text:
    Albertine Stauss, as Trustee, Respondent, v. Title Guarantee and Trust Company, Appellant.

      Submitted June 10, 1940;
    decided October 8, 1940.

      Flynn L. Andrew, William J. Junkerman and Eugene Z. DuBose for appellant.

      Martin D. Jacobs and John J. Boyle for respondent.
   Lewis, J.

The plaintiff has thus far prevailed in this action at law for money had and received which is based upon her executed rescission of the purchase of three mortgage participating certificates alleged to have been induced by fraudulent representations by an agent of the defendant.

The complaint alleges in substance that in April, 1926, the plaintiff advised a representative of the defendant that she desired to invest the sum of $6,000 “ * * * in a safe investment in such a way so that upon her death her children would be entitled to the investments; ” that she was induced by the defendant’s agent to purchase mortgage participating certificates which were represented as a safe and proper investment for trust funds, secured by a mortgage on buildings and guaranteed by the defendant. Such representations, it is alleged, were made by the defendant with intent to deceive and defraud the plaintiff and were false in that the mortgage against which the participating certificates were issued was an unauthorized and improper investment for trust funds; that the mortgage was not upon a building but upon unimproved land and that the payment of the certificates was not guaranteed by the defendant but by a subsidiary of the defendant whose financial responsibility was uncertain. It is also alleged that the last payment received by the plaintiff upon the certificates was a partial payment of interest due August 15, 1933, and that after discovering the true facts relating to the transaction she offered to return the certificates thus purchased, tendered all sums received by her from the investment and demanded return of the purchase price.

The answer denies the material allegations of the complaint except defendant admits that the plaintiff purchased the three mortgage participating certificates in question and alleges as an affirmative defense that long prior to September 29, 1935, the plaintiff had knowledge of the facts but made no attempt to rescind the purchase prior to that date and, therefore, must be deemed to have ratified the same.

At the close of the plaintiff’s evidence her counsel stipulated that “ * * * the only question that should be submitted to the jury will be whether there was a representation that there were buildings on the premises.” Accordingly we pass at once to the evidence submitted upon that narrow question. The plaintiff testified that on the first occasion, when she went to one of the defendant’s branch offices,- she made the following inquiry of a man whose name she did not know: I asked him if he has buildings what I could putjmy money into but that it should be safe, * * *. I asked him if it surely would be safe, my money, and he said yes, they had lots of buildings to put my money into. So I asked him if it could be arranged that I could put the money in trust for my children; * * She made no purchase at that time, her state-

ment being, “ I only want to go down and see if they had buildings to invest the money that it should be safe. I only went down to inquire the first time. * * * ” On the following day, according to her testimony, the plaintiff returned to the defendant’s office where she delivered $6,000 to the same man to whom she had talked on the previous day. After giving her a receipt for that sum there were prepared and later delivered to her by the defendant, three mortgage participating certificates of two thousand dollars each due February 15, 1929, with interest at five and one-half per cent per annum payable February 15th and August 15th. The three certificates were issued to the plaintiff as trustee for her three children respectively. Each certificate, according to the undisputed proof, entitled her to an undivided share, equal to the amount of two thousand dollars with interest, in a certain bond of the obligor, Avenue D Building Co., Inc., and secured by a real estate mortgage of $35,000 covering one hundred and six lots having a fair market value on April 1, 1926, of $75,300. In connection with the three certificates there were also prepared at plaintiff’s request and then executed by her under date of April 1, 1926, three written declarations of trust for the benefit of her three children, the terms of which are immaterial here.

Thereafter for a period of more than seven years the plaintiff received in full the interest due upon each certificate. Meantime, in 1929 and again in 1932, on the dates when they became due and payable, she applied for an extension and renewal of each certificate. There came a time, however, on August 15, 1933, when there was paid on each certificate only seventy-five per cent of the interest then due. This fact prompted the plaintiff to inquire at the defendant’s office and elsewhere as to the reason why the full amount of interest was not paid. In the course of such inquiries and upon an occasion in February, 1934, she claims to have received at the defendant’s office her first information that the real property covered by the mortgage to which her participating certificates attached was unimproved land.

There may be doubt whether the evidence outlined above was sufficient to establish fraud on the part of the defendant. However, we find it unnecessary to consider that question because, in any event, by her failure promptly to return the certificates upon the discovery of the alleged fraud, the plaintiff has defeated her right to recovery herein. By her conduct she ratified the purchase here in suit. Upon that subject this court has said: one may confirm a transaction voidable for fraud * * * by exercising dominion over the subject-matter of a sale, or even by silence and inaction with knowledge of one’s rights.” (Schenck v. State Line Telephone Co., 238 N. Y. 308, 313.) The right of a party to a sale to avoid the transaction for fraud or misrepresentation is conditioned upon an offer, made promptly after acquiring knowledge thereof, to return the subject-matter of the sale and any avails therefrom. (Cf. American Law Institute, Restatement of the Law of Contracts, § 480.)

Testing the record by these rules we find it to be conceded that no formal tender and rescission was made by the plaintiff within a period of more than two years after the date in February, 1934, when she claims to have discovered that the mortgaged property was unimproved. Meantime her conduct in relation to the three certificates owned by her includes acts of dominion which are incompatible with her present claim based upon rescission. When she was informed at the defendant’s office in February, 1934, that the mortgaged property was unimproved land she then advised defendant’s representative that she would consult a lawyer. Thereupon she interviewed an officer of the Dime Savings Bank, who referred her to a firm of attorneys who in turn promptly investigated the matter and reported to her. In May, 1934, three months after the date when she claims to have been informed of the unimproved character of the mortgaged premises, she applied for and secured from the Superintendent of Insurance a list of the holders of certificates similar to those which she had purchased. Thereafter in August, 1934, seven months after her alleged discovery, she attended a meeting of the holders of such certificates in the office of an attorney and was elected and acted as a member of a committee of certificate holders. During the following year — in April and August, 1935 — she continued to attend meetings of the certificate holders and on September 26, 1935, more than nineteen months after her alleged discovery of what she claimed to be a fraudulent representation by the defendant, she went to the office of the defendant where she presented three written memoranda in which she stated that she rescinded the purchase of the three certificates made more than nine years prior to that date. The return of the certificates was not offered at that time. In fact the formal tender and rescission was not made until March 13, 1936.

The three mortgage certificates here in suit were things of value. (Matter of New York Title & Mortgage Co., 277 N. Y. 66, 77.) By the terms of each certificate the defendant assigned to the plaintiff an equitable interest in the mortgage to which it held title. Each certificate gave the plaintiff as its owner certain rights and interests. While they were outstanding they incumbered the defendant’s title with a lien. (E. T. C. Corp. v. Title Guarantee & Trust Co., 271 N. Y. 124, 129, 130; Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69, 88.) So long as plaintiff retained her certificates, the defendant — to the extent of plaintiff’s holdings — was at a disadvantage by being prevented from taking such action as conditions warranted in relation to the property. (Matter of Lawyers Mortgage Co., 277 N. Y. 244; Matter of People [Title & Mortgage Guarantee Co.], supra, pp. 86, 87, 93.)

The record at hand discloses a failure .by the plaintiff to establish a rescission of the purchase in suit — including the return or tender of all she received as avails of the transaction — promptly after she became aware of the alleged fraudulent representation by the defendant. “ A return of the property * * * obtained under the contract is part of the act of rescission.” (Gould v. Cayuga County Nat. Bank, 86 N. Y. 75, 82.) Such proof was an essential element of the plaintiff’s present action at law which is based upon an executed rescission. (Shappirio v. Goldberg, 192 U. S. 232, 242; Schiffer v. Dietz, 83 N. Y. 300, 308; Cobb v. Hatfield, 46 N. Y. 533, 537; Baird v. Mayor, 96 N. Y. 567, 598; Tanenbaum v. Federal Match Co., 189 N. Y. 75, 83, 84; Friedman v. Richman, 213 App. Div. 467, 469, 470; affd., 241 N. Y. 576; Trowbridge v. Oehmsen, 207 App. Div. 740, 748, 749; affd., 241 N. Y. 564. Cf. American Law Institute, Restatement of the Law of Contracts, § 349, comment C, and §§ 480, 483, 484; 5 Williston on The Law of Contracts [Rev. ed.], § 1469, p. 4110.)

In the circumstances disclosed by the record we conclude that a delay by the plaintiff of more than two years in restoring to the defendant or tendering the certificates and the interest received thereupon which, as we have seen, are valuable items of property, defeats her right to recovery herein.

The judgments should be reversed, with costs in all courts, and the complaint dismissed.

Lehman, Ch. J., Loughran, Finch and Sears, JJ., concur; Rippey and Conway, JJ., dissent and vote to affirm.

j Judgments reversed, etc.


source: Caselaw Access Project

author: Sears, J.

license: Public Domain

text:
    In the Matter of the City of New York, Appellant and Respondent, Relative to Acquiring Title to Real Property Required for the Bronx River Parkway, Southerly Extension, and Two Public Parks in the Borough of The Bronx. A. F. &, G. Realty Corporation et al., Respondents and Appellants.

      Argued June 7, 1940;
    decided October 8, 1940.

      William C. Chanler, Corporation Counsel (Paxton Blair, Stanley Buchsbaum and William A. Marks of counsel), for City of New York, appellant and respondent.

      Bernard L. Bermant and Jacob W. Bermant for claimants, respondents and' appellants.
   Sears, J.

On March 31, 1938, the city of New York instituted this proceeding pursuant to a resolution of its Board of Estimate to acquire title to certain properties owned by the claimants for park purposes. Under an order of condemnation in the proceeding, title vested in the city on April 25, 1938. The award of compensation was made the 29th day of December, 1939. The final order of the Special Term declared the interest on the amount of the award should be at the rate of four per centum per annum from the date of the vesting of title. The provision as to the rate of interest was dependent upon the statute of the State of New York which became effective on the 1st day of July, 1939 (Laws of 1939, ch. 594, adding to the General Municipal Law [Cons. Laws, ch. 24], section 3-a). The pertinent part of the statute is as follows: “ Rate of interest on judgments and accrued claims against municipal corporations. The rate of interest to be paid by a municipal corporation upon any judgment or accrued claim against the municipal corporation shall not exceed four per centum per annum.” On appeal by the claimants to the Appellate Division, the order was modified to provide that interest on the award should be at the rate of six per centum per annum from the day that title was taken by the city to the 1st day of July, 1939, and at the rate of four per centum thereafter.

Both the city and the property owners have appealed to this court. The latter contend that interest should have been allowed at the rate of six per centum from the date on which title vested in the city to the date of payment of the award. The former claims, on the other hand, that the interest rate should be four per centum for the entire period as declared by the final order of the Special Term. Some questions here raised are the same as those before us in the case of People ex rel. Emigrant Industrial Sav. Bank v. Sexton, 284 N. Y. 57), decided herewith. We consider here only such questions as are not involved on the other appeal. In the Emigrant Industrial Bank case we held that the act of 1939 did not delegate legislative power, and that the statute was to be given prospective effect only. Here the additional questions to be considered are: (1) Isjthe law of 1939 unconstitutional (a) as denying to the defendants the equal protection of the laws (U. S. Const. 14th Amendt.); (b) as impairing the obligation of a contract (U. S. Const. art. 1, § 10); (2) is the statute applicable, to an"award in condemnation proceedings instituted by a municipal corporation?

The claimants contend that the 1939 statute denies them the equal protection of the laws inasmuch as the general interest rate in the State of New York is six per centum (Gen. Business Law, § 370 [Cons. Laws, ch. 20]), while the statute provides a lower interest rate for obligations of municipal corporations. (Another statute contains a similar provision as to State obligations. Laws of 1939, ch. 586.) We are called upon to say whether the Legislature indulged in an unreasonable and palpably arbitrary classification when it provided for this differentiation. (People ex rel. Bryant v. Zimmerman, 241 N. Y. 405; Radice v. New York, 264 U. S. 292; People v. Klinck Packing Co., 214 N. Y. 121.) The sovereign and public character of the favored debtors and the lower rates of interest usually applicable on their borrowings may well form a basis for differentiation. The classification cannot be deemed unreasonable.

There is here no contract protected against impairment. (Crane v. Hahlo, 258 U. S. 142.) Where the right of eminent domain is exercised and compensation awarded for the taking, it is sometimes said that there is an implied contract to pay the property owner the value of the property taken. The obligation, however, is not based upon voluntary acts of the parties. The obligation to pay rests on statutory provisions and on the constitutional guaranty of property interests. To call the obligation an implied contract does not change its basic character. To be sure, compensation, when not paid coincidently with thejfcaking of the property, must include some sum in addition to the bare value of the property at the date of taking for the delay in making payment, so that the compensation may be just. Without the addition of some sum, the requirement of just compensation constitutionally guaranteed, would not be met. (Jacobs v. United States, 290 U. S. 13; Phelps v. United States, 274 U. S. 341.) In the absence of evidence as to what such additional sum should be, interest, as provided by law, meets the constitutional requirement. (Seaboard Air Line Ry. Co. v. United States, 261 U. S. 299.) Claimants’ contention that interest at the rate of four per centum per annum is so unreasonably low as to deprive them of just compensation is not supported by any evidence, and is contrary to common experience. Of course the Legislature could have secured the property owners whose property was condemned interest at a specific rate on the principal sum awarded. Claimants claim that section B 15-28.0 of the Administrative Code of the City of New York (Laws of 1937, ch. 929) does this. We do not so construe that provision. The section, so far as pertinent, provides as follows: “ All damages awarded by the court, with interest * * * if title to the real property acquired shall have vested in the city prior thereto, from the date of such vesting, * * * shall be paid by the city to the respective owners mentioned or referred to in the final decree * * *, as hereinafter provided. * * * c. In the case of a capital project proceeding, payment shall be made * * * within two calendar months after the entry of the final decree. In default of such payment, the owners or other persons entitled to be paid in the proceeding may at any time after application first made to the comptroller therefor, sue for and recover the amount due, with lawful interest, and the costs of such suit.” No fixed rate of interest is specified. The payment of lawful interest is made obligatory. Lawful ” we construe to mean lawful for the period during which it is earned. In the absence, therefore, of any contractual or statutory right to interest at a specific rate, or any evidence that four per centum per annum is unreasonably low, the statute of 1939 is applicable (unless awards in condemnation proceedings are impliedly excluded from its application) for the period following the effective date of the statute. The result of such construction is to assure equality in awards without reference to their being made before or after the effective date of the interest statute of 1939.

Claimants would have us construe the word claims ” in section 3-a of the General Municipal Law as applicable only to demands adjudicated in cases where the city is the defendant. Here, it is true, no proceeding or action has been instituted by a claimant. The city, the obligor, is the moving party in the litigation. Nevertheless, the talcing of the property, which is the end and aim of the proceeding, gives rise to an obligation on the part of the city of which the property owners are the beneficiaries. It would be a narrow construction, indeed, to hold that a claim within the meaning of the 1939 statute occurs only when litigation to enforce the claim is solely within the hands of the owner of the claim; but, even if a narrow construction is given to the word “ claim,” to enforce payment of the compensation under the language of the Administrative Code just quoted in this instance, there must be afiirmative action on the part of the property owner. An action has to be brought by the claimant to secure a judgment against the city. All the elements of a claim are here present and the right of the property owners is within the content of the word “ claim ” as used in the 1939 statute.

The conclusion follows that the order should be affirmed, without costs. (See 284 N. Y. 701.)

Lehman, Ch. J., Loughran, Finch, Rippey, Lewis and Conway, JJ., concur.

Order affirmed.


text:
    The People of the State of New York ex rel. Emigrant Industrial Savings Bank, Appellant and Respondent, against James J. Sexton et al., as Commissioners of Taxes and Assessments of the City of New York, Respondents and Appellants.
    Argued June 7, 1940;
    decided October 8, 1940.

      William H. King and Eugene Fay for relator, appellant and respondent.

      William C. Chanler, Corporation Counsel (Paxton Blair, Stanley Buchsbaum and Arthur H. Goldberg of counsel), for defendants, respondents and appellants.

      John J. Bennett, Jr., Attorney-General (Henry Epstein of counsel), amicus curiӕ.

   Sears, J.

The petitioner, as the owner of real property in the city of New York, paid its city tax on the property for the year 1932 upon an aggregate valuation of $800,000. Payment was made on the 29th day of April, 1932. The petitioner, feeling aggrieved by the amount of the assessment and of the taxes based thereon, instituted a certiorari proceeding to obtain a reduction. The proceeding has resulted favorably to the petitioner and the assessment has been reduced to $725,000. The final order reducing the amount of the assessment was granted on the 24th day of August, 1939. Under the provisions of section 296 of the Tax Law (Cons. Laws, ch. 60), there was included in the final order a direction to the city to pay the petitioner the amount paid by it for the 1932 taxes in excess of what the taxes would have been if the assessment had been made as fixed by the order, with interest thereon at four per cent per annum from the date of payment. The provision as to the rate of interest was based upon a statute amending the General Municipal Law (Cons. Laws, ch. 24) by adding a new section numbered 3-a (Laws of 1939, ch. 594) which became effective on the 1st day of July, 1939, and of which the pertinent part is as follows: Rate of interest on judgments and accrued claims against municipal corporations. The rate of interest to be paid by a municipal corporation upon any judgment or accrued claim against the municipal corporation shall not exceed four per centum per annum.”

On an appeal by the petitioner to the Appellate Division, the rate of interest was increased to six per cent from the date of payment to the 1st day of July, 1939, and fixed at four per cent for the time thereafter. Both the petitioner and the defendants have appealed to this court from the order of the Appellate Division.

The petitioner attacks the validity of the statute of 1939 solely on the ground that it constitutes a delegation of legislative power in conflict with the constitutional provision. (N. Y. State Const. art. III, § 1.) We reject this contention. We find in the statute no delegation of power whatever. A limit merely is imposed. There can be no doubt that the fixing of the rate of interest, or a limitation of the rate, is legislative in character. This circumstance is, however, without significance. The statute mandates no particular rate. Courts have long exercised authority to determine in accordance with legal rules and principles whether or not interest should be directed to be paid and the rate thereof. (Watkinson v. Laughton, 8 Johns. 213; King v. Talbot, 40 N. Y. 76; Ellis v. Kelsey, 241 N. Y. 374.) This power is by this statute restricted in one particular only, a maximum is imposed. This is clearly permissible.

If the statute is valid, petitioner argues, it only relates . to the interest allocated to the period after the date it became effective, July 1, 1939. This claim is based upon the language of section 296 of the Tax Law, and the language of the 1939 addition to the General Municipal Law, quoted above. Petitioner contends that the former section must be interpreted as requiring the payment of interest upon tax refunds at the rate provided by law during the periods that the interest has or is deemed to have run; and that the latter section must be construed as affecting the rate of interest to be paid upon accrued claims and judgments from its effective date, since it does not contain a clear expression of legislative intent justifying a retroactive application. The defendants, on the other hand, contend that the statute of 1939 is retroactive and that interest on an accrued claim against a municipality embodied in a judgment or order granted after the effective date of the statute is to be computed at the four per cent rate; that the statute was intended to relieve municipalities of heavy interest charges, and that full relief can only be secured by such an interpretation. However desirable an interpretation in favor of municipalities upon this argument might be, it would run counter to the accepted rule as to the prospective character of statutes. (Jacobus v. Colgate, 217 N. Y. 235.) We are here dealing with a case where there has been no express contract for the payment of interest. Petitioner’s right to a refund with interest is statutory only. Interest is given as damages for delay in payment of the principal obligation. (Matter of O’Berry, 179 N. Y. 285.) Thus, the rate of interest should be that current in the periods during which the delay in payment has occurred, (O’Brien v. Young, 95 N. Y. 428; Reese v. Rutherfurd, 90 N. Y. 644.) Nor does the use of the word “ accrued ” in describing the type of claims affected denote an intention that the statute is to be applied retroactively. The juxtaposition of,the words “accrued claim” to the word “ judgment ” negatives such an interpretation. There is no possible indication in the use of the word “ judgment ” that the effect of the statute was intended to be retroactive.

The defendants do not argue that the statute limits the payment of interest on judgments rendered before it became effective (until the effective date of the statute) at not more than four per cent. Such a contention would be in conflict with the decision of this court in the O’Brien case. Nor can it be successfully urged that Salter v. Utica & Black River R. R. Co. (86 N. Y. 401) is controlling in the construction of this particular statute. In the Salter case the court had before it the question of the rate of interest to be allowed on damages for wrongful death when the legal rate had been changed from seven per cent to six per cent between the time of the death and the entry of judgment. The court held that the six per cent rate applied for the whole period. While this holding indicates that under some circumstances interest statutes may be applied retroactively, we find no warrant for such a result in this case. Further, the parties in this case on both sides agree, as is doubtless the sound position, that petitioner’s claim accrued within the meaning of the statute when the tax was originally paid. (Parsons v. City of Rochester, 43 Hun, 258; Reid v. Board of Supervisors, 128 N. Y. 364.) As used here, the word accrued,” though grammatically in the past tense, must be construed as a description, and not as referable to a date previous to the effective date of the statute.

Construing the statute of 1939 as prospective only, petitioner is entitled to receive interest on the refund at the rate of six per cent from the date of payment of the tax to July 1, 1939, and at the rate of four per cent thereafter.

The order should be affirmed, without costs.

Lehman, Ch. J., Loughran, Finch, Rippey, Lewis and Conway, JJ., concur.

Order affirmed.


author: Rippey, J.

text:
    In the Matter of the Accounting of Fifth Avenue Bank of New York et al., as Trustees under the Will of Frank Eveland, Deceased. Georgette L. E. Fifield, as Administratrix of the Estate of F. Winsor Eveland, Deceased, Appellant. Winsor G. Eveland et al., Appellants and Respondents. Bern Budd, as Special Guardian for Marylyn L. Eveland et al., Infants, Respondent and Appellant. Fifth Avenue Bank of New York, as Trustee under the Will of Frank Eveland, Deceased, Respondent.

      Argued June 11, 1940;
    decided October 8, 1940.

      Benjamin W. Moore, Philip A. Obst and Margaret J. Moore for Georgette L. E. Fifield, as administratrix of the estate of F. Winsor Eveland, deceased, appellant.

      Harvey M. Bagg and Edward A. Voesseler for Winsor G. Eveland et al., appellants and respondents.

      Bern Budd, special guardian, Edwin K. Bertine and Frederick F. Hufnagel for Marylyn L. Eveland et al., infants, respondents and appellants.

      Edward F. Manion and H. A. Cushing for respondent.
   Rippey, J.

This proceeding was brought in the Surrogate’s Court of Westchester county for the judicial settlement of the final account of the trustees under the last will and testament of Frank Eveland, for the construction of certain provisions of his will and for directions as to the disposition of principal and accumulated income of the lesidue of his estate now in the hands of the trustee. We are in accord with the correctness of the decisions of the courts below in all matters upon which they were able to agree. We think the Surrogate correctly decided what disposition should be made of the residue of the estate except in a minor particular to which we will later refer.

The testator died on May 6, 1926, leaving a will dated October 9, 1921, and a codicil dated June 29, 1923, which were admitted to probate on May 25, 1926. He left him surviving a widow, Ella V. Eveland, a son, F. Winsor Eveland, and three grandchildren, all of whom were the children of that son. The son died intestate April 3, 1928. The widow of the testator died March 2, 1938. The grandson arrived at the age of twenty-one years on May 15, 1928, but the two granddaughters, Marylyn L. and Jule C. Eveland, were and still are under twenty-one years of age, Two of the three grandchildren were in being when the will and codicil were executed; all three were alive both when the testator and his son died.

The question of construction arises under the “ Fourth ” paragraph of the will which disposes of the residuary estate of the testator as and if modified or changed by the First ” paragraph of the codicil. He gave the residue to his trustees to hold, invest, etc., and pay over the income as provided in three subdivisions of paragraph Fourth ” of the will. Under subdivision (1) he provided that his wife should receive $6,000 annually from the net income of the trust for life, payable in quarterly installments or at such other times as might be mutually agreed upon between her and the trustees, and the entire net income during her lifetime, though it should be more than $6,000 per year, in the event his son should predecease him or survive him and die before the death of his wife. In subdivision (2) he provided that the entire balance of the net income remaining after payment to his wife of $6,000 per year for her life if she survived the testator should be paid annually to the son for life. In that subdivision he also provided that if the wife should predecease him or should survive him but die before the death of the son, then from the date of her death the son should receive the entire net income for life subject to payment by the trustees to or for the benefit of the grandson, W. G. Eveland, of the annual sum of $1,500. Subdivision (3) then reads as follows:

“(3) Upon the death of my said wife, Ella V. Eveland, or of my said son F. Windsor Eveland, whichever shall happen last, the principal of this trust fund and all earnings or accumulations thereon then remaining unclaimed in the hands of my said trustees or of their successor or successors in this trust, after deducting the expenses incident to the trust, is to be paid over and distributed among the children of my said son F. Windsor Eveland, then living if any, as follows: seventy-five per cent (75%) thereof to my grandson W. G. Eveland; the balance to be equally divided among my other grandchildren, the issue of any deceased child to take the share of their deceased parent, by right of representation. But in case there is not then living any child of my said son, F. Windsor Eveland, or any issue of any deceased child, then and in such case, the whole of said principal trust fund and the net earnings and accumulations remaining shall be paid over and belong to these persons who would have been entitled to my personal estate, if I had died intestate at the time of the final distribution of my estate, in accordance with the Statute of Distribution of the State of New York existing at that time.”

The codicil contains paragraphs numbered “ First ” and “ Second,” In the Second ” paragraph the testator changes his executors and trustees in part. The “ First ” paragraph starts off: “ Subdivision numbered three, paragraph fourth on the third page of my Will is changed so as to read as follows:” With certain words supplied by the courts below which were evidently omitted through inadvertence by the testator, this provision of the codicil is in the identical wording of subdivision 3 of paragraph “Fourth” of the will which is quoted above except that one sentence thereof was changed in the codicil to read as follows: “ Seventy-five per cent (75%) thereof to my grandson W. G. Eveland, when he reaches the age of thirty-five years, the balance to be equally divided among my other grandchildren, when each reaches the age of thirty-five years, the issue of any deceased child to take the share of their deceased parent, by right of representation.”

We think it was the clear intent and purpose of the testator, as exhibited in the will and codicil, to fix as of the date of death of the widow (who was the last survivor of the life beneficiaries) both the persons who should take the remainder and the share which each should take. He repeated verbatim in the codicil the words of gift contained in the will, and provided by a separate clause in the codicil that his will should remain in full force and effect except as to any changes therein made. It is quite clear that it was his intention in making the codicil to leave intact those provisions of his will. By the codicil, the testator did not postpone a determination of either the persons who would take or the share which each would take in the residue. If the testator had intended that each share should not vest until the grandchild entitled thereto should reach the age of thirty-five years, no reason can 'be found for the omission to add clauses in the codicil providing for the continuance of the trust and of provisions relating to the interest or income on the share. Such an omission is strong evidence against an intention that the ownership should be suspended during that period of time. (Quade v. Bertsch, 65 App. Div. 600; affd., 173 N. Y. 615.) There was no intent that vesting of title to the respective interests should be postponed nor does the codicil by express terms or by implication so provide. It seems clear, therefore, that each grandchild became vested finally and indefeasibly with the title to his or her share of the remainder upon the death of the widow — the grandson to seventy-five per cent thereof and each granddaughter to twelve and one-half per cent thereof.

The testator failed to express in words his intention concerning the disposition of the income from each share or the manner and by whom the share should be held until the owner became thirty-five years of age. By fair implication, however, it [seems that the testator, by making the codicil, intended that the share of each grandchild should remain in the hands of the trustee until the owner should reach the age of thirty-five years, at which time that share with accumulated unpaid income should be paid over to the proper owner. Upon the whole will the inference is that the income was intended to be paid during the interval as it accrued. Such trusts would be invalid as violating the statute limiting the period for allowable restriction of the power of alienation. Premature termination of the trusts which the testator attempted to create cannot affect or change the persons who take the remainder or the share that each will take or change the remainder. The excision of the provision in the codicil merely gives immediate effect to a remainder which would otherwise be postponed. The dominant scheme of the testator shown both in the will and the codicil was to vest in his grandchildren living at the death of the last survivor of the two life beneficiaries the entire corpus of his residuary estate and unclaimed accumulated income in certain specified shares. The scheme for distribution was not so intimatelyjtied up with the alleged invalid provision of the codicil as to be inseparable from it and thus override the purpose of the testator and make nugatory his whole clearly defined scheme. We think the testator neither intended nor expected such a result to obtain by the making of the codicil. The persons who take and the share each takes were unalterably fixed by the testator. Whether the trusts are valid or void and whether the trusts terminated at the death of the widow or continued for the additional term, the same persons will take in the same proportions. Under such circumstances, the invalid parts of the instrument admitted to probate may be expunged without destroying the will as a whole, without interfering with the dominant purpose of the testator, and without creating intestacy, in whole or in part (Kalish v. Kalish, 166 N. Y. 368, 375; Matter of Hitchcock, 222 N. Y. 57; Matter of Chittick, 243 N. Y. 304; Matter of Durand, 250 N. Y. 45; Oliver v. Wells, 254 N. Y. 451; Looram v. Looram, 269 N. Y. 296). Thus, as was said in Kalish v. Kalish (supra) at page 375: “ When it is possible to cut out the invalid provisions, so as to leave intac%the parts that are valid, and to preserve the general plan of the testator, such a construction will be adopted as will prevent intestacy, either partial or total, as the case may be.”

It does not necessarily follow, however, that a provision that the trustee should continue to hold the trust fund for each infant until she reaches the age of twenty-one would also be invalid, although in apparent violation of the provisions of section 11 of the Personal Property Law (Cons. Laws, ch. 41; Matter of Trevor, 239 N. Y. 6, 16). There was an implied gift of income before she became entitled to receive the corpus of the trust. The Surrogate correctly directed that the share of the grandson with accumulated unclaimed income should be paid over to him at once and that the share of each granddaughter should be paid to her upon attaining the age of twenty-one years. He had no power to direct the accumulation of income of such shares in the hands of the trustee during the interval between the death of the widow and the majority of the infants against the testamentary intent.

The order of the Appellate Division and the decree of the Surrogate’s Court should be modified in accordance with this opinion and, as so modified, affirmed, with costs to each party filing a brief, payable out of the estate.

Lehman, Ch. J., Loughran, Finch, Sears, Lewis and Conway, JJ., concur.

Ordered accordinelv.


author: Lewis, J. Rippey, J.

text:
    The People of the State of New York, Respondent, v. Richard C. Robinson, Appellant.

      Argued April 16, 1940;
    decided October 8, 1940.

      John W. Hollis for appellant.

      Norman G. Stagg, District Attorney, for respondent.
   Lewis, J.

The defendant-appellant, a security salesman, stands convicted of grand larceny in the first degree. According to the indictment the larceny occurred when_the defendant, without the consent of the owner thereof, appropriated to his own use the sum of $600 which had been intrusted to him as bailee or agent by his client, Miss Lillie Happy. At that time the defendant’s business, which he and his wife formerly conducted as a partnership, had been incorporated under the name of “ R. C. Robinson Securities Corporation,” with its principal office at Ithaca, New York.

For several years prior to 1934, Miss Happy, a woman then more than seventy years of age, had dealt with the defendant in the purchase of securities. Her transactions with him were not numerous but involved separate purchases in connection with which she had paid to him amounts which totaled $1,261.50. Of that total sum she testified: He took that to invest for me, and to do with it as well as he could, to bring in the best returns for me.”

Without dwelling on their earlier dealings, we pass at once to a transaction which occurred in September, 1934, a month after the incorporation of the defendant’s business and which immediately preceded the acts for which he has been held criminally responsible. The defendant then had in his possession seventy-five shares of Bankers’ National Investment Corporation stock, owned by Miss Happy, which he used as payment for ten shares of the preferred stock of R. C. Robinson Securities Corporation. The proof of this transaction was afforded by two written memoranda — one in the handwriting of the defendant, which purports to be an agreement by Miss Happy to purchase ten shares of R. C. Robinson Securities Corporation preferred stock at $100 per share. This memorandum, dated September 15, 1934, bears the name of Lillie Happy printed in pencil, to the left of which and under the printed word witness ” the defendant wrote his initials “ R. C. R.” The other memorandum is also in the defendant’s handwriting and purports to acknowledge receipt from Miss Happy of seventy-five shares of Bankers’ National Investment Corporation stock in payment for “ equal value shares ” of R. C. Robinson Securities Corporation stock. Miss Happy testified that she had no recollection of purchasing ten shares of the stock of the defendant’s corporation or that she had ordered the . defendant to do so.

Upon the trial this transaction was traced through to the preferred stock book of R. C. Robinson Securities Corporation, from which it appeared that the ten shares of preferred stock thus purchased by the defendant for Miss Happy were represented by stub No. 15 from which the corresponding stock certificate No. 15 had been detached. Then followed proof that although stub No. 15, from which the corresponding certificate had been detached, bears the name of Lillie Happy in the defendant’s handwriting, the certificate No. 15, originally attached thereto, had been issued to the defendant “ R. C. Robinson.” When the defendant was asked by his counsel to explain why certificate No. 15 for the ten shares of preferred stock sold to Miss Happy had been issued in his name he testified that, in line with common practice in such transactions, he had issued the stock certificate in his own name to obviate the necessity of his going to Bovina Center, where Miss Happy lived, to secure her indorsement upon the certificate for transfer in the event a sale, exchange or other disposition of the stock should take place.

Such an event did take place shortly thereafter in the form of the transaction which has led to the defendant’s indictment and conviction. On December 31, 1934, when the books of the R. C. Robinson Securities Corporation showed that Miss Happy owned ten shares — or, as the ■record states, $1,000 worth ” — of the corporation’s preferred stock, the defendant informed the witness Dunbar, who was then the assistant treasurer of the corporation, that Miss Happy was in need of money for the repair of a barn or farm buildings and that she “ needed $400 of the stock redeemed.” Thereupon, in accord with the defendant’s direction, a check in the amount of $400 was drawn, payable to his order. Eleven days later, on January 11, 1935, the defendant again called into his office the assistant treasurer and stated to him that Miss Happy needed the $600 balance which was left.” A check in the amount of $600 was then drawn to the order of the defendant who in turn delivered to the assistant treasurer preferred stock certificate No. 15 which bore the defendant’s name. The assistant treasurer then wrote across the certificate the word canceled ” and affixed it to stub No. 15 in the stock book. The $600 check which thus came into the hands of the defendant was at once deposited to the credit of his personal account in which at the time was a balance of $28.39. Against the increment afforded by the deposit of $600, the defendant promptly proceeded to make disbursements for his personal debts.

Miss Happy testified that she owned no bam and that she had never told the defendant she needed money for the repair of farm buildings. When the defendant was questioned by his own counsel, “ Do you know the fact she [Miss Happy] did not have any bam at that time? ” he replied, “ I knew it very well.” And when asked, “ Do you know whether you told him [Mr. Dunbar] she wanted to repair a barn or not? ” the defendant answered, “ No.”

The defendant did not deny that he put to his own use the avails of the check for $600 to which reference has been made. His defense was that at the time the two checks for $400 and $600 were prepared he had two Starrett Investing Corporation bonds which he valued at approximately $1,000, as to which he then made a written memorandum that they were for Miss Happy.” According to his testimony, the memorandum was either attached to or lying with ” the bonds which he left in one of the safes. I do not remember which. Or possibly in the bank. I did not keep watch of them.” “ Q. And were those bonds still in that office when you left there? A. It was my understanding they were, yes. Q. Had you ever disposed of them in any way? A. I had not.” He also told the jury that he first learned that Miss Happy had not received the Starrett bonds when the indictment upon which he has been convicted was returned against him in November, 1937.

Meantime the affairs of R. C. Robinson Securities Cor-' poration had come under the surveillance of the Attorney-General, who, in an action instituted by him against that corporation and others, secured a court order on October 28, 1935, appointing a receiver who promptly took possession of the property and affairs of the corporation. The receiver testified that although there were several Starrett bonds among the securities of which he took possession under court order, he found nothing to indicate that Lillie Happy had an interest in any of them.

We are told in support of the defendant’s position that the facts outlined above and others too numerous for recital here did not warrant a finding against the defendant of criminal guilt. It is said that the transaction which led to the defendant’s indictment left him and his client in the relation of debtor and creditor to be dealt with by civil law without interference by criminal authorities. We must reject such a view, believing as we do, that in the evidence brought together by the prosecutor, which the jury chose to believe, there are the elements of grand larceny, first degree — the application by the defendant to his own use, without the owner’s consent, of funds in excess of $500 belonging to Miss Happy and then being in his control as her bailee or agent. (Penal Law, §§ 1290,1294.) He possessed himself of her funds which she had intrusted to him for purposes of investment; he used those funds without her consent, for another and unrelated purpose — the payment of his personal obligations. What was said in People v. Meadows (199 N. Y. 1, 6) applies with equal force to the facts now before us: “ The criminal act in this case was committed, and the criminalintent evidenced, when, departing from his duty to use the moneys in paying for the stock, the defendant diverted it to other purposes.”

But it is now suggested that if any money was stolen by the defendant, it was not the money of Lillie Happy but was the money of the defendant’s corporation. The record facts and applicable law afford several answers to such a suggestion but the complete and practical answer is that throughout the trial and in both the opening and the summation by his counsel the defendant admitted that it was he who owed Miss Happy money — not the corporation. Indeed the record shows that when the defendant, upon his direct examination, was asked to give a conversation he had with Miss Happy one week before the trial he stated: “ She [Miss Happy] said she would like to have the money that I owed her, and I told her I would like to give it to her. I said ‘ If we can arrange some solution of this thing where we are not going to be all tied up on it, I would be very glad indeed, and will anyway to the best of my ability, see that you get back the money you entrusted to me.’ * * * At the time I was there I had intended paying her a portion of what I owed her and giving her my father’s note, the way we originally talked.” And again when this subject became a matter of cross-examination, the following testimony was given by the defendant: “ Q. How much money do you owe Lillie Happy? A. I believe the figure is twelve hundred and some odd dollars. Q. You do owe her that money, don’t youV A. Certainly I do owe it to her. Q. And you said to her ' I will give you the money that you entrusted to me ’ didn’t you? A. That is correct. Q. You have not done it, have you? A. I have not.” (Emphasis supplied.)

No suggestion was made to the jury on the facts or to the trial justice on the law that the funds appropriated by the defendant belonged to the corporation. In reaching a decision in this case upon the law we may not acquit the defendant by resting a conclusion to that end upon a view as to established facts not shared by the defendant upon the trial. A controversy put out of the case by the parties is not to be put into it by us.” (Martin v. Herzog, 228 N. Y. 164, 167.)

We cannot agree with the defendant’s assertion that his rights were prejudiced by the receipt in evidence of Exhibit 50, a written memorandum prepared by the assistant treasurer in 1935 shortly after the receiver took charge of the corporation’s property and affairs. This item of proof was offered by the prosecution as a means of showing to whom the Starrett bonds belonged of which the receiver took possession. It was prepared by the assistant treasurer who, as a witness for the defendant, upon cross-examination, gave independent testimony from his personal knowledge of the facts contained within the memorandum which had a direct bearing upon the defendant’s claim that he had set aside two of the Starrett bonds for Miss Happy and that before the receiver took possession they had been earmarked as her property. The assistant treasurer testified that he did practically all ” the buying of securities for R. C. Robinson Securities Corporation and that he had the securities in his charge after they were delivered. He had personal knowledge of the bonds in the possession of the corporation at the time of the receivership and stated from memory that the number of Starrett bonds was sixteen — fourteen of which then belonged to John and Mittie Weaver and two belonged to John D. Robinson. He testified that Exhibit No. 50 was prepared by him in November, 1935, as a record of the numbers of the two bonds owned by John D. Robinson and used, with other collateral, in arranging a bank loan for John D. Robinson. The arranging of such loan was not a corporation matter but a personal transaction between the defendant and John D. Robinson. In .view of this testimony by the assistant treasurer and other testimony by the same witness which fully explain facts set forth in Exhibit 50, we do not regard as prejudicial the receipt in evidence of that exhibit.

Nor does the record warrant the criticism of the trial justice which has been made for an alleged failure to submit to the jury as a question of fact whether the relationship between the defendant and Miss Happy resulting from the transaction here involved was that of debtor and creditor. We find in the body of the charge a sufficient presentation of this question to the jury.

Other errors assigned by the defendant have been examined by us with care. In no instance do we find an error which was prejudicial to the defendant’s rights.

The .judgment should be affirmed.

Rippey, J.

(dissenting). Defendant was convicted on an indictment containing two counts each charging him with the crime of grand larceny in the first degree. The first count charges him with the felonious appropriation on January 11, 1935, of the sum of $600 which he then had in his possession, custody and control as bailee, servant, attorney, agent, clerk and trastee of one Lillie Happy,” said sum then being her property. The second count sets out certain specific acts which are alleged to arise out of and constitute a part of the same transaction as specified and set out in the first count. The indictment, in fact, contains but one charge and was so treated at the trial. That is necessarily so since there is no evidence to sustain the theory of the second count standing by itself. The theory there set out is that a specific sum of money belonging to Lillie Happy, first in the possession of the partnership of R. C. Robinson & Company, then in the possession of the R. C. Robinson Securities Corporation, and definitely earmarked as her money, was converted and misappropriated by defendant. Upon that theory, neither the indictment when read as a whole nor separately by count could be sustained.

It appears that Lillie Happy, a woman about seventy-five years of age at the time of the trial, first met defendant sometime between 1927 and 1929 when he was a salesman for a brokerage concern of Binghamton, N. Y., and purchased through him and that concern $4,000 worth of securities of an offering made by Clarence Hudson & Company, New York city brokers. Subsequently, at least, she had stock and security dealings with other stock salesmen and brokers and she had other investments not made through defendant. In 1932 defendant opened an office in Ithaca, N. Y., to deal in the Hudson Company offerings on his own account under the firm name of R. C. Robinson & Company, of which he was the principal partner. The partnership business continued until August, 1934. In October and November, 1933, Miss Happy turned over to defendant $1,025 which he invested in Collateral Bankers’ bonds. Later the bonds were sold by him. She gave him an additional $236.50, which made the aggregate sum of $1,261.50 of her money in his hands. That sum he invested in Bankers’ Industrial Investing Corporation Class A stock, a Hudson offering, certificates for which were issued in her name and delivered to defendant. Although she says that she was not advised at the time of the making of that particular investment for her and knew nothing of it specifically, it is not asserted that defendant made any improper use of the money. She authorized him to invest it and handle any of such investments from it and change her securities at his option in any manner he saw fit. Subsequently she was notified of the making of the investment and indorsed the stock in blank for transfer. She left the stock in defendant’s hands. The transactions were partnership affairs and the stock remained with the partnership as a partnership account. She testified that she did not know of subsequent transfer of securities or of investments made for her or on her account by defendant but she authorized the making of them and subsequently by her conduct ratified them. She received interest on those securities from the partnership while the partnership handled the account and a dividend from the Robinson Corporation on the subsequent investment in stock as later noted.

In August, 1934, the partnership business was incorporated ■under the name of the R. C. Robinson Securities Corporation and the business, assets and accounts of the partnership were turned over to the corporation. The corporation thus acquired or subsequently had some thirty employees, at least three branch offices, a large volume of business and a large number of brokerage accounts and upwards of 700 satisfied customers. Defendant was president of the corporation. The Lillie Happy account and securities were among those turned over to the corporation. In the early part of September, 1934, the stock then standing in her account was sold by the corporation for $1,087.50, which amount was deposited in the general checking account of the corporation at the First National Bank of Ithaca, N. Y., and she was. credited on the books of the corporation with that sum less $5.25_taxes or a net sum of $1,082.25. Her account, as shown by the corporation books, was then debited with the sum of $1,000 which represented the purchase price of ten shares of the preferred capital stock of the R. C. Robinson Securities Corporation of the par value of $100 per share and a balance unused of $82.50 appears as a credit balance in her favor. The stock, however, was issued by the corporation in the name of the defendant and not in the name of Lillie Happy. The District Attorney asserts that the stock was, in fact, her property. The defendant so concedes and the evidence conclusively establishes it to be the fact. There was subsequently paid to her by the corporation and she received and accepted on October 10, 1934, one dividend on the stock. Such was the status of her account on December 31, 1934, and of her security holdings so far as defendant and the corporation are concerned. To that point no irregular dealings by the corporation or by defendant with her money or property are charged. None appears in the evidence. The relations and dealings between defendant and Miss Happy were by her authorization and approval and entirely satisfactory to her.

The alleged larceny occurred later. On December 31, 1934, the assistant treasurer of the corporation, upon the request of defendant who represented that Miss Happy needed money, issued a check on its general account in the First National Bank of Ithaca to the order of defendant for $400, and on January 11, 1935, another check for $600, both of which checks defendant deposited in his own personal account at the same bank and the proceeds were used by him to pay his' own personal obligations, whereupon the assistant treasurer procured the stock certificate and canceled it on the books of the company. , ,

It is the position of the prosecution that the stock belonged to Miss Happy although not issued or registered in her name, that the money derived from the redemption of the stock by the corporation was her money and that defendant feloniously appropriated the same to his own use. On the merits, defendant asserts, first, that, at the most, only a relation of debtor and creditor existed between Miss Happy and himself and that the transaction furnished no basis for criminal prosecution against him; second, if there was any theft at all, it was from the corporation and not from Miss Happy, and, third, that he substituted and deposited with the corporation other securities as he had authority to do to replace the canceled stock. He urges that the indictment should have been dismissed but, if not, that substantial errors occurred on the trial which entitled him to a new trial.

Upon the conceded or undisputed facts, it seems to me that, if any money was stolen by defendant, it was not the money of Lillie Happy, but was the money of the corporation. It was and is the theory of the prosecution, as stated in the brief of the District Attorney, that the indictment taken as a whole charges larceny by a trustee of a specific item of property belonging to Miss Happy, to wit, the sum of $600. Concededly, defendant came rightfully into possession of her money in 1933 and subsequently rightfully invested and reinvested it for her in the Bankers Collateral bonds, in the Class A stock of the Bankers’ Industrial Investing Corporation and in the preferred capital stock of the R. C. Robinson Securities Corporation. The investments were first made by and carried on the books of the partnership and subsequently by, and on the books of, the latter corporation. When the R. C. Robinson Corporation was organized, her investment in the Bankers’ Industrial Investing Corporation Class A stock became a corporate account and the stock was carried in its portfolio as her stock. The money she gave Robinson in 1933 had lost its identity as her money long prior to the date of the alleged larceny. In September, 1934, the corporation had possession of the stock certificates indorsed by her in blank. When that stock was sold by the corporation, the check of the purchasers was made payable to the corporation, not to defendant, and the corporation collected the money on the check and deposited it in its general bank account. When the sale of those securities was closed and the moneys received, the corporation, not defendant, owed Miss Happy $1,082.25, the selling price of the stock. The obligation of defendant to Miss Happy, if any, arose not because he personally had any money of hers in his possession but on another basis entirely. He had no money belonging to her at that time in his possession. In the event of loss on investments, defendant was bound by the agreement between Miss Happy and himself to reimburse her to the extent thereof. Partially to satisfy its obligation, the corporation charged her on its books with $1,000 for the purchase price of ten shares of its own preferred capital stock. No money passed at any time from Miss Happy to the corporation. The corporation had in its possession no special fund earmarked as belonging to her. If any loss occurred for any reason whatsoever on account of that investment, the corporation may have been civilly liable. As between defendant and Miss Happy, defendant was liable only in a civil suit therefor, not on the basis of conversion but because of his guaranty to her against loss. When the corporation redeemed its own stock, its own checks on its own general account were issued and payment thereof was made out of its own general funds. Whether those checks were made payable to defendant or to any other person, its obligation to Miss Happy was not satisfied until she got the money. The corporation had definite notice that the stock belonged to her and acknowledged its debt to her. The account stood in her own name on its books. Out of it she had not authorized the corporation to pay any money to Robinson or to any one else. The payment of the $1,000 to Robinson did not satisfy the corporation debt to her, in whole or in part, no matter what representations Robinson made to the assistant treasurer to

induce Mm to issue the checks. The bank account out of wMch the checks were cashed in December, 1934, and January, 1935, respectively, contained thousands of dollars of money belonging to it and to numerous of its customers, mixed and not separately earmarked for anybody. But it did not contain one dollar of money belonging to Miss Happy -unless it was the balance of $82.25 to her credit on the corporation books, but even that had long since been mixed in the general corporation bank account with its other general funds and its identity had long since disappeared. What the corporation got for the stock it redeemed was a credit on Miss Happy’s account of $1,000, not cash in hand. Miss Happy had nothing to do with the issuance of the checks or with the money obtained when they were cashed. She knew nothing of the transaction. It was the money of the corporation wMch defendant procured on misrepresentations of fact and used for Ms own purposes and not the money of Miss Happy wMch he is charged m the indictment with having feloniously appropriated to his own use. If defendant was trustee as to that particular money for any one, it was for the corporation and it was the money of the corporation that he misappropriated. The motions of defendant to dismiss the rndictment on the ground that the People failed to prove the commission of the crime charged in the indictment should have been granted.

Nevertheless, if the refusal to dismiss the indictment on the above ground was not erroneous, numerous errors were committed on the trial of such gravity and so prejudicial to the rights of defendant that they cannot be overlooked.

The evidence is susceptible to no interpretation other than that Miss Happy turned over her money to defendant in 1933 to use and invest and reinvest as he saw fit. He had authority to invest it for her in the Collateral Bankers’ bonds, in the stock of the Bankers’ Industrial Investing Corporation and in the stock of the R. C. Robinson Securities Corporation, to use it whenever and however he saw fit in connection with any investment he might select, to substitute securities at will and generally to handle it in his sole discretion for her benefit. He guaranteed to reimburse her for any loss that might occur in such investments. She supervised or directed none of the investments. She said she had no thought that he stole any of her money and that she believed she had the right to hold him civilly for loss in investments and intended to hold him therefor in the event any loss occurred. Up to December, 1934, there is no evidence of any intent on his part to steal her money and nothing irregular is claimed in his dealings with it. All of that is from her own testimony. There is nothing to the contrary. Defendant testified to like effect. On the basis of the agreement made between Miss Happy and him, defendant claimed that any liability that existed against him arose only out of their relationship of debtor and creditor. He admitted that he owed her money in the event that loss occurred in the investments and was liable therefor on demand provided it should be held that he had not substituted and placed in the possession of the corporation securities in place óf the stock. No demand for the return of any money was proven or claimed to have been made. Additionally, it might again be noted that he was not directed to invest the fund in any specific security or keep the fund intact. In fact, the fund was turned over to him for general investment purposes and not to be supervised or controlled by Miss Happy. He had no duty to hold the money intact in specific currency. He was specifically not to do that. He was not required to keep an equivalent fund available at all times for her use. On all the facts it appropriately might be found that the deposit with him was general, not specific, and that the only relation that existed was that of debtor and creditor. If such were the situation and that relation existed, there could be do larceny, at least, unless the money was not returned upon demand. Although the issue could not be decided, on the record, as one of law, and the weight of evidence might indicate a trust relation between defendant and her or between defendant and the corporation, there was evidence to support defendant’s claim. It clearly raised an issue of fact sharply litigated from the beginning to the end of the trial and discussed in the summaries. Even though its weight was sufficient only to raise a reasonable doubt as to defendant’s guilt, that would have been sufficient to require defendant’s acquittal. The court, however, submitted no such claim or issue to the jury. Defendant then attempted to get the issue before the jury by requests to charge but without success, and refusal to submit the issue or to charge as requested, protected by exceptions, presents reversible error.

Defendant presented another defense which would have compelled an acquittal had the jury found the evidence sustained it. For that defense he relied mainly on his own testimony that, although he did take and use the cash received from the sale of Lillie Happy’s stock, he did so because it belonged to him, since he substituted for the stock sold two Starrett Investing Corporation bonds from his personal holdings as indicated by an appropriate notation made at the time on the records of the R. C. Robinson Securities Corporation. Defendant’s failure to produce the entries made was explained by the fact that some three years and a half prior to the trial an injunction proceeding was commenced by the Attorney-General in which a receiver was appointed who took possession of all of the books and effects of the corporation. Over defendant’s objection and exception, rebuttal testimony was allowed to be elicited by the District Attorney from two of defendant’s witnesses to the effect that the records of the R. C. Robinson Securities Corporation indicated ownership of all of the sixteen Starrett bonds found by the receiver among the effects of the corporation in persons other than Lillie Happy or the defendant. The records described as indicating the ownership of the bonds were not produced nor was any attempt made to explain the failure to do so. These witnesses were thus allowed to testify as to their opinions and conclusions on theVery question which the jury was to decide, viz., whether or not the defendant transferred certain bonds to Lillie Happy’s account as shown by a notation on the records of the corporation. This evidence also flagrantly offends against the best evidence rule, for, certainly, the records themselves were the best evidence of what they contained or indicated (3 Black. Comm. 368; Butler v. Mail & Express Publishing Co., 171 N. Y. 208, 211; Mahaney v. Carr, 175 N. Y. 454, 462; Trombley v. Seligman, 191 N. Y. 400, 403; Code Crim. Proc. § 392). Equally inadmissible, for the same reasons, was a record received in evidence as Exhibit 50 which purported to show the name, numbers and the names of the owners of the bonds found by the receiver when he took over. Concededly, this record was not a corporate record but was prepared by an assistant to the receiver at the request of the receiver subsequent to the defendant’s severing of his connections with the corporation from information purported to be contained in the books and records of the corporation which were not produced.

It is urged that no prejudice resulted from the admission of this evidence for the reason that one witness testified to the same facts from his own personal knowledge and recollection. A comprehensive search of the record has failed to reveal such testimony. On the contrary, it appears that all testimony concerning the ownership of the bonds was limited to what it was claimed the records showed. It is true that the bookkeeper, who was also an officer of the corporation, testified from personal knowledge as to certain transactions involving two Starrett bonds, but subsequently he denied any personal recollection as to the identity of the two bonds in question. It cannot be said that the erroneous admission of this evidence did not affect the substantial rights of the defendant. Conviction or acquittal depended on whether the jury believed the testimony of the defendant on a crucial point in the case and incompetent evidence was admitted to contradict him.

In reversing another conviction of this same defendant under a different indictment this court pointed out that questions concerning irregularities and other larcenies uncovered in an investigation into the defendant’s business affairs were incompetent and prejudicial (People v. Robinson, 273 N. Y. 438, 445). An exactly similar error is present in the record now before us. Here, the bookkeeper was allowed to testify, over the defendant’s objection and exception, that when he returned to the office after having been absent on a vacation for some time, he discovered that defendant’s accounts were short. No logical or evidentiary connection has been or can be shown between that larceny, if it was one, and the one for which the defendant was on trial. The evidence appears to have been admitted solely to prove the defendant’s propensity for irregularities and larcenies in the conduct of his business.

Many other errors are alleged upon this appeal. Some are so substantial as to merit serious consideration. However, without further considering them, it seems clear to me that the errors above discussed are so substantial and prejudicial that they cannot be overlooked and warrant a reversal of the judgment appealed from and the granting of a new trial, although I am personally of the opinion that, on the ground first above stated, the indictment should be dismissed and the defendant discharged.

Lehman, Ch. J., Loughran, Sears and Conway, JJ., concur with Lewis, J.; Rippey, J., dissents in opinion, in which Finch, J., concurs.

Judgment affirmed.