text:
    Pauline Karr, Respondent, v. Inecto, Inc., Appellant.
    Negligence — chemical products — action to recover for injury to finger from infection alleged to have been caused by use of hair dye — plaintiff must show that injury resulted from contact with dye, that it was inherently dangerous and that defendant was negligent in marketing a dangerous product —• plaintiff may not recover where possibility of other cause of infection is not excluded and there is no direct evidence that product contained any irritant or poison.
    1. In an action to recover for injury to a finger from infection alleged to have been caused by hair dye manufactured by defendant which plaintiff used in the course of her business as a hairdresser, in order to recover plaintiff must show that the injury to the finger resulted from contact with the chemical product manufactured by the defendant; that it was inherently dangerous and poisonous and that the defendant was negligent in putting upon the market a dangerous and poisonous product.
    2. Where, therefore, in such an action, there is no direct evidence of the nature of the dye and from the evidence it may be determined only that even if the dye used might possibly be a competent producing cause of a condition such as developed on plaintiff’s finger, it does not always produce such a result, plaintiff cannot recover. An inference may not be drawn that the poison or irritant which it is said caused injury to plaintiff was contained in the product of defendant merely because the infection developed on the finger which was stained by the dye twelve hours before, where possibility of other cause is not excluded and there is no direct evidence that defendant’s product contained any poison or irritant.

      Karr v. Inecto, Inc., 220 App. Div. 621, reversed.
    (Argued January 12, 1928;
    decided February 14, 1928.)
    Appeal from an order of the Appellate Division of the Supreme Court in the first judicial department, entered June 3, 1927, reversing a judgment in favor of defendant entered upon a dismissal of the complaint by the court at a Trial Term and granting a new trial.

      Murray Hulbert and Morris Buchter for appellant.
    The evidence in the record does not warrant the inference that the hair dye manufactured by the defendant company was the proximate cause of the injuries suffered by the plaintiff. (Yaggle v. Allen, 24 App. Div. 594; Favo v. Remington Arms, 67 App. Div. 416; Benson v. Dean, 232 N. Y. 52.) In the absence of any proof as to the composition or any disastrous effect of the defendant’s hair dye, the doctrine of res ipsa loquitur may not be invoked by the plaintiff in aid of her prima facie case. (McPherson v. Buick Co., 217 N. Y. 382; Bruchel v. Milhaus’ Sons, 116 App. Div. 832.)

      Leo J. Rosett and David Schenker for respondent.
    Plaintiff established a prima facie case. It was error to dismiss the complaint. (Cahill v. Inecto, 208 App. Div. 191; Race v. Krum, 162 App. Div. 911; 222 N. Y. 410; Rosenbusch v. Ambrosia Milk Corp., 181 App. Div. 97; Gerkin v. Brown & Sehler Co., 177 Mich. 45.) Appellant’s contentions that plaintiff failed to establish that the dye was the proximate cause of her injury are based upon distorted and erroneous versions of the testimony. (Tracey v. Metropolitan Street Ry. Co., 49 App. Div. 197; 168 N. Y. 653; Dunican v. Union Railway Co., 56 App. Div. 181; 171 N. Y. 692; Sands v. Sparling, 82 Hun, 401; Cole v. Fall Brook Coal Co., 159 N. Y. 59; Stearns v. Field, 90 N. Y. 640; Pierrpont v. Fifth Ave. Coach Co., 151 App. Div. 40; Smith v. Manhattan Ry. Co., 112 App. Div. 202; Coles v. Interurban Street Ry. Co., 49 Misc. Rep. 246; Goldstein v. Pullman Co., 220 N. Y. 549; Griffen v. Manice, 166 N. Y. 188.) Plaintiff established a prima facie case of negligence against the defendant. (MacPherson v. Buick Co., 217 N. Y. 382.)
   Lehman, J.

The defendant manufactures a chemical product known as Inecto Rapid. It offers that product for general sale, representing to the public that it may be used as a hair dye and applied to the head. The plaintiff conducts an establishment for the dressing and dyeing of women’s hair and for what she describes as “ general beauty culture work.” On March 31st, 1924, the plaintiff applied some of the dye manufactured by the defendant to the hair of her customer. The plaintiff had never used this dye on a customer’s hair before. The customer asked the plaintiff to use it. On four or five occasions such dye had been applied to the customer’s hair by defendant’s employees at defendant’s place of business. The customer brought a package of the dye to the plaintiff. The package contained several bottles with directions for mixing and using. The plaintiff mixed the dye according to the directions. The customer explained to the plaintiff how the dye was applied in defendant’s place of business. The plaintiff applied it in the same manner. The plaintiff always wore gloves while applying dye to a customer’s head. She did so on this occasion. After she removed her gloves she washed her hands with soap. Then she saw that a few drops of the dye were trickling down her customer’s forehead. The plaintiff wiped the dye off the forehead with a piece of cotton. Some of the dye stained the plaintiff’s right index finger. The plaintiff washed her hands again. The stain still remained. That night at two o’clock the plaintiff awoke. Her finger was red, swollen, and painful. She called a doctor. The finger grew worse. Several operations were performed on it. The plaintiff has never regained the full use of the finger. The plaintiff claims in her complaint that the injury to her finger was caused by the dye manufactured by the defendant and that this dye was inherently dangerous and poisonous to the skin and other portions of the body with which the said ' Inecto Rapid ’ came in contact, and if applied thereto would cause dangerous and injurious infection of the blood and portions of the body with which the said substance came in contact.” At the close of the plaintiff’s evidence the trial justice dismissed the complaint. The Appellate Division has reversed the judgment of dismissal, holding that the plaintiff’s evidence was sufficient to make out a prima facie case.

Before the plaintiff may recover she must show, first, that the injury to the finger resulted from contact with the chemical product manufactured by the defendant; second, that the chemical product was inherently dangerous and poisonous; and third, that the defendant was negligent in putting upon the market a dangerous and poisonous product. I'f the evidence establishes that the liquid contained in the bottles of dye used by the plantiff was dangerous and poisonous, then from the fact that the injury followed contact with the dye we might draw the inference that the injury was the result of that contact. In such case, too, we might without further evidence as to how these particular bottles happened to contain a dangerous and poisonous liquid infer that such a condition could not have arisen without fault on the part of employees of the defendant. As the foundation of her cause of action, the plaintiff must show by direct or circumstantial evidence at least that the bottles of dye manufactured by the defendant and used by the plaintiff contained a dangerous and poisonous liquid.

There is no direct evidence of the nature of the dye contained in these bottles. We are asked to draw the inference that the liquid was dangerous because the staining of the right index finger was followed by a morbid condition on the same finger. The physicians who treated the finger say that in their opinion the morbid condition was not due primarily to a bacteriological infection, but to contact with a chemical irritant or chemical poison, and they “ think ” that the condition was caused by the dye, because the finger was stained by the dye. We assume that the injury was due to a chemical irritant or poison. It manifested itself some twelve hours after the dye came in contact with the finger. The dye had been applied to the hair and scalp of the customer. It had trickled down her forehead. Apparently it had not injured her, yet without Other evidence that the dye contained a chemical poison or irritant we are ■ asked to assume that this so-called “ chemical product,” admittedly harmless to the customer, was dangerous and poisonous and caused injury to the plaintiff. Possibly some individuals may possess a peculiar immunity against the effects of a particular chemical poison or irritant; possibly other individuals possess a peculiar susceptibility. We know only that even if the dye used may possibly be a competent producing cause of a morbid condition such as developed on plaintiff’s finger, it does not always produce such a result, otherwise the customer would not have escaped injury. All else rests purely on conjecture.

Doubtless there are cases where a condition is so closely linked to an antecedent occurrence that the inference that the condition was the result of the occurrence may logically be drawn, even though there is otherwise no evidence as to whether the occurrence might be a competent producing cause of the condition. That is, of course, true wherever other possible causes are excluded. Such was apparently the situation in Cahill v. Inecto, Inc. (208 App. Div. 191). In the case now under consideration the morbid condition became apparent only twelve hours after the finger became stained. We are not informed how long after a chemical poison is applied the tissues break down as they are said to have broken down here; we are not informed as to the nature of the chemical irritant or poison which might produce such a condition;, we are not informed whether such chemical poisons or irritants are at times found in hair dyes, and are always absent from soaps, massage creams and other articles which the plaintiff uses in her business or household work. We are asked to draw the inference that the “ chemical poison or irritant ” which it is said caused injury to the plaintiff was contained in the chemical product ” of the defendant merely because the injury occurred on the finger which was stained by the dye twelve hours before, though possibility of other cause is not excluded and though there is no direct evidence that the chemical product ” contained any chemical poison or irritant. Then we are asked to go further and find that the dye not only caused the injury but was so inherently dangerous that the defendant was negligent when it put the bottle on the market though dye from exactly the same bottle produced no harmful effect upon the customer. We do not find that the evidence sustains such inferences.

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

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

Ordered accordingly.


source: Caselaw Access Project

author: Lehman, J.

license: Public Domain

text:
    May Boronkay, as Administratrix of the Estate of Nicholas Boronkay, Deceased, Respondent, v. Robinson & Carpenter, Appellant.
    Negligence — motor vehicles — traffic law — disregard of statute and ordinance prohibiting vehicles stopping with left side to curb — no breach of duty towards those not within zone of apprehended danger — child on curb caught by hook hanging from left side of starting truck and drawn under wheels — action for death — erroneous charge that finding that driver had violated statute and ordinance would warrant verdict for plaintiff.
    1. Disregard of statutory provisions, requiring vehicles to proceed along the right-hand side of the roadway and prohibiting their stopping with their left sides towards the curb, is a breach of duty towards those for whose protection the safeguards have been prescribed, and liability follows where there is a resulting injury, but, even where the statutory command is not obeyed, there is no breach of duty towards those who do not come within the zone of apprehended danger and no liability where the injury is not the result of disobedience of the statute.
    2. In an action, therefore, to recover for the death of a child, who, the evidence showed, while standing on the curb, upon the starting of defendant’s truck was caught by a hook hanging from its left side, drawn under the wheels and killed, a charge that the jury might bring in a verdict in favor of plaintiff if it found that the driver had violated the provisions of the General Highway Traffic Law (Cons. Laws, ch. 70, § 15, subd. 6) or similar provisions of city ordinances and that such violation caused the accident, is error.

      Boronkay v. Robinson & Carpenter, 221 App. Div. 813, reversed.
    (Argued January 20, 1928;
    decided February 14, 1928.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the third.judicial department, entered July 8, 1927, unanimously affirming a judgment in favor of plaintiff entered upon a verdict.

      Boland Ford and Oscar J. Brown for appellant.
    It was error for the court to charge that the violation of the General Highway Traffic Law and the ordinance of the city of Ithaca was negligence and evidence of negligence respectively. (Martin v. Herzog, 228 N. Y. 164; Williams v. Vanderbilt, 28 N. Y. 217; Donnelly v. Piercy Contr. Co., 222 N. Y. 210; Leeds v. N. Y. Tel. Co., 178 N. Y. 118; Story v. Mayor, 29 App. Div. 316; Di Caprio v. N. Y. C. R. R. Co., 231 N. Y. 94; Hyde v. McCreery, 145 App. Div. 729; Brown v. Shyne, 242 N. Y. 176; Platz v. City of Cohoes, 89 N. Y. 219; Saugerties Bank v. Delaware & Hudson Co., 236 N. Y. 425.) No negligence could be predicated on a violation of section 4 of chapter 6 of the ordinances of the city of Ithaca. (Wright v. Delafield, 25 N. Y. 266; Gropp v. Great Atlantic & Pacific Tea Co., 205 N. Y. 617; Treadwell v. City of Yonkers, 192 App. Div. 421; Hoffman v. Third Ave. R. R. Co., 45 App. Div. 586; Block v. Third Ave. R. R. Co., 60 App. Div. 191; Williams v. State of New York, 106 Misc. Rep. 19; People v. Braun, 100 Misc. Rep. 343; People v. Quayle, 122 Misc. Rep. 607.)

      Harold E. Simpson for respondent.
    The court properly charged the jury that the violation of the General Highway Traffic Law and the ordinance of the city of Ithaca was prima facie negligence and evidence of negligence respectively. (Martin v. Herzog, 228 N. Y. 164; Hartman v. Berlin Envelope Co., 71 Misc. Rep. 30; 146 App. Div. 926; Ehrgott v. Mayor, etc., 96 N. Y. 264; Amberg v. Kinley, 214 N. Y. 531.)
   Lehman, J.

The defendant delivered coal at the home of the plaintiff in the city of Ithaca. The defendant’s coal truck stopped on the left-hand side of the curb. The driver of the truck with his helper carried the coal in bags to a coal bin in the rear of the house. The plaintiff’s son, a boy about four years of age, followed the men back and forth as they carried the bags of coal. When the coal had been delivered the driver started the truck. In some manner the plaintiff’s son was thrown under the wheels of the truck and killed. There is evidence that the boy was standing at the curb, and was caught by a hook which was hanging from the truck from a chain upon the side nearest the curb. The plaintiff has recovered a judgment for the damages caused by the child’s death.

In spite of denial by the defendant’s witnesses that the accident occurred in the manner claimed by the plaintiff, the jury might have found that the defendant’s driver was negligent in permitting a chain and hook to hang from the truck in a position in which it might injure others using the street. Perhaps the jury might have found that the driver was negligent in starting the truck without noting where the boy was standing. The complaint predicates liability also upon the defendant’s negligence in stopping the truck with its left side to the curb in violation of the provisions of subdivision 6, section 15 of the General Highway Traffic Law (Cons. Laws, ch. 70). The trial judge charged the jury that it might bring in a verdict in favor of the plaintiff if it found that the driver violated the provisions of the Highway Traffic Law or similar provisions of the ordinances of the city of Ithaca and that such violation caused the accident.

Statutes and ordinances which require vehicles to proceed along the right-hand side of the roadway and prohibit vehicles from stopping with their left sides towards the curb of the roadway tend to facilitate the safe passage of persons or vehicles using the roadway. Such statutes and ordinances are intended to create order where disorder might be dangerous. The law prescribes safeguards to protect those who might come within the zone where danger is apprehended. Disregard of the statutory safeguards is a breach of duty, at least towards those for whose protection the safeguards have been prescribed. Liability properly follows where a breach of duty results in injury. (Martin v. Herzog, 228 N. Y. 164.) Even where a statutory command is not obeyed there is no breach of duty towards those who do not come within the zone of apprehended danger, and no liability where the injury is not the result of disobedience of the statute. (Di Caprio v. N. Y. C. R. R. Co., 231 N. Y. 94.)

Here the infant plaintiff stood on the curb. He might be injured by a vehicle passing or stopping at the right-hand side of the roadway, as well as at the left-hand side. The chain and hook happened to be hanging from the left-hand side of the truck. The driver used an entrance to the truck on its right-hand side. If at the moment of the accident the chain had hung from the side of. the truck away from the curb, this particular accident would not have occurred; but nothing in the record shows that the position of the chain on that side was in any way connected with the rule of law that vehicles must proceed and stop with their right-hand' sides towards the curb. The death of plaintiff’s intestate may have been due to negligence on the part of the defendant in failing to observe that the chain was in a position where it might strike a person on the curb, but the rule as to the manner in which vehicles" must proceed and stop created no safeguard against such a danger, and disobedience of that rule was not the cause of the plaintiff’s intestate’s death. If that was due to any negligence on the part of the defendant it was negligence which had no connection with the duty imposed by statute or ordinance.

The judgments should be reversed and a new trial granted, with costs to abide the event.

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

Judgments reversed.


author: Andrews, J.

text:
    The People of the State of New York, Respondent, v. George Haupt, Appellant.
    Crimes — attempted larceny — jury while acquitting defendant of burglary may convict him of attempted larceny • — ■ no double jeopardy.
    There is no inconsistency in a jury acquitting a defendant of burglary and finding that he attempted to commit larceny, nor does his trial for attempted larceny when acquitted of burglary subject him to double jeopardy. Under the proof in a given ease, a jury has power to ignore incidents relating to a burglary or regard them as not proven. If nothing is taken it may then convict of attempted larceny. If there is actual theft, then of larceny.

      People v. Haupt, 221 App. Div. 485, affirmed.
    (Argued January 16, 1928;
    decided February 14, 1928.)
    Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the third judicial department, entered September 27, 1927, which reversed a judgment of the Rensselaer County Court rendered upon a verdict convicting the defendant of the crime of attempted grand larceny in the first degree and granted a new trial.

      Gerald W. O’Connor, Thomas O’Connor and George E. O’Connor for appellant.
    The verdict of acquittal of the charge of burglary set forth in the first count of the indictment, as a matter of law entitled the defendant to a dismissal of the entire indictment and to his discharge from custody notwithstanding the verdict of guilty of the charge of attempted grand larceny set forth in the second count of the indictment. (Code Crim. Pro.§§ 278, 279; People v. May, 179 App. Div. 290; People v. Downs, 56 Hun, 5; 125 N. Y. 558; People v. Collins, 234 N. Y. 355; People v. Graham, 176 App. Div. 38; Munson v. McClaughney, 198 Fed. Rep. 72; Morgan v. Devine, 237 U. S. 632; People v. Atwater, 191 App. Div. 345; State v. Spear, 164 N. C. 452; People v. Cox, 67 App. Div. 344; People v. Hale, 1 N. Y. Cr. Rep. 533; People v. Headrick, 179 Mo. 300; Dedieu v. People, 22 N. Y. 178; People v. Schleiman, 197 N. Y. 383; People v. Grzesczak, 77 Misc. Rep. 202.)

      Frederick C. Filley, District Attorney (Philip J. Cirillo of counsel), for respondent.
    The court properly charged the jury they might find the defendant guilty on either count of the indictment. (People v. Wilson, 151 N. Y. 407; People v. Hassan, 196 App. Div. 89; People v. Weiss, 158 App. Div. 235; 210 N. Y. 546; People v. Comas, 11 N. Y. Cr. Rep. 194; People v. Adams, 72 App. Div. 166; 16 N. Y. Cr. Rep. 454; People v. Miller, 143 App. Div. 252; People ex rel. Dawkes v. Frost, 58 Misc. Rep. 618; People v. Reiter, 130 Misc. Rep. 105; 221 App. Div. 751.)
   Andrews, J.

Indicted on two counts for burglary in the third degree and for attempted grand larceny, both arising out of a transaction at the same time and place, the defendant was acquitted of the former charge and convicted of the latter. Upon his appeal from the judgment the Appellate Division reversed on the law and the facts and granted a new trial. Claiming that the verdict acquitting him of burglary entitled him to a dismissal of the entire indictment the defendant now appeals to this court from so much of the judgment as directs a new trial.

Locked in a garage was a motor car worth $2,500. A window of the building was broken open and a door inside was forced. The car was not taken. In acquitting the defendant of burglary the jury may have found either that he did not break or enter the building or that he did so with no intent to commit a crime therein. There is no inconsistency in a finding, however, that he attempted to commit larceny. If, having entered the building with no evil design he then formed the intent to steal the car and acted in pursuance of that intent; if with a like intent he reconnoitered the garage to determine the means of forcing his way in, or tried the doors with the purpose of entering and stealing the car, he was at least guilty of an attempt at larceny. (People v. Collins, 234 N. Y. 355.) Nor does his trial for attempted larceny when acquitted of burglary subject bim to double jeopardy. The same facts would not lead to a conviction for both alleged offenses.

Whether the evidence produced in this case was sufficient to justify the finding on which the conviction must rest we do not discuss. By its reversal on the facts the Appellate Division has apparently held it was not, although in its opinion it states that " the circumstantial evidence was sufficient to warrant the conviction of the defendant of both crimes.” But as there is to be a new trial it may be well to record that we disagree with any holding to the effect that a jury acquitting a defendant of burglary may not on the same facts convict him of an attempt to commit larceny. Where the intent is to steal, burglary is but an attempted larceny with aggravated incidents. Illogical as it may seem under the proof in a given case, a jury has the power to ignore these incidents or regard them as not proven. If nothing is taken it may then convict of attempted larceny. If there is actual theft, then of larceny. To do so is not an error of law.

The order appealed from should be affirmed.

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

Order affirmed.


text:
    Mabel Rees et al., Appellants, v. Teachers’ Retirement Board of the City of New York et al., Respondents.
    Municipal corporations — New York city — officers — injunction— Teachers’ Retirement Board — appointment of secretary a “ decision ” within meaning of charter provision requiring concurrence of one member elected by teachers for decision of Board — complaint alleging appointment of secretary without such concurrence and asking injunction states cause of action — injunction pendente lite properly granted.
    The appointment of a secretary to the Teachers’ Retirement Board is a “ decision ” of the Board within the meaning of subdivision C-ll of section 1092 of the charter of the city of New York, as amended (L. 1917, ch. 303), which provides that “ the concurrence of the comptroller or of one member appointed by the mayor, of a member elected by the retirement association (the teachers) and of at least two other members shall be necessary for a decision of the retirement board.” Such an appointment, therefore, may not be made without the concurrence of one member of the teachers’" representatives, and a complaint alleging that a secretary had been appointed by the vote of four members of the Board, without the concurrence of either of the members elected by the teachers and demanding that defendants be restrained from signing or paying any warrants for his salary, states a cause of action and an injunction pendente lite was properly granted.

      Rees v. Teachers' Retirement Board, 221 App. Div. 646, reversed.
    (Argued January 9, 1928;
    decided February 14, 1928.)
    Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the first judicial department, entered November 4, 1927, which reversed an order of Special Term granting a motion for an injunction pendente lite and denied said motion.
    The following question was certified: “ Does the complaint herein state facts sufficient to constitute a cause of action? ”

      Leonard M. Wallstein and Ralph M. Frink for appellant.
    The “ appointment ” of a secretary of the Board is but one kind of “ decision ” by the Board and, since by the plain, unambiguous and all-embracing language of the statute the concurrence of a teacher-member is required for all decisions, there is no room for an interpretation of the statute which would differentiate this decision from others and which would except this one kind of decision alone from the requirement of concurrence by a teacher-member. (Johnson v. H. R. R. R. Co., 49 N. Y. 455; McCluskey v. Cromwell, 11 N. Y. 593; Mushlitt v. Silverman, 50 N. Y. 360.) The statutory requirement of the concurrence of certain members of the Board as essential to the validity of a Board decision is intended for the plain purpose of protecting both the city and the teachers from the domination of either by the other, such protection being assured by prescribing a common kind of joint control. (Craig v. Matthews, 238 N. Y. 88; Craig v. Commissioners, 208 App. Div. 412; McCarthy v. Mills, 214 App. Div. 70; Matter of Ashmead, N. Y. L. J. March 13, 1925.)

      George P. Nicholson, Corporation Counsel {William E. C. Mayer and J. Joseph Lilly of counsel), for respondents.
    The Legislature has expressly authorized and empowered the Board of Retirement to “ appoint ” its secretary. (Matter of Craig v. Matthews, 238 N. Y. 88.)
   Andrews, J.

The Teachers Retirement Board of the City of New York consists of seven members, three of whom are elected by the teachers themselves. Its object is to secure pensions to teachers on their retirement. To its funds, held by the board of trustees, and now amounting it is said to some $39,000,000, the teachers have contributed sixty per cent. As beneficiaries of ■ the trust they may appeal to the courts to prevent the misuse of the trust estate. So may a minority of the trustees.

The question before us is whether the payment of a salary to Irving Crane, claiming to be secretary to the Board, would be such a misuse. If he is not such secretary, payments to him are not justified. This is not a proceeding to try his title to the office. That matter is involved but incidentally.

Mr. Crane was appointed secretary by the vote of four members of the Board. There was no concurrence in his choice by either of the three members elected by the teachers. The statute (Greater N. Y. Charter, amd. L. 1917, ch. 303, § 1092, subd. C-ll) provides that “ the concurrence of the comptroller or of one member appointed by the mayor, of a member elected by the retirement association [the teachers], and of at least two other members shall be necessary for a decision of the retirement board.” Is the appointment of a secretary “ a decision ” within the meaning of this section?

There seems to have long been jealousy between the municipal authorities and the teaching staff of the city as to the management and control of this particular fund to create which both contribute. The provision quoted apparently was a compromise between conflicting claims. Its precise meaning is not clear. “A decision ” has been defined as “ the determination of a question.” Whether or not as here used it means the determination of every question which may come before the Board, about which there may be difference of opinion, choice as to its policy or wisdom, depends upon the statute as a whole. For in it no definition of the word is given.

Such is the interpretation sought by the appellants. The respondents, on the contrary, would limit its scope to cases of “ judicial action taken by the Board with regard to the retirement of a particular teacher and not to action or matters of an ordinary administrative nature.”

Paragraph C which contains the limitation quoted is in the early part of the section. It creates the Retirement Board and fixes its membership. It then specifies certain of the powers and duties of the Board. It shall elect a chairman and appoint a secretary and necessary medical, clerical and other employees. It shall fix their salaries, subject to the approval of the Board of Estimate and Apportionment. It shall establish rules for the administration of its funds. It shall adopt mortality tables and certify the amounts required to be contributed by teachers. Then, and in connection with these powers- is inserted the important section 11. Finally the Board is to perform such other functions as are required by the provisions of the act. Among them it is to control, manage and invest its funds, and to purchase and sell securities (E, 1); to order payments on warrants (E, 3); to submit an estimate of the amounts required for its expenses as a basis for appropriations (F, 1); to certify the amount which the city is required to pay to maintain the contingent reserve fund (F, 2); to make rules as to deductions from teachers’ salaries (F, 5); to certify to the heads of departments the proper amount to be deducted from the payroll of each teacher (F, 5, c); to restore to the service a teacher retired for disability, at discretion (L, 4); to grant financial relief to teachers (R), and finally to appoint a medical board of three physicians (T).

The provisions as to retirement come at the end of the section. They are largely self-executory. The amount of each pension is fixed by the law itself. If retirement comes because of disability the Board has no discretion. It must retire the teacher upon the certificate of the medical board (L, 1). As to others any teacher 65 years old or with 35 years of service must be retired on application. One 70 years old must be retired in any event. Again the Board has no discretion. There is a question of fact involved in these cases as to whether the teacher is 65 or 70 or whether he has served 35 years. As to the latter the Board may have had originally some leeway in cases of teachers claiming credit for service before 1917. Each teacher files with the Board a detailed statement of such service rendered by him. As to what credit he shall be given, the details are fixed. This statement is to be verified by the Board. There can be little room for dispute. It then issues to the teacher a certificate as to the aggregate time of past service. This is conclusive unless modified by the Board or by the Board of Education (H). So when application for retirement is made all the Board may do is to-examine this certificate.

If retirement is asked because the age of 65 is reached or required because the teacher is 70 the Board also has no discretion. In the few cases where there may be doubt, doubtless it will refuse to order a warrant until in some manner, by mandamus or otherwise, a judicial decision as to the fact is obtained. But no trial before the Board is provided. The teacher has an absolute right to retire at 65. He must retire at 70 but cannot be forced to retire before unless disabled. No dispute, therefore, as to retirement is to be settled by the Board except the preliminary and narrow question as to the credit for service rendered before 1917, to be allowed a teacher. His service thereafter is a matter of official record.

In view of the slight field of action as to retirement granted to the Board it would not seem possible that the Legislature, in speaking of “ a decision ” in another part of the section, intended to restrict it to a determination as to certificates in the limited class of cases described. Action required by the act itself could hardly be called “ a decision of the retirement board.” A decision iniplies the power to say Yes ” or “ No.” Clearly the adoption of mortality tables, the investment of its funds, the purchase and sale of securities involve a more important exercise of discretion, a more important choice between alternative courses of action than a decision that A is to be credited with 5 or 6 years of service. The integrity of the fund itself depends upon what course the Board adopts. Here the beneficiaries of the trust have a vital interest. It is not unreasonable that the Legislature thought they should have through their representatives a veto power. We conclude that this was the design.

If the adoption of mortality tables or the designation of investments is a decision ” then the appointment of a secretary is one also. No distinction can be drawn. Under the statute the office is an important one. The selection of a proper candidate may involve questions of policy, provoke differences of opinion. We hold that the choice is “ a decision of the board ” and may not be made without the concurrence of one member of the teachers’ representatives.

Some amendments have been added since the original statute was adopted. That of May, 1920, in a limited class of cases, permits the Board upon evidence, to determine certain facts. It in no way affects our conclusion as to the original meaning of the Legislature.

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

Cabdozo, Ch. J., Pound, Cbane, Lehman and Kellogg, JJ., concur; O’Bbien, J., dissents.

Ordered accordingly.


author: Andrews, J. Lehman, J.

text:
    Catherine C. Mitchill, Respondent, v. Charles Lath et al., Appellants.
    Contract — specific performance — oral agreement so closely related to subject dealt with in written contract that it may not be proved — where it is evident that plaintiff was the principal, contract made with her husband must be treated as if made by her.
    1. Where plaintiff entered into a written agreement to purchase real property from defendants containing precise provisions as to the obligations of each of the parties thereto, a collateral oral agreement on the part of defendants to remove an ice house owned by them and facing the property sold is so closely related to the subject dealt with in the written agreement that it may not be proved in an action to compel its specific performance.

      2. Nor is this changed by the fact that while the collateral agreement was made by the plaintiff, the contract of sale was with her husband and no assignment of it from him appears, where the deed was given to her and it is evident that in the transaction she was the principal from beginning to end. The contract must be treated as if in form, as it was in fact, made by her.

      Mitchell v. Lath, 22Ó App. Div. 776, reversed.
    (Argued January 10, 1928;
    decided February 14, 1928.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered May 27, 1927, unanimously affirming a judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term in an action to compel specific performance of an alleged contract to remove an ice house.

      James G. Meyer, John T. Kelly and Daniel A. Dugan for appellants.
    The court erred in destroying the contract by receiving evidence of prior negotiations. (Newburger v. Am. Surety Co., 242 N. Y. 134; Filkins v. Whyland, 24 N. Y. 338; Eighmie v. Taylor, 98 N. Y. 288; Emmett v. Penoyer, 151 N. Y. 564; Sturmdorf v. Saunders, 117 App. Div. 762; Marsh v. McNair, 99 N. Y. 174; Lossing v. Cushman, 123 App. Div. 693; 195 N. Y. 386.) The case at bar is not within the exceptions to the general rule that evidence of parol agreements may not be received to contradict or vary the terms of an instrument in writing. (Thomas v. Scutt, 127 N. Y. 133; House v. Walch, 144 N. Y. 418; Mead v. Dunleavy, 174 N. Y. 108; Studwell v. Bush Co., 206 N. Y. 416; Newburger v. American Surety Co., 242 N. Y. 134.)

      Arthur H. Haaren for respondent.
    Specific performance of defendants’ oral contract was properly granted below. (Rintelen v. Schaefer, 158 App. Div. 477.) The parol evidence rule has not been violated and no other ground for reversal has been shown. (Newburger v.
      Am. Surety Co., 242 N. Y. 134; Indelli v. Lesster, 130 App. Div. 548; Finkle v. Lasher, 178 App. Div. 471; Brown v. De Graff, 183 App. Div. 177; Amer. Aniline Products Co. v. Mitsui & Co., 190 App. Div. 485; Taylor v. Hopper, 62 N. Y. 649; Lobel v. Van Hoose, 141 N. Y. Supp. 490; M’Crea v. Purmort, 16 Wend. 460; Hocking Valley Ry. Co. v. Barbour, 192 App. Div. 654; Post v. Thomas, 180 App. Div. 627.) The injunction prayed for was properly granted. (Musgrave v. Sherwood, 23 Hun, 669.)
   Andrews, J.

In the fall of 1923 the Laths owned a farm. This they wished to sell. Across the road, on land belonging to Lieutenant-Governor Lunn, they had an ice house which they might remove. Mrs. Mitchill looked over the land with a view to its purchase. She found the ice house objectionable. Thereupon the defendants orally promised and agreed, for and in consideration of the purchase of their farm by the plaintiff, to remove the said ice house in the spring of 1924.” Relying upon this promise, she made a written contract to buy the property for $8,400, for cash and a mortgage and containing various provisions usual in such papers. Later receiving a deed, she entered into possession and has spent considerable sums in improving the property for use as a summer residence. The defendants have not fulfilled their promise as to the ice house and do not intend to do so. We are not dealing, however, with their moral delinquencies. The question before us is whether their oral agreement may be enforced in a court of equity.

This requires a discussion of the parol evidence rule — a rule of law which defines the limits of the contract to be construed. (Glackin v. Bennett, 226 Mass. 316.) It is more than a rule of evidence and oral testimony even if admitted will not control the written contract (O’Malley v. Grady, 222 Mass. 202), unless admitted without objection. (Brady v. Nally, 151 N. Y. 258.) It applies, however, to attempts to modify such a contract by parol. It does not affect a parol collateral contract distinct from and independent of the written agreement. It is, at times, troublesome to draw the line. Williston, in his work on Contracts (sec. 637) points out the difficulty. Two entirely distinct contracts,” he says, each for a separate consideration may be made at the same time and will be distinct legally. Where, however, one agreement is entered into wholly or partly in consideration of the simultaneous agreement to enter into another, the transactions are necessarily bound together. * * * Then if one of the agreements is oral and the other is written, the problem arises whether the bond is sufficiently close to prevent proof of the oral agreement.” That is the situation here. It is claimed that the defendants are called upon to do more than is required by their written contract in connection with the sale as to which it deals.

The principle may be clear, but it can be given effect by no mechanical rule. As so often happens, it is a matter of degree, for as Professor Williston also says where a contract contains several promises on each side it is not difficult to put any one of them in the form of a collateral agreement. If this were enough written contracts might always be modified by parol. Not form, but substance is the test.

In applying this test the policy of our courts is to be considered. We have believed that the purpose behind the rule was a wise one not easily to be abandoned. Notwithstanding injustice here and there, on the whole it works for good. Old precedents and principles are not to be lightly cast aside unless it is certain that they are an obstruction under present conditions. New York has been less open to arguments that would modify this particular rule, than some jurisdictions elsewhere. Thus in Eighmie v. Taylor (98 N. Y. 288) it was held that a parol warranty might not be shown although no warranties were contained in the writing.

Under our decisions before such an oral agreement as the present is received to vary the written contract at least three conditions must exist, (1) the agreement must in form be a collateral one; (2) it must not contradict express or implied provisions of the written contract; (3) it must be one that parties would not ordinarily be expected to embody in the writing; or put in another way, an inspection of the written contract, read in the light of surrounding circumstances must not indicate that the writing appears “ to contain the engagements of the parties, and to define the object and measure the extent of such engagement.” Or again, it must not be so clearly connected with the principal transaction as to be part and parcel of it.

The respondent does not satisfy the third of these requirements. It may be, not the second. We have a written contract for the purchase and sale of land. The buyer is to pay $8,400 in the way described. She is also to pay her portion of any rents, interest on mortgages, insurance premiums and water meter charges. She may have a survey made of the premises. On their part the sellers are to give a full covenant deed" of the premises as described, or as they may be described by the surveyor if the survey is had, executed and acknowledged at their own expense; they sell the personal property on the farm and represent they own it; they agree that all amounts paid them on the contract and the expense of examining the title shall be a lien on the property; they assume the risk of loss or damage by fire until the deed is delivered; and they agree to pay the broker his commissions. Are they to do more? Or is such a claim inconsistent with these precise provisions? It could not be shown that the plaintiff was to pay $500 additional. Is it also implied that the defendants are not to do anything unexpressed in the writing?

That we need not decide. At least, however, an inspection of this contract shows a full and complete agreement, setting forth in detail the obligations of each party. On reading it one would conclude that the reciprocal obligations of the parties were fully detailed. Nor would his opinion alter if he knew the surrounding circumstances. The presence of the ice house, even the knowledge that Mrs. Mitchill thought it objectionable would not lead to the belief that a separate agreement existed with regard to it. Were such an agreement made it would seem most natural that the inquirer should find it in the contract. Collateral in form it is found to be, but it is closely related to the subject dealt with in the written agreement — so closely that we hold it may not be proved.

Where the line between the competent and the incompetent is narrow the citation of authorities is of slight use. Each represents the judgment of the court on the precise facts before it. How closely bound to the contract is the supposed collateral agreement is the decisive factor in each case. But reference may be made to Johnson v. Oppenheim (55 N. Y. 280, 292); Thomas v. Scutt (127 N. Y. 133); Eighmie v. Taylor (98 N. Y. 288); Stowell v. Greenwich Ins. Co. (163 N. Y. 298); Newburger v. American Surety Co. (242 N. Y. 134); Love v. Hamel (59 App. Div. 360); Daly v. Pisa (105 App. Div. 496); Seitz v. Brewers Refrigerating Co. (141 U. S. 510); American Locomotive Co. v. Nat. Grocery Co. (226 Mass. 314); Doyle v. Dixon (12 Allen, 576). Of these citations, Johnson v. Oppenheim and the two in the Appellate Division relate to collateral contracts said to have been the inducing cause of the main contract. They refer to leases. A similar case is Wilson v. Deen (74 N. Y. 531). All hold that an oral stipulation, said to have been the inducing cause for the subsequent execution of the lease itself, concerning some act to be done by the landlord, or some condition as to the leased premises, might not be shown. In principle they are not unlike the case before us. Attention should be called also to Taylor v. Hopper (62 N. Y. 649), where it is assumed that evidence of a parol agreement to remove a barn, which was an inducement to the sale of lots, was improper.

We do not ignore the fact that authorities may be found that would seem to support the contention of the appellant. Such are Erskine v. Adeane (L. R. 8 Ch. App. 756) and Morgan v. Griffith (L. R. 6 Exch. 70), where although there was a written lease a collateral agreement of the landlord to reduce the game was admitted. In this State Wilson v. Deen might lead to the contrary result. Neither are they approved in New Jersey (Naumberg v. Young, 15 Vroom, 331). Nor in view of later cases in this court can Batterman v. Pierce (3 Hill, 171) be considered an authority. A line of cases in Massachusetts, of which Durkin v. Cobleigh (156 Mass. 108) is an example, have to do with collateral contracts made before a deed is given. But the fixed form of a deed makes it inappropriate to insert collateral agreements, however closely connected with the sale. This may be cause for an exception. Here we deal with the contract on the basis of which the deed to Mrs. Mitchill was given subsequently, and we confine ourselves to the question whether its terms may be modified.

Finally there is the case of Chapin v. Dobson (78 N. Y. 74, 76). This is acknowledged to be on the border line and is rarely cited except to be distinguished. Assuming the premises, however, the court was clearly right. There was nothing on the face of the written contract, it said, to show that it intended to express the entire agreement. And there was a finding, sustained by evidence, that there was an entire contract, only part of which was reduced to writing. This being so, the contract as made might be proved.

It is argued that what we have said is not applicable to the case as presented. The collateral agreement was made with the plaintiff. The contract of sale was with her husband and no assignment of it from him appears. Yet the deed was given to her. It is evident that here was a transaction in which she was the principal from beginning to end. We must treat the contract as if in form, as it was in fact, made by her.

Our conclusion is that the judgment of the Appellate Division and that of the Special Term should be reversed and the complaint dismissed, with costs in all courts.

Lehman, J.

(dissenting). I accept the general rule as formulated by Judge Andrews. I differ with him only as to its application to the facts shown in the record. The plaintiff contracted to pinchase land from the defendants for an agreed price. A formal written agreement was made between the sellers and the plaintiff’s husband. It is on its face a complete contract for the conveyance of the land. It describes the property to be conveyed. It sets forth the purchase price to be paid. All the conditions and terms of the conveyance to be made are clearly stated. I concede at the outset that parol evidence to show additional conditions and terms of the conveyance would be inadmissible. There is a conclusive presumption that the parties intended to integrate in that written contract every agreement relating to the nature or extent of the property to be conveyed, the contents of the deed to be delivered, the consideration to be paid as a condition precedent to the delivery of the deeds, and indeed all the rights of the parties in connection with the land. The conveyance of that land was the subject-matter of the written contract and the contract completely covers that subject.

The parol agreement which the court below found the parties had made was collateral to, yet connected with, the agreement of purchase and sale. It has been found that the defendants induced the plaintiff to agree to purchase the land by a promise to remove an ice house from land not covered by the agreement of purchase and sale. No independent consideration passed to the defendants for the parol promise. To that extent the written contract and the alleged oral contract are bound together. The' same bond usually exists wherever attempt is made to prove a parol agreement which is .collateral to a written agreement. Hence “ the problem arises whether the bond is sufficiently close to prevent proof of the oral agreement.” See Judge Andrews’ citation from Williston on Contracts, section 637.

Judge Andrews has formulated a standard to measure the closeness of the bond. Three conditions, at least, must exist before an oral agreement may be proven to increase the obligation imposed by the written agreement. I think we agree that the first condition that the agreement must in form be a collateral one ” is met by the evidence. I concede that this condition is met in most cases where the courts have nevertheless excluded evidence of the collateral oral agreement. The difficulty here, as in most cases, arises in connection with the two other conditions.

The second condition is that the “ parol agreement must not contradict express or implied provisions of the written contract.” Judge Andrews voices doubt whether this condition is satisfied. The written contract has been carried out. The purchase price has been paid; conveyance has been made, title has passed in accordance with the terms of the written contract. The mutual obligations expressed in the written contract are left unchanged by the alleged oral contract. When performance was required of the written contract, the obligations of the parties were measured solely by its terms. By the oral agreement the plaintiff seeks to hold the defendants to other obligations to be performed by them thereafter upon land which was not conveyed to the plaintiff. The assertion of such further obligation is not inconsistent with the written contract unless the written contract contains a provision, express or implied, that the defendants are not to do anything not expressed in the writing. Concededly there is no such express provision in the contract, and such a provision may be implied, if at all, only if the asserted additional obligation is “so clearly connected with the principal transaction as to be part and parcel of it,” and is not “ one that the parties would not ordinarily be expected to embody in the writing.” The hypothesis so formulated for a conclusion that the asserted additional obligation is inconsistent with an implied term of the contract is that the alleged oral agreement does not comply with the third condition as formulated by Judge Andrews. In this case, therefore, the problem reduces itself to the one question whether or not the oral agreement meets the third condition.

I have conceded that upon inspection the contract is complete. “ It appears to contain the engagements of the parties, and to define the object and measure the extent of such engagement; ” it constitutes the contract between them and is presumed to contain the whole of that contract. (Eighmie v. Taylor, 98 N. Y. 288.) That engagement was on the one side to convey land; on the other to pay the price. The plaintiff asserts further agreement based on the same consideration to be performed by the defendants after the conveyance was complete, and d'rectly affecting only other land. It is true, as Judge Andrews points out, that “ the presence of the ice house, even the knowledge that- Mrs. Mitchill thought it objectionable, ‘ would not lead to the belief that a separate agreement existed with regard to it; ” but the question we must decide is whether or not, assuming an agreement was made for the removal of an unsightly ice house from one parcel of land as an inducement for the purchase of another parcel, the parties would ordinarily or naturally be expected to embody the agreement for the removal of the ice house from one parcel in the written agreement to convey the other parcel. Exclusion of proof of the oral agreement on the ground that it varies the contract embodied in the writing may be based only upon a finding or presumption that the written contract was intended to cover the oral negotiations for the removal df the ice house which lead up to the contract of purchase and sale. To determine what the writing was intended to cover the document alone will not suffice. What it was intended to cover cannot be known till we know what there was to cover. The question being whether certain subjects of negotiation were intended to be covered, we must compare the writing and the negotiations before we can determine whether they were in fact covered.” (Wig-more on Evidence [2d ed.], section 2430.)

The subject-matter of the written contract was the conveyance of land. The contract was so complete on its face that the conclusion is inevitable that the parties intended to embody in the writing all the negotiations covering at least the conveyance. The promise by the defendants to remove the ice house from other land was not connected with their obligation to convey, except that one agreement would not have been made unless the other was also made. The plaintiff’s assertion of a parol agreement by the defendants to remove the ice house was completely established by the great weight of evidence. It must prevail unless that agreement was part of the agreement to convey and the entire agreement was embodied in the writing.

The fact that in this case the parol agreement is established by the overwhelming weight of evidence is, of course, not a factor which may be considered in determining the competency or legal effect of the evidence. Hardship in the particular case would not justify the court in disregarding or emasculating the general rule. It merely accentuates the outlines of our problem. The assumption that the parol agreement was made is no longer obscured by any doubts. The problem then is clearly whether the parties are presumed to have intended to render that parol agreement legally ineffective and non-existent by failure to embody it in the writing. Though we are driven to say that nothing in the written contract. which fixed the terms and conditions of the stipulated conveyance suggests the existence of any further parol agreement, an inspection of the contract, though it is complete on its face in regard to the subject of the conveyance, does not, I think, show that it was intended to embody negotiations or agreements, if any, in regard to a matter so loosely bound to the conveyance as the removal of an ice house from land not conveyed.

The rule of integration undoubtedly frequently prevents the assertion of fraudulent claims. Parties who take the precaution of embodying their oral agreements •in a writing should be protected against the assertion that other terms of the same agreement were not integrated in the writing. The limits of the integration are determined by the writing, read in the light of the surrounding circumstances. A written contract, however complete, yet covers only a limited field. I do not think that in the written contract for the conveyance of land here under consideration we can find an intention to cover a field so broad as to include prior agreements, if any such were made, to do other acts on other property after the stipulated conveyance was made.

In each case where such a problem is presented, varying factors enter into its solution. Citation of authority in this or other jurisdictions is useless, at least without minute analysis of the facts. The analysis I have made of the decisions in this State leads me to the view that the decision of the courts below is in accordance with our own authorities and should be affirmed.

Cardozo, Ch. J., Pound, Kellogg and O’Brien, JJ., concur with Andrews, J.; Lehman, J., dissents in opinion in which Crane, J., concurs.

Judgment accordingly.


text:
    Mary Hanlon, Respondent, v. Union Bank of Medina, Appellant.
    Debtor and creditor — principal and surety — subrogation — surety who pays portion of indebtedness for which mortgage is held as collateral before receipt of proceeds of collateral not entitled to part thereof — may insist on subrogation to creditor’s title to collateral only on paying entire indebtedness.
    A surety who has already paid a portion of a total indebtedness, for which a mortgage is held as collateral, before the proceeds of the collateral is received, may not claim a portion thereof. At most she may, on paying the entire indebtedness, insist that she be subrogated to the creditor’s title to the collateral mortgage. She cannot demand any pro rata or partial subrogation.

      Hanlon v. Union Bank of Medina, 221 App. Div. 788, reversed.
    (Argued January 18, 1928;
    decided February 14, 1928.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered July 14, 1927, unanimously affirming a judgment in favor of plaintiff entered upon a decision of the court at a Trial Term without a jury.

      Simon Fleischmann and Harry Cooper for appellant.
    The principles of subrogation were not applicable to the facts found by the trial court and were not available to plaintiff. (Wanamaker v. Powers, 102 App. Div. 485; 186 N. Y. 562; White v. Costigan, 138 Cal. 564; Halstead v. Griefen, 173 Ill. App. 551; Jackson v. Bailey, 12 Ill. 159; Chapman v. Com., 25 Gratt. 721; Am. Surety Co. v. Farmer, 240 N. Y. 63; Sheldon on Subrogation [2d ed.], 191, § 127; McGrath v. Carnegie Trust Co., 221 N. Y. 92; U. S. v. National Co., 254 U. S. 73; Peoples v. Peoples, 254, Fed. Rep. 489; U. S. F. & G. Co. v. Union Bank, 228 Fed. Rep. 448; Maryland Co. v. Fouts, 11 Fed. [2d] 71; Buffalo G. Ins. v. Title Co., 51 Misc. Rep. 267; 115 App. Div. 920; Jones v. Benedict, 83 N. Y. 79; Hard

      ing v. Tift, 75 N. Y. 461; Rothschild v. Title Guaranty Co., 204 N. Y. 458; Krantz Mfg. Co. v. Gould Storage Battery Co., 83 App. Div. 133.)

      William H. Munson for respondent.
    The plaintiff, having paid the note in question, became entitled to be subrogated to all the security and all the rights that the defendant had, and was entitled to share pro rata in the proceeds of such security. (Morehouse v. Brooklyn Heights R. R. Co., 185 N. Y. 520; Dunlop v. James, 174 N. Y. 411; Mansfield v. N. Y., 165 N. Y. 208; Lewis v. Palmer, 28 N. Y. 271; Lockhaven State Bank v. Smith, 155 N. Y. 185; Sternbach v. Friedman, 34 App. Div. 534; Aker v. Hotchkiss, 97 N. Y. 396.)
   Andrews, J.

In December, 1925, the Union Bank of Medina held some eleven notes aggregating more than $21,000 of Francis E. Hanlon, some of which were indorsed by others. Among them was one payable on demand for $3,500 made by the plaintiff and Hanlon and indorsed by one Walsh. Of this note the plaintiff was an accommodation maker as the bank knew. It also held a mortgage for $14,000 given by Hanlon as continuing collateral security to secure his past and future indebtedness.

During that month Hanlon became a bankrupt. The bank then recovered a judgment against the plaintiff for the face of the $3,500 and issued execution. The judgment was paid and the note delivered to her. Thereafter the bank might enforce no claim against Hanlon or the indorser. It held its collateral as security for the balance of the indebtedness.

As for the plaintiff she might doubtless, on paying this entire indebtedness, insist that she be subrogated to the bank’s title to the collateral mortgage. Clearly this was the extent of her rights. She could not demand any pro rata or partial subrogation. (McGrath v. Carnegie Trust Co., 221 N. Y. 92.)

Later, in recognition of its claim to the collateral security the receiver in bankruptcy turned over to the bank $14,000. It is said this was not a voluntary payment made by the debtor but one made in the course of a judicial proceeding. Very possibly this may be true. At all events, we shall so assume for the purposes of this case. Then the application of this payment is made by the courts. How this should be done is described in Orleans Co. Nat. Bank v. Moore (112 N. Y. 543). With the application of this $14,000 when paid, actually made by the bank upon the various notes held by it, we are not here concerned. We have only to determine whether a surety who has already paid and satisfied a portion of the total indebtedness for which the mortgage was held as collateral, a month or a year or an indefinite time before the proceeds of the collateral is received, may claim a portion of these proceeds. And this, where the entire proceeds are insufficient to satisfy the existing indebtedness.

That it may be done is the conclusion reached in the courts below. This we think a mistake. The collateral was taken to protect the bank, not others. Its interests are primarily to be preserved. Existing indebtedness which the collateral protects is first to be paid. If insufficient in amount for that purpose some rules may exist as to the way in which it should be credited. It is only when the bank has been reimbursed in full that a surety who has paid a part of the secured indebtedness has any conceivable equitable interest in the surplus. To hold otherwise would largely disrupt usual banking practice and the banking custom of securing loans or advances by the taking of collateral. If as suggested when such collateral on foreclosure is found insufficient for its purpose any surety who had previously paid one of many notes supposed to be secured by it might claim a part of the proceeds, then reliance upon “ continuing collateral security ” is vain. No banker, depending on such security, might safely discount new notes when the old are paid. At least unindorsed notes would be preferable.

Neither law nor equity require such a conclusion. The very most to which the plaintiff might be entitled would be a right to the $14,000 upon the payment by her to the bank of the entire Hanlon indebtedness. Even then she may under the circumstances disclosed in this record be too late. As to that we express no opinion.

The judgment of the Appellate Division and that of the Special Term should be reversed and the complaint dismissed, with costs in all courts.

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

Judgment accordingly.


text:
    Ell Dee Clothing Company, Inc., Appellant, v. Frederick A. Marsh, Respondent.
    Insurance (burglary) — contract — principal and agent — trial — duty of defendant to call attention to defect in proof that might easily have been supplied — sufficiency of description of goods covered by binder — provisions of policy in ordinary use by assurer imported into binder —• in absence of regulation by State, burden upon assurer to show what conditions are implied — agent acting for unknown principal personally liable on contract — broker who signs binder as agent for “ London Lloyds ” personally liable until risk is assumed by underwriters.
    1. Upon trial of an action to recover on a contract of burglary insurance, defendant should have called attention to the defect in proof, where plaintiff failed to show that defendant ever received the check for the premium, if he considered it important and intended to rely thereon. The missing proof might have been supplied.
    2. A binder issued upon an application for insurance against burglary, made by the receiver of a named store at a stated address, covers the personal property held by the receiver at that place and a contention that the goods covered by the binder are not described cannot be upheld.
    3. A contention that there was a failure to prove a meeting of the minds of the parties and a contract for the reason that the binder was intended to be superseded by a formal policy containing conditions and in its absence the nature of the risk assumed was not shown, cannot be sustained. A “ binder ” is a present contract of insurance issued to protect the assured temporarily while the assurer investigates the risk and determines whether or not to issue a permanent policy. Imported into it are all the obligations of the policy in ordinary use by the assurer. If the form of the policy is fixed by the State then its provisions are held to be included in any binder. In the absence of State regulations it is for the assurer to show that conditions are implied and what they are.
    4. The defendant is personally liable on the binder where he signed it with knowledge by all that he was acting as agent for “ London Lloyds,” so that even he did not and could'not know who were or were to be his principals, the custom being for a broker to post the particulars of the proposed risk, whereupon each underwriting member of the association subscribes his name and the share of the total he desires to assume, a policy being issued when the total amount is underwritten. An agent anting for an unknown principal is personally hable on the contract and the mere knowledge by the plaintiff or its predecessors of the facts, is not, as matter of law, sufficient to exonerate the defendant.

      Ell Dee Clothing Co. v. Marsh, 220 App. Div. 701, reversed.
    (Argued January 20, 1928;
    decided February 14, 1928.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered April 13, 1927, unanimously affirming a judgment in favor of defendant entered upon a dismissal of the complaint by the court at a Trial Term.

      Leopold Bluniberg for appellant. The plaintiff established a cause of action.

      (Lipman v. N. F. Ins. Co., 121 N. Y. 454; Sherry v. National Surety Co. of N. Y., 243 N. Y. 266.) Defendant by signing individually the contract or binder of insurance without disclosing the name of any other principal is personally hable thereunder. (Meyer v. Redmond, 205 N. Y. 481; Argersinger v. Macnaughton, 114 N. Y. 538; Cobb v. Knapp, 71 N. Y. 348; Held v. Kennelly, 208 N. Y. Supp. 503; Deremer v. Brown, 165 N. Y. 410.) The objection that there is no binding contract because defendant did not receive the premium cannot be sustained. (Von Wein v. Scottish Union Ins. Co., 152 N. Y. Super. Ct. 490; Van Wert v. St. Paul Fire Ins. Co., 8 App. Div. 109; Washoe Tool Mfg. Co. v. Hibernia Fire Ins. Co., 66 N. Y. 613; Church v. La Fayette Fire Ins. Co., 66 N. Y. 222.)

      Grant Hoerner and Henry Herzbrun for respondent.
    The plaintiff failed to allege and prove a cause of action against this defendant for damages for a breach of contract of insurance. (Lipman v. N. F. Ins. Co., 121 N. Y. 454; Eames v. Home Ins. Co., 94 U. S. 621; Cottingham v. Nat. Mut. Church Ins. Co., 290 Ill. 26; Underwood v. Greenwich Ins. Co., 161 N. Y. 413; Hicks v. British Am. Assur. Co., 162 N. Y. 284.) The defendant by signing the “ alleged binder ” is not personally liable thereon. The plaintiff and his witnesses testified to the effect that they knew Marsh was acting for London Lloyds. (Argersinger v. Macnaughton, 114 N. Y. 535; Hernandez v. Brookdale Mills, Inc., 194 App. Div. 369.)
   Andrews, J.

In November, 1923, the receiver of the plaintiff applied to his broker for a policy of burglary insurance to cover the stock of goods which had come into his possession. In turn the broker passed on the application to another firm of brokers. They endeavored to place the insurance and finally succeeded in making some arrangement with the defendant.

Mr. Marsh was the agent in New York of the London Lloyds.” Precisely what were his powers is not clear. But when the application was handed to him it was understood by all parties that a Lloyds ” policy was to be received.

The application had been made out upon a form appropriate to marine insurance. On the back were printed the clauses relating to that class of risk and immaterial here. It was headed, “ Underwriters and Brokers Emergency Agreement,” and the form was stated to be Provisional.” The application was said to be made by the- brokers for the receiver- of the Ell Dee clothing store. The amount of the insurance was to be $15,000. It was to protect against burglary for 60 days, at and from 189 Stanton St., New York ” (where in fact the goods were located), and then follows, amount under deck $101.50.” That sum was in fact the agreed premium for the policy. Then follow the words “ Binding ” and the signature Marsh —for Company.”

This paper was delivered to the receiver; he drew a check for $101.50, which was received by the negotiating brokers; on December 6 there was a burglary at 189 Stanton street, clothing in the receiver’s hands being taken; shortly thereafter Marsh was notified of the burglary and about January 21 he received proofs of loss made out to F. A. Marsh, Representing Lloyds.”

No formal policy was ever executed by any one, and the plaintiff, having been vested with all the rights of the receiver in the subject-matter upon his discharge, brings this action to recover the loss directly of the defendant. It claims that he is personally liable upon the so-called binder ” executed by him.

Some preliminary matters must be considered before we reach the more important question involved in this case. It is said that the plaintiff has failed to show that Mr. Marsh ever received the check for the premium. It is true. But if the defendant considered it important and intended to rely on a missing bit of proof that might have been supplied, he should have called attention to the defect. No reference tó it was made on the trial. It is said the goods supposed to be covered by the binder are not described. But the application is against burglary made by the receiver of the Ell Dee clothing store at 189 Stanton street. This would seem to cover the personal property, held by Mr. Derby as receiver of the corporation, at that place. It is said there is here no complete contract. The binder is intended to be superseded by a formal policy. Such a policy contains conditions to be performed by the assured. In its absence the nature of the risk assumed is not shown. So there is a failure to prove a meeting of the minds of the parties and a contract. A binder ” is a present contract of insurance issued to protect the assured temporarily while the assurer investigates the risk and determines whether or not to issue a permanent policy. Imported into it, however, are all the obligations according to the terms of the policy in ordinary use by the company.” (Sherri v. National Surety Co., 243 N. Y. 266.) If the form of the policy is fixed by the State, then its provisions are held to be included in any binder. If there is proof that the company has adopted any particular and customary form the same thing is true. But it is for the company to show this fact. In the absence of legislative direction it may use such a policy as it chooses. It may adopt many or few conditions. In the absence of all testimony there is no presumption that in its policy it has inserted any conditions precedent. If it has adopted conditions subsequent it is for it to show that fact and that they have been broken by the assured. There is no reason why it may not simply agree to indemnify for the loss by burglary of certain goods in return for a consideration. So whether the binder is to be interpreted by itself or with the addition of implied conditions the minds of the parties meet. And in the absence of State regulations it is for the assurer to show that conditions are implied and what they are. Such seems to be intimated in Underwood v. Greenwich Ins. Co. (161 N. Y. 413). There may be an exception to this rule. Some conditions may be so well understood as universally entering into insurance contracts, such as the necessity of notice and proofs of loss given to the insurer within a reasonable time, that the courts will imply them even though the binder be silent. They must, however, be few.

We come, therefore, to the substantial question which we must determine. The general rule may be stated that where one party to a written contract is known to the other to be in fact acting as agent for some known principal, he does not become personally liable whether he signs individually or as agent. (Johnson v. Cate, 77 Vt. 218.) On the other hand, although known to be acting for an unknown principal, he is personally liable. Knowledge of the real principal is the test, and this means actual knowledge, not suspicion. (Cobb v. Knapp, 71 N. Y. 348; Argersinger v. Macnaughton, 114 N. Y. 535; McClure v. Central Trust Co., 165 N. Y. 108; De Remer v. Brown, 165 N. Y. 410; Winsor v. Griggs, 5 Cush. 210.) If this be a correct statement of the law, it determines the case before us.

London Lloyds is a voluntary association of merchants, shipowners, underwriters and brokers, originating in the seventeenth century and growing into a vast commercial organization. To it is due much of the law of marine insurance. In 1871 it was granted all the rights and privileges of a corporation. In its rooms an extensive insurance business is carried on. Lloyds itself, however, writes no policies. A broker for one wishing insurance posts the particulars of the proposed risk. Then each underwriting member of the association who wishes to do so subscribes his name and the share of the total desired that he wishes to take. When that total is reached the insurance is effected. A policy, in the form approved by Lloyds is then issued containing the names of the underwriters bound thereby and the name of their attorney in fact who handlés the insurance affairs of the group. So who will become obligated on any policy is not and cannot be known until the underwriting is completed. And in each case only those who underwrite each particular policy are liable for any loss under that policy, and liable for the amount which they have underwritten. The insured contracts with each separately, not with the group, jointly. (Fish v. Vanderlip, 218 N. Y. 29.)

Therefore, while the binder was signed by Marsh, with the knowledge by all that he was acting as agent, who were or were to be his principals, even he did not and could not then know. Under such circumstances the agent becomes personally liable on his contract. Not only were his supposed principals unknown to either Mr. Derby and his agents; in fact there were none. Some time in the future a group might be formed who would assume the risk. None existed when the binder was signed. And the mere knowledge by the plaintiff or its predecessors of all these facts is not, as a matter of law, sufficient to exonerate the defendant.

The judgments should be reversed and a new trial granted, with costs to abide the event.

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

Judgments reversed, etc.


author: ' Per Curiam.

text:
    In the Matter of the Application of the County of Westchester, by Westchester County Park Commission, Respondent, to Acquire Title to Lands of William Baruch et al., Defendants, and Fred H. Ponty, Appellant.
    Condemnation proceedings — costs — provision in subdivision 2 of section 16 of Condemnation Law covers all costs and allowances that may be awarded — extra allowance not limited by sections 1513 and 1614 of Civil Practice Act — amount in discretion of court up to five per cent — allowance figured on award not on award plus interest.
    1. Subdivision 2 of section 16 of the Condemnation Law (Cons. Laws, ch. 73), providing for costs and additional allowances in condemnation proceedings, covers all the costs and allowances which may be awarded under the circumstances stated, and the five per cent additional allowance which may be granted in the discretion of the court is not limited by sections 1513 and 1514 of the Civil Practice Act.
    2. The court is not obliged to give an additional allowance, or if it make an allowance, need it be the full five per centum. In no instance can it exceed five per centum but it may be less or nothing at all in the discretion of the court which is to be exercised according to the circumstances. When it is given, however, the allowance is to be figured upon the award and not upon the award plus the interest.

      Matter of County of Westchester v. Baruch, 222 App. Div. 691, reversed.
    (Argued February 13, 1928;
    decided February 21, 1928.)
    Appeal from an order of the Appellate Division of the Supreme Court in the second judicial department, entered November 18, 1927, which modified and affirmed as modified so much of an order of Special Term as granted an extra allowance in condemnation proceedings.

      Arthur I. Strang for appellant.
    The limitation of $2,000 contained in section 1514 of the Civil Practice Act has no application and is not a restriction upon the power of the court granted to it by section 16 of the Condemnation Law. (Matter of Lake Shore & M. S. Ry. Co., 65 Hun, 538; Matter of Grade Crossing Commrs., 20 App. Div. 271; Matter of Simmons, 208 N. Y. 69; Matter of City of Brooklyn, 10 Misc. Rep. 650; 148 N. Y. 107; Matter of People v. Johnson & Co., 219 App. Div. 285; 245 N. Y. 627; Matter of Brooklyn, 148 N. Y. 107.) The allowance granted should be computed on the award inclusive of the interest. (Matter of N. Y. Municipal Ry. Corp. v. Holliday, 189 App. Div. 814; 228 N. Y. 561; Matter of City of New York (Westchester Ave.), 217 App. Div. 381; Matter of Bronx Parkway Comm., 191 App. Div. 387; Matter of Commissioners of Palisade Interstate Park, 172 App. Div. 634; Matter of Simmons, 208 N. Y. 69.)

      Henry R. Barrett, Charles H. Peck and Francis J. Morgan for respondent.
    The power to grant an extra allowance in such a case is limited to $2,000. (Matter of City of Brooklyn, 148 N. Y. 110; County of Erie v. Friedenberg, 221 N. Y. 395.) The allowance granted must be computed on the award exclusive of interest. (Matter of Bronx Parkway Comm., 191 App. Div. 387; Matter of Palisades Interstate Park, 172 App. Div. 643;
      Matter of Trustees, etc., 137 N. Y. 95; Matter of Bd. of Water Supply, 75 Misc. Rep. 150; Matter of City of New York (Westchester Ave.), 217 App. Div. 381.)
   ' Per Curiam.

Subdivision 2, section 16 of the Condemnation Law (Cons. Laws, chap. 73) provides for costs and additional allowance in condemnation proceedings. It is headed: Offer to purchase; costs; additional allowance.”

It reads: “ * * * If the compensation awarded shall exceed the amount of the offer with interest from the time it was made, or if no offer was made, the court shall, in the final order, direct that the defendant recover of the plaintiff the cost of the proceeding, to be taxed by the clerk at the same rate as is allowed, of course, to the defendant when he is the prevailing party in an action in the supreme court, including the allowances for proceedings, before and after notice of trial, and the court may also grant an additional allowance of costs, not exceeding five per centum upon the amount awarded.”

This provision covers all the costs and allowances which may be awarded under the circumstances stated. The five per cent additional allowance which may be granted in the discretion of the court is not limited by sections 1513 and 1514 of the Civil Practice Act. (Matter of Simmons, 208 N. Y. 69.) The costs of the proceeding are limited to the rate allowed the defendant in an action in the Supreme Court. Here is a specific reference to the Code provision which fixes costs. In no other way can the amount 'be determined. As to the additional allowance, however, no reference is made to proceedings in the Supreme Court or to the-Civil Practice Act or any other provision of law. The limitation is “ not exceeding five per centum upon the amount awarded.” While uniformity in practice may be desirable it cannot be accomplished through the courts in the face of positive legislation. (See Matter of Scherrer, 206 App. Div. 734; Matter of People v. Johnson & Co., 219 App. Div. 285; Matter of City of Rochester v. Cohen, 246 N. Y. 551.)

The court is not obliged to give an additional allowance, or if it make an allowance, need it be the full five per centum. In no instance can it exceed five per centum but it may be less or nothing at all in the discretion of the court which is to be exercised according to the circumstances. When it is given, however, the allowance is to be figured upon the award and not upon the award plus the interest.

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

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

Ordered accordingly.