author: Desmond, J. Froessel, J.

text:
    In the Matter of Catherine Ebling, Appellant, against New York State Civil Service Commission et al., Respondents. In the Matter of John Filip et al., Appellants, against J. Edward Conway et al., Constituting the Civil Service Commission of the State of New York, et al., Respondents. In the Matter of Harold Doyle et al., Appellants, against J. Edward Conway et al., Constituting the Civil Service Commission of the State of New York, et al., Respondents. In the Matter of Harry P. Minich, Appellant, against J. Edward Conway et al., Constituting the Civil Service Commission of the State of New York, et al., Respondents. In the Matter of Edward J. O’Malley et al., Appellants, against J. Edward Conway et al., Constituting the Civil Service Commission of the State of New York, et al., Respondents.
    Argued January 12, 1953;
    decided April 9, 1953.

      Leonard N. Lakser for Catherine Ebling, appellant.
    I. The State Civil Service Commission, in order to set aside an examination taken by petitioner as given by the Lackawanna Civil Service Commission, must find that the Lackawanna Civil Service Commission acted in an unreasonable, arbitrary or capricious manner. (Matter of Furman v. Marsh, 185 Misc. 209; Matter of Pape v. Kern, 176 Misc. 36; Davis v. Wiener, 260 App. Div. 127; Matter of Cowen v. Reavy, 283 N. Y. 232.) II. The State Civil Service Commission acted in an illegal, arbitrary and capricious manner in canceling petitioner’s appointment without giving petitioner an opportunity to defend. (Palko v. Connecticut, 302 U. S. 319; Railroad Comm. v. Pacific Gas Co., 302 U. S. 388; Ohio Bell Tel. Co. v. Commission, 301 U. S. 292.) II. Respondents, constituting the New York State Civil Service Commission, do not have the power to remove petitioner. (Matter of Brooklyn Children’s Aid Soc. v. Prendergast, 166 App. Div. 852, 215 N. Y. 705.) IV. Respondents are guilty of aches. (Matter of Williams v. Pyrke, 233 App. Div. 345.) V. The Court of Appeals must enter a peremptory order of nandamus.

      Thomas J. O’Donnell for John Filip and others, appellants.
    I. The State Civil Service Commission seeks to substitute its judgment and discretion for that of the Lackawanna Civil Service Commission. (Matter of Joseph Burstyn, Inc., v. Wilson, 303 N. Y. 242; Matter of Wignall v. Fletcher, 303 N. Y. :35.) II. The State commission did not proceed in accordance with law. (Matter of Kaney v. New York State Civil Service Comm., 298 N. Y. 707; Matter of Wignall v. Fletcher, 303 N. Y. :35.) III. The commission was guilty of loches.

      Nathaniel L. Goldstein, Attorney-General (Matthew A. Tiffany md Wendell P. Brown of counsel), for respondents.
    I. The court had the power summarily to deny petitioners’ applications md dismiss the petitions. (Matter of Maresca v. McElligott, 262 App. Div. 179; Matter of Doherty v. McElligott, 258 App. Div. 257; Matter of Rosenberg v. Board of Estimate of City of N. Y., 257 App. Div. 839, 281 N. Y. 835; Matter of Strauss v. Hannig, 256 App. Div. 662, 281 N. Y. 612; Matter of Levi v. Regents of Univ. of State of N. Y., 256 App. Div. 444, 281 N. Y. 527.) II. Petitioners have failed to present any evidentiary acts to create a triable issue of their claim that the State comnission acted arbitrarily, capriciously or unreasonably. The indings of the State commission with respect to the police natron examination and that for fire lieutenant, fire captain and >olice lieutenant cannot be said to be arbitrary, capricious or mreasonable. III. The State commission could rescind the nunicipal examination if it found it to be an inadequate test of he relative capacity and fitness of the candidates for the posiion in question. (Matter of Kaney v. New York State Civil Service Comm., 190 Misc. 944, 273 App. Div. 1054, 298 N. Y. 707.) V. Petitioners are not entitled to notice of a hearing before the State commission. (Matter of Connolly v. Conway, 27 App. Div. 945; Matter of Kaney v. New Yorh State Civil Service Comm., 190 Misc. 944, 273 App. Div. 1054, 298 N. Y. 707.) V. The lapse of time between the date of the examinations and the dot of the action by the State commission is immaterial. (Matte of Kaney v. New York State Civil Service Comm., 190 Misc 944, 273 App. Div. 1054, 298 N. Y. 707; Matter of Conway v. Kaney, 274 App. Div. 849; Matter of Connolly v. Conway, 27 App. Div. 945.)
   Desmond, J.

In April, 1949, all fifteen of these petitioner were, without notice or hearing, removed, by order of respond ent State Civil Service Commission, from their respective pos: tians in the classified civil service of the City of Lackawanm They had been appointed to those posts (as police matroi police lieutenants, fire department lieutenants and fire captains on various dates in 1945,1947 and 1948, after successfully pass ing written, competitive civil service examinations held by th Lackawanna Municipal Civil Service Commission in 1944, 194 and 1946. All the petitioners had previous service (som for many years) prior to those examinations and appointment: in the same departments of the Lackawanna municipal goveri ment. The present proceedings are brought, under article 7 of the Civil Practice Act, for mandamus type orders reinstatin the petitioners in their positions.

The answer of the commission sets forth its reasons for pet tioners’ removal. It tells us that, in conducting an investigatio (under Civil Service Law, § 11, subd. 6) of the Lackawann Municipal Civil Service Commission, it found (see same se< tian, subd. 7) that the examinations which these petitionei had passed were not practical or sufficient tests of capacity an fitness for the several positions to which they were latí appointed. Accordingly, says the commission, it exercised tl power given it by subdivision 7 of section 11 of the Civil Ser ice Law to rescind any examination or eligible list í cancel an appointment already made from a list so rescinded 5 Attached to the pleadings filed herein by the State commissic are the disputed examination questions, and the State commi sion’s conclusions as to their inadequacies. From other exhibí' similarly attached, it appears that the commission, in so co] jluding, relied on the opinions of experts employed by the iommission. Attached to the petitions, on the other hand, are affidavits by five other experts, all of whom concur in the view ;hat the several examinations thrown out by the commission instituted fair tests of fitness for the public employments in piestion.

No trial of these proceedings was held by Special Term. That iourt held that no triable issue of fact existed, since the comnission had decided that the tests were not fair and adequate, md since the affidavits of petitioners’ experts established merely i basis for a difference of opinion as to that. Therefore, each Detition was dismissed. Thus, petitioners, with no showing of !ault on their parts, or fraud by anyone, are out of their jobs.

This truly extraordinary result is sought to be justified by section 11 (supra) which empowers the commission at any ime ”, by unanimous vote, to rescind any examination or eligi)le list and cancel any appointments made from a list so eseinded, the only limitation being that such action shall not >e taken on any ground other than that “ the provisions or mrposes of this chapter [i.e., the Civil Service Law] are lot properly or sufficiently carried out ”, there being a urther requirement of written specifications showing in what larticulars the provisions or purposes ” have not been tarried out. So reads subdivision 7, and it has been authoritaively held in other proceedings growing out of this same jackawanna civil service investigation (see Matter of Kaney v. New York State Civil Service Comm., 190 Misc. 944, affd. 173 App. Div. 1054, affd. 298 N. Y. 707), that the statute gives lersons appointed from lists later disputed no right to notice t hearing as to such dispute. The order which we are reviewag herein means, therefore, this: that any municipal employee, espite his good-faith passing of a competitive written civil ervice examination, and good-faith appointment from an approbate eligible list, may at any time thereafter lose his position f the commission, in an investigation in which the employee .as no part at all, decides that the examination he passed was ot a fair test of qualification for the particular employment. Ve do not deny that the Legislature could so enact, if it wished. 5ut, in view of the fundamental purposes of the Civil Service Law, and the traditional legislative policy in this State of furnishing effective protection to civil service appointees, we cannot bring ourselves to the belief that the Legislature ever intended or foresaw an outcome like this one.

Subdivision 7 of section 11 of the law allows examination rescission and list rescission and appointment cancellation, on one ground only, that is, that “ the provisions or purposes ” of the Civil Service Law ‘ ‘ are not properly or sufficiently carried out ”. Bead literally, that language would license the commission to wipe out examinations, lists and appointments in municipalities for any violation of any one of dozens of “ provisions ” in the law, and so would leave no permanence at all in any appointment in the civil service of any municipality. But statutes are not so construed, if construction so harsh,, unreasonable and disastrous can be avoided (see Kauffman & Sons Saddlery Co. v. Miller, 298 N. Y. 38, 44). We think a meaning more fair, and less destructive, can readily be found. We hold that the provisions or purposes ” referred to in subdivision 7 are the prime, fundamental purposes of the Civil Service Law only, and that it must have been the legislative intent, at least as to appointments already made, that there could be no cancellation thereof, unless the examination had been so-obviously inadequate, or so completely unrelated to the duties of the position, as to be on its face a nullity. Only by such a construction can the integrity and permanence of municipal civil service and the rights of good-faith examinees and appointees be safeguarded.

Our conclusion that the Legislature never intended to confer on the State commission so sweeping a power to overrule the fifty-six municipal commissions is confirmed by the general statutory scheme which makes those municipal commissions largely autonomous. Subdivision 18 of section 20 of the General City Law empowers every city to create a municipal civil service and to make rules for the classification of the offices and employments in the city’s service, for appointments, promotions and examinations ”. Section 14 of the Civil Service Law, as to the competitive class, provides for examinations to be conducted by the state or municipal commission ” and requires that such examinations “ shall be practical in their character and shall relate to those matters which will fairly test the relative capacity and fitness of the persons examined ”, etc. (see, also, Rules for Classified Civil Service, rule X). Nowhere in any statute or rule (except in § 11, subd. 7, supra) do we find any permission or requirement for review by the State commission of a municipal commission’s examinations and certifications.

The dissenting Justice in the Appellate Division, who thought, as we do, that the statute could not fairly be applied in all its stark literalness, concluded that the courts should read into it a requirement that rescission or cancellation must be had within a reasonable time. We agree that such an interpolation should be made, but it would not of itself afford sufficient protection to appointees. All but one of the appointments here in question were, apparently, promotional within the same municipal department, but the statutory construction applied by the commission and the courts below would, if upheld by us, be available as against any appointee. A new appointee in the civil service of a city, who had, by accepting an appointment, burned behind him the bridge to an old job in private industry, would be little comforted by a proviso that his removal, without notice or hearing, from his city job, would have to be ordered within a “ reasonable time Our thought is that, to make this statute jibe with the general purpose, apparent throughout the Civil Service Law, of protecting civil service employees (see § 22, for instance) it must be read as referring to those examinations only which are so faulty as to be no tests at all. We cannot ourselves take on the role of examination experts, but we have looked at the questions on these rescinded examinations, and are satisfied that they are not so patently unrelated to the positions involved, as to bring into play the commission’s extraordinary subdivision 7 powers. This record, accordingly, shows that there is no more than a difference of opinion as to the quality and comprehensiveness of the respective tests. We hold that appointments made from lists resulting from competitive municipal civil service examinations cannot be nullified on such a mere balancing of expert opinions. On these papers, petitioners were entitled to the mandamus orders they prayed for.

Matter of Kaney v. New York State Civil Service Comm. (supra) is not controlling on us here. That was a prohibition proceeding wherein certain persons, theretofore appointed to municipal service positions in Lackawanna, sought to halt the State commission’s Lackawanna investigation, out of which these attempted rescissions and cancellations later arose. Prohibition was refused, since the statute (§ 11, subd. 7, supra) was construed, in that case, as neither requiring notice to appointees of such an investigation, nor permitting any such investigation to produce a result which would be binding on the appointees. Indeed, the Special Term opinion in Kaney (no opinion was written in this court or in the Appellate Division) said that, if any examinations, lists or appointments should be stricken down by the commission, the holders of the affected positions could later have their day in court in mandamus proceedings.

The orders appealed from should be reversed, with costs in all courts, and the several proceedings remitted to Special Term with instructions to grant the relief prayed for.

Froessel, J.

(dissenting). Fifteen petitioners in five article 78 proceedings seek to annul a decision and order of the State Civil Service Commission rescinding City of Lackawanna civil service examinations and the eligible lists resulting therefrom, and canceling the appointments of petitioners from said lists. The examinations were for police matron, fire lieutenant, fire captain and police lieutenant, and were given between 1944 and 1946. Petitioners passed such examinations as were given them, and in due time were appointed, the last appointment having been made on September 27, 1948.

In 1946 the State Civil Service Commission commenced an investigation of the affairs of the Lackawanna Municipal Civil Service Commission, following which extended hearings were held under subdivision 7 of section 11 of the Civil Service Law, upon notice and charges as therein required, resulting in the determination sought to be annulled, which has thus far been sustained. The basis of the State commission’s decision and order was that the examinations did not properly or sufficiently carry out the provisions or purposes of the Civil Service Law; in other words, did not adequately test the candidates’ merit and fitness.

It would serve no useful purpose to discuss in detail each of the examinations. A brief reference thereto, however, will be illuminating. The police matron examination — the subject matter of the first proceeding — consisted of five simple questions. The first four were on first aid: “ #1 — What is fainting ? #2 — What is the treatment for fainting? #3 — What is sunstroke? #4 — What is the treatment for sunstroke?” These were evaluated at 60%. The sole remaining question, evaluated at 40%, was: “ Write a composition of forty words or more pertaining to the duties and responsibilities of a police matron.” The answer thereto was in the “ specification ” for this examination, as was indeed the case with the composition questions in all the other examinations. Petitioner was appointed within twenty-four hours after taking the examination.

In the fire lieutenant examination, a 60% credit was allowed for answers to three so-called service record ” questions, which asked for the commencement date of service, number of ilhiess absences in three years, and the number of charges against the candidate. Ten per cent was allowed for knowing where ten fire boxes were located; and 15% each for two compositions.

In the fire captain examination, the same first aid questions were asked as on the police matron examination, the same ‘6 service record ’ ’ questions as on the fire lieutenant examination, and a fifty-word composition was called for, rated together at 70%; fifteen general questions, rated at 30%, were also asked, the first of which was: Why is it so important that fire apparatus gets to the fire as soon as possible? ”

In the police lieutenant examination, 10% was allowed for substantially the same “ service record ” questions as were asked on the fire lieutenant examination, 30% for the correct spelling of eight simple words, such as “ kriminal ”, 20% for four elementary questions in arithmetic, one of which was: What part of an hour is 30 minutes? ” and likewise as to 20, 45 and 55 minutes; and 30% for six so-called practical questions, such as: “ What is a Barrister? ” and “ What is burglary? ” The examinations given under subdivision 5 of section 246 of the Military Law were identical (not comparable, as required by that statute) with examinations given less than two years previously as to fire lieutenant, and less than a year previously as to fire captain.

Our State Constitution (art. V, § 6) provides that “ Appointments and promotions in the civil service of the state and all of the civil divisions thereof, including cities and villages, shall be made according to merit and fitness to be ascertained, as far as practicable, by examination which, as far as practicable, shall be competitive To this fundamental constitutional mandate, all legislative and judicial power must yield. As we said, through Lehman, J., in Palmer v. Board of Educ. (276 N. Y. 222, 225, 226): By placing this provision in the Constitution the People of the State have declared in unmistakable terms that merit, ascertained as therein provided, shall govern appointments and promotions in the public service, and have thus formulated and announced the public policy of the State. No administrative officer may violate the provisions of the Constitution, and no court may sanction a violation. * * * An employment which in its inception violates the provisions of the Constitution is illegal and against public policy, regardless of the good faith of the parties.” (See, also, Matter of Carow v. Board of Educ., 272 N. Y. 341, 344; Matter of Scahill v. Drzewucki, 269 N. Y. 343, 346.)

To implement the constitutional mandate, the Legislature in 1944 (L. 1944, ch. 435) enacted subdivision 7 of section 11 of the Civil Service Law, which reads: Said state commission may at any time, by unanimous vote of the three commissioners, amend or rescind any rule, regulation or classification prescribed under the provisions of this section or rescind any examination or eligible list or cancel an appointment already made from a list so rescinded, provided that said state commission shall state the reasons for such action in writing and file the same and a certified transcript thereof as a public document as hereinbefore provided, and give an opportunity to the municipal civil service commissioners concerned to make a personal explanation and to file papers in opposition to such action. The said state commission, however, shall not take such action upon any ground other than that the provisions or purposes of this chapter are not properly or sufficiently carried out, nor without specifying in writing and detail in what particular such provisions or purposes are not carried out ”. (Emphasis supplied.) The constitutionality and the purpose of this statute have been passed upon by us in Matter of Kaney v. New York State Civil Service Comm. (190 Misc. 944, 949, affd. 273 App. Div. 1054, affd. 298 N. Y. 707), where it was said: “ Under the 1944 amendment, the State Civil Service Commission has the power to rescind an eligible list established by a municipal commission not only on the ground of fraud or material misstatement but also on the ground that the provisions or purposes of this chapter [Civil Service Law] are not properly or sufficiently carried out. ’ This would seem to embrace the power to rescind the list and cancel appointments upon the ground that the examination given for the position was not sufficiently practical in character and did not fairly test the relative capacity and fitness of the persons examined to discharge the duties of the position (Civil Service Law, § 14).” It was also held in that case that the statute does not entitle petitioners to notice and hearing before the State commission. (See, also, Matter of Connolly v. Conway, 277 App. Div. 945, motion for leave to appeal denied 301 N. Y. 814.)

Pursuant to the clear and unambiguous power vested in it by subdivision 7 of section 11, the State commission, in its decision and order herein, made the determination here challenged on the ground that the examinations “ did not properly or sufficiently carry out the provisions or purposes of the Civil Service Law ”, and, more specifically, that they did not meet the requirements of Section 14 ” (now § 14, subd. 6) thereof “ and of Bules X and XXVII(6) ” of the Lackawanna Eules of Civil Service. Section 14 provided: “ The examinations shall be public and shall be practical in their character and shall relate to those matters which will fairly test the relative capacity and fitness of the persons examined to discharge the duties of that service into which they seek to be appointed.” (Emphasis supplied.)

Having predicated its action on the enforcement of section 14, the State commission was clearly acting in strict compliance with the plain mandate of subdivision 7 of section 11. (Matter of Kaney v. New York State Civil Service Comm., supra; Matter of Connolly v. Conway, supra.) The statute must be read to mean what it says, and we may not read words into it that are at variance with its clear purpose. It expressly authorizes action by the commission in accordance with the “ provisions or purposes of this chapter ”, with appropriate safeguards against precipitate action, and with the requirement of unanimity. Section 14 is one of its provisions. And the purpose of the chapter — indeed its fundamental purpose — is mandated by the Constitution. The Legislature has endeavored to obey this direction; we have no right to disobey it nor to attribute to the Legislature such a design. The majority agree that the Legislature could enact such a statute as to achieve the result here attained, and the fact is that it has. The wisdom of the statute is for the Legislature, and not the courts, to decide ” (Matter of Kaney v. New York State Civil Service Comm., supra, p. 949). The purpose of the constitutional provision is to protect the civil service, so that appointments and promotions may be made only on “ merit and fitness ”, tested by valid competitive examinations. Failure to uphold this injunction will impair the integrity of and do incalculable harm to the whole civil service system, and result in withholding the very protection which the Constitution mandates.

Nor should we overlook the fact that, the People of the State, who mandated the constitutional provision, have rights in the public policy which it announces. We are here dealing with fire captains and fire and police lieutenants, as well as police matrons — responsible officers charged by law with the duty of protecting the lives, the liberty and the property of our people. It is a grave matter when such officers may be admitted to their positions on the basis of examinations which utterly fail to test their relative capacity and fitness * * * to discharge the duties ” appertaining thereto. The preservation of the merit system is not only in the best interests of civil service, but also affords the public that protection to which it is entitled under our Constitution. The inconveniences to petitioners flowing from the determination challenged must yield to the constitutional and statutory requirements that a valid appointment can be based only upon merit and fitness as determined by a proper examination.

We are told by the majority (p. 227) that “ Nowhere in any statute or rule (except in § 11, subd. 7, supra) do we find any permission or requirement for review by the State commission of a municipal commission’s examinations and certifications.” Is not one enactment sufficient? Must it be multiplied to be effective ?

The fact that petitioners have already been appointed does not preclude the State commission from invalidating the appointments, for subdivision 7 of section 11 expressly provides that the commission may “ cancel an appointment already made ”, (Emphasis supplied.) (Matter of Kaney v. New York State Civil Service Comm., supra.) Petitioners are not being deprived of any vested right because if, as found by the State commission, these examinations failed to carry out the provisions of section 14, then each of the petitioners failed to pass a requisite examination. The effect is the same as if there had been no examinations; the appointments were therefore invalid and conferred no tenure on petitioners, irrespective of good faith. (Palmer v. Board of Educ., 276 N. Y. 222, supra; People ex rel. Hannan v. Board of Health, 153 N. Y. 513, 519-520.)

It may not be said, as a matter of law and on the record before us, that the commission was not justified in finding that the provisions of section 14 were not being obeyed. The examination questions speak eloquently for their own inadequacy. A comparison of the duties listed in the specifications with the subject matter of the examinations likewise establishes their utter deficiency. Moreover, the testimony of the commission’s two well-qualified experts in the field of preparation and grading of civil service examinations was comprehensive arid specific and clearly supported the commission’s findings, even when considered in the light of the affidavits of petitioners ’ experts, which were general in nature. The commission’s findings in each case were likewise clear and definite, and in accord with the statute.

In addition to failing to meet the standards- enunciated in section 14, there is a further basis for rescinding the fire captain and fire lieutenant examinations taken respectively by petitioners Hughes and Kalamajka. They were in military service at the time the original examinations were given and upon discharge were examined for the respective positions pursuant to subdivision 5 of section 246 of the Military Law. The State commission rescinded their examinations, and properly so, because they were identical with the examinations originally given and not, as required by the Military Law, “ comparable ” examinations.

It is urged that the State commission has been guilty of loches. The short answer thereto is that subdivision 7 of section 11 specifically provides that the State commission may take the action authorized thereunder “ at any time ”. (Emphasis supplied.) Moreover, these examinations were given between 1944 and 1946. Appointments were made from 1945 until as late as September 27,1948. The commission’s investigation was already under way in 1946, and notice of charges was served upon the Lackawanna commission in 1947. Between that time and the decision and order of the State commission on April 12, 1949, it was confronted with litigation arising out of examinations given by the Lackawanna Municipal Civil Service Commission, two of which reached the appellate courts (Matter of Kaney v. New York State Civil Service Comm., supra; Matter of Conway v. Kaney, 274 App. Div. 849, appeal dismissed 298 N. Y. 709, motion for leave to appeal dismissed 298 N. Y. 752). Indeed, in the commission hearings, the president stated: “ nor is there any attitude or disposition on the part of any member of this Commission to engage in a race with the Courts to make a determination of the proceeding ”. Thus it may not be said that the commission did not proceed with reasonable dispatch, consistent with their onerous responsibilities, the numerous issues involved,, and the necessity of protracted hearings.

The orders of the Appellate Division should be affirmed, without costs.

Dye and Fuld, JJ., concur with Desmond, J.; Conway, J., concurs in the result upon the dissenting memorandum of Piper, J., in the Appellate Di-vision; Froessel, J., dissents in opinion in which Loughran, Ch. J., and Lewis, J., concur.

Orders reversed, etc.

         Reflecting very slight, immaterial amendments made in 1950.


source: Caselaw Access Project

author: Fuld, J. Desmond, J.

license: Public Domain

text:
    Louis Sternberg, as Trustee in Bankruptcy of Harold B. Fink, Doing Business under the Name of Delaware Bootery, Respondent, v. Jack Rubenstein, Appellant.
    Argued January 21, 1953;
    decided April 16, 1953.

      Victor Levine and Benjamin M. Gingold for appellant.
    A type of sale which recurs regularly in a business is not a sale in bulk and is made in the ordinary course of trade and in the (regular prosecution of that business. (Feldstein v. Fusco, 205 App. Div. 806; Mott v. Reeves, 125 Misc. 511, 217 App. Div. 718, 246 N. Y. 567.)

      Donald S. Day for respondent.
    I. This was a sale in bulk otherwise than in the ordinary course of trade and in the regular prosecution of the bankrupt’s business. (Personal Property Law, § 44; Jubas v. Sampsell, 185 F. 2d 333; Irving Trust Co. v. Rosenwasser, 5 F. Supp. 1016; Conquest v. Atkins, 123 Me. 327;
      Klein v. Maravelas, 219 N. Y. 383.) II. This was a sale in bulk as contemplated by the New York Bulk Sales Act. (Mott v. Reeves, 125 Misc. 511, 217 App. Div. 718, 246 N. Y. 567.)
   Fuld, J.

Plaintiff trustee in bankruptcy, acting on behalf of creditors, sues to hold defendant Jack Rubenstein accountable, under the Bulk Sales Act (Personal Property Law, § 44), for the value of a batch of “ off-season ” shoes sold to Rubenstein by the bankrupt, Harold B. Fink. The question presented is whether, under the statute, the sale of such “ off-season ” merchandise constitutes a sale “ in bulk * # * otherwise than in the ordinary course of trade and in the regular prosecution of said business ”.

Three weeks before Christmas, 1948, Fink opened a family shoe store in Buffalo, New York. At a cost of some $25,000, he stocked the store with men’s, women’s, and children’s shoes. By the following May, Fink’s inventory had declined to around $19,000 and still consisted, in part, of fall and winter styles. To clear his shelves of those “ off-season ” shoes, as well as to obtain cash to pay debts and thus obtain credit for the purchase of new summer stock, Fink sold some thirteen hundred pairs of shoes — described as “ obsolete ” in the record — for $3,549.50 to Rubenstein, a dealer in leftover footwear. Although Fink concededly did not comply with the requirements of the Bulk Sales Act, nowhere is there the slightest intimation that he did not secure the best price available for his goods, and, as was found by the Official Referee before whom the case was tried, “ There is nothing to indicate ” that there was any intention to defraud any of the [seller’s] creditors ”. There was no discontinuance of any branch of Fink’s business or of any line or brand of merchandise carried by him, and actually the sale to Rubenstein did not include Fink’s entire stock of off-season ” shoes. Fink continued in business for six months after the sale, until the filing of the petition in bankruptcy in November of 1949.

The Official Referee concluded that the sale to Rubenstein 11 was in the ordinary course of the bankrupt’s business ”, and directed dismissal of the complaint. The Appellate Division reversed, its view being that the 1 ‘ regular and usual practice and method of business ” of retail shoe merchants “ was selling shoes to those who came into the store to buy from the stock in trade for wear.” (279 App. Div. 30, 31.) Following an accounting, upon remission of the matter to Special Term, judgment was rendered directing Rubenstein to pay the trustee the sum of $3,549.50, and, from that judgment, Rubenstein appeals directly to this court, seeking review only of the Appellate Division’s determination (Civ. Prac. Act, § 590).

Decision turns upon the following language: “ The sale * * * in bulk of any part or the whole of a stock of merchandise * * * pertaining to the conducting of the business of the seller * * * otherwise than in the ordinary course of trade and in the regular prosecution of said business, shall be void as against the creditors of the seller,” unless there is compliance with certain specified requirements (Personal Property Law, § 44). Failure on the part of the purchaser to conform ” to these requirements, it is recited, shall, upon application of any of the seller’s creditors, render him “ a receiver * * * accountable to such creditors for all the goods # * * that have come into his possession by virtue of such sale ”. In our view, both the design and scope of this section make clear that the words, otherwise than in the ordinary course of trade and in the regular prosecution of * * * business,” were meant to exempt the sale of off-season ’ ’ shoes — merchandise rendered ‘ ‘ obsolete ’ ’ by the passage of time.

Section 44 derives from legislation first enacted in 1902. (L. 1902, ch. 528, held unconstitutional in Wright v. Hart, 182 N. Y. 330; amd. by L. 1904, ch. 569; L. 1907, ch. 722; L. 1914, ch. 507, held constitutional in Klein v. Maravelas, 219 N. Y. 383, 387, overruling Wright v. Hart, supra, 182 N. Y. 330; see, also, Note, 2 Corn. L. Q. 28.) By 1916, similar provisions had been

adopted, largely through the efforts of the National Association of Credit Men, in every state of the nation. (See Klein v. Maravelas, supra, 219 N. Y. 383, 385; see, also, Billig, Bulk Sales Laws: A Study in Economic Adjustment, 77 U. of Pa. L. Rev. 72,81-99.) In the words of that Association’s first president, these laws generally were aimed at curbing a favorite indoor sport of three decades ago ” when the fraudulently inclined debtor * ® * [could] sell his stock in bulle, pocket the proceeds and laugh at his creditors.’- (Tregoe, 29 Credit Monthly, pp. 11,12.) In particular, the statutes were designed, the draftsmen of the Proposed Uniform Commercial Code have written, to discourage “ two common forms of commercial fraud, namely: (a) the merchant, owing debts, who sells out his stock in trade to a friend for less than it is worth, pays his creditors less than he owes them, and hopes to come back into the business through the back door ” and (b) the merchant, owing debts, who sells out his stock in trade to any one for any price, pockets the proceeds and disappears leaving his creditors unpaid.” (Comment to § 10-101, Proposed Uniform Commercial Code, Final Draft [Spring, 1950], p. 819; see, also, Mott v. Reeves, 125 Misc. 511, 512-513, affd. 217 App. Div. 718, affd. 246 N. Y. 567; Sixth Annual Report of N. Y. Judicial Council, 1940, pp. 383-384.)

Recognizing the onerous nature of the restrictions imposed upon transactions within its scope, this court early construed the Bulk Sales Act as being meant, to apply only in “ rare and irregular cases ”, only to the extraordinary sale * * * such as can occur but few times in the life of a merchant ”. (Wright v. Hart, supra, 182 N. Y. 330, 356, 357, per Vann, J., dissenting — whose dissent was later adopted unanimously in Klein v. Maravelas, supra, 219 N. Y. 383, 387.) Following this guide, our courts have limited the reach of this statutory provision to cases involving the sale of substantially an entire inventory or business. (See, e.g., Mott v. Reeves, supra, 125 Misc. 511, affd. 217 App. Div. 718, affd. 246 N. Y. 567; Bimberg & Co. v. Unity Coat & Apron Co., 150 Misc. 836, affd. 244 App. Div. 777; Texas Co. v. Drexelius, 176 Misc. 371; see, also, New York Credit Men’s Assn. v. Domestic Broadtail Producers, 61 F. Supp. 102, 105.) Similarly, in other jurisdictions, bulk sales legislation has been applied only to transactions “ uniquely extraordinary and out of the usual course of * * * a merchant’s business ” (First Nat. Bank of Shreveport, La., v. Sharp, 54 F. 2d 886, 888) —such as sales “ discontinuing * * * business at * * * [the] old store ” (Cohen v. Calhoun, 168 Miss. 34, 39) or closing out one link in a chain of stores (Keller v. Fowler Bros. & Cox, 148 Tenn. 571, 576), one branch of a business (Conquest v. Atkins, 123 Me. 327, 328), one line of wares (Irving Trust Co. v. Rosenwasser, 5 F. Supp. 1016) or an “ entire stock of merchandise ” (Tupper v. Barrett, 233 Mass. 565, 569; see, also, Vacuum Oil Co. v. Wichita Ind. Consolidated Companies, 110 Kan. 245, 246; Fitz Henry v. Munter, 33 Wash. 629, 630.)

It thus becomes evident that the statute was never designed to cover the sort of sale effected by Fink to Rubenstein. Its application depends essentially * * * upon the nature of the seller’s business * * * [and the] ordinary method of making sales ”. (Hart v. Brierley, 189 Mass. 598, 601; see, also, Markwell & Co. v. Lynch, 114 F. 2d 373, 374-376.) The record here shows that in the business of shoe retailing the sale of ‘ off-season ” wares is no rare and irregular occurrence, but rather an established operating pattern, no attempt to defraud creditors, but rather an inevitable incident to the conduct of business. Shoe styles may vary sharply from season to season and year to year, with the result that last year’s rage ” may clog this season’s shelves. As seasons change, a merchant seeks to clear his store, and as rapidly as possible, of shoes still unsold. Larger stores may resort to much publicized ‘ ‘ clearance sales ’ ’ or operate their own special outlet ” stores. But the smaller, independent retailer, lacking the means for extensive advertising or a separate store, must, of necessity, rely on dealers specializing in unseasonable obsolete shoes. Thus, as the record reveals, Rubenstein alone regularly dealt with as many as several hundred ” retailers in “ smaller towns * * * throughout northern and western New York ”.

Such recurring sales, vital as these may be to the operation of the smaller independent retailer, must be regarded, in the words of the statute, as sales made in the ordinary course of trade and in the regular prosecution of said business ”, Indeed, to subject such transactions to the requirements prescribed by section 44 would tell creditors little more than they already know. They are forewarned, by industry and trade custom, that ‘ ‘ off-season ’ ’ sales are regular occurrences and, entirely apart from the Bulk Sales Act, they may anticipate usual sales of obsolete leftovers and scrutinize such transactions beforehand. And, if fraud or covert advantage is later unearthed, a creditor may set it aside as a fraudulent conveyance under state law (N. Y. Debtor and Creditor Law, § 276) or as a preference or fraudulent conveyance under federal statute (Bankruptcy Act, § 3, subd. a, pars. [1], [2]; § 60, subd. b; § 67; XT. S. Code, tit. 11, § 21, subd. [a], pars. [1], [2]; § 96, subd. [b]; § 107).

In point of fact, to hold that these frequently repeated transactions are controlled by section 44 might, contrary to the aim of the statute, render the creditor’s lot more hazardous. Even if a dealer could be found to purchase “ off-season ” stock on the terms prescribed by the statute, the prices realized would almost certainly be lower. Small retailers might, therefore, be forced to rely upon markdown sales or below-cost clearances — which, as one expert testified at the trial, would ” make it difficult * * * to sell the same customers other shoes at the list price ”. The result, it is easy to see, might well be to curtail the retailer’s business and thus endanger prompt payment to his creditors. Of the three cases relied upon by the trustee to support his position (Jubas v. Sampsell, 185 F. 2d 333; Irving Trust Co. v. Rosenwasser, supra, 5 F. Supp. 1016; Conquest v. Atkins, supra, 123 Me. 327; see, also, Markwell & Co. v. Lynch, supra, 114 F. 2d 373), two are distinguishable on their facts, and the third (Jubas v. Sampsell, supra, 185 F. 2d 333) arose under a California statute which, unlike our statute, adopts the explicit criterion whether the sale was made in the regular and usual practice and method of business of the vendor ” (Cal. Civ. Code [Deering Supp., 1951], § 3440.1, formerly § 3440). But, distinguishable or not, reason and a regard for the practices prevalent in the retail shoe business — as reflected by the record before us — prompt rejection of the arbitrary and inflexible rule that would invalidate this sale. We cannot ignore the usages and necessities of modern retailing, by holding that only those sales made to customers off the street are in the ordinary course of trade or the regular prosecution of business.

The judgment should be reversed and the judgment entered upon the decision of the Official Eeferee dismissing the complaint, affirmed, with costs in this court and in the Appellate Division.

Desmond, J.

(dissenting). I think the Appellate Division was right in holding that, on the facts and the law, this bulk sale was not “ in the ordinary course of trade ”, and so was subject to the Bulk Sales Act. This vendor was not a wholesaler but the proprietor of a small retail shoe shop. His “ ordinary course of trade ” was the selling of shoes at retail, one or two pairs at a time, for personal use by his customers. His sale and delivery, in a quick cash transaction to one buyer, of about thirteen hundred pairs out of his comparatively small stock was just the sort of thing this statute deals with. When a retail merchant makes a bulk sale of the whole, or a substantial part, of his stock, the impact of the Bulk Sales Act is automatic (see Mott v. Reeves, 125 Misc. 511, affd. 217 App. Div. 718, affd. 246 N. Y. 567). It cannot make any difference that this particular sale was nonfraudulent (see Mott v. Reeves, supra), or that it was of a kind that has become common among retail shoe merchants. The statute was enacted because of similar practices that had become all too common, and — to prevent or penalize the fraudulently motivated ones — advance notice to creditors, of all such sales, was prescribed. An affirmance here would not abolish any commercially necessary method of closing out old stocks -— it would merely call attention to the necessity of complying with the statute, as to such bulk sales.

Applying an almost identical statute to a similar sale, by a retailer, of out-of-style shoes, a Federal court wrote this :

“ The ‘ regular and usual practice and method of business of the vendor ’ cannot be measured by a prevalent custom of merchants which the vendor followed. The vendors herein were retail shoe merchants whose regular and usual practice and method of business was selling shoes to those who came into the store to buy from the stock in trade for wear.
‘ ‘ The plain meaning of the statute is that when a storekeeper disposes of a substantial part of his stock in trade in bulk, and selling in bulk sales is not the usual and ordinary way in which he conducts his business from day to day, the sale falls within the statute.” (Jubas v. Sampsell, 185 F. 2d 333, 334.)

The judgment should be affirmed, with costs.

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

Ordered accordingly.

      . Among the conditions enumerated are these: (1) the seller must give the purchaser, at least ten days before the sale, “ a full and detailed inventory,” showing the quantity and the cost price of each article to be sold; (2) the purchaser must retain “ said inventory ” for at least ninety days for inspection by any creditor of the seller; (3) the purchaser must obtain a list of the names and addresses of such creditors, with the amount of the indebtedness owing to each; and (4) the purchaser must notify personally or by registered mail every creditor of the proposed sale, of its terms and conditions, at least ten days before he takes possession of or pays for the merchandise involved.

      . Conquest v. Atkins (supra, 123 Me. 327), and Irving Trust Co. v. Rosenwasser (supra, 5 F. Supp. 1016), involved, not the routine and recurring disposal of scattered leftovers as in the case before us, but “the closing out of [the] business” (123 Me., p. 329) or the “close out” of a line of merchandise (5 F. Supp., p. 1017.)


author: Conway, J. Dye, J.

text:
    James Morgan, Appellant, v. Greater New York Taxpayers Mutual Insurance Association, Respondent.
    Argued January 14, 1953;
    decided April 16, 1953.

      Alexander Chananau, Harold G. Aron and William Merritt for appellant.
    I. The damages sustained by plaintiff are within the coverage of the policies issued by defendant. Where several interests are insured under a policy, the doing of a prohibited act by one assured does not defeat a cause of action to enforce an obligation of the insurer to another assured to pay all sums which the latter assured shall become liable to pay. (Schroeder v. Columbia Cas. Co., 126 Misc. 205; Dean v. Marschall, 90 Hun 335; Weiss v. New Jersey Fidelity & Plate Glass Ins. Co., 131 Misc. 836; Stromblad v. Hanover Fire Ins.

      Co., 121 Misc. 322; Bobrow v. United States Cas. Co., 231 App. Div. 91; Wenig v. Glens Falls Ind. Co., 294 N. Y. 195; Donley v. Glens Falls Ins. Co., 184 N. Y. 107; Maryland Cas. Co. v. Lopopolo, 97 F. 2d 554; Hoyt v. New Hampshire Fire Ins. Co., 29 A. 2d 121; Fireman’s Ins. Co. v. Larey, 125 Ark. 93; Pratt v. Hanover Fire Ins. Co., 50 R. I. 203; Smolensky v. Massachusetts Bonding & Ins. Co., 120 Misc. 346.) II. An assault upon plaintiff is an accident covered under the policies even in the absence of the “ assault and battery ” clause. (Green Bus Lines v. Ocean Accident & Guar. Corp., 287 N. Y. 309; Floralbell Amusement Corp. v. Standard Sur. & Cas. Co., 170 Misc. 1003, 256 App. Div. 221.) III. The definitions clause in the policies issued by defendant is designed to broaden, and not to restrict or limit, coverage. (U. S. F. & G. Co. v. Brann, 297 Ky. 381; Clinton v. Hope Ins. Co., 45 N. Y. 454; Zivitz v. Maryland Cas. Co., 192 App. Div. 83.) IV. Any doubts as to the meaning of the clauses in the policies must be resolved against defendant who prepared the policies. (Conn v. Hengerer Co., 152 Misc. 201; People ex rel. Leonard v. Hamilton, 27 Misc. 308; Matter of Mortgage Corp. of N. Y. v. Menan Realty Corp., 258 App. Div. 429; United States v. Hudson, 65 F. 68; Hartol Products Corp. v. Prudential Ins. Co., 290 N. Y. 44; Mansbacher v. Prudential Ins. Co., 273 N. Y. 140; Burr v. Commercial Travelers Mut. Accident Assn., 295 N. Y. 294; Tonkin v. California Ins. Co., 294 N. Y. 326; Lewis v. Ocean Accident & Guar. Corp., 224 N. Y. 18.)

      Alexander E. Rosenthal and Irving Segal for respondent.
    Defendant’s policy did not provide coverage for the cause of action upon which plaintiff recovered his judgment against defendant’s assured. (Lavine v. Indemnity Ins. Co., 260 N. Y. 399; Coleman v. New Amsterdam Cas. Co., 247 N. Y. 271; Weatherwax v. Royal Ind. Co., 250 N. Y. 281; Brustein v. New Amsterdam Cas. Co., 255 N. Y. 137; Devitt v. Continental Cas. Co., 269 N. Y. 474; Hartigan v. Casualty Co. of America, 227 N. Y. 175; Floralbell Amusement Corp. v. Standard Sur. & Cas. Co., 256 App. Div. 221; De Luca v. Coal Merchants Mut. Ins. Co., 203 Misc. 261; McLoughlin v. New York Edison Co., 252 N. Y. 202; Soper v. Fidelity & Cas. Co. of N. Y., 198 Misc. 1117.)
   Conway, J.

Plaintiff holds an unsatisfied judgment against Murray Cronin and Morris Leventhal, as copartners, for damages for personal injuries and has brought this action, under paragraph (b) of subdivision 1 of section 167 of the Insurance Law, to recover the amount of that judgment from defendant, Cronin’s insurer.

The facts, which are not in dispute, are as follows: Cronin and Leventhal owned and operated the Concourse Residence Club. Plaintiff was their tenant and, while on the named premises, sustained personal injuries during an assault upon his person by Leventhal. Cronin was in Florida at that time and it is not contended that the assault was committed at his direction. Plaintiff instituted an action to recover damages against Cronin and Leventhal “ individually and as co-partners doing business under the name and style of Concourse Residence Club ”. Defendant who had issued a public liability policy to Cronin and Leventhal, as individuals, was given notice of the action but refused to defend in their behalf.

The action was dismissed as to Cronin in his individual capacity but a judgment, which remains unsatisfied, was obtained against him and Leventhal as copartners, the jury having found that the assault was committed by Leventhal “ in the ordinary course of the business of the partnership ” (Partnership Law, § 24). Cronin is of course individually liable to plaintiff for the full amount of that tort judgment (Partnership Law, §§ 24, 26). A judgment with which we are not here concerned was also had against Leventhal, individually, for punitive damages.

Plaintiff in the present action “ stands in the shoes ” of the assured Cronin, not of Leventhal, and seeks to avail himself of Cronin’s alleged right of indemnity against the defendant insurer. (Devitt v. Continental Cas. Co., 269 N. Y. 474, 479.)

The policy involved here is an “ Owners, Landlords and Tenants Public Liability Policy ”. The insuring agreements provide, “ subject to * * * exclusions, conditions and other terms of this policy ”, that defendant shall “ pay on behalf of the Assured all sums which the Assured shall become obligated to pay by reason of the liability imposed upon him by law for damages * * * because of bodily injury * * * sustained by any person e * * caused by accident, arising out of the care, maintenance or operation of the premises herein insured.” It is further provided that “Assault and battery shall be deemed an accident unless committed by or at the direction of the Assured.” (Emphasis supplied.) The policy then recites that: “ The foregoing agreements are subject to the following conditions: * s *

“ Definitions
2. (a) The word ‘ Assured ’ used in this Policy shall mean the individual, partnership, corporation, trustee or estate named in Declaration 3, and includes not only such named Assureds but also any partner, executive officer or director thereof while acting within the scope of his duties as such ’ ’.
The Declarations, insofar as pertinent here, are as follows, the emphasized words having been typed upon the printed form policy:
“ 1. Name of Assured MURRAY CRONIN AND MORRIS LEVENTHAL * * *
3. The Assured# ARE INDIVIDUALS
(Individual, Partnership, Corporation, Trustee or Estate).”

Defendant argues that the policy excluded from coverage assaults committed by or at the direction of the Assured ” and that the assault by Leventhal is within the exclusion, i.e., an assault committed by the assured. The policy states, and defendant concedes that Cronin and Leventhal were insured as individuals. Thus, defendant’s position that the assault was committed by the Assured ” does not rest upon the fact that Leventhal, who committed the assault, was named as an assured in the Declarations ” as quoted. Reliance is placed upon the quoted1 ‘ Definitions ’ ’ section, which provides that the term Assured ” includes, in addition to the named assured, a partner of the named assured. The situation then is the same as if separate policies had been issued to Cronin and Leventhal and we were concerned here only with the policy issued to Cronin. Thus, Leventhal, as partner of the named assured, Cronin, is an additional assured, as far as Cronin is concerned, by virtue of the Definitions ” section, and the question for decision is whether the provision excluding from coverage assaults cornmitted by the assured denies to the named assured coverage for liability imposed upon him by reason of an assault committed by a defined additional assured.

Clearly the reason for the exclusion from coverage of an assault committed by or at the direction of the assured is that it would not be in accord with public policy to indemnify a person for losses incurred as a consequence of his criminal acts. That, we think, and nothing more is the intent of that exclusory provision. The denial of coverage to an assured for liability imposed upon him for an assault in which he himself took no part finds no justification in the policy which lies behind the exclusory provision. To indemnify him does not save him from the consequences of his criminal act for he committed none.

“ Our guide must be the reasonable expectation and purpose of the ordinary business man when making an insurance contract * * * ” (Burr v. Commercial Travelers Mut. Accident Assn., 295 N. Y. 294, 301). “ The language employed in the contract of insurance must be given its ordinary meaning, such as the average policyholder of ordinary intelligence, as well as the insurer, would attach to it.” (Abrams v. Great Amer. Ins. Co., 269 N. Y. 90, 92.) We believe that the meaning which we attribute to the exclusory provision is the only proper one. If defendant intended the exclusory provision to mean more than that, i.e., to mean that there is no obligation to indemnify an assured for liability resulting from an assault committed by another assured, it should have made that intention known.

Defendant urges, however, that that intention is manifested in the policy’s definition of the term “ Assured ”. The term as there defined includes partners of the named assured. Hence, defendant concludes, the assault by Leventhal was an Assault * * * committed by * * * the Assured ’ ’ and not within the coverage of the policy. But that argument, based upon the Definitions ” section, cannot withstand analysis. Defendant, we think, seeks to turn to its own advantage a provision of the policy intended to benefit, not to prejudice, the named assured. The Definitions ” section, by assigning a broad meaning to the term Assured ”, extends coverage to various persons in addition to the named assured. That section which might be termed an “ additional assured ” provision serves as an inducement to purchase insurance to one contemplating taking out a liability policy, by affording coverage, without added premium, to others in addition to the applicant. To hold that such a provision, purporting as it does to broaden coverage by extending it to additional assureds, works a reduction in the coverage which would be afforded to the named assured in the absence of such provision is not in harmony with the true, beneficial purpose of the provision. In Wenig v. Glens Falls Ind. Co. (294 N. Y. 195) we discussed a somewhat similar provision and said (Lehman, Ch. J., p. 201): “ The liability of the insurance company upon its promise to insure the ‘ named assured ’ is neither extended nor limited by the fact that under the terms of the policy it assumed an obligation also to insure the ‘ additional assured ’ against liability for damages for which he might become liable.” (Emphasis supplied.)

The proper view of the policy under consideration is that by it the defendant has undertaken separate and distinct obligations to the various assureds, named and additional, and where liability is imposed upon one of the assureds for an assault by another assured in which he took no part, the result should be no different from that which would obtain where the assault was committed by a person who is not an assured — e.g., an employee. Thus, while Leventhal could have no right to indemnity for the consequences of his act, the liability of Cronin for the act of Leventhal falls within the coverage of the policy. In short, since defendant has undertaken separate obligations to each of the assureds, an assault committed by an assured relieves the defendant insurer of its obligation to that particular assured but not of its obligations to the other assureds. (See Wenig v. Glens Falls Ind. Co., 294 N. Y. 195, 201-202, supra.)

The authority upon which defendant and Special Term relied is De Luca v. Coal Merchants Mut. Ins. Co. (203 Misc. 261). There the liability policy excluded from coverage assaults committed by or at the direction of the corporation insured. The assault was committed at the direction of the manager and president through whom, as agent, the corporation acted. Thus his acts were its acts. The situations there and here are not alike.

The judgment and order of the Appellate Division should be reversed and plaintiff’s cross motion for summary judgment granted, with costs in all courts. The question certified is answered in the negative.

Dye, J.

(dissenting). I dissent and vote to answer the certified question in the affirmative on the ground that the plain words of the policy excluded coverage for loss occasioned by assault and battery committed by “ any partner * * * while acting within the scope of his duties as such ”. The verdict of the jury established that the assault was committed by Cronin’s copartner Leventhal while acting within the scope of his duties as a copartner and in furtherance of partnership business; the judgment entered thereon was against Cronin and Leventhal as copartners, the complaint as against Cronin individually having been dismissed by the trial court. Under such circumstances, Cronin was not covered.

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

Judgment accordingly.


author: Froessel, J.

text:
    Delancey Kosher Restaurant & Caterers Corp., Respondent, v. Phil Gluckstern et al., Appellants, et al., Defendants.
    Argued January 21, 1953;
    decided April 16, 1953.

      Abraham L. Pomerantz and William E. Haudek for appellants.
    I. Plaintiff’s predecessor conferred upon defendants a clear and unambiguous grant to open “ Gluckstern ” restaurants after 1945 without any territorial restrictions whatever. (California Packing Corp. v. Sun-Maid Raisin Growers, 81 F. 2d 674, 298 U. S. 668; Waukesha H. M. Springs Co. v. Hygeia S. D. Water Co., 63 F. 438; Genet v. Delaware & Hudson Canal Co., 163 N. Y. 173.) II. The establishment by defendants of a “ Gluckstern ” restaurant at 83 Norfolk Street does not violate the “regulation of competition convenant ”. III. Plaintiff cannot prevail under the general rules of the law of “unfair competition ” because the 1940 contract expressly defined the types of conduct which, as between these parties, should be deemed “ fair ” or “ unfair ”. IV. No public policy prevents enforcement of the 1940 contract. The right to sue for unfair competition rests upon the violation of private rights, not upon the public interest. (American Washboard Co. v. Saginaw Mfg. Co., 103 F. 281; Weener v. Brayton, 152 Mass. 101; Borden Ice Cream Co. v. Borden’s Condensed Milk Co., 201 F. 510; Federal Trade Comm. v. Klesner, 280 U. S. 19; Mosler Co. v. Ely-Norris Co., 273 U. S. 132; Chamberlain v. Columbia Pictures Corp., 186 F. 2d 923; Schlitz Brewing Co. v. Houston Ice & Brewing Co., 241F. 817; Cohn & Rosenberger, Inc., v. Kaufman & Ruderman, Inc., 280 App. Div. 241; Bennett & Sons v. Farmers’ Seed &

      Gin Co,, 288 F. 365; International Silver Co. v. Oneida Community, 73 F. 2d 69.) V. Regardless of possible public confusion, the authorities unanimously uphold the validity of contracts, such as that at bar, regulating the methods and extent of competition as between two parties. (Manhattan Shirt Co. v. Sarnoff-Irving Hat Stores, 19 Del. Ch. 151, 20 Del. Ch. 455; Jergens Co. v. Woodbury, Inc., 273 F. 952, 279 F. 1016; Waukesha H. M. Springs Co. v. Hygeia S. D. Water Co., 63 F. 438; American Crayon Co. v. Prang Co., 38 F. 2d 448; California Packing Corp. v. Sun-Maid Raisin Growers, 81 F. 2d 674, 298 U. S. 668.) VI. Plaintiff is not entitled to protection of the name “ Grluckstern ” since its use of that name is deceptive and fraudulent. (Prince Mfg. Co. v. Prince’s Metallic Paint Co., 135 N. Y. 24; Neva-Wet Corp. v. Never Wet Processing Corp., 277 N. Y. 163; Worden v. California Fig Syrup Co., 187 U. S. 516; Manhattan Medicine Co. v. Wood, 108 U. S. 218.)

      Irving Schneider and Kalman I. Nulman for respondent.
    I. The agreement of June 1, 1940, which gives defendants the right to use the name “ Grluckstern’s ”, by its express terms prohibits any use which suggests a connection between plaintiff’s predecessor and defendants. The trial court found, on uncontradicted evidence, as did the court below, that defendants’ use of the name “ Grluckstern’s ” at 83 Norfolk Street, was fraudulently intended to, and did, violate this express condition of the contract. (Martin v. Cope, 28 N. Y. 180; Lathers v. Keogh, 109 N. Y. 583; Dodge v. Zimmer, 110 N. Y. 43; Woolsey v. Funke, 121 N. Y. 87; Stewart v. Barber, 182 Misc. 91; G & G Wholesale Grocers v. Three G Wholesale Grocers, 256 App. Div. 950.) II. Defendants acquired no right to engage in unfair and dishonest competition, steal plaintiff’s good will and perpetrate a fraud upon the public by the agreement of June 1, 1940. The court below correctly found that defendants’ selection of the disputed site fifty feet from plaintiff was designed to accomplish all of these things and constituted unfair competition as well as a violation of the contract. (G & G Wholesale Grocers v. Three G Wholesale Grocers, 256 App. Div. 950; Forman Co. v. Forman Mfg. Co., 119 Misc. 87; Mark Realty Corp. v. Hirsch, 180 App. Div. 549.)
   Froessel, J.

In or about the year 1900, Simon Gluckstern opened a restaurant which presently has entrances on Delancey and Norfolk Streets in New York City. In due time it achieved a widespread reputation as a Rumanian kosher restaurant. In or about 1916 or 1917, Simon’s twin brother, Louis, became associated with him in the business. In 1928 they formed a corporation known as “ Gluckstern’s, Inc.”, each owning half its stock, and to which they transferred this business. In 1940 differences arose between them resulting in litigation which was subsequently settled. With the advice and under guidance of counsel, the settlement was embodied in a written agreement executed by Simon and Louis, and their respective sons, Samuel and Philip, who were employees and directors of the corporation.

The agreement provided, among other things, for the sale by Louis of his stock to Simon, and for the resignations by Louis and Philip of their positions in the corporation. The agreement also contained a covenant on the part of Louis and Philip that they will not at any time during the period of five years =::= # * directly or indirectly engage in or become interested * * * in the restaurant * * * business ” in an area bounded by 23rd Street, the Bast River, the Battery, the Bowery and Third Avenue. Louis and Philip also agreed that during said five-year period they would not give to any person the right to use the Gluckstern ” name. The agreement then continued: All of the above restrictions shall cease and terminate at the expiration of five years or prior thereto in the event of a default ”.

In the succeeding twelfth paragraph the agreement provides that, except as to the aforesaid area, Louis and Philip have the right at any and all times to engage in any business whatsoever including a restaurant * * * in their own names or otherwise, and that Louis ’ and Philip ’ have the right in connection with any business in which they chose to engage to use the name Gluckstern ’ or Gluckstern’s ’ in the title of or in connection with the business. In the event that ‘ Philip ’ or ‘ Louis ’ or either of them shall engage in the restaurant business, and in connection therewith use the name 6 Gluckstern ’ or Gluckstern’s ’, the said ‘ Louis ’ and Philip ’ covenant and agree that they will not represent that their said business is a part of or that they are interested in the business of Gluckstern’s, Inc. or that Gluckstern’s, Inc. has removed its business from its present address, 135 Delancey Street, or that Gluckstern’s, Inc. is no longer engaged in business at its present address, 135 Delancey Street.” At or about the same time, the corporate directors adopted a resolution authorizing Louis and Philip ££ to use the name * Gluckstern ’ or £ Glucksterns ’ in conjunction with any other words * * * but said name must be one that will not conflict with the name Gluckstern’s, Inc. in the opinion of the Secretary of State.”

Thereafter, Louis and Philip opened two kosher restaurants in midtown Manhattan, one at 157 West 49th Street in the name of the corporate defendant Gluckstern’s Restaurant, Inc., and the other at 209 West 48th Street in the name of the corporate defendant Phil Gluckstern’s Restaurant, Inc. No question whatever is raised as to the right of defendants to conduct such businesses in the names of these corporations, and they were in operation at the time of the trial.

By an agreement dated December 21, 1951, and a bill of sale dated March 10, 1952, plaintiff purchased from Gluckstern’s, Inc., the physical assets of its business and the ££ goodwill ” thereof, but, as ‘6 to the use of the name Gluckstern’s ’ ”, plaintiff was given only a “ non-exclusive license ” on certain specified terms and conditions, one of which was a ££ license to the use of said name only so long as the Buyer shall remain the owner of said restaurant business, as hereinafter provided.”

After the bill of sale had been delivered and preparations for renovation were under way, Philip, Louis’ son, having-leased a site across the way from the Norfolk Street entrance of Gluckstern’s, Inc., posted a sign outside his premises announcing: “ Opening for Passover ”, ££ The Original Gluckstern’s Restaurant”, and containing the following* legends: ££ Two Generations of Service ”, ££ Mid-Town Branch 157 W. 49th St., N.Y.”.

Plaintiff thereupon instituted this action for injunctive relief. Defendants by way of counterclaim demanded that plaintiff be restrained from conducting a kosher restaurant in New York City under the name “ Gluckstern’s ”, and for related relief. After a trial before a special referee, a sweeping injunction was granted to plaintiff prohibiting defendants, among other things, from continuing the use of the name * Gluckstern’s,’ or any derivative of such name, in connection with the restaurant business within twelve city blocks in every direction from plaintiff’s present restaurant business Defendants’ counterclaim was dismissed upon the merits.

The Appellate Division modified the judgment to the extent of reducing the geographical limitation from twelve to three city blocks in every direction from plaintiff’s present restaurant business ” and affirmed in all other respects. Defendants appeal from the judgment of modification and affirmance.

We think the courts below were clearly right in dismissing defendants’ counterclaim. As to the affirmative relief granted to plaintiff, defendants acquiesce in the restraint placed upon them as to the use of the words Original Gluckstern’s ” and Two Generations of Service ”, Their primary contention here is that, by reason of their contract rights ” following the expiration of the five-year limitation period, the judgment should be modified by authorizing them to operate their Norfolk Street restaurant under the name “ Phil Gluckstern’s ”, and they are willing to add thereto such legends as will preclude any possible claim that the regulation of competition covenant is breached ”.

In the final analysis, then, the question presented is whether, in the light of the 1940 agreement and resolution, the Appellate Division had the right to impose the <( three city blocks ” limitation. At the outset, it should be kept in mind that we are dealing with an express contract between parties, which by its terms defines what conduct is to be deemed fair or unfair, and such contract, rather than general principles relating to unfair competition in the absence of agreement, must govern. In this view, while the courts below were warranted in their determinations in other respects, they were not authorized to erect boundaries never agreed upon by the parties, whether at a distance of three or twelve city blocks from plaintiff’s premises. Such total restraint in the area of plaintiff’s business would be in conflict with the agreement.

Under the settlement agreement, Louis and Philip had the right after five years to engage in any business whatsoever including a restaurant * * * in their own names or otherwise, and * * * to use the name 6 Gluckstern ’ or 1 Gluckstern’s ’ in the title of or in connection with the business ”, without any territorial restriction. The intention of the parties was clearly and unambiguously set forth, and, when so expressed, ‘ ‘ ‘ effect must be given to the intent as indicated by the language employed ’ ” (Matter of Western Union Tel. Co., 299 N. Y. 177, 184). We have no right, under the guise of construction, to excise from the settlement agreement the rights and obligations of the parties as defined by them, nor may we add thereto (Friedman v. Handelman, 300 N. Y. 188, 194).

The only limitation on that right after the five-year period, so far as here pertinent, was that Louis and Philip “ will not represent that their said business is a part of or that they are interested in the business of Gluckstern’s, Inc.” The question remains, then, whether defendants made such representation with respect to their Norfolk Street premises. The evidence in that connection is the use of the words Original Gluclcstern’s ” and Two Generations of Service ”, as to which they have been properly restrained. So long as defendants do not make the representations forbidden in paragraph twelfth, they have a contractual right to conduct a restaurant business anywhere in the city, for no territorial restrictions were imposed after the first five years, and no public policy was thereby violated. That was their contract, and the courts have no right to abrogate it. Consent does not give rise to liability (Restatement, Torts, § 754). It cannot therefore be said that merely locating across the way from plaintiff’s business is a violation of the so-called regulation of competition covenant.

The right to sue for unfair competition depends on the violation of private rights rather than the public interest (Federal Trade Comm. v. Klesner, 280 U. S. 19, 27; Borden Ice Cream Co. v. Borden’s Condensed Milk Co., 201 F. 510, 513; Weener v. Brayton, 152 Mass. 101,103; 2 Nims, Unfair Competition and Trade-Marks [4-th ed.], § 416, p. 1306). In any event, where the parties or their predecessors have regulated the methods and extent of competition between them by agreement, such agreement controls (Manhattan Shirt Co. v. Sarnoff-Irving Hat Stores, 19 Del. Ch. 151, 163-165, affd. 20 Del. Ch. 455; Jergens Co. v. Woodbury, Inc., 273 F. 952, 966-967, affd. 279 F. 1016, certiorari denied 260 U. S. 728; Tode v. Gross, 127 N. Y. 480; 52 Am. Jur., Trademarks, Tradenames, etc., § 38, p. 530).

In view of defendants’ use of the words which the courts below have properly restrained, they might reasonably have been required to employ some designation showing clearly that they did “ not represent that their said business is a part of or that they are interested in ” plaintiff’s business, and this they are willing to do (see Herring-Hall Marvin Safe Co. v. Hall’s Safe Co., 208 U. S. 554). Inasmuch as Special Term has provided in its judgment that plaintiff may “ apply, on notice at any time at the foot of this judgment for such further or other injunctive relief against the defendants * * * as the exigency of the case may warrant or require ”, plaintiff may avail itself of such right if and when it be so advised.

The judgment entered upon the order of the Appellate Division and that of Special Term should be modified in accordance with the opinion herein, and, as so modified, affirmed, without costs.

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

Judgment accordingly.


author: Per Curiam.

text:
    In the Matter of the People of the State of New York, by Alfred J. Bohlinger, as Superintendent of Insurance of the State of New York, Respondent. International Workers Order, Inc., Appellant; Herman A. Seligson et al., for International Workers Order Policyholders Protective Committee, Interveners, Appellants.
    Argued February 25, 1953;
    decided April 23, 1953.

      Osmond K. Fraenkel and Arthur Kinoy for appellant.
    I. The statutory scheme of liquidation is specifically designed to meet only problems involving financial loss or risk of loss arising out of the business operations of an insurer. (Attorney-General v. North America Life Ins. Co., 82 N. Y. 172; Matter of People [Second Russian Ins. Co.], 243 N. Y. 524; Connecticut Fire Ins,. Co. v. Manning, 160 F. 382; Matter of Importers & Exporters Ins. Co. v. Rhoades, 239 N. Y. 420; People ex rel. New York Fire Ins. Exch. v. Phillips, 237 N. Y. 167; Matter of New Jersey Fidelity & Plate Glass Ins. Co. v. Van Schaick, 261 N. Y. 521; Travelers’ Ins. Co. v. Hotchkiss, 197 N. Y. 585; Mutual Life Ins. Co. v. Prewitt, 127 Ky. 299; State v. Harty, 276 Mo. 583; Matter of Bankers Deposit Guar. & Sur. Bond Co., 80 Kan. 442; Commercial Std. Ins. Co. v. Board of Ins. Comr., 34 S. W. 2d 343 [Tex.]; Board of Ins. Comr. v. Guardian Life Ins. Co., 180 S. W. 2d 906 [Tex.]; Scanlon v. Home Ins. Co., 79 S. W. 2d 186 [Tex.].) II. The statute, if susceptible of the interpretation placed on it by the lower courts, (1) violates the due process clauses of the State and Federal Constitutions because of vagueness; (2) violates the rights of freedom of speech, press and assembly as guaranteed by the Fourteenth Amendment to the Federal Constitution as well as the Constitution of this State, and (3) would be invalid as an unconstitutional delegation of legislative power. (Herndon v. Lowry, 301 U. S. 242; Lovell v. Griffin, 303 U. S. 444; Taylor v. Mississippi, 319 U. S. 583; Winters v. New York, 333 U. S. 507; Saia v. New York, 334 U. S. 558; Kunz v. New York, 340 U. S. 290; Gelling v. Texas, 343 U. S. 960; Musser v. Utah, 333 U. S. 95; Jordan v. De George, 341 U. S. 223; Thomas v. Collins, 323 U. S. 516; Niemotko v. Maryland, 340 U. S. 268; Jamison v. Texas, 318 U. S. 413; Cantwell v. Connecticut, 310 U. S. 296; Schneider v. State, 308 U. S. 147; Hague v. C. I. O., 307 U. S. 496; Packer Collegiate Inst. v. University of State of N. Y., 298 N. Y. 184; Matter of Fink v. Cole, 302 N. Y. 216; Matter of Federal Tel. & Radio Corp. [Corsi], 301 N. Y. 95; Matter of Concordia Collegiate Inst. v. Miller, 301 N. Y. 189; Matter of Little v. Young, 299 N. Y. 699; Matter of Cherry v. Board of Regents, 289 N. Y. 148; Matter of Corporate Employment Service v. Moss, 286 N. Y. 601; Matter of Lyons v. Prince, 281 N. Y. 557; Matter of Small v. Moss, 279 N. Y. 288; Matter of Seignious v. Rice, 273 N. Y. 44; Darweger v. Staats, 267 N. Y. 290; Matter of Picone v. Commissioner of Licenses, 241 N. Y. 157; People v. Klinck Packing Co., 214 N. Y. 121.) III. No evidence in the record supports an assumption of presently “ hazardous ” activity. (People v. Society of St. Joseph Palo Bel Colle, Italy, 177 Misc. 419; Van Schaick v. Cronin, 237 App. Div. 182.)

      Milton H. Friedman, Thomas Russell Jones and Robert Silk for interveners-appellants.
    I. The facts found did not warrant, and in any event did not require, the order of liquidation. (Equitable Life Assurance Soc. v. Brown, 213 U. S. 25; Matter of Franklin Tel. Co., 114 Mass. 447; Commonwealth v. Pittsburgh & Connellsville R. R. Co., 58 Pa. 26; State ex rel. Peoples Mut. Benefit Assn., 42 Ohio St. 579; Stewart v. Father Matthew Soc., 41 Mich. 67; People v. Ulster & Delaware R. R. Co., 128 N. Y. 240.) II. The order appealed from violates the constitutional rights of policyholders of I. W. O. in that it deprives them of their property without due process of law. (People v. Globe

      Mut. Life Ins. Co., 91 N. Y. 174; Cowan v. City of Buffalo, 247 App. Div. 591; Farnham Realty Corp. v. Posner, 200 App. Div. 827; Matter of Friedman v. Valentine, 177 Misc. 437, 266 App. Div. 561; Wynehamer v. People, 13 N. Y. 378; Colon v. Lisk, 153 N. Y. 188; Gaines v. Buford, 1 Dana 484; Lawton v. Steele, 152 U. S. 133.) III. The order appealed from violates the rights of members and policyholders of I. W. O. to freedom of assembly and freedom of speech guaranteed by the Federal and State Constitutions. (Equitable Life Assurance Soc. v. Brown, 213 U. S. 25; Grosjean v. American Press Co., 297 U. S. 233; Matter of Gallaher v. American Legion, 154 Misc. 281, 242 App. Div. 604.) IV. The Supreme Court, in the exercise of its general equity jurisdiction, has power to deal with any corporate problems of I. W. O. which have been mentioned in this proceeding, without participation or intervention of the Superintendent of Insurance. (Matter of Lawyers Mtge. Co., 169 Misc. 802; Matter of Steinway, 159 N. Y. 250; Matter of Rich v. Kaminsky, 254 App. Div. 6.)

      Paul W. Williams, Special Counsel (James B. Henry, Jr., of counsel), for petitioner-respondent.
    I. International Workers Order from its foundation to the present, has been dominated by the Communist party, and its primary purpose is the support of the Communist party and the dissemination of Communist doctrines. International Workers Order was formed with the approval of Communist International by withdrawal of the Communist group from the Workmen's Circle. (United States v. Dennis, 183 F. 2d 201, 341 U. S. 494; Harisiades v. Shaughnessy, 90 F. Supp. 397, 187 F. 2d 137, 342 U. S. 580; Carlson v. Landon, 342 U. S. 524; Martinez v. Neelly, 197 F. 2d 462, 344 U. S. 916.) II. International Workers Order teaches loyalty to the Union of Soviet Socialist Republics and disloyalty to the United States of America. III. International Workers Order has willfully violated its charter within the meaning of subdivision (f) of section 511 of the Insurance Law, and it has secured and retained its charter fraudulently and in willful violation of sections 463 and 465 of said law. The activities of I. W. O. have constituted an abuse of its charter and a perversion of the purposes for which it was incorporated. (Chicago Life Ins. Co. v. Needles, 113 U. S. 574; Matter of Collins-Doan

      Co., 3 N. J. 382; Matter of Warner Co., 232 Minn. 207; People v. North Riv. Sugar Refining Co., 121 N. Y. 582; People v. Milk Exch., 145 N. Y. 267; People v. Volunteer Rescue Army, 262 App. Div. 237; Matter of Bennett [American-Canadian Ambulance Corps], 179 Misc. 21; Matter of Lithuanian Workers’ Literature Soc., 196 App. Div. 262; People v. White Circle League of America, 408 Ill. 564; Reiter v. American Legion, 189 Misc. 1053, 273 App. Div. 757; Weinstock v. Ladisky, 197 Misc. 859.) IV. Further transaction of business by I. W. 0. would be hazardous to its policyholders, its creditors and the public within the meaning of subdivision (e) of section 511 of the Insurance Law. (People v. Formosa, 131 N. Y. 478; California Auto. Assn. v. Maloney, 341 U. S. 105; Attorney-General v. North America Life Ins. Co., 82 N. Y. 172; Matter of People [Second Russian Ins. Co.], 243 N. Y. 524; Andre v. Beha, 211 App. Div. 380, 240 N. Y. 605.) V. The present proceeding is constitutional and involves no question of unconstitutional delegation of legislative powers, due process or equal protection of the laws. (Connally v. General Const. Co., 269 U. S. 385; Communications Assn. v. Douds, 339 U. S. 382; People v. White Circle League of America, 408 Ill. 564; People v. Beauharnais, 408 Ill. 512, 343 U. S. 250; Hague v. C. I. O., 307 U. S. 496; Western Turf Association v. Greenberg, 204 U. S. 359; Hallmark Productions v. Mosley, 190 F. 2d 904; Asbury Hospital v. Cass County, 326 U. S. 207; Dennis v. United States, 341 U. S. 494; Harisiades v. Shaughnessy, 342 U. S. 580; United Public Workers v. Mitchell, 330 U. S. 75; Bailey v. Richardson, 182 F. 2d 46, 341 U. S. 918; Washington v. McGrath, 182 F. 2d 375, 341 U. S. 923; Friedman v. Schwellenbach, 159 F. 2d 22, 330 U. S. 838.) VI. Liquidation is the only appropriate remedy since Communist domination exists at every level of I. W. O.
   Per Curiam.

As we read section 511 (e) of the Insurance Law, the term “ hazardous ”, contrary to the assertion of the Superintendent of Insurance, encompasses only dangers financial in nature. In our view, however, the record supports the conclusion that further operation of the I. W. O. would prove “ hazardous ” in a financial sense.

Be that as it may, though, there can he no question that the I. W. O.’s continued course of political action, involving as it did financing Communist Party organizers and publications, disseminating Party literature, and supporting Communist policies and candidates for public office, violates the I. W. 0. charter as well as laws of this state and, therefore, permits liquidation under section 511 (f). These activities, carried on for almost two decades with the active support of the membership, were unauthorized by the Order’s charter and, perhaps, even contravened its express provisions. Indeed, its failure to include a true and complete statement of its “ purposes ”, as well as ‘1 the mode and manner in which its corporate powers are * * * exercised ”, offends against the demands of paragraphs (c) and (d) of subdivision 3 of section 463 of the Insurance Law. Moreover, as noted, its political activities involve, in the language of section 671 of the Penal Law, a use of “ money or property * * * for, or in aid of, any corporation * * * or other association organized or maintained for political purposes, or for * * s any candidate for political office * * :S or for any political purpose whatever, ’ ’ and, as a consequence, violate that provision as well. So dominant was the I. W. O.’s allegiance to its unlawful purpose that, in reality, the Order ‘ wasted and perverted the privileges conferred by [its] charter, abused its powers, and * * * substituted [illegal action] for the conduct which the State had a right to expect and require.” (People v. North Riv. Sugar Refining Co., 121 N. Y. 582, 623.) The abuses noted undoubtedly Avarranted liquidation of the I. W. 0. under applicable provisions of the Insurance Law.

As for the contention advanced by appellants-interveners, the International Workers Order Policyholders Protective Committee, that liquidation would cause undue hardship to the many members who cannot otherwise secure insurance protection, it is sufficient to note that counsel for the Insurance Department, authorized to do so by the Superintendent of Insurance, gave assurance upon the argument before us that arrangements have been made for the reinsurance of all [I. W. 0.] policyholders ”, that there are “ companies prepared to issue insurance on the same basis as those insured now enjoy ” and that every member of the I. W. 0. will be insured on substantially the same contract ” as he now has.

The order of the Appellate Division should be affirmed, with costs.

Lewis, Conway, Desmond, Dye, Fuld and Froessel, JJ., concur; Lowhran, Ch. J., deceased.

Order affirmed.


text:
    In the Matter of the Claim of Frank Fiol, Respondent. Calmar Steamship Corporation, Appellant; Edward Corsi, as Industrial Commissioner, Respondent.
    Argued March 4, 1953;
    decided April 24, 1953.

      Ralph L. McAfee, Albert R. Connelly and Edward C. Perkins for appellant.
    I. Under the New York State Constitution a union regulation cannot of itself be good cause under the Unemployment Insurance Law for voluntary relinquishment of employment. (Packer Collegiate Inst. v. University of State of N. Y., 298 N. Y. 184; Matter of Lyons v. Prince, 281 N. Y. 557; People v. Klinck Packing Co., 214 N. Y. 121; Matter of Levine v. O’Connell, 275 App. Div. 217, 300 N. Y. 658; Barclay-White Co. v. Unemployment Compensation Bd. of Review, 356 Pa. 43, 332 U. S. 761; Bigger v. Delaware Unemployment Compensation Comm., 43 Del. 553; Chambers v. Owens-Ames-Kimball Co., 146 Ohio St. 559.) II. The sixty-day rule violates the purpose and effect of the Unemployment Insurance Law and cannot be accepted as good cause. III. Subdivision 2 of section 593 of the Unemployment Insurance Law prevents use of unemployment benefits as an antiunion weapon. It does not empower unions to control eligibility for such benefits.

      Nathaniel L. Goldstein, Attorney-General (Francis R. Curran and Wendell P. Brown of counsel), for Edward Corsi, as Industrial Commissioner, respondent.
    I. The question whether claimant had good cause for leaving his employment was one of fact. Since there is sufficient evidence in the record to sustain the board’s finding, the decision should not be disturbed. (Matter of Rumsey Mfg. Corp. [Corsi], 296 N. Y. 113.) II. The union does not determine what constitutes good cause for leaving employment under paragraph (b) of subdivision 1 of section 593 of the Unemployment Insurance Law. (Matter of Mounting & Finishing Co. v. McGoldrick, 294 N. Y. 104; Barclay-White Co. v. Unemployment Compensation Bd. of Review, 356 Pa. 43, 332 U. S. 761; Bigger v. Delaware Unemployment Compensation Comm., 43 Del. 553; Chambers v. Owens-Ames-Kimball Co., 146 Ohio St. 559.)
   Per Curiam.

The referee and the Appeal Board found justification for the claimant’s relinquishment of his job in the union’s sixty-day rule. But the mere fact of the existence of such a union rule did not warrant the conclusion that claimant was excused from continuing his employment. The referee and the Appeal Board had to go further and determine whether, under all the facts of the case, the claimant was justified in complying with the union regulation. Such an inquiry would involve a decision as to the reasonableness of the regulation in question — whether, in other words, the nature of the industry, the state of the labor market and other relevant considerations, furnished reasonable basis in fact for that regulation. To hold otherwise would be to allow the union to determine arbitrarily what constituted “ good cause ” for the claimant’s leaving his job — a function which the Labor Law entrusted to the referee and the Appeal Board (see Labor Law, § 623).

It follows that the order of the Appellate Division and the determination of the Unemployment Insurance Appeal Board should be reversed, with costs in this court and in the Appellate Division to abide the event, and the matter remanded to the board for further proceedings in accordance with this opinion.

Loughran, Ch. J., Lewis, Conway, Desmond, Dye and Fuld, JJ., concur in Per Curiam opinion; Froessel, J., dissents and votes to affirm.

Order reversed, etc.


author: Lewis, Ch. J.

text:
    Harry M. Elish et al., Appellants, v. St. Louis Southwestern Railway Company, Respondent, et al., Defendants.
    Submitted February 26, 1953;
    decided May 21, 1953.

      Abraham K. Weber for appellants.
    The cumulative effect of the activities of Cotton Belt in New York establish that said railroad is doing business in New York sufficient to make it amenable to process. (Tauza v. Susquehanna Coal Co., 220 N. Y. 259; International Text Book Co. v. Tone, 220 N. Y. 313; International Harvester v. Kentucky, 234 U. S. 579; Sterling Novelty Corp. v. Frank & Hirsch Distr. Co., 299 N. Y. 208; Chaplin v. Selznick, 293 N. Y. 529; Pine & Co. v. McConnell, 273 App. Div. 218, 298 N. Y. 27; Pomeroy v. Hocking Valley Ry. Co., 218 N. Y. 530; Kilpatrick v. Texas & P. Ry. Co., 166 F. 2d 788; Rothenberg v. Western Pacific R. R. Co., 206 App. Div. 52; Green v. Chicago, Burlington & Quincy Ry., 205 U. S. 530; Hutchinson v. Chase & Gilbert, Inc., 45 F. 2d 139; Barnett v. Texas & P. Ry. Co., 145 F. 2d 800; Yeckes-Eichenbaum, Inc., v. McCarthy, 290 N. Y. 437; Worthy v. Louisville & Nashville R. R. Co., 276 App. Div. 1068.)

      Mark F. Hughes and Vincent R. Fitz Patrick for respondent appearing specially.
    Despondent was not doing business within New York at the commencement of this action and was not amenable to service of process in New York. (Green v. Chicago, Burlington & Quincy Ry., 205 U. S. 530; Phila. & Reading Ry. Co. v. McKibbin, 243 U. S. 264; Maxfield v. Canadian Pacific Ry. Co., 70 F. 2d 982, 293 U. S. 610, 632; St. Louis S. W. Ry. v. Alexander, 227 U. S. 218; Commercial Mutual Accident Co. v. Davis, 213 U. S. 245; Lumbermen’s Insurance Co. v. Meyer, 197 U. S. 407; Yeckes-Eichenbaum, Inc., v. McCarthy, 290 N. Y. 437; Worthy v. Louisville & Nashville R. R. Co., 79 N. Y. S. 2d 588, 276 App. Div. 1068; International Harvester v. Kentucky, 234 U. S. 579; Tauza v; Susquehanna Coal Co., 220 N. Y. 259; Pine & Co. v. McConnell, 298 N. Y. 27; Sterling Novelty Corp. v. Frank & Hirsch Distr. Co., 299 N. Y. 208.)
   Lewis, Ch. J.

The single question presented by this appeal is whether the defendant-respondent St. Louis Southwestern Bail-way Company, a Missouri corporation not qualified to do business in this State — known and hereinafter referred to as the ‘ ‘ Cotton Belt Line ” — is conducting business in the State of New York to such an extent as to be legally amenable to process served in this action.

At Special Term it was ruled that Cotton Belt Line is doing business in this State to such an extent as to bring the corporation within the jurisdiction of the court. At the Appellate Division, where the order of Special Term was reversed and the service of process vacated, the court based its ruling (280 App. Div. 215) upon the following facts: That none of Cotton Belt Line’s trains operate in this State; that none of its New York State offices issue bills of lading in the normal course of freight business; that none of its officers accept or collect freight charges, adjust claims or solicit passenger traffic; and that the salary checks of its New York employees are drawn on a St. Louis bank.

The items of proof upon which the Appellate Division based its decision are factors to be considered. In addition, however, we find in the record evidence of corporate activities within this State by Cotton Belt Line which we regard as more than casual or occasional, and so systematic and regular as to manifest continuity of action from a permanent locale ”. (Sterling Novelty Corp. v. Frank & Hirsch Distr. Co., 299 N. Y. 208, 210.) Although mere solicitation of business by a foreign corporation within this State may be insufficient to make it subject to the jurisdiction of our courts (Green v. Chicago, Burlington & Quincy Ry., 205 U. S. 530, 533-534; Yeckes-Eichenbaum, Inc., v. McCarthy, 290 N. Y. 437, 443-444), nevertheless, “ solicitation * * * plus some additional activities there are sufficient to render the corporation amenable to suit * * (International Shoe Co. v. Washington, 326 U. S. 310, 314.) (Emphasis supplied.)

Cotton Belt Line does not deny that it solicits freight business from one of its two offices maintained in New York City and from the single office it maintains in Buffalo. Indeed, from an affidavit by the corporation’s president read into the record it appears that One of the New York City offices located at 331 Madison Avenue, is a freight' solicitation office. * ® *

The activities of this office and the persons employed therein are confined wholly to the solicitation of freight in and about the metropolitan area for trans-shipment upon the lines of the Cotton Belt after routing through the lines of other carriers ”. As to the Buffalo office the same affiant stated for the record herein — ‘ ‘ The office in Buffalo is located at 201 Ellicott Square and is also a freight solicitation office. ® * • * Here again, the office is confined to freight solicitation.” The corporation’s letterhead for its office at 331 Madison Avenue in New York City states that at that address is its “ Traffic Department ” and names its “ Eastern Traffic Manager ”, its “ General Agent ” and two Commercial Agents ”.

The Cotton Belt Line office at 165 Broadway in New York City, which is in charge of a vice-president who is also secretary and assistant treasurer of the corporation, is listed in the Manhattan telephone directory as an “ Executive office ”, and in the “ Official Guide of the Railways ” as one of the corporation’s three “ General Offices ” — the other two being described as located in “ Cotton Belt Bldg., 4th and Pine Sts., St. Louis, Mo.” and Cotton Belt Bldg., Tyler, Tex.”

There is also evidence, which stands uncontradicted, that at the corporation’s office at 165 Broadway it conducts business transactions which relate themselves to its financial structure. For example, in making an offer for tenders of certain of its bond issues Cotton Belt Line inserted advertisements, in New York City newspapers which stated that tenders should be sent to the corporation’s secretary at the company’s office at 165 Broadway. It also appears from an affidavit by the corporation’s vice-president and secretary that there are held each year a minimum of four meetings of the board of directors, of which one is held in New York. As to that one meeting concededly held each year in New York, we regard as apposite a statement in the opinion (per Hiscock, J.) written in Pomeroy v. Hocking Valley Ry. Co. (218 N. Y. 530, 536) —where this court considered a kindred problem — “ It must be assumed that when its board of directors * * * were meeting in the state of New York they were there exercising supervision over its management and business and providing for the successful transaction of the latterand further that when, as in the case at hand, the secretary had his office in the city and State of New York “ * * * it was for the purpose of discharging duties which were incidental and necessary to the transaction of its business ’ ’.

Knowing, as we do, that‘1 All that is requisite is that enough be done to enable us to say that the corporation is here ” (Tauza v. Susquehanna Coal Co., 220 N. Y. 259, 268) we think it clear, from the record before us, that when to solicitation of freight business is added evidence of its other proven business activities conducted in this State, Cotton Belt Line is “ here ”. “To do these tilings is to do business within this state in such a sense and in such a degree as to subject the corporation doing them to the jurisdiction of our courts.” (Tauza v. Susquehanna Coal Co., supra, p. 266; and see Chaplin v. Selznick, 293 N. Y. 529.)

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

Conway, Desmond, Dye, Fulo and Froesseu, JJ., concur; Loughban, Ch. J., deceased.

Judgment accordingly. [See 305 N. Y. 824.]