws, ch. 56), as amended in 1928, to invest funds deposited in court, where the court order directed him to hold the same until the further order of the court. We hold that, even assuming the amendment to be constitutional, yet in the case at bar the wording of the order of the court precluded any investment without a further order of the court.

There is no dispute as to. the facts in this case. In 1924, in a proceeding in the County Court of Kings county for the sale of the interest in certain real estate of Elizabeth Schmidt, then an infant, an order was entered directing the special guardian of the infant to deposit her share of the proceeds of the sale with the Chamberlain of the city of New York.

The sum of $1,554.75 was deposited by the special guardian with the Chamberlain to the credit of the applicant,, under an order which provided: “ * * *; and that the said Special Guardian pay the balance remaining in his hands to the Chamberlain of the City of New York to the credit of the infant herein, Elizabeth Schmidt, to be held by said Chamberlain of the City of New York until the further order of this court herein, and report back to this court his proceedings hereunder and the disposition of proceeds with all convenient speed.” (Italics interpolated.)

Subsequent to the deposit of the fund under the order above referred to, neither the County Court nor the Supreme Court entered any further order relating to the fund until January 28, 1934, when upon the application of the applicant, who had attained her majority, an ex parte order was made by the Supreme Court, Kings county, directing the Chamberlain to pay to her $2,092.09 in cash, that being the amount originally deposited to her credit together with interest. The Chamberlain refused to pay the same, on the ground that he had invested $2,000 thereof in mortgage participation certificates which had depreciated in value, but offered to pay the balance not so invested ($92.09) and to consent to an order directing him to transfer to the applicant such certificates. It had been customary for the Chamberlain’s office to make payment in cash of amounts which had been invested by transferring the investment in any fund directed to be paid to some other fund, but the Chamberlain refused to do this for the applicant because of the depreciated value of her certificates. The applicant does not question the propriety of the refusal of the Chamberlain to make payment to her by transferring the investment to some other fund, but she contends that the investment made of the money held for her was illegal because no court order directing such an investment had been made, as was provided for in the Civil Practice Act '(§ 136).

The Chamberlain maintains that such an order was unnecessary since the investment was made in accordance with and in reliance on section 44-c of the State Finance Law, as amended by Laws of 1928 (Chap. 837) which provides as follows:

§ 44-c. Deposit of funds or money paid into court; investment. All funds or moneys paid into court shall be deposited in such savings bank, trust company, bank, banking association or with such banker, as shall be designated by the state comptroller, as soon as received by the custodian thereof. But the money must be deposited in the county where the fund belongs, where it can be done conveniently and safely and with advantage to the parties interested. All moneys so paid into court may be invested by the several county treasurers and in the city of New York by the chamberlain, without a specific direction of the court having jurisdiction, in securities that are legal investments for trustees, when the said county treasurers or chamberlain deem it for the best interests of the funds to ?nake such investment.” (Italicized portion of quotation added by the amendment.)

The applicant claims that this provision of the State Finance Law, as amended, is unconstitutional and violative of article VI, section 1, of the State Constitution. The applicant further contends that the State Finance Law does not, in any event, apply to a fund deposited in court prior to its enactment.

The Special Term denied the application of Elizabeth Schmidt for a peremptory order of mandamus commanding the Chamberlain of the city of New York to pay her the full sum deposited together with interest, and the decision of that court has been unanimously affirmed by the Appellate Division.

In order to decide this appeal it is unnecessary to determine whether the amendment of section 44-c of the State Finance Law is unconstitutional, as infringing on the rights and powers of the Supreme Court. The amendment to section 44-c is not applicable in the case at bar, notwithstanding that this proceeding originated, not in the Supreme Court, but in the County Court of Kings county. Our decision must rest on the ground that the amendment to section 44-c applies to moneys paid into court “ without a specific direction of the court having jurisdiction.” The order in question specifically provides that the money is to be held by the Chamberlain “ until the further order of this court herein.” The language used in the order clearly shows that the court intended that the money be held readily available for disposition in the manner to be determined by the court. To hold that this phraseology is not a specific direction would be to disregard the clear language of the order. So to do would make it necessary for a court expressly to negative the provisions of the statute in order to escape its application. This would cast an unusual and an unreasonable burden on the court. The amendment to section 44-c not applying, the Chamberlain had authority to invest the money only under direction of the court, embodied in an order or decree. (Civ. Prac. Act, § 136.) Until such order was made the money should have been deposited in a “ savings bank, trust company, bank, banking association or with * * * banker designated by the state comptroller.” (State Finance Law, § 44-c.)

The brief submitted in behalf of the Chamberlain of the city of New York relies inter alla upon the case of Chesterman v. Eyland (81 N. Y. 398). That case involved the same question, namely, the investment of an infant’s fund that had been paid into court. Instead of a statutory provision there was then applicable a rule of court (Rule 180 of the Court of Chancery) which provided that where no direction for the investment of funds paid into court was contained in the decree the money might be invested after a lapse of six months. It was there held that the Chamberlain was not liable for a substantial loss resulting from an investment of the fund. The case is in no way controlling, since the order of the court in that case did not specifically provide for the fund to be held subject to the further order of the court. Moreover, there is to be noted the difference in wording between the present statute, which provides for immediate investment, and the old rule 180, which provided that no funds should be invested until the lapse of six months. The six months’ period afforded the parties and the court an opportunity to consider the needs of the litigation in connection with the kind of investment or none at all if the liquidity of the fund was imperative.

The history of the right to invest court funds is interesting but not important, since all right to invest such funds without a specific direction of the court was taken away in 1892 by an amendment to the Code of Civil Procedure. Prior to that time statutory enactments contained provisos which preserved the force and effect of old court rule 180. For example, the statute enacted in 1847 (Laws of 1847, chap. 280, § 71), providing that moneys deposited in court should be placed in certain named depositories, contained the following additional proviso: And all the rules and regulations of the present Court of Chancery relative to receiving, keeping and disbursing any of the funds in the Court of Chancery * * * shall continue in force * * *.” The Revised Statutes of 1859 incorporated the above-quoted proviso (3 Revised Statutes 1859, tit. 3, § 34, p. 286). When the Code of 1877 was adopted, this proviso was ehminated by the applicable sections providing that investments might be made by general rule (Code Civ. Proc. 1877, § 745-7). In 1892 these sections were amended (Laws of 1892, chap. 651) to read in substantially the same form as they are to-day found in the Civil Practice Act (§ 136).

Civil Practice Act, section 136, is as follows:

“ § 136. Disposition of court funds. Each court may direct that money paid into that court in any action or proceeding brought therein, or any bond, mortgage or other security which represents property belonging to any suit or party interested therein, may, after having been deposited with the county treasurer or city chafnberlain, be paid out, transferred, invested or reinvested in any manner or form that appears to it best for the interests of the owners thereof. Such directions must be embodied in an order or decree of such court, founded upon proper and sufficient evidence satisfactory to the court that such disposition of the property is best for the interests of the owners thereof or parties interested therein. When the whole of án original deposit of money, or the whole of a distributive share thereof, or any security or other property, is directed to be paid or transferred out of court, the order must direct the payment of all accrued interest or other income belonging to the party or parties to whom such deposit or distributive share or security is ordered to be paid, transferred or delivered.” (Italics interpolated.)

This section, then and now, tends to cover the ehtire situation as to investment of court funds and, making no proviso for investment in accordance with a general court rule, abrogated old Chancery rule 180.

It may also be of passing interest to note that when the jurisdiction and duties of the Court of Chancery were transferred to the Supreme Court (Laws of 1847, chap. 280, § 71), the securities which represented such court funds as were duly invested by order of the court and which had been theretofore registered in the name of the Clerk of the Court of Chancery were then reregistered in the name of the Clerk of the Court of Appeals. Subsequent legislation substituted for the latter the present Chamberlain of the city of New York and the respective County Treasurers.

It is further to be noted that the decision of Chesterman v. Eyland (supra), in upholding rule 180, is not decisive of the question of the constitutionality of the amendment to section 44-c of the State Finance Law. Rule 180 was promulgated by the Supreme Court itself, while section 44-c is a legislative enactment. The latter section can only be upheld if it is clearly found in no way to impinge upon the jurisdiction of the Supreme Court. That question, however, is reserved until a case arises which requires its determination.

The orders appealed from should be reversed and the application granted, with costs.

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

Orders reversed, etc.


author: Hubbs, J.

text:
    The People of the State of New York, Respondent, v. Max Ludkowitz, Appellant.

      (Argued January 15, 1935;
    decided February 26, 1935.)

      David F. Price and Alexander Baldwin for appellant.
    The admission of the alleged dying declaration constituted error. (People v. Falletto, 202 N. Y. 494; People v. Mikulec, 207 App. Div. 505; 240 N. Y. 573; People v. Sullivan, 239 App. Div. 511; People v. Sarzano, 212 N. Y. 231; Shepard v. United States, 290 U. S. 96; People v. Ricken,
      242 App. Div. 106; People v. Brecht, 120 App. Div. 769; 192 N. Y. 581; People v. Kane, 213 N. Y. 260; Young v. State, 95 Ala. 4; People v. Chase, 79 Hun, 296.) The guilt of the defendant was not established beyond a reasonable doubt. The dying declaration unsupported by other evidence is insufficient to sustain the judgment of conviction. (People v. Kraft, 148 N. Y. 631; People v. Corey, 157 N. Y. 332; People v. Haber, 221 App. Div. 150; Reeves v. State, 106 Miss. 885; Marley v. State, 109 Miss. 717; People v. Cassidy, 160 App. Div. 651; People v. Ledwon, 153 N. Y. 10; People v. Pignataro, 263 N. Y. 229.) The trial court erred in charging the jury. (Darry v. People, 10 N. Y. 120; People v. Gallo, 149 N. Y. 106; People v. Darragh, 141 App. Div. 408.)

      William F. X. Geoghan, District Attorney (Henry J. Walsh of counsel), for respondent.
    All the legal requisites of a dying declaration were established and the declaration was properly received in evidence and upon it the jury was justified in finding the defendant guilty of the crime of murder in the first degree. (People v. Sullivan, 239 App. Div. 511; People v. Kraft, 91 Hun, 474; People v. Falletto, 202 N. Y. 494; People v. Corey, 157 N. Y. 332; Hackett v. People, 54 Barb. 370; Waldele v. N. Y. C. & H. R. R. R. Co., 95 N. Y. 274; People v. Sarzano, 212 N. Y. 231; Shepard v. United States, 290 U. S. 96; People v. Kane, 213 N. Y. 260; People v. Del Vermo, 192 N. Y. 470; People v. Conklin, 175 N. Y. 333.) The trial court committed no errors in its charge. (People v. Jernatowski, 238 N. Y. 188.)
   Hubbs, J.

The appellant has been convicted of the crime of murder in the first degree under an indictment charging that on July 5, 1934, he “ wilfully, feloniously and of malice aforethought, shot Benjamin Simon with a revolver, inflicting upon the said Benjamin Simon injuries as a result of which he died on July 6, 1934.”

The homicide occurred in front of a restaurant at 49 Humboldt street in the borough of Brooklyn. At about nine-thirty o’clock in the evening the deceased drove up to the restaurant in his automobile, got out and took a chair facing the restaurant with his back to the curb. Two other men were sitting in front of the restaurant facing the curb, one on the same side of the entrance as deceased with whom deceased was engaged in conversation, and the other on the opposite side of the entrance. Shortly thereafter the man who was talking with deceased heard shots, saw the deceased jump up and run into the restaurant and he ran across the street. He testified that he did not see the shooting or the man who did it. The other man sitting in front of the restaurant and two men who were on the opposite side of the street testified that they saw the shooting. One said there were two assailants, the others one, but all agreed that appellant was not present and did not do it. No one testified to any act on the part of deceased indicating that he turned around or saw his assailant.

The appellant himself testified that he knew deceased; that he was not in the vicinity of the restaurant that night and that he did not do any shooting. He admitted that several months prior to the trial he and deceased had entered into a mild dispute as a result of the fact that he had remonstrated with deceased because, as he explained, the deceased had been practicing extortion upon the owners of unlawful drinking places; that they were in each other’s company thereafter; and that their friendly relations continued notwithstanding the argument. It appeared that, upon learning of the homicide and that he was being sought in connection therewith, he surrendered himself to the authorities.

There was no testimony on the part of any eye-witness directly or indirectly connecting appellant with the crime or which indicated that he was in the vicinity of the restaurant on the evening in question. The only evidence offered which might tend to show that appellant was the man who did the shooting was an alleged dying declaration offered on the part of the People, and the testimony of the detective who took down the declaration and of a surgeon who was present when it was taken. The declaration reads as follows:

Ante Mortem Statement.
Place — St. Catherine’^ Hosp.- — • Time 10:10 p. m. Date — July 5th, 1934.
“ Q. What is your name? A. Benjamin Simon.
“ Q. Where do you live? A. 158 Boerum St.
Q. Do you believe you are about to die? A. Yes.
“ Q. Have you any hope of recovery from the effects of the injury you have received? A. No.
“ Q. Are you willing to make a true statement as to how and in what manner you came by the injury from which you are now suffering? A. I was sitting by the store and fire works fired by Max Ludkowitz (Barney’s brother). 10:20 p. m.
Q. How long do you know Max Ludkowitz? A. A long time. I then showed injured man a picture of Max Ludkowitz and asked him is this the man that shot you? Yes that’s Max Ludkowitz the fellow that shot me.
“ Signature — Unable to sign,
Name of Doctor — Leslie Hughes Tisdall, M. D.
Name of nurse —
Statement taken by — Det. Yitalo
Statement witnessed by •— Det. Sarcono
Det. McCarron
Detective assigned to case — Det. Yitalo #1080 —85.”

The detective testified that he went to the beer garden, arriving there about 9:55 p. m.; that he saw deceased lying on the floor inside the door; that deceased was conscious; that within five minutes an ambulance arrived; that he went to the hospital with deceased where he saw the surgeon; that the antemortem statement, which it appears was on a police blank, was in his handwriting except for the signatures; that he wrote down verbatim what deceased told him in response to the questions he put to him; that after asking the first six questions, he went to the police station and returned with two photographs of appellant which he showed to the deceased; that the deceased identified one of them as the man who shot him.

The physician testified that Several detectives, including the one who testified, questioned deceased for half an hour before the statement was taken; that at first deceased told the detective who testified to mind his own business ■— that he would take care of himself; that he, the surgeon, told deceased that he was in a dying condition and advised him if he had anything to say he better tell it to the detective who was questioning him at the time — that he was most likely going to die; that the detective first asked deceased whether or not he realized that he was in a dying condition and the deceased said he did; that the detective asked what happened and that deceased said he was sitting in the beer garden just after arrival. The witness testified that was all he could recall at the time, but that he heard the questions asked and the answers given, also that he heard the questions read back to. the deceased, and that the witness read the questions and answers before he signed as a witness; that at the time deceased was suffering from twelve bullet wounds of the chest, face, abdomen and arms, and from considerable loss of blood.

It is seriously contended by the counsel for appellant that the trial court erred in receiving in evidence the dying declaration. The general rule as to the preliminary proof necessary to entitle dying declarations to be received in evidence is reasonably well established. The application of the rule to particular cases has resulted in some conflict in decisions, as each case differs in its surrounding circumstances from all others.

The rule governing the admission of dying declarations is anomalous, and constitutes an exception to the general rule of evidence which prohibits the receipt in evidence of hearsay statements. Courts, in applying the rule permitting the receipt in evidence of dying declarations, have strictly enforced the rule which requires that before their receipt in evidence a preliminary examination must clearly establish to the satisfaction of the trial judge that the deceased was, at the time, under the sense of impending death and without any hope of recovery. Different courts have expressed the thought in different language, but the meaning intended to be expressed is the same. (3 Wigmore on Evidence [2d ed.], p. 169; People v. Sarzano, 212 N. Y. 231; People v. Falletto, 202 N. Y. 494; Shepard v. United States, 290 U. S. 96.)

Whether the preliminary proof advanced is sufficient to admit the receipt in evidence of a dying declaration presents in each case a question which must be determined by the trial judge. (People v. Smith, 104 N. Y. 491; People v. Kraft, 148 N. Y. 631; People v. Del Vermo, 192 N. Y. 470.) Its determination rests not alone upon the declarations of the deceased, but includes the surrounding circumstances. The general rule was stated by Vann, J., in People v. Falletto (supra) as follows: “ The absolute requirements prehminary to the admission of such evidence are that there must be clear proof of the certainty of speedy death, and that the declarant had no hope of recovery. Such facts, however, as we have recently held, need not be proved by statements made to or by him, but may be inferred from the surrounding circumstances, such as the nature of his wounds, his physical condition, preparation for death and the like (p. 500). The preliminary testimony in this case brought it within the rule prevailing in this jurisdiction and the declaration was properly received in evidence.

The conviction must stand, if at all, upon the dying declaration and the testimony regarding its execution, uncorroborated by any evidence tending to connect the appellant with the crime charged. It is urged by appellant that an uncorroborated dying declaration in no case establishes guilt beyond a reasonable doubt, and that a court is never justified in permitting a conviction upon an uncorroborated dying declaration, and that such declarations are admitted in evidence solely in support of other direct or circumstantial evidence which connects the defendant with the commission of the crime and not as primary evidence which, standing alone, will be sufficient to support a judgment of conviction.

We are unprepared to hold, as it is unnecessary to the decision which we are about to make, that there may never be a case upon which a determination of guilt may properly rest upon an uncorroborated dying declaration.

We entertain no doubt, however, that the conviction in this case should not be permitted to stand upon the uncorroborated dying declaration received in evidence. As stated in Wood’s Practice Evidence, page 326: “It is the universal judgment of the courts, text-writers, and all thinking men, that this class of evidence is to be received with great caution, and, except where the circumstances were such as to render it next to impossible that the deceased could be mistaken as to the criminating facts stated, juries should scan the statement with great care, especially where there is evidence tending to show that the deceased was mistaken, for it is to be remembered that while the deceased made the statement under the apprehension of certain death, yet the respondent has not had the privilege of cross-examining the witness, or testing the real foundation of the deceased’s belief as to his guilt, and that where the witness has not a deep sense of accountability to his Maker, and an enlightened conscience, the passion of anger, and feelings of revenge, or, in the case of mutual conflict, the natural desire of screening his own misconduct, may affect the truth and accuracy of his statements, and give a color to the transaction which, had further investigation been attainable, might have been proved to be incorrect.” We believe the statement of the learned author correctly summarizes the decisions in the best considered cases.

Three witnesses present at the time of the shooting each testified that they saw the man who shot deceased, and that appellant was not the man. Two described the man who did the shooting and each was in a position where he could plainly see what transpired. No circumstance was testified to which affected the credibility of either of those witnesses except minor discrepancies which were of slight importance. No motive was shown for the act and no evidence corroborating the dying declaration was offered.

Under such circumstances to permit a conviction to stand would shock one’s sense of justice.

The fact that the testimony introduced by the People constituted some evidence which presented a question of fact proper to be submitted to the jury does not necessarily lead to the conclusion that such evidence was sufficient to establish the guilt of the defendant beyond a reasonable doubt. While the preliminary proof was sufficient to permit the introduction in evidence of the dying declaration, still it was not as clear and satisfactory as in most cases where such declarations have been received. Under the conditions existing at the close of the case it was clearly the duty of the court carefully to instruct the jury as to the weight to be given to such declaration in arriving at its verdict. It has been repeatedly stated by courts of the highest standing that the receipt of such evidence is in violation of the rule which excludes the receipt of hearsay evidence; that its receipt is based upon public necessity in order to protect the innocent and prevent murder going unpunished; that other satisfactory proof is unobtainable; and that the belief of impending death is equivalent to an oath. (3 Wigmore on Evidence [2d ed.], §§ 1440, 1441 and 1442.)

In the case of People v. Falletto (supra) Judge Vann pointed out in detail the danger which exists in convicting upon an uncorroborated dying declaration, where fear of prosecution for perjury does not exist and the test afforded by cross-examination is lacking. He then wrote: “ Still the law does not regard such evidence, when admitted, as of the same value and weight as the testimony of a witness given in open court under the sanction of an oath and under the tests and safeguards which are there provided ” (p. 500). In People v. Kraft (supra, p. 635) the trial court in a murder case charged the jury upon the question as to the weight which it should give to a dying declaration that it was the jury’s duty to take it into consideration as competent testimony as it had all the sanction of evidence that the law could ascribe to evidence. This court held that the charge was erroneous. In the opinion it was said: “ It was, therefore, of the utmost importance that the jury should not receive the incorrect impression that, however admissible in evidence the dying statement, it was as valuable, or as authoritative, for the purpose of proving the defendant’s guilt, as though the inculpatory evidence had been given by a witness in a court of justice and with every opportunity to the defendant to investigate its truth by means of cross-examination.’’ (People v. Corey, 157 N. Y. 332; Armstrong v. United States, 41 Fed. Rep. [2d] 162.) In the case at bar the trial judge in the main charge stated: “And they [dying declarations] have been permitted to be used for a long period of time because of the belief that the person who makes the statement is approaching dissolution, and has given up all hope of recovery, that These conditions combined make the statement the equivalent of having the sanctity of an oath. * * * The court having admitted it then it is for the jury to determine what weight it will give to the statement, and what finding it will make as a result of the statement.” As a statement of law the charge was correct, but the court failed to say one word about how the jury should weigh the dying declaration. It might well have understood from the charge that the statement was entitled to the same weight as that of a witness who had given his testimony in open court subject to cross-examination. Counsel for appellant, at the close of the charge, by various requests to charge, called attention to that fact, but the trial judge did not, at any time, give further instruction upon that question.

The court should, in answer to requests, have told the jury that the statement was not to be considered as having the same probative value as the testimony of a witness given in open court, subject to cross-examination, and should have explained the reason for receiving dying declarations in evidence. The jury would then have been in a position properly to weigh the evidence in arriving at a verdict. (Armstrong v. United States, supra; State v. Valencia, 19 N. M. 113 [52 L. R. A. (N. S.) 152, and note]; Worthington v. State, 92 Md. 222 [56 L. R. A. 353, and note].)

When we are satisfied that a judgment of conviction in a death case is contrary to the weight of evidence and that the ends of justice require a new trial, it is our duty to grant it. (People v. Cashin, 259 N. Y. 434.)

We are satisfied also that the case was erroneously submitted to the jury under section 1044, subdivision 2, of the Penal Law. That subdivision is not applicable to the facts in this case. It clearly appears that the person who fired the fatal shots deliberately aimed at the deceased, that his intent was to hit a particular person, i. e., the deceased. (Darry v. People, 10 N. Y. 120.)

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

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

Judgment of conviction reversed, etc.


text:
    Peggy C. Conklin, as Administratrix of the Estate of Arthur V. Conklin, Deceased, Respondent, v. Canadian-Colonial Airways, Inc., Appellant.
    (Argued January 8, 1935;
    decided February 26, 1935.)

      Alfred M. Bailey for appellant.
    The ruling that the limitation of liability to $5,000 is illegal and void as contrary to public policy, is reversible error. (Seybolt v. N. Y., L. E. & W. R. R. Co., 95 N. Y. 562; Anderson v. Erie R. R. Co., 223 N. Y. 277; Bissell v. N. Y. C. R. R. Co., 25 N. Y, 442; Onondaga Golf & Country Club v. Syracuse & S. R. R. Co., 96 Misc. Rep. 213; New York Central R. R. Co. v. Lockwood, 17 Wall. 357; Hart v. Pennsylvania R. R. Co., 112 U. S. 331.) A common carrier’s liability under contracts of limitation is to be determined by the law of the place where the contract was made and the transportation begins, unless contrary intention is shown, and that the transportation is to be completed in another State is not evidence of such intention. (Fish v. D., L. & W. R. R. Co., 211 N. Y. 374; Dyke v. Erie R. R. Co., 45 N. Y. 113; Valk v. Erie R. R. Co., 130 App. Div. 446; Willcox v. Erie R. R. Co., 162 App. Div. 94.)

      G. Everett Hunt for respondent.
    The provision in the ticket on which the deceased was riding which undertakes to limit the liability of the defendant to the general public for damages arising out of the active negligence of its employees was illegal and void. (Southern Ry. Co. v. Prescott, 240 U. S. 632; Kansas City Southern Ry. Co. v. Carl, 227 U. S. 639; Sheridan v. N. J. & N. Y. R. R. Co., 104 N. J. L. 622; Barnet v. N. Y. C. & H. R. R. R. Co., 222 N. Y. 195; Barstow v. N. Y., N. H. & H. R. R. Co., 158 App. Div. 665; Kennedy v. Cunard S. S. Co., 197 App. Div. 459; 235 N. Y. 604; Straus & Co. v. Canadian Pacific Ry. Co., 254 N. Y. 407; Kilthau v. International Mer. Marine, 245 N. Y. 361; Burke v. Union Pacific Ry. Co., 226 N. Y. 534; People v. N. Y. C. & H. R. R. R. Co., 28 Hun, 543.)
   Crane, Ch. J.

On the 18th day of April, 1930, Arthur V. Conklin, then a young man thirty-two years of age, went to the Albany Airport and obtained passage to Newark, New Jersey. The defendant had a regularly scheduled trip leaving Albany at two p. m. The deceased paid for his ticket in cash. Nothing was said to him about flying conditions in and about Newark nor about different priced tickets. The plane ran into a fog at Poughkeepsie, which thickened on the approach to Newark, so that in the attempted landing the plane struck against high tension electric wires, destroying ship and passengers.

The negligence of the defendant is not disputed upon this appeal, the single point being made that the defendant was relieved from liability in excess of $5,000 for negligence causing young Conklin's death, by reason of the terms and conditions stated upon the ticket which he purchased. Is it the law of this State that a common carrier of passengers for hire can refuse to carry them unless they stipulate or contract that the carrier shall not be hable for its own negligence or that of its employees? This State has never gone that far.

The ticket which Conklin purchased read in part:

" This passage ticket is issued by the Company and accepted by the holder hereof on the following conditions:
sH «I» »{> ¥
“ 6. That the holder voluntarily assumes the ordinary risks of air transportation, and stipulates that the Company shall not be responsible save for its own neglect of duty, and that the liability of the Company to the holder hereof or his legal representatives in case of accident resulting in death or physical disability, in any event, and under any circumstances, is limited as follows: Class A Contract, (Minimum Rate) Maximum Liability, $5,000.00, Class B Contract, (Double Rate) Maximum Liability, $10,000.00, Class C Contract, (Triple Rate) Maximum Liability, $15,000.00.
“ Company’s ticket agents are provided with all three
forms of contract. This is a Class A ’ Contract. *******
" The Holder Hereof Has Read and Accepted The Foregoing Conditions Of Passage.
“ A. Y. CONKLIN,
signature of holder “ 1441 Broadway, N. Y. C.
“ Address.
For the Company
“ TRUMAN SEWALL
“ General Traffic Manager “ M. A. Krueger
“ Issuing Agent.”

The carrier did not give to the purchaser the choice of buying a ticket which would allow recovery in case of injury from negligence or of obtaining for a less price passage, upon releasing or limiting liability. He was given no choice, other than a limited liability in case of injury or death.

This court said, in Straus & Co. v. Canadian Pacific Ry. Co. (254 N. Y. 407, 414): The progressive enactments of the Legislature in this State during comparatively recent years have been so pronounced and fundamental that there can be no doubt that it has deliberately reached the conclusion, contrary to the early decisions, that to allow public service corporations by contract to absolutely exempt themselves from liability for negligence is opposed to the best interest of the citizens of the State.” While this has reference to the carriage of goods, the principle applies equally to the transportation of persons.

The weight of authority throughout this country in both State and Federal courts is against the legality of common carriers absolutely exempting themselves from liability for negligence in the carriage of either goods or persons. (Railroad Co. v. Lockwood, 17 Wall. [U. S.] 357.) Where one is carried gratuitously, however, the stipulotion contained in the pass, exempting the carrier from liability in case of injury through negligence, has been held valid. (Charleston & Western Carolina Ry. Co. v. Thompson, 234 U. S. 576; Boering v. Chesapeake Beach Ry. Co., 193 U. S. 442; Northern Pacific Ry. Co. v. Adams, 192 U. S. 440. See, also, Santa Fe, Prescott & Phœnix Ry. Co. v. Grant Bros. Constr. Co., 228 U. S. 177, 184, 185.) As applicable to an airplane journey, the Circuit Court of Appeals for the Third Circuit, in Curtiss-Wright Flying Service v. Glose (66 Fed. Rep. [2d] 710; certiorari denied, 290 U. S. 696) held that the carrier could not even limit the amount of its liability for negligence. The cases from the various States which have held to the like rule with the Federal authorities are collected in the article on Carriers found in 10 Corpus Juris at page 153, section 193 and following.

The decisions in this State relied on by the appellant (Bissell v. N. Y. C. R. R. Co., 25 N. Y. 442; Ulrich v. N. Y. C. & H. R. R. R. Co., 108 N. Y. 80; Seybolt v. N. Y., Lake Erie & Western R. R. Co., 95 N. Y. 562, and Anderson v. Erie R. R. Co., 223 N. Y. 277) either involved free passage or else contracts to exempt the carrier from liability for negligence in consideration of a reduced fare. There was always left the voluntary choice to the passenger of obtaining full or limited liability. That this element of choice has been a material element in the opinion of this , court, see Kilthau v. International Mercantile Marine Co. (245 N. Y. 361); Burke v. Union Pacific R. R. Co. (226 N. Y. 534).

As a general rule the place of the wrong is in the State where the last event necessary to make an actor hable for an alleged tort takes place. (American Law Institute, Proposed Restatement, Conflict of Laws, chap. 9.) The accident occurred in New Jersey. The law of the State of New York, however, governs this case. • The validity of a stipulation in a contract for the transportation of persons or property from one State to another limiting the carrier’s common law liability is to be determined by the law of the place where the contract was made and the transportation commenced, without reference to the law of the place of destination. (Fish v. Delaware, L. & W. R. R. Co., 211 N. Y. 374, 383.)

We, therefore, conclude that there was no error in the rulings of the trial court upon this alleged contract. The judgment should be affirmed, with costs. . Lehman, O’Brien, Hubbs, Crouch and Loughran, JJ., concur; Finch, J., not sitting.

Judgment affirmed.


text:
    Loomis J. Grossman et al., Appellants, v. Joseph Herman et al., Respondents.

      (Argued January 14, 1935;
    decided February 26, 1935.)

      Hugo Levy and Jesse H. Barkin for appellants.
    The Appellate Division erred in reversing the judgment of the trial court and in dismissing the complaint. (Mc Knight v. McGuire, 117 Misc. Rep. 306; Pease & Elliman, Inc., v. Gladwin Realty Co., 216 App. Div. 421; Kirwan v. American Lithographic Co., 197 N. Y. 413; Thedford v. Herbert, 195 N. Y. 63; Costello v. Third Ave. R. R. Co., 161 N. Y. 317; Waldron v. Fargo, 170 N. Y. 130.)

      Stanley S. Groggins for respondents.
    A broker employed by an owner of real property to sell the same, who procures the consent of his principal to sell upon terms contained in a counter-proposal made by prospective purchasers, may not recover commissions by way of damages from such prospective purchasers, even though they arbitrarily refused to complete the sale. (Fox Co. v. Wohl, 255 N. Y. 268; Morgenthau-Seixas Co. v. Greene, 143 Misc. Rep. 456; Parker v. Simon, 231 N. Y. 503; Niesen v. Galewski, 211 App. Div. 858; 240 N. Y. 652; Goff v. Adelson, 229 App. Div. 802; Mulhall v. Bradley & Currier Co., 50 App. Div. 179; Windman v. Bulkowstein, 168 N. Y. Supp. 57; Eichenbaum v. Taxicab Casualty Co., 135 Misc. Rep. 339; Calkins v. Woolworth Co., 27 Fed. Rep. [2d] 314.)
   O’Brien, J.

Plaintiffs are real estate brokers and were employed by the owner of 860 Eighth avenue in the borough of Manhattan to effect the sale of these premises. After they had been retained as brokers for this purpose, they approached defendants and participated in numerous conferences with them in an effort to make a sale. Several proposals were made by plaintiffs and rejected by defendants. Eventually plaintiffs again called upon defendants and in the presence of both plaintiffs and both defendants the plaintiff Grossman suggested: “ I have got an idea where I can show you how you can buy 860 Eighth Avenue without any cash at a price of $145,000. Would you be interested? ” The defendant Herman replied: “ If you can do that, don’t hesitate; close the deal right off the bat. If you can get me that property without any cash, I will close it immediately,” Defendant Herman admits, in reference to that conversation, that he “ authorized Mr. Grossman, the broker who is suing in this action, to go out and get the premises 860 Eighth avenue for the sum of $145,000, no cash.” The owner consented to the terms which had been offered by plaintiffs and orally accepted by defendants, but later defendants changed their minds and decided not to purchase this property.

The complaint embracing the first cause of action, which is the only one which survives the verdict of the jury, alleges an employment of plaintiffs not only by the owner but also by defendants and a breach by defendants of that alleged contract of employment. It demands as damages a sum measured by the amount of the commission which defendants are alleged to have prevented plaintiffs from receiving from the owner of 860 Eighth avenue. The jury rendered a verdict in favor of plaintiffs on this cause of action but the Appellate Division reversed the judgment on questions of law and dismissed the complaint.

The mere fact that brokers have been employed by an owner to procure a sale or lease of real estate need not in itself necessarily prevent such brokers, under proper circumstances, from accepting employment also from a purchaser or a lessee. The question always is whether the facts in a given case may be held as matter of law to justify an inference of a double employment. In Pease & Elliman, Inc., v. Gladwin Realty Co. (216 App. Div. 421) the Appellate Division, in weighing the evidence, inferred an employment by defendant as well as the owner. When, as in the case before us, the complaint alleges an employment of plaintiffs by defendants as prospective purchasers, the right to recovery must depend upon proof of such allegations. There must be an existing contract between the plaintiffs and defendants which the latter had broken with resulting liability for damages. (Parker v. Simon, 231 N. Y. 503, 508.)

The facts proved in this case do not constitute an employment of plaintiffs by defendants. Both parties knew that plaintiffs were authorized by the owner to negotiate and attempt to bring about a meeting of minds on such terms as might be satisfactory to him. Plaintiffs were aggressive, as they had. the right to be, in their efforts to dispose of this property either by lease or sale and thus earn a commission. First, they offered to sell the property to defendants, but, at that stage of the negotiations, defendants expressed an interest in leasing it. Later they decided not to lease it. Then plaintiffs renewed the offer to sell and made that proposition for $145,000, without cash. There was not even a counter offer by defendants but merely an oral acceptance of plaintiffs’ suggestion. When one of the plaintiffs asked one of the defendants: “ If I can show you how you can buy the property without any cash, would you be willing to make those alterations, would you be willing to agree to make those improvements, so that the owner would feel justified in selling the property and taking back a mortgage without getting any cash security in a sale? ” one of the defendants answered in the affirmative.

The question of law is reduced to this proposition: Is a prospective purchaser liable for commissions to a broker employed by the owner when the prospective purchaser fails to carry out an oral acceptance of an offer made by that broker? There can be no such liability unless the prospect employed the broker. These defendants’ acceptance of the proposition tendered by plaintiffs cannot lead to an inference that defendants thereby employed them. As far as they were concerned, plaintiffs acted merely as intermediaries to offer proposals and to convey to the owner acceptance of such proposals or the advancement of counter proposals by a prospect whom plaintiffs were sufficiently energetic to discover. As between the owner and the prospect an oral acceptance to purchase real estate can be withdrawn, without risk of incurring.fiability for damages, at any time prior to the incorporation of such acceptance in a written instrument and execution thereof. Until that time, oral offers and oral acceptance must be deemed to be conditional and to constitute merely part of negotiations which are not consummated. If the broker is not employed, he takes his chances in respect to a consummation of pending negotiations and unless he definitely brings the parties together to such an extent that the prospective purchaser is bound, his services are rendered without right to compensation. Otherwise, every conditional offer or tentative acceptance by a prospect would result in a contract of employment.

Each case in which allegations of employment are made must be decided on the particular facts. The evidence in this case does not, in our opinion, justify an inference of employment by defendants. It does not appear that defendants had agreed, expressly or impliedly, to pay commissions or that the parties ever contracted with reference to commissions or even contracted at all.

The judgment should be affirmed, with costs.

Crane, Ch. J., Lehman, Httbbs, Crouch and Loughran, JJ., concur; Finch, J., not sitting.

Judgment affirmed.