author: Thacher, J.

text:
    Manufacturers & Traders Trust Company, Appellant, v. Samuel Sapowitch, as Administrator of the Estate of George Simon (also Known as George Shuman), Deceased, et al., Defendants, and Fidelity and Casualty Company of New York et al., Interveners, Respondents.
    Argued November 19, 1946;
    decided February 27, 1947.

      Hugh McM. Buss, Laurence B. Goodyear and Francis J. Maloney for appellant.
    I. Plaintiff is, as a matter of law, a holder in due course of the bonds pledged by the borrower. (Murray v. Gardner, 2 Wall. [U. S.] 110; Knox v. Eden Musee Co., 148 N. Y. 441; Cheever v. Pittsburgh, Chenango & Lake Erie R. R. Co., 150 N. Y. 59; Goetz v. Bank of Kansas City, 119 U. S. 551; Springs v. Hanover Nat. Bank, 209 N. Y. 224; Carlisle v. Norris, 215 N. Y. 400; Second Nat. Bank of Morgantown v. Weston, 172 N. Y. 250; Manhattan Sav. Inst. v. New York Nat. Exch. Bank, 170 N. Y. 58; Wiese v. Corn Exch. Bank Trust Co., 240 App. Div. 198, 265 N. Y. 582; Dalton v. Hamilton Hotel Operating Co., 242 N. Y. 481; Hazzard v. Chase Nat. Bank of New York, 159 Misc. 57, 257 App. Div. 950, 282 N. Y. 652, 311 U. S. 708.) II. The evidence does not reveal any connection between the borrower’s role as a professional gambler and the defect in his title to the bonds. This connection must exist if a holder is to be affected by constructive notice. (Manhattan Sav. Inst. v. New York Nat. Exch. Bank, 170 N. Y. 58; Wilson v. Metropolitan Elevated Ry. Co., 120 N. Y. 145; Dutchess County Mut. Ins. Co. v. Hachfield, 73 N. Y. 226; Cowing v. Altman, 71 N. Y. 435; Birdsall v. Russell, 29 N. Y. 220; Second, Nat. Bank of Morgantown v. Weston, 172 N. Y. 250.) III. Plaintiff’s conduct was in conformity with ordinary banking customs and usages.

      Mark N. Turner and Cleveland Pond for respondents.
    I. There was a question of fact as to whether the plaintiff was a holder in due course of the bonds. (Sleeper v. Middlesworth, 4 Den. 431; Watts v. Malatesta, 262 N. Y. 80; Meech v. Stoner, 19 N. Y. 26; Chapin v. Austin, 165 Misc. 414; Benisch v. Mandelbaum, 160 App. Div. 206; Grace v. Corn Exch. Bank Trust Co., 287 N. Y. 94; Ward v. City Trust Co., 192 N. Y. 61; Bochester & Charlotte Turnpike Road Co. v. Paviour, 164 N. Y. 281; Kittredge v. Grannis, 244 N. Y. 168; Bank of United States v. Cooper-Bessemer Corp., 146 Misc. 20; Soma v. Handrulis, 277 N. Y. 223; Hoberg v. Sofranscy, 217 App. Div. 546.) II. The standard or test of good faith is peculiarly a question for the jury. (State Bank of Binghamton v. Bache, 162 Misc. 128; Hoberg v. Sofranscy, 217 App. Div. 546; Karpas v. Bandler, 218 App. Div. 418; New York Bankers, Inc., v. Duncan, 257 N. Y. 160; Harter v. Peoples Bank of Buffalo, 221 App. Div. 122; Neinken v. Brill, 251 App. Div. 730; United States Fidelity & Guaranty Co. v. Leon, 165 Misc. 549; Canajoharie Nat. Bank v. Diefendorf, 123 N. Y. 191.)
   Thacher, J.

This action wop brought by Manufacturers and Traders Trust Company of- Buffalo to foreclose a lien on six $1,000 negotiable bonds of the Narragansett Electric Company and twenty negotiable bonds of the same denomination of the City of Havre de Grace, Maryland, received by the trust company from George Shuman as collateral security for loans aggregating $22,600. Shuman was not a holder in due course of the'Narragansett bonds, which were in fact stolen from the firm of Drys-dale & Company, nor of the Havre de Grace bonds, which were stolen from the firm of Dominick & Dominick.

Pursuant to stipulation, issues were framed and tried by a jury, whose findings it was agreed should have the same effect as a general verdict. The questions framed and submitted to the jury were all answered in the negative. They read as follows : 1. Did the Plaintiff act in good faith in accepting from George Shuman the six Narragansett Bonds as collateral security for a loan of $4400.00 on June 6,1941?

2. Did the Plaintiff act in good faith in making a further loan in the sum of $1600.00 on July 30,1941, on the Narragansett Bonds pledged by Shuman on June 6, 1941?
3. Did the Plaintiff act in good faith in accepting ten Havre de Grace Bonds as collateral security for an additional loan to George Shuman of $7000.00 on September 10, 1941?
“ 4. Did the Plaintiff act in good faith in accepting ten additional Havre de Grace Bonds as collateral security for an additional loan of $7000.00 to George Shuman on September 20, 1941? ”

This verdict was set aside. The jury was directed to answer each of the questions in the affirmative and the verdict was recorded accordingly. Judgment followed foreclosing plaintiff’s lien upon the bonds. The Appellate Division reversed this judgment, reinstated the verdict and directed judgment for the intervening defendants, who had insured the two firms against theft of the bonds. Defendants ’ only claim is that plaintiff did not take the bonds in good faith and had notice.of the defect in Shuman’s title. There is no suggestion that the plaintiff had knowledge that the bonds were stolen, and the controlling question is whether facts of such a character were known to its officers that a jury might find that they accepted the bonds in had faith, although without actual knowledge that they had been stolen from the rightful owners. (Negotiable Instruments Law, § 95.)

The requirement of the statute is good faith, and had faith is not mere carelessness. It is nothing less than guilty knowledge or willful ignorance. (Kittredge v. Grannis, 244 N. Y. 168, 178-179; Cheever v. Pittsburgh, 8. & L. E. R. R. Co., 150 N. Y. 59, 65-66; Chapman v. Rose, 56 N. Y. 137,140.) There is no claim of guilty knowledge in this case; at most it is argued that the knowledge of two of the officers that Shuman in 1930 and 1931 was the proprietor of a sumptuous night club where, during the period of national prohibition, patrons were furnished with fine food, wines and liquors and high-class entertainment and were in addition given access to a gambling establishment on an upper floor, was a fact which in ihe absence of further inquiry made the acceptance from him of negotiable bonds as collateral for loans in 1941 an act of had faith.

The case most heavily relied upon by respondents is Canajoharie Nat. Bank v. Diefendorf (123 N. Y. 191) where, as this court declared in American Exchange Nat. Bank v. New York Betting & Packing Co. (148 N. Y. 698, 706) the circumstances attending the transaction of the purchase were deemed to be so strange and unusual, that it could not he said, as matter of law, that the note had been acquired in good faith. These circumstances indicated connivance at the wrong or at least a willful ignorance lest the wrong be discovered. One of the circumstances upon which this conclusion was predicated was the purchase of the notes at excessive and usurious discounts, so excessive, indeed, as to warrant the inference of bad faith (Second Nat. Bank of Morgantown v. Weston, 172 N. Y. 250, 257), and that was but a part of the strange and unusual transaction.

One who purchases commercial paper for full value before maturity, without notice of any equities between the original parties, or of any defect of title, is to be deemed a bona fide holder. He is not bound at his peril to be upon the alert for circumstances which might possibly excite the suspicions of wary vigilance. He does not owe to the party who puts negotiable paper afloat the duty of active inquiry, to avert the imputation of bad faith. The rights of the holder are to be determined by the simple test of honesty and good faith, and not by speculations in regard to the'purchaser’s diligence or negligence (Magee v. Badger, 34 N. Y. 247, 249). These principles have often been restated in varying forms and have never been questioned in the decisions of this court (Soma v. Handrulis, 277 N. Y. 223, 233; New York Bankers, Inc., v. Duncan, 257 N. Y. 160, 165; Kittredge v. Grannis, supra; Kittredge v. Grannis, 236 N. Y. 375, 388-389; Second Nat. Bank of Morgantown v. Weston, supra, pp. 254-255; Second Nat. Bank of Elmira v. Weston, 161 N. Y. 520; Cheever v. Pittsburgh, S. & L. E. R. R. Co., supra; Knox v. Eden Musee Americain Co., 148 N. Y. 441, 454; American Exchange Nat. Bank v. New York Belting & Packing Co., supra, pp. 704, 706; Joy v. Diefendorf, 130 N. Y. 6). Nor are the rights of a purchaser to "be affected by constructive notice, unless it clearly appear that the inquiry suggested by the facts disclosed at the time of the purchase would if fairly pursued result in the discovery of the defect existing but hidden at the time (Birdsall v. Russell, 29 N. Y. 220, 250).

Thus in the case at bar the knowledge that the maker, of the note had ten years before been engaged in operating a gambling establishment at the most would suggest inquiry as to whether he had received the bonds in payment of a gambling debt. That was not the fact; all parties agreed that the bonds were stolen. The essential connection between the prompting facts and the defect of title was absent in this case (Manhattan Sav. Inst. v. New York Nat. Exch. Bank, 170 N. Y. 58, 68).

In other States the prevailing rule appears to be that the mere fact that the borrower is a gambler is not, standing alone, sufficient to impugn the good faith of a bank which accepts from him a negotiable instrument paying fair value. (Mitchell v Catchings, 23 F. 710; Wilson v. National Fowler Bank, 47 Ind. App. 689.) In Standard Acceptance Corp. v. Chapin (277 Mass. 278) it was held that information that the seller of a negotiable instrument is unscrupulous and has been concerned in shady or illegal transactions is not enough of itself to render the purchaser from him one who does not take in due course. Thus the purchase of negotiable paper from those engaged in the illegal sale of liquor is hot in itself an act of bad faith, nor is the purchaser bound to inquire as to the consideration given for the note (Estabrook v. Boyle, 1 Allen [Mass.] 412; Bottomley v. Goldsmith, 36 Mich. 27).

We find in the record of this case no evidence of the plaintiff’s bad faith in accepting the bonds from Shuman as collateral security for loans at the usual rate of interest and without discount. Accordingly, the jury’s determination of the question submitted was without evidence to support it and this determination was properly set aside.

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

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

Judgment accordingly. [See 296 N. Y. 998.]


source: Caselaw Access Project

author:
      Per Curiam.
     Desmond, J.

license: Public Domain

text:
    The People of the State of New York ex rel. Joseph Rao and Michael Coppola, Appellants, v. William A. Adams, as Warden of City Prison of the City of New York, Respondent.
    Argued February 17, 1947;
    decided February 28, 1947.

      Gilbert Goldstein and David Goldstein for appellants.
    I. No proof was adduced before the Court of General Sessions to warrant the issuance of the orders of commitment. (People ex rel. Livingston v. Wyatt, 186 N. Y. 383; People v. Smith, 266 App. Div. 57; Matter of Blum, 9 Misc. 571; United States v. McCunn, 40 F. 2d 295; United States v. Gokey, 32 F. 2d 793; People v. John Doe [Bernoff], 261 App. Div. 504; People ex rel. Ditchik v. Sheriff of Kings County, 256 App. Div. 1081; People ex rel. Maloney v. Sheriff, 117 Misc. 421; People ex rel. Tweed v. Liscomb, 60 N. Y. 559.) II. A construction of section 618-b of the Code of Criminal Procedure contended for by the People to permit the taking of proof ex parte in the absence of relators, would deprive them of a “ hearing ” under the statute and would constitute a deprivation of liberty without due process of law. (People v. Nisonoff, 293 N. Y. 597; Matter of Lyons v.
      Goldstein, 290 N. Y. 19; People v. Henriques & Co., 267 N. Y. 398; People ex rel. Morriale v. Branham, 291 N. Y. 312; People ex rel. Barone v. Fox, 202 N. Y. 616; Carter v: Kubler, 320 U. S. 243; Market Street Ry. Co. v. Commission, 324 U. S. 548; United States v. Hillman, 146 F. 2d 572.) III. The bail of $250,000 fixed for each of the relators is excessive, and they have already been imprisoned for an unreasonable length of time. (People ex rel. Lobell v. McDonnell, 296 N. Y. 109; People ex rel. Tweed v. Liscomb, 60 N. Y. 559; Matter of Prestigiacomo, 234 App. Div. 300.)

      Frank S. Hogan, District Attorney (Whitman Knapp, Bichard G. Denser, Eugene A. Leiman and Harold Boland Shapiro of counsel), for respondent.
    I. The Appellate Division properly sustained the finding that the relators were material witnesses in the investigation. Since a judge of the Court of General Sessions has jurisdiction to commit witnesses pursuant to section 618-b of the Code of Criminal Procedure, the factual determinations upon which his orders of commitment are based may not' be' reviewed in a habeas corpus proceeding. (Matter of Morhous v. New York Supreme Court, 293 N. Y. 131; People ex rel. Carr v. Martin, 286 N. Y. 27; People ex rel. Tweed v. Liscomb, 60 N. Y. 559; Henry v. Henkel, 235 U. S. 219; People ex rel. Scharff v. Frost, 198 N. Y. 110; People ex rel. Bailey v. McCann, 222 App. Div. 465; People ex rel. Conway v. Warden, 180 App. Div. 336; Matter of Hogan v. Court of General Sessions, 296 N. Y. 1; People ex rel. McCabe v. Superintendent, 8 Abb. Prac. [N. S.] 112; People ex rel. Edwards v. Superintendent, 235 N. Y. 398; People v. Nitsberg, 289 N. Y. 523.) II. The orders of commitment would have been properly sustained even if they had been subject to review in this proceeding. (People ex rel. Ditchik v. Sheriff of County of Kings, 171 Misc. 248, 256 App. Div. 1081; People ex rel. La Tempa v. Hughes, 182 Misc. 1078; People ex rel. Nuccio v. Warden, 8th District Prison, 182 Misc. 654; People v. John Doe [Bernoff], 261 App. Div. 504; People ex rel. Tweed v. Liscomb, 60 N. Y. 559.) III. The Appellate Division properly restored the amount of bail fixed in the Court of General Sessions. (People ex rel. Bothensies v. Searles, 229 App. Div. 603; People ex rel. Lobell v. McDonnell 296 N. Y. 109; People ex rel.

      Shapiro v. Keeper of City Prison, 290 N. Y. 393; People ex rel. Delis v. Warden, 260 App. Div. 155; People v. Acherson, 166 Misc. 130; People of the State of New York v. Tweed, 63 N. Y. 202.)
   Per Curiam.

By resort to a writ of habeas corpus, a relator, be he defendant or witness, is entitled to the constitutional protection against being held °unreasonably or in excessive bail. (N. Y. Const., art. I, § 5.) Belief will be granted, however, only to prevent invasion of constitutional right, not because of difference of opinion as to the amount fixed.

In view of the facts here presented — for instance, the seriousness of the crime under investigation, murder; the character, reputation, background and extensive criminal records of relators; their relationship to others against whom they may be called to testify; the possibility of flight to avoid giving testimony; the difficulty, if not impossibility, of procuring their return if they do leave the State — in view, we say, of those facts among others, there was sufficient before the Judge of the Court of General Sessions to permit him, in the exercise of discretion, to fix the bail at $250,000 (Code Crim. Pro., § 618-b). While it is urged that such amount is high, it may not properly be said — on the record before us — that it was excessive as "matter of law. (See People ex rel. Rothensies v. Searles, 229 App. Div. 603.) People ex rel. Lobell v. McDonnell (296 N. Y. 109), neither supports nor suggests a contrary view. As we there indicated, the reasonableness of bail in any case depends upon examination of the particular record. Evidence such as was here adduced was not there furnished.

Order affirmed, without costs, but without prejudice to the institution of any proceedings wherein relators may raise the question of undue or prolonged detention. That matter was pressed upon us by relators upon this appeal, but the People are entitled to an opportunity to submit evidence bearing on that issue.

Desmond, J.

(dissenting). “ Excessive bail shall not be required * * * nor shall witnesses be unreasonably detained ” (N. Y. Const., art. I, § 5).

Each of these relators has been held in jail for three months, in default of $250,000 bail, as a “ material witness under section 618-1) of the Code of Criminal Procedure. The fixing of the bail at that extraordinary figure was made at a hearing in the Court of General Sessions. At that hearing there was a prima facie showing that each relator was “ a necessary and material witness for the people in a criminal action ”. There was nothing in the record of that hearing, however, to form a basis for the exaction of bail of a quarter of a million dollars, for each relator. If that bail be reasonable on this bare showing, then equal justification exists for requiring a million dollars, or any multiple thereof. Such an arbitrary determination was held illegal in People ex rel. Lobell v. McDonnell (296 N. Y. 109), where the relator had been indicted for numerous felonies involving large sums. It was no less illegal here, where relators, being prospective witnesses only, not indicted or convicted, had an ábsolute right to be released on their undertaking to appear when the case should be called. If there be no limit to the bail, then a bond prohibitive in amount may always be demanded of a witness. In other words, section 618-b may be used simply to keep a witness locked up. Nothing in the language or history of the statute permits such a use of it. When, as here, there is besides the imposition of prohibitive bail, a subsequent detention for a long period, we have the very situation against which the State Constitution has set a positive ban. These relators, like all other citizens, are entitled to the protection of the Constitution.

The order below should be reversed, without costs, and the case remitted to the Special Term to hold a hearing at which there shall first be determined whether continued detention of the relators, or either of them, is legal, and then, if that first question be answered affirmatively, reasonable bail shall be ordered.

Lewis, Conway, Thachee and Fuld, JJ., concur in Per Curiam opinion; Desmond, J., dissents in memorandum in which Loughban, Ch. J., concurs; Dye, J., taking no part.

Order affirmed, etc.


author: Desmoíto, J.

text:
    The People of the State of New York, Respondent, v. Joseph Wolosky, Appellant.
    Argued January 9, 1947;
    decided February 28, 1947.

      Joseph Aronstein for appellant.
    I. Evidence adduced’at the trial was insufficient to establish defendant’s guilt beyond a reasonable doubt of knowingly, willfully and unlawfully possessing policy numbers written on the marble slab. (People v. Leon, 262 N. Y. 664; People v. Razezicz, 206 N. Y. 249; People v. Fitzgerald, 156 N. Y. 253; People v. Woltering, 275 N. Y. 51; People v. Richardson, 287 N. Y. 563; People v. Silverman, 264 App. Div. 758.) II. The trial court erred in the admission of the marble slab in evidence.

      Frank S. Hogan, District Attorney, New York County (Edward T. Perry and Richard Q. Denzer of counsel), for respondent.
    The guilt of defendant was established beyond a reasonable doubt.
   Desmoíto, J.

The information in this criminal cause charges that defendant, in violation of section 974 of the Penal Law, ‘ ‘ did knowingly, wilfully and unlawfully have in his possession written on a marble slab at hallway of premises 161 Rivington Street in the County of New York, City and State of New York, 300 numbers, said slips or papers representing and being bets or records of chances, shares and interests in numbers sold, drawn and selected, and to be drawn and selected, and in what is commonly called policy, or being papers, writings or articles of a kind commonly used in carrying on or playing the game commonly called policy.” „

The evidence at the trial was given by a police officer who saw defendant standing, for about ten minutes, in the hallway of the apartment building at 161 Rivington Street. During that period several persons approached defendant and each such person talked with defendant and handed something to him. On each such occasion defendant took out a pencil and made motions as if writing on the wall. The police officer then arrested and searched defendant. On his person was found some $60 in bills and coin, but no policy slips. On a marble slab affixed to the wall, at about the point where the. officer had seen defendant applying his pencil, there were found written .in pencil many names and numbers. The officer removed the slab from the wall, brought it into court and testified, as an expert, that the inscriptions referred to policy wagers or plays. The building was occupied but the officer was unable to state whether defendant was the owner of, or a tenant in. the building, or had any control or management of it. Defendant’s counfeel moved to dismiss the information on the ground that there was no proof of possession by defendant of the slab, on which the names and numbers appeared. Defendant was, however, found guilty as charged.

Section 974 of the Penal Law contains a single, long, involved sentence, the meaning of which was simply stated, in People v. Hines (284 N. Y. 93, 104, 105) as follows: 11 Section 974 prohibits one from keeping an establishment for policy playing, from delivering or receiving money by playing policy, or possessing policy slips, or other articles used in carrying on policy, or owning or being the agent or janitor of any establishment where lottery policies are sold.” Thus, four kinds of activities having to do with policy are forbidden: maintaining a place wherein to play it, having ownership or control of such a place, handling the money involved, or possessing papers, writings or articles commonly used in carrying on this form of gambling. The charge here was of possessing the slab on which were the legends. The’proof was that defendant put the marks on the slab. The question of law is whether “ possession ” was proven.

In 1901 (see chapter 190 of the laws of that year) the then Penal Code was amended, in an effort to prevent policy playing, by the addition of three new sections, two of which, practically unchanged since then, have since become' sections 974 and 975 of the Penal Law. The scheme of law enforcement therein provided is a drastic one. Section 974 makes it a misdemeanor to possess policy slips or similar articles and section 975 makes the mere possession thereof presumptive evidence that such possession is knowing and in violation of section 974. Throughout the two sections the word “ possession ” is used many times. Since mere “ possession ”, without more, is made a criminal offense, it is of course essential that defendant’s “ possession ” be conclusively shown (see People v. Leon, 262 N. Y. 664; People v. Rosen, 294 N. Y. 761, 762). The import of the pertinent part of section.974 is plain enough. It penalizes the mere having on one’s person, or under one’s control, of certain kinds of personal property commonly employed in this particular kind of gambling (see People v. Adams, 176 N. Y. 351, 360). The Supreme Court has warned us that “ there is no word more ambiguous in its meaning than Possession ” and that the word is interchangeably used to describe actual possession and constructive possession which often so shade into one another that it is difficult to say where one ends and the other begins ” (National Safe Deposit Co. v. Illinois, 232 U. S. 58, 67). But this defendant, so far as the record shows, had no title or right to the place where he carried on his trade, no ownership, custody or control. However ambiguous the word “ possession ” may be, it still, at least in a criminal statute, means something more than making marks on another man’s wall. If we are to deal with realities and not appearances, with substance rather than form (see People ex rel. Briggs v. Hanley, 226 N. Y. 453, 458) we must say that defendant was a mere trespasser in the hallway, in “ possession ” of nothing. We consider that section 974, when it speaks of “ possession ”, means possession in fact, physical possession, actual custody or control of articles of personal property capable of being physically held.

The judgments should be reversed, the fine remitted and the information dismissed.

Loughran, Ch. J., Lewis, Thaoher, Dye and Fuld, JJ., concur; Conway, J., taking no part.

Judgments reversed, etc.


author: Per Curiam.

text:
    In the Matter of Restaurants & Patisseries Longchamps, Inc., et al., Respondents, against John F. O’Connell et al., Constituting the State Liquor Authority, Appellants.
    Argued February 17, 1947;
    decided February 28, 1947.

      Alvin McKinley Sylvester for appellants.
    The appeal was properly taken by order of the Appellate Division which certified that in its opinion a question of law was involved which should be decided by the Court of Appeals. Since the order appealed from did not direct a new hearing on the merits, the appellants could not. appeal as of right by stipulation for order absolute. Moreover, all of the charges having been sustained, such a stipulation, even if authorized, would be contrary to public policy. (Matter of Bolani v. O’Connell, 271 App. Div. 850; Friedman v. Friedman, 240 N. Y. 608; Conger v. Conger, 77 N. Y. 432; Matter of Decker v. Story, 259 N. Y. 580; People ex rel. Judson v. Thacker, 55 N. Y. 525.)

      J. Bertram Wegman, I. Maurice Wormser, Jesse Moss, Myron L. Shapiro and Robert J. Fitzsimmons for respondents.
    The Appellate Division had no power to grant leave to appeal in a case such as this where an appeal lies as of right. (Mundt v. Glokner, 160 N. Y. 571; N. Y. C. & H. R. R. R. Co. v. State of New York, 166 N. Y. 286; Lordi v. People’s Surety Co., 143 App. Div. 477; Smith v. Furst, 188 App. Div. 892; Carroll v. City of Yonkers, 194 App. Div. 974; Flagg v. Moses, 222 App. Div. 821; Gross & Son v. State of New York, 243 N. Y. 629; Brandorff v. Rogers, 201 App. Div. 885; Matter of Weinstein v. Board of Regents, 292 N. Y. 589; Matter of Epstein v. Board of Regents, 295 N. Y. 154; Matter of Colonial Liquor Distributors v. O’Connell, 295 N. Y. 129; Matter of Begent v. Noyes, 284 N. Y. 229.)
   Per Curiam.

Petitioners’ restaurant liquor licenses and warehouse permit were cancelled by the State Liquor Authority following a hearing on charges that petitioners had been guilty of violations of the Alcoholic Beverage Control Law. In a proceeding brought to review that determination, the Appellate Division, though sustaining the charges, annulled the determination and remitted the proceeding to the Liquor Authority to receive certain additional evidence, excluded at the hearing, which, in the opinion of the Appellate Division, was relevant ‘6 in mitigation of the ofíense and in consideration of the penalty to be imposed.” The Liquor Authority has appealed to this court by permission of the Appellate Division, without filing a stipulation for order absolute.

The appeal must be dismissed. Though the new hearing ordered by the Appellate Division was limited to the issue of the penalty to be imposed, its order was nonetheless an order granting a new hearing from which an appeal lies only upon the filing of a stipulation for order absolute, as provided in the Constitution (N. Y. Const., art. VI, § 7) and in the Civil Practice Act (§ 588, subd. 3). (Cf. Mundt v. Glokner, 160 N. Y. 571; Flagg v. Moses, 248 N. Y. 509; Morris v. Gardner, 282 N. Y. 712; Matter of Schoenewerg, 277 N. Y. 424, 427; Elder v. New York & Pennsylvania Motor Express, Inc., 284 N. Y. 350; Matter of Epstein v. Board of Regents, 295 N. Y. 154.)

Motion to dismiss appeal granted and appeal dismissed, with costs and $10 costs of motion.


text:
    In the Matter of Harris Motors, Inc., et al., Appellants, against William Klapp, a City Magistrate of the City of New York, Presiding in the War Emergency Court of the Borough of Manhattan, et al., Respondents.
    Argued January 14, 1947;
    decided February 28, 1947.

      Abraham Kaplan for appellants.
    The Local Law in question (Local Laws, 1945, No. 34 of City of New York) having expired, any proceedings thereunder are without or in excess of the jurisdiction of the Magistrate. The order appealed from should be reversed and the applicatom of petitioners granted.

      John J. Bennett, Corporation Counsel (Joseph J. Lucchi, Seymour B. Quel and Daniel Rosen of counsel), for respondents.
    Local Law No. 34 of 1945 evidences a clear legislative intent that it shall apply to violations of any Federal regulation, relating to price, rationing and rent control programs, which “ has been or may hereafter be prescribed ” under authority of any acts of Congress. The offense charged against petitioners occurred on August 5,1946, when Federal price control regulations were in force and hence the War Emergency Court of the City Magistrates’ Courts is vested, with jurisdiction of the charge. (People v. Lewis, 295 N. Y. 42; People ex rel. Gross v. Adams, 270 App. Div. 607, 296 N. Y. 604; Matter of Meyer, 209 N. Y. 386; People ex rel. Wood v. Lacombe, 99 N. Y. 43; Westchester County S. P. C. A. v. Mengel, 292 N. Y. 121; People v. Mailman, 182 Misc. 870, 293 N. Y. 887; Transit Commission v. Long Island R. R. Co., 272 N. Y. 27; People v. Fire Association of Phila., 92 N. Y. 311; United States v. Curtiss-Wright Corp., 299 U. S. 304.)

      Samuel Mermin, William E. Remy, David London and Kenneth V. Fisher for The Temporary Controls Administrator of the Office of Price Administration, as amicus curia, in support of respondents ’ position.
    Local Law No. 34 was in full force and effect on August 5, 1946, the date of the ceiling price violation in this case. (Posadas v. National City Bank, 296 U. S. 497; People v. Mailman, 182 Misc. 870, 293 N. Y. 887; Transit Commission v. Long Island R. R. Co., 248 App. Div. 749, 272 N. Y. 27.)
   Per Curiam.

Petitioners have pleaded not guilty to a complaint filed in the War Emergency Court of the Magistrates’ Courts of the City of New York charging them with having violated section U41-4.0 of the Administrative Code of the City of New York in that on August 5, 1946, they offered for sale, sold and delivered a motor vehicle at a price in excess of the ceiling price of such car as fixed by the Office of Price Administration. In this proceeding to obtain an order in the nature of prohibition against the War Emergency Court, petitioners urge that Local Law No. 34 of the Laws of 1945, which enacted the section of the Administrative Code of the City of New York which they are charged with having violated, had expired on June 30, 1946, and was not in effect on .the day the offense was alleged to' have been committed. This question turned upon a construction of the local law. In our view, the Magistrate was not without jurisdiction to determine that question and to dismiss the proceeding or proceed with the trial accordingly. The .aggrieved party by the ordinary process of appeal may secure adequate relief from error, if such error should develop (cf. People ex rel. Hummel v. Trial Term, 184 N. Y. 30; People ex rel. Ballin v. Smith, 184 N. Y. 96). Solely on the ground that an order in the nature of prohibition is not available to petitioners, the determination of the courts below denying the application is affirmed.

Order affirmed, with costs.

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

Order affirmed.


text:
    In the Matter of the Accounting of Syracuse Trust Company, as Trustee under the Will of Frank E. Wade, Deceased, Respondent. Margaret S. Wade et al., Appellants.
    Argued November 12, 1946;
    decided February 28, 1947.

      James N. Vaughan for Margaret S. Wade, appellant.
    I. The agreement to “ reduce ” the $500,000 trust under article seventh of the will to $400,000 was void as agáinst public policy. (Matter of Wentworth, 190 App. Div. 829, 230 N. Y. 176; Personal Property Law, § 15; Real Property Law, §§ 103, 105; Genet v. Hunt, 113 N. Y. 158; Wood v. Wood, 5 Paige 596; Matter of Kistler, 167 Misc. 528; Dale v. Guaranty Trust Co., 168 App. Div. 601; Stringer v. Young, 191 N. Y. 157; Matter of Sullard, 247 App. Div. 761; Matter of Benn, 177 Misc. 195; Seely v. Fletcher, 63 Misc. 448; Douglas v. Cruger, 80 N. Y. 15; Cuthbert v. Chauvet, 136 N. Y. 326.) II. Investment in 1937 in railroad bonds which did not meet the test contained in subdivision 7 of section 235 (formerly § 239) of the Banking Law were investments in nonlegal securities notwithstanding the fact that such bonds could and did meet the test contained in subdivision 7-a of that law as it existed in 1937. (L. 1938, chs. 352, 356; Hassett v. Welch, 303 U. S. 303; Baldwin v. Standard Accident Ins. Co., 144 Misc. 53, 237 App. Div. 334, 262 N. Y. 575; People ex rel. Sheldon v. Board of Appeals, 234 N. Y. 484; People ex rel. West F. I. Co. v. Davenport, 91 N. Y. 574.) III. The allowances awarded in the Surrogate’s Court to the referee and special guardian were excessive.

      Raymond O. Campbell, special guardian, appellant.
    I. Neither the parties nor the court could lawfully reduce the corpus of the trust from $500,000 to $400,000. (Matter of Lyons, 271 N. Y. 204; Dreyer v. Reisman, 202 N. Y. 476; Matter of Kistler, 167 Misc. 528.) II The allowances to the referee and special guardian were entirely warranted and proper.

      Francis P. Maloney, Willis H. Michell and Gustav P. Blaustein for respondent.
    I. The 1937 decree of the Surrogate’s Court was conclusive on all the parties herein and may not be the subject of collateral attack. (Herring v. N. Y. L. E. & W. R. R. Co., 105 N. Y. 340; Crouse v. McVickar, 207 N. Y. 213; Mater of Malloy, 278 N. Y. 429; Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304; Vogel v. Edwards, 283 N. Y. 118.) II. The ágreement of all interested parties, followed by the 1937 decree made in conformity therewith, was not in contravention of Personal Property Law, section 15, or Real Property Law, sections 103, 105, and void as against public policy as constituting a partial destruction of'the trust. (Matter of Rogers, 153 N. Y. 316; Matter of Kohler, 231 N. Y. 353; Matter of Rutherfurd, 196 N. Y. 311; Matter of Stanfield, 135 N. Y. 292; Wheeler v. Ruthven, 74 N. Y. 428; Matter of Lindgren, 293 N. Y. 18; Matter of O’Keeffe, 167 Misc. 148.) III. All railroad securities involved were “ legáis ” and the appellants having stipulated that the' trustee was not negligent in the acquisition, retention or disposition if such securities were legáis ”, the objections thereto cannot be sustained. (Mills v. Bluestein, 275 N. Y. 317; Matter of Smith, 279 N. Y. 479.)
   Per Curiam.

Though the compromise agreement of January 7,1937, was made in violation of section 15 of the Personal Property Law and section 103 of the Real Property Law, the Surrogate’s decree of January 14, 1937, approving that agreement was nevertheless a conclusive adjudication of the validity thereof. The decree of January 14, 1937, was consented to by all parties in interest and no appeal therefrom was ever taken. Hence that decree was not open to the collateral attack that was made upon it by the appellants in this independent proceeding. (See Crouse v. McVickar, 207 N. Y. 213, 217; Schacht v. Schacht, 295 N. Y. 439; 1 Freeman on Judgments [5th ed.], § 357.) Douglas v. Cruger (80 N. Y. 15) is not authority for a contrary view. The determination that was under attack in the Douglas case was an order which had none of the attributes of a final adjudication. The relevant distinction is pointed out in Bannon v. Bannon (270 N. Y. 484). (See 2 Freeman on Judgments [5th ed.], § 667.)

We think the Appellate Division was right in its refusal to surcharge the trustee for the losses that resulted from the acquisition or retention of the railroad bonds in question.

The challenge to the allowances that were awarded to the referee and to the special guardian does not present any question of law.

The order should be affirmed, with costs to the respondent, payable out of the estate.

Loughran, Oh. J., Conway, Desmond, Thaoher, Dye and Fuld, JJ., concur; Lewis, J., taking no park

Order affirmed.


author: Fuld, J.

text:
    Coleman F. Madden, Appellant, v. Queens County Jockey Club, Inc., Respondent.
    Argued January 9, 1947;
    decided April 17, 1947.

      Raphael H. Weissman for appellant.
    I. The license to conduct horse racing is a license or franchise to perform a public or quasi public purpose. (People v. Holstein-Friesian Assn., 41 Hun 439; People ex rel. Burnham v. Flynn, 189 N. Y. 180; Woollcott v. Shubert, 217 N. Y. 212; Corrigan v. Coney Island Jockey Club, 2 Misc. 512; Crannan v. Westchester Racing Assn., 16 App. Div. 8, 153 N. Y. 449; People ex rel. Empire City Trotting Club v. State Racing Comm., 120 App. Div. 484, 190 N. Y. 31.) II. The license to conduct pari-mutuel betting rendered defendant an administrative agent of the State in the execution of the law. (Aliano v. Westchester Racing Assn., 265 App. Div. 225.) III. As licensee to perform a public or quasi public purpose and as administrative agent under the PariMutuel Law, defendant was under like obligation as the State to accord plaintiff equal accommodation as an aspect of the constitutional guarantee of equal protection of the laws. (Nixon v. Condon, 286 U. S. 73; Kerr v. Enoch Pratt Free Library of Baltimore City, 149 F. 2d 212.) IV. Founded upon the constitutional guarantee of equal protection of the laws, plaintiff’s right of equal accommodation requires no statutory sanction and, therefore, it does not derogate from the plaintiff’s right that the Legislature has not seen fit to provide, as to race courses, that the public be admitted without discrimination. (Boyce v. Greeley Square Hotel Co., 228 N. Y. 106; Morningstar v. Lafayette Hotel Co., 211 N. Y. 465; Matter of Doyle, 257 N. Y. 244; Northern Securities Co. v. United States, 193 U. S. 197.)

      Conrad Saxe Keyes, Cyrus S. Jullien and Joseph B. Cavallaro for respondent.
    I. The complaint fails to state facts sufficient to constitute a cause of action. Failure to allege that the plaintiff was excluded by reason of race, creed or color renders the complaint insufficient. Plaintiff has no legal right or privilege of attending the races or participating in pari-mutuel betting at the race track of the defendant. II. The proprietor of a place of amusement, in the absence of legislation to the contrary, has a right to exclude any person from such place of amusement provided he does not discriminate upon the grounds of race, creed or color. (Madden v. Queens County Jockey Club, Inc., 175 Misc. 522; Grannan v. Westchester Racing Assn., 153 N. Y. 449; Aaron v. Ward, 203 N. Y. 351; Woollcott v. Shubert, 217 N. Y. 212; Collister v. Hayman, 183 N. Y. 250; People ex rel. Burnham v. Flynn, 189 N. Y. 180.) III. The common-law right of exclusion from places of amusement continues until changed by specific legislation. (Christie v. 46th St. Theatre Corp., 265 App. Div. 255, 292 N. Y. 520.) IV. No limitation of the right of race tracks to exclude has been enacted. V. There is a common-law right to exclude in the absence of restrictive legislation. (Western Turf Association v. Greenberg, 204. U. S. 359; Marfone v. Washington Jockey Club, 227 U. S. 633; Levine v. Brooklyn National League Baseball Club, 179 Misc. 22; Mandel v. Brooklyn National League Baseball Club, 179 Misc. 27.) VI. A race track is not a public utility. (Buder v. First National Bank, 16 F. 2d 990; Pulitzer Pub. Co.
      v. Federal Communications Commission, 94 F. 2d 249; Davies Warehouse Co. v. Brown, 137 F. 2d 201; Bradley v. Degnan Construction Co., 224 N. Y. 60; People v. Budd, 117 N. Y. 1.) VII. Licenses are not franchises. (Lord v. Equitable Life Assuranee Society, 194 N. Y. 212; Trustees of Southampton v. Jessup, 162 N. Y. 122; Eighth Ave. Coach Corp. v. City of New York, 286 N. Y. 84; People v. O’Brien, 111 N. Y. 1.) VIII. The PariMutuel Law does not create a public utility. (Chopin v. Austin, 165 Misc. 414; Corrigan v. Coney Island Jockey Club, 2 Misc. 512.) IX. There is no standard for the limitation of the right of defendant to exclude. (Aaron v. Ward, 203 N. Y. 351; Frost v. Pinkerton, 61 App. Div. 566.)

      Martin A. Schenck, Harold C. McCollom and Kenneth W. Greenawalt for Westchester Racing Association, The Sara-toga Association, Metropolitan Jockey Club and Empire City Racing Association, amici curice, in support of respondent’s position.
    I. The complaint is insufficient and was properly dismissed. (Harbison v. Propper, 112 Misc. 588; Marrone v. Washington Jockey Club, 227 U. S. 633; Corrigan v. Coney Island Jockey Club, 2 Misc. 512; Gerdes v. Reynolds, 281 N. Y. 180; Weinberger v. Quinn, 264 App. Div. 405; Davis v. Cohn, 260 App. Div. 624; Lifshutz v. Adams, 285 N. Y. 180; Kalmanash v. Smith, 291 N. Y. 142; Oshrin v. Celanese Corporation of America, 291 N. Y. 170; Reed v. Littleton, 275 N. Y. 150; Schieffelin v. Komfort, 212 N. Y. 520.) II. The Pari-Mutuel Law emphasizes the importance of defendant’s right to exclude without expressing a reason. (People ex rel. Lichtenstein v. Langan, 196 N. Y. 260; People v. Carpenito, 292 N. Y. 498; atts v. Malatesta, 262 N. Y. 80; Bamman v. Erickson, 288 N. Y. 133; Hofferman v. Simmons, 290 N. Y. 449; Aliano v. Westchester Racing Assn., 265 App. Div. 225; Holberg v. Westchester Racing Assn., 184 Misc. 581; Matter of Stewart v. Department of State, 174 Misc. 902,260 App. Div. 979.) III. The Pari-Mutuel Law has not changed the long-recognized rule that the plaintiff’s right to attend' defendant’s race course is a qualified right. (Grannan v. Westchester Racing Assn., 153 N. Y. 449; Madden v. Queens County Jockey Club, Inc., 175 Misc. 552; Woollcott v. Shubert, 217 N. Y. 212.) IV. The Legislature has intended not to give the general public any unqualified right to enter race tracks and bet at pari-mutuels.
   Fuld, J.

“ Owney ’*’ Madden was named by one Frank Costello in 1943 as a bookmaker with whom he placed bets. Coley ” Madden, plaintiff herein, a self-styled “ patron of the races ”, was barred by defendant from its Aqueduct Race Track in 1945, under the mistaken belief that he was Costello’s bookmaker. Plaintiff thereupon sought a declaratory judgment declaring that he has a right, as citizen and taxpayer — upon paying the required admission price — to enter the race course and patronize the pari-mutuel betting there conducted. Defendant, on the other hand, asserted an unlimited power of exclusion. "Special Term, finding that plaintiff was a citizen of good repute and standing, decided that the complaint stated a cause of action and entered an order enjoining defendant from keeping plaintiff off the race track. The Appellate Division, reversing, dismissed the complaint.

The question posed — which this court explicitly declined to consider in 1897, in Grannan v. Westchester Racing Assn. (153 N. Y. 449, 459) —is whether the operator of a race track can, without reason or sufficient excuse, exclude a person from attending its races. In our opinion he can; he has the power to admit as spectators only those whom he may select, and to exclude others solely of his own volition, as long as the exclusion is not founded on race, creed, color or national origin.

At common law, a person engaged in a public calling, such as innkeeper or common carrier, was held to be under a duty to the general public and was obliged to serve, without discrimination, all who sought service. (See e.g., People v. King, 110 N. Y. 418, 427; see, also, Wyman, Public Callings and The Trust Problem, 17 Harv. L. Rev. 156, 217.) On the other hand, proprietors of private enterprises, such as places of amusement and resort, were under no such obligation, enjoying an absolute power to serve whom they pleased. (See, e.g., Woollcott v. Shubert, 217 N. Y. 212; Aaron v. Ward, 203 N. Y. 351; People ex rel. Burnham v. Flynn, 189 N. Y. 180; Collister v. Hayman, 183 N. Y. 250.) A race track, of course, falls within that classification. .(See Marrone v. Washington Jockey Club, 227 U. S. 633; [Edward J.] Madden v. Queens County Jockey Club, Inc., 175 Misc. 522; Corrigan v. Coney Island Jockey Club, 2 Misc. 512.)

The common-law power of exclusion, noted above, continues until changed by legislative enactment. In this State, a statute — explicitly covering “race courses” — limits the power by prohibiting discrimination on account of race, creed, color, or national origin. (Civil Bights Law, § 40; see, also, Penal Law, §§ 514, 700.) That, then, is the measure of the restriction.

Plaintiff, however, asserts a right founded upon the constitutional guaranty of equal protection of the laws. The argument is based on two assumptions, first, that the license to conduct pari-mutuel betting constitutes the licensee an administrative agent of the State in the execution of the law, and, second, that the license to conduct horse racing is a franchise to perform a public purpose.

The first assumption is quickly disposed of. Section 9 of the Pari-Mutuel Bevenue Law (L. 1940, ch. 254, § 9, as amd. by L. 1946, ch. 339, § 1) provides in substance that the licensee shall retain 10% of the total deposits and pay therefrom “ to the state tax commission as a reasonable tax by the state for the privilege of conducting pari-mutuel betting ”, an amount equal to a certain percentage of the total pool. It should be noted that the tax is thus imposed not on the bettor for the privilege of betting — analogous to the imposition of a sales tax upon the purchaser from a retail store — but upon the licensee for the privilege of conducting pari-mutuel betting. Adopting plaintiff’s position, it would be equally valid to argue that every licensee, theatre manager, cab driver, barber, liquor dealer, dog owner — to mention a few — must be regarded as “an administrative agency of the state ” in the conduct of his everyday business simply because he pays a tax or fee for his license.

Plaintiff’s second assumption — that the license is a franchise — requires more lengthy treatment. There is little need to cite authority for the proposition that a race track is normally considered a place of amusement and that — with the possible exception of ancient Borne — amusement of the populace has never been regarded as a function or purpose of government. Horse racing does not become a function of government merely because, in sanctioning it, the Legislature anticipated a consequent, though incidental, advantage to the public in “ improving the breed of horses ”. (L. 1926, ch. 440, § 1; cf. People m rel. Empire City Trotting Club v. State Racing Comm., 120 App. Div. 484, 485-486, affd. 190 N. Y. 31.) There is, then, nothing inherent in the nature of horse racing which makes operation of a race track the performance of a public function. If plaintiff’s assumption were valid, it would follow that the mere fact of licensing makes the purpose a public one and the license in effect a franchise. Such, however, is not the law. (Woollcott v. Shubert, supra, p. 216; Collister v. Hayman, supra, p. 253.)

Plaintiff’s argument results from confusion between a “ license ”, imposed for the purpose of regulation or revenue, and a “ franchise ”. A franchise is a special privilege, conferred by the State on an individual, which does not belong to the. individual as a matter of common right. (See Smith v. The Mayor, 68 N. Y. 552, 555; Matter of Penn-York Natural Gas Corp. v. Maltbie, 164 Misc. 569, 573; City of Tulsa v. Southwestern Bell Telephone Co., 75 F. 2d 343, 350.) It creates a privilege where none existed before, its primary object being to promote the public welfare. (See e.g., Southern Ry. Co. v. South Carolina Public Service Comm., 31 F. Supp. 707, 711; City of Oakland v. Hogan, 41 Cal. App. 2d 333, 347.) A familiar illustration is the right to use the public streets for the purpose of maintaining and operating railroads, waterworks and electric light, gas and power lines.

A license, on the other hand, is no more than a permission to exercise a pre-existing right or privilege which has been subjected to regulation in the interest of the public welfare. The grant of a license to promote the public good, in and of itself, however, makes neither the purpose a public one nor the license a franchise, neither renders the enterprise public nor places the licensee under obligation to the public. (Woollcott v. Shubert, supra; Collister v. Hayman, supra.) In the Woollcott case {supra) for instance, where the power of a theatre owner to bar a critic from his theatre was upheld, this court wrote (217 N. Y., at p. 216): “At the common law a theatre, while affected by a public interest which justified licensing under the police power or for the purpose of revenue, is in no sense public property or a public enterprise. * * * The proprietor does not derive from the state the franchise to initiate and conduct it. His right to and control of it is the same as that, of any private citizen in his property and affairs. He has the right to decide who shall be admitted or excluded.” Likewise, race tracks may well be affected with a public interest sufficient to justify governmental licensing or other regulation. Eecognition of a public interest, however, is neither recognition nor acknowledgment that the State is a partner in the business of horse racing or that the race track operator is the State’s administrative agent to collect revenue.

Observing, however, that the conduct of races for stakes had long been decláred illegal “ except as specially authorized ”, plaintiff argues from that that the license was in effect a franchise, since it granted a privilege not previously enjoyed by common right. That,' though, overlooks the fact that the privilege of conducting horse races for stakes does exist at the common law, that it is taken away only by statute, and that the statute’s prohibition is removed only under certain circumstances and upon compliance with specified conditions. (See Corrigan v. Coney Island Jockey Club, supra; cf. Marrone v. Washington Jockey Club, supra; Western Turf Association v. Greenberg, 204 U. S. 359.) Consequently, the license, instead of creating a privilege, merely permits the exercise of one restricted-and regulated by statute.

In short, plaintiff’s asserted right to admittance must rest either upon common law or upon statutory provision. No such right existed at common law and the Legislature has not chosen to create one. (Civil Eights Law, §§ 40, 40-b.)

The judgment should be affirmed, with costs.

Loughean, Ch. J., Lewis, Conway, Desmond, Thacheb and Dye, JJ., concur.

Judgment affirmed.


author: Dye, J.

text:
    Marion Wischnie, as Administratrix of the Estate of Alex Wischnie, Deceased, Plaintiff, v. Martin Dorsch et al., Copartners under the Firm Name of Armor Elevator Company et al., Defendants; Brookman Realty Corporation, Defendant-Appellant, and Premier Linen Supply & Laundry Service, Inc., Impleaded Defendant-Respondent.
    Argued November 21, 1946;
    decided April 17, 1947.

      I. Maurice Wormser and Martin J. For gang for appellant.
    I. The cross complaint sets forth facts sufficient to constitute a valid cause of action. The case of Semanchuck v. Fifth Avenue $ Thirty Seventh St. Corp. (290 N. Y. 412) does not apply nor does it render the cross complaint insufficient. (Schwarts v. Merola Bros. Construction Corp., 290 N. Y. 145; Lobello v. City of New York, 268 App. Div. 880, 294 N. Y. 816.) II. As between appellant and respondent, the latter is liable over to the former for its neglect and failure to perform its covenants to put and keep the elevators in good order and repair and to comply with all applicable statutes and ordinances. (Scott v. Curtis, 195 N. Y. 424; Phoenix Bridge Co. v. Creem, 102 App. Div. 354, 185 N. Y. 580; Dunn v. Uvalde Asphalt Paving Co., 175 N. Y. 214; Mirsky v. Seaich Realty Co., 256 App. Div. 658; Booth v. Silverman, 157 Misc. 93; Walkowicz v. Whitney’s, Inc., 178 Misc. 331.)

      Harry Schechter, William H. Stieglitz and Bernard Katzen for respondent.
    I. The covenant in the lease whereby respondent (lessee) agreed to put and keep the premises in good repair generally, is not an express agreement to indemnify appellant (lessor) for damages caused by appellant’s own active primary negligence. (Thompson-Starrett Co. v. Otis Elevator Co., 271 N. Y. 36; Cullings v. Goetz, 256 N. Y. 287; Dunn v. Uvalde Asphalt Paving Co., 175 N. Y. 214.) II. The duty imposed by sections 316 and 255 of the Labor Law upon appellant as owner of a tenant-factory building to maintain and operate the elevator therein so as to be safe to all persons is a positive nondelegable duty and the failure to comply with such statute constitutes active primary negligence and an agreement to provide indemnity therefor must be unequivocally expressed. (Hente v. Shercoop Corp., 289 N. Y. 140; Dunn v. Uvalde Asphalt Paving Co., 175 N. Y. 214; Scott v. Curtis, 195 N. Y. 424; Phoenix Bridge Co. v. Creem, 102 App. Div. 354; Iroquois Gas Corp. v. International Ry. Co., 240 App. Div. 432; Birchall v. Clemons Realty Co., 241 App. Div. 286; Eisenberg v. Kemp, Inc., 256 App. Div. 698; Smith v. 167th Street & Walton Ave. Corp., 264 App. Div. 570; Semanchuck v. Fifth Ave. & 37th Street Corp., 290 N. Y. 412; Order of United Commercial Travelers v. Smith, 192 F. 102; De Haen v. Rockwood Sprinkler Co., 258 N. Y. 350.) III. It is immaterial whether or not appellant was in possession of the premises to charge it with active negligence for the failure to maintain and operate the elevator of a tenant-factory building so as to be safe to all persons. (Gerber v. Seaich Realty Co., 259 App. Div. 667.) IV. Even if the building is not a tenant-factory building but is a nonfactory building the cross complaint is invalid as the plaintiff cannot recover from an owner out of possession and the cross complaint is predicated on the right of the plaintiff to recover from appellant. (Wischnie v. Brookman Realty Corp., 184 Misc. 506; Liebowitz v. Denison Realty Corp., 250 App. Div. 204, 277 N. Y. 670.)
   Dye, J.

The plaintiff’s intestate died from injuries sustained while lawfully riding in an elevator located in a tenant-factory building (Labor Law, § 315, subd. 2) owned by the defendant Brookman Realty Corporation, which it had leased to the defendant Premier Linen Supply & Laundry Service, Inc. For convenience, the defendants will be referred to herein as Brook-man and Premier.

The plaintiff originally sued only Brookman, alleging that it was negligent in failing to keep the elevator in safe and proper condition as required by statute (Labor Law, §§ 255, 316). Brookman thereupon procured an order of interpleader to bring in the tenant Premier. In its answer Brookman cross-complained for recovery over against Premier for the amount of any judgment recovered by the plaintiff, alleging that it owned the demised premises; that Premier, under a long-term written lease, was in sole and exclusive possession of the premises, including the elevator; and that the injuries suffered by the decedent were occasioned primarily and solely by Premier’s negligence and carelessness- in failing to keep the elevator, its machinery and equipment, in good order and repair, as required by statute. It also alleged that Premier was liable over to Brookman because of its failure as such lessee pursuant to the terms of the lease “ to put and keep * * * elevators in good order and repair at its own expense ” and to properly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the Federal, State and City Governments, and of any and all their Departments and Bureaus applicable to said premises * * * during said term ”; that, if plaintiff recovered a judgment, it would be because of Premier’s negligence in the performance of its primary obligation and duty under the lease; and that Brookman, as owner, was out of possession and without fault in the premises.

. Premier moved at Special Term for an order to strike out and dismiss the cross complaint for insufficiency, which was granted and which has been affirmed by the Appellate Division. The dismissal was on the theory that the owner’s omission to do a ¿statutory nondelegable act, although out of possession, made it a joint tort-feasor along with the tenant in possession, as both owed a positive duty under the statute to keep the premises, including the elevator, in proper condition; and that failure to plead the existence of an unequivocal agreement by Premier to indemnify Brookman rendered the cross complaint insufficient to state a cause of action for recovery over, citing as authority our recent decision in Semanchuck v. Fifth Ave. & 37th St. Corp. (290 N. Y. 412).

In that case we concluded that, in construction and demolition projects, the statute imposed a “ positive ” duty upon the owner and contractor alike (Labor Law, § 241); that it was an active, primary duty; and that any agreement to provide indemnity for concurrent failure to perform such duty must be “ unequivocally expressed ”, under the general theory that contracts “ will not be construed to indemnify a person against his own negligence unless such intention is expressed in unequivocal terms ” (Thompson-Starrett Co. v. Otis Elevator Co., 271 N. Y. 36, 41). We also concluded, and it seems to have been overlooked, that we should not extend such rule to other fields not' included in its scope (Labor Law, § 241), but leave those situations to be controlled by the rules and standards antedating the statute.

In the instant controversy the pleading under attack alleges that the owner-landlord had neither possession nor control of the demised premises; that, on the contrary, such were under the exclusive possession and control of the tenant which was primarily responsible for safe and proper maintenance, including the elevator, as well as for compliance with applicable statutory requirements; that the tenant had an active, primary duty; and that the plaintiff’s alleged injuries, if any, resulted from its active wrongdoing. The owner, although under a statutory duty (Labor Law, §§ 255, 316), was a passive wrongdoer at best. We, thus, have a pleading which alleges a cause of action for recovery over in a situation quite different from that considered in the Semanchuck case (supra) and which we conclude is controlled, not by the rule requiring an unequivocal expression ” of intention, but rather by the rules and standards antedating the statute considered in the Semanchucht case.

The legislative design, as we see it, was to insure the injured plaintiff an existing and responsible defendant. As to the injured plaintiff it makes no difference whether the owner is in or out of possession or whether the tenant is in sole and exclusive possession and control; that is an expression of sound public policy approved by the court (Hente v. Shercoop Corporation, 289 N. Y. 140). However, it is something else to hold that the Legislature, in adopting a statute to benefit a person in fields of activity other than construction and demolition work, also intended to deprive the owner, guilty of only passive negligence at most, of his common-law right against the party in possession and control, whose negligence was the active and primary cause of plaintiff’s injury. This brings us to the conclusion that the allegations of the cross complaint are sufficient to state a prima facie cause of action.

The judgment of the Appellate Division and the order of the Special Term should be reversed and the motion to dismiss the cross complaint denied, with costs in all courts.

Lotjghban, Ch. J., Lewis, Conway, Desmond, Thacher and Fold, JJ., concur.

Judgment and order reversed, etc.


author: Loughran, Ch. J.

text:
    Donald Flamm, Appellant, v. Edward J. Noble, Respondent.
    Argued January 14, 1947;
    decided April 17, 1947.

      Philip Handelman, Colin C. Ives, 8. 8. Goldsmith and Leon Wagman for appellant.
    I. Plaintiff is entitled, as a matter of law, to interest on the amount of the verdict from the date of the wrong which resulted-in the transfer of radio station WMCA, to the date of the rendition of the verdict. (Prager v. New Jersey Fidelity & Plate Glass Ins. Co., 245 N. Y. 1; White v. Miller, 78 N. Y. 393; Blackwell v. Finlay, 233 N. Y. 361; Faber v. City of New York, 222 N. Y. 255; Funkhouser v. Preston Co., 261 N. Y. 140, 290 U. S. 163; Wilson v. City of Troy, 135 N. Y. 96; Regan v. City of New York, 175 App. Div. 861; Lakeside Paper Co. v. State of New York, 55 App. Div. 208.) II. Interest is allowed as a matter of law in cases involvixxg fraud and deceit. (Reno v. Bull, 226 N. Y. 546; Hubbell v. Meigs, 50 N. Y. 480; A. & B. Export & 1. Corp. v. Franco-American Chemical Co., 189 App. Div. 618; Merry Realty Co. v. S. & H. R. E. Co., 103 Misc. 9,186 App. Div. 538; Holden v. New York and Erie Bank, 72 N. Y. 286; Davidge v. Guardian Trust Co., 120 N. Y. S. 628; Lambert v. Elmendorf, 124 App. Div. 758; United States v. Pan American Petroleum Co., 24 F. 2d 206; Demms v. Blanchard, 150 Misc. 867; Among v. McGregor, 15 Johns. 24.) III. Interest is allowed as a matter of law in cases involving duress. (Aronoff v. Levine, 190 App. Div. 172, 232 N. Y. 529; Eadie v. Slimmon, 26 N. Y. 9; American District Telegraph Co. v. City of New York, 213 App. Div. 578; Kilpatrick v. Germania Life Ins. Co., 183 N. Y. 163; Aetna Insurance Co. v. The Mayor, 153 N. Y. 331.) IV. Interest is allowed as a matter of law in trover and conversion cases. (Distillator & Sons, Inc., v. Smith, 140 Misc. 34; Andrews v. Durant, 18 N. Y. 496; Corn Exchange Bank v. Peabody, 111 App. Div. 553; Flagler v. Hearst, 91 App. Div. 12; Booth v. Powers, 56 N. Y. 22; McCormick v. Pennsylvania Central R. R. Co., 49 N. Y. 303.) V. Interest is allowed as a matter of law in trespass cases. (Sciaky v. Rodgers & Hagerty, Inc., 277 N. Y. 483; Weprin & Glass Bldg. Corp. v. Rosoff Subway Constr. Co., 269 N. Y. 672; Wehle v. Haviland, 69 N. Y. 448.) VI. Plaintiff’s claim for damages represents a pecuniary loss which the jury was able to, and did, ascertain with reasonable certainty as of a fixed date. Plaintiff is, therefore, entitled to interest as a matter of law. (Faber v. City of New York, 222 N. Y. 255; Blackwell v. Finlay, 233 N. Y. 361; Prager v. New Jersey Fidelity and Plate Glass Ins. Co., 245 N. Y. 1; Sweeny v. City of New York, 173 N. Y. 414; General Supply & Construction Co. v. Goelet, 241 N. Y. 28; Andrews v. Durant, 18 N. Y. 496; O’Gorman v. Kaplan, 198 N. Y. S. 221; McCormick v. Pennsylvania Central R. R. Co., 49 N. Y. 303; Govin v. de Miranda, 140 N. Y. 474.) VII. Plaintiff is entitled to interest on the verdict pursuant to section 480 of the Civil Practice Act. (Demms v. Blanchard, 150 Misc. 867; Miller v. Foltis Fisher, Inc., 152 Misc. 24; Case v. Hardenbrook, 238 App. Div. 169, 263 N. Y. 630; Smith v. Ryan, 191 N. Y. 452; Whipple v. Brown Brothers Co., 225 N. Y. 237; Katz v. Nichols, 48 N. Y. S. 2d 640.)

      Ralph M. Carson, Clarence Fried and Franklin S. Wood for respondent.
    I. The Trial Justice properly denied plaintiff’s motion to add interest to the verdict. (Grobe v. Kramer, 178 Misc. 247, 266 App. Div. 768; Faber v. City of New York, 222 N. Y. 255; Wilson v. City of Troy, 135 N. Y. 96.) II. The plaintiff in tort actions such as this is not entitled to interest as a matter of right. (Wilson v. City of Troy, 135 N. Y. 96; White v. Miller, 78 N. Y. 393; Security Sav. Bank v. Kellems, 274 S. W. 112; Megarty v. Hegarty, 52 F. Supp. 296; Faber v. City of New York, 222 N. Y. 255; Gray v. Central Railroad Co. of New Jersey, 157 N. Y. 483; American Castype Corp. v. Niles-Bement-Pond Co., 177 Misc. 13.) III. Plaintiff would not be entitled to interest even under section 480 of the Civil Practice Act. (Roberts v. Larsen, 29 N. Y. S. 2d 311, 262 App. Div. 764, 287 N. Y. 652; Ketcham v. Wilbur, 256 N. Y. 525; Greater New York Coal & Oil Corp. v. Philadelphia & Reading Coal & Iron Co., 278 N. Y. 270; Klausner v. Queens Fur Dressing Co., 130 Misc. 579.)
   Loughran, Ch. J.

By leave of the Appellate Division, the plaintiff brings here for decision the following question certified: “ Upon the facts presented herein, where the plaintiff was awarded a verdict in the sum of $350,000.00 in an action for fraud and duress, should the Trial Court have granted plaintiff’s motion for an order directing that the sum of $107,508.33 be added as° interest to the said verdict herein from. January 17, 1941, the date of the wrong, to the date of the rendition of the verdict? ” We are to say whether the plaintiff is entitled to such interest as matter of law. The answer of both courts below was in the negative.

The Trial Term Judge took his stand upon Faber v. City of New York (222 N. Y. 255). In that case, the question was whether interest should be allowed upon a claim of damages for extra work done in performance of a contract. This court there said: The question of the allowance of interest on unliquidated damages has been a difficult one. The rule on this subject has been in evolution. To-day, however, it may be said that if a claim for damages represents a pecuniary loss, which may be ascertained with reasonable certainty as of a fixed day, then interest is allowed from that day. The test is not whether the demand is liquidated. Was the plaintiff entitled to a certain sum? Should the defendant have paid it? Could the latter have determined what was due, either by computations alone or by computation in connection with established market values, or other generally recognized standards ? ’ ’ (P. 262.) In the Faber case, the plaintiff sued for $159,180. The verdict was for $79,590. Because of that discrepancy and because the plaintiff’s extra work had no established market value, a recovery of interest was denied. In the present case, the defendant made misstatements and threats and as the result thereof the plaintiff parted with certain corporate stock for less than its true value. The loss thereby inflicted upon the plaintiff was found by the jury to be $350,000. Since the stock was closely held and was not dealt in on any exchange or in any market, the value thereof was not ascertainable with reasonable certainty as of a fixed day either by computation alone or by computation in connection with generally recognized standards. “ The value of this stock [said the Trial Judge] was a straight question of fact presented to the jury on widely divergent testimony.” In that state of the record, the plaintiff’s motion for an order adding interest to the verdict was rightly denied, if our decision in the Faber case was here applicable.

The Faber case was decided in 1918. The rule thereby declared was a procedural limitation of liability for interest on contract claims of uncertain amount. In 1927 (L. 1927, ch. 623), section 480 of the Civil Practice Act was amended by the incorporation therein of a provision which now reads as follows: “In every action wherein any sum of money shall be awarded by verdict, report or decision upon a cause of action for the enforcement of or based upon breach of performance of a contract, express or implied, interest shall be recovered upon the principal sum whether theretofore liquidated or unliquidated and shall be added to and be a part of the total sum awarded.” As thus amended, section 480 means that interest must be paid on a pecuniary loss caused by breach of contract even in a case where the defendant could not determine on any fixed date what was due. (Preston Co. v. Funkhouser, 261 N. Y. 140, 145, affd. 290 U. S. 163.) The reasons for that statutory innovation are reasons of policy and justice. The party not performing should not deprive the party not in fault of the use of his money without paying therefor.” (Preston Co. v. Funkhouser, supra, at p. 145.) Consequently, the rule of the Faber case no longer stands in the way of a full recovery of interest as an incident of liability arising from the violation of a contractual obligation.

The plaintiff tries to bring himself within the above amendment of section 480 of the Civil Practice Act by describing the present action as one for breach of a contract implied in law. We cannot adopt that characterization. There is of course authority for saying that restitution of a benefit obtained by fraud may be compelled in an action of assumpsit. But such a theory of action is here excluded by the plaintiff’s complaint and by the position he took at the trial, as well as by the question certified to us by the Appellate Division, all of which stamp the present action as a prosecution for fraud or duress. The above amendment of section 480 provides for the addition of interest to a principal sum awarded by verdict, report or decision for breach of contract, and that amendment, therefore, has no bearing upon tort actions of the kind here maintained by this plaintiff. Nor is there any warrant for his assumption that a contrary viewpoint was taken in Weprin & Glass Building Corp. v. Rosoff Subway Constr. Co. (269 N. Y. 672) and Sciaky v. Rodgers & Magerty, Inc. (277 N. Y. 483). To be sure, the tort in both of those cases was trespass to real property; still the recovery in each case was had upon a covenant whereby the,,obligor had contracted to indemnify the property owner against such a wrong; hence in each case interest was necessarily added to the verdict in compliance with the command of section 480.

The plaintiff is right, however, in his contention that the former rule of the Faber case (supra) was never regarded by this court as relevant where, as here, the main question was one of liability for a wrong to possession or property. Again and again, awards of interest made in such cases have been sanctioned by us without any inquiry in respect of the ability of the defendant to ascertain with reasonable certainty the extent of the loss he had caused. (See Andrews v. Durant, 18 N. Y. 496; Parrott v. Knickerbocker Ice Co., 46 N. Y. 361; McCormick v. Pennsylvania Central R. R. Co., 49 N. Y. 303; Wehle v. Haviland, 69 N. Y; 448; Wilson v. City of Troy, 135 N. Y. 96.) Indeed in the case last cited — an action for injury to property — this court took pains to declare the inapplicability of “ the cases arising upon contract in which it has been held that interest is not allowable ”. (Wilson v. City of Troy, supra, at p. 106.)

We come then to the question whether the plaintiff is entitled to interest as matter of law. Under a long-settled New York rule, interest is recoverable of right in actions for trespass and conversion, whereas in actions for injuries done to property through negligence the allowance of interest is left to the discretion of the jury. (See Wilson v. City of Troy, 135 N. Y. 96, supra.) Such a distinction is manifestly unsound, because interest is essential to complete indemnity in J>oth classes of cases. But no decision of this court makes the recovery of interest a matter of discretion where, as here, damages are demanded for a money loss caused by fraud or duress. More than that, Reno v. Bull (226 N. Y. 546) — an action for fraud — is authority the other way. This court there said that the true measure of damage in such an action is the actual pecuniary loss sustained, with interest from the time of the wrong. (P. 553.) (See, also, Shaw v. Gilbert, 111 Wis. 165; Nichol v. Sensenbrenner, 220 Wis. 165; Vernson v. Baker, 124 Kan. 575.) The same legal measure of liability should, we think, be here enforced, though the present action may be deemed to be one for duress rather than one for fraud (Restatement, Torts, § 871, comment f); that is to say, the plaintiff is in either event entitled as matter of law to a recovery of the interest now demanded by him.

Several questions of practice remain. The complaint containéd no specific demand for interest; the plaintiff made no request that his right to interest be declared by the jury;'nor did he give notice of his present motion for a recovery of interest until after expiration of the term at which this case was tried. Nothing turns on any such omission in cases where, under section 480 of the Civil Practice Act, the addition of interest to a verdict is matter of right. (Cf. Greater New York Coal & Iron Corp. v. Philadelphia & Reading Coal & Iron Co., 278 N. Y. 270; Weprin & Glass Building Corp. v. Rosoff Subway Constr. Co., 269 N. Y. 672, supra,. Civ. Prac. Act, § 479.) On the analogy of that practice, the plaintiff, we think, should be held to be none the worse for his failure sooner to bring forward the issue that we now decide in his favor.

The orders should be reversed, the question certified should be answered in the affirmative and the motion granted, with costs to the plaintiff in all courts.

Lewis, Conway, Desmond, Thacher, Dye and Fuld, JJ., concur.

Orders reversed, etc.


author: Loughran, Ch. J. Fuld, J.

text:
    The People of the State of New York, Respondent, v. Gordon Jenman, Appellant.
    Submitted January 8, 1947;
    decided April 17, 1947.

      Bay F. Fowler for appellant.
    I. The evidence that a second party entered his car after the offense and was apparently searching for the pinch bar, and was arrested thereaftei, raised the inference that defendant had committed the act with an accomplice. II. Ultimate inference of defendant’s guilt depended almost entirely upon circumstantial evidence. This evidence was insufficient to justify the findings of guilt beyond a reasonable doubt. (People v. D’Anna, 243 App. Div. 259.)

      Daniel J. O’Mara, District Attorney (Harry L'. Rosenthal of counsel), for respondent.
    I. The facts established gave rise to no other inference except that of guilt. (People v. Willett, 213 N. Y. 368; People v. Birnbaum, 208 App. Div. 476; People ex rel. Pressler v. Warden, 109 Misc. 155; People v. Wilson, 7 App. Div. 326, 151 N. Y. 403; Foster v. People, 63 N. Y. 619; People v. Lamed, 7 N. Y. 445; Knickerbocker v. The People, 43 N. Y. 177.) II. The evidence as to the young woman’s entering defendant’s car and her arrest did not raise the inference that she was an accomplice. III. The evidence upon. which defendant’s guilt depended was sufficient to justify the findings of guilt beyond a reasonable doubt. (People v. Razezicz, 206 N. Y. 249.)
   Loughran, Ch. J.

After trial -in the County Court of Monroe County, the defendant was convicted of burglary in the third degree and of felonious possession of a burglar’s instrument. (See Penal Law, §§ 404, 408.) The Appellate Division affirmed. One of the Justices dissented and the case is now here by his permission.

On the night of March 26,1944, several pieces of jewelry were stolen from a dwelling house in the town of Brighton, Monroe County, during an absence of the occupants. Entry had been effected through an upstairs window. Soon after discovery of the crime the defendant drove past the scene in an automobile owned by him; shortly thereafter the same vehicle (which was then unoccupied) stood in front of a drugstore three miles away and was there searched by police officers who seized a pinch bar that was lying on the floor near the front seat; fifteen minutes later, a woman with a gown or apron in her hand got into the car and sat upon the passenger’s side of the front seat where she was arrested when the waiting police officers saw her bend downward toward the floor of the vehicle. Two hours afterward, the defendant came out of the drugstore and, at the request of the officers, went with them to their headquarters. Deposits of paint that were found upon the pinch bar corresponded in color and texture with fragments of paint that had been ground into the sill of the window through which the unlawful entry had been accomplished, and a portion of the pinch bar fitted approximately into indentations that were observable on the window sill at the time in question. In the opinion of an expert witness who testified to the facts last stated, the pinch bar and the window sill had come into contact at some time. Such was the case for the People.

There was no evidence as to any acquaintance or communication at any time between the defendant and the woman who was arrested inside his automobile after the police officers had removed the pinch bar therefrom. In his address to the jury, the District Attorney referred to the taking of the pinch bar by the officers and said: “A short time later, some girl appears on the scene, and you have heard her actions described in reference to the car in the vicinity where this pinch bar had been located. Who sent her there? * *.* What was the occasion of her coming there? Those are circumstances you can construct in your own minds from the facts that have taken place.” When objection to that argumentation was made by the defendant’s counsel, the Trial Judge said: “ I think it is a proper summary. You may have an exception. The jury has the right to consider that.” Counsel for the defendant pressed his point in these words: Yes, but not that she was sent there by the defendant.” Nevertheless the Trial Judge said: “ No, they have a right to construct the meaning of it.” The same issue arose after the Trial Judge had delivered Ms charge to the jury. At that stage, counsel for the defendant requested the Judge to declare that “ there is no evidence in this case by which the jury can assume there was any confederate.” To that request the Judge replied: “ There is no direct evidence of any confederate, but in your words I decline so to charge.”

These rulings, we think amounted to material error. Thereby the jury were permitted to draw the inference that the woman who entered the defendant’s automobile had been summoned by him to do so, though there was no evidence to that effect nor even an intimation of any knowledge by him of the fact of her existence. The jury ought not to have thus been licensed to reach a verdict of criminal guilt upon a ground that had no evidentiary basis (People v. Van Alien, 217 N. Y. 532); and they must be taken to have followed the above last-word instruction of the Trial Judge, since he had correctly advised' them of their sworn duty to accept the law as laid down by him (Stokes v. People of the State of N. Y., 53 N. Y. 164,184; see Code Crim. Pro., § 419).

The judgments should be reversed and a new trial ordered.

Fuld, J.

(dissenting). ' The proof, albeit circumstantial — consisting of evidence of defendant’s possession of the tool used in forcing entry into the burglarized premises (People v. Wilson, 7 App. Div. 326, 333, affd. 151 N. Y. 403; People v. Larned, 7 N. Y. 445, 447, 452; People v. Weiss, 367 Ill. 580, 587; Wilborne v. Commonwealth of Virginia, 182 Va. 63, 66) and of evidence of his presence falsely denied, near the scene of the crime (People v. Deitsch, 237 N. Y. 300, 303; People v. Gorski, 236 N. Y. 673; see, also, People v. Kress, 284 N. Y. 452, 466) —is exceedingly clear and convincing and establishes guilt beyond any doubt.

It may not be overlooked, as remarked in a capital case several years ago, that “ Errors which loom large to a judge, learned in the law and trained to administer justice in strict accordance with the law, may be scarcely visible to the lay juror.” (People v. Buchalter, 289 N. Y. 181, 224-225, per Lehman, Ch. J.) So, here, even were we to assume the existence of error — to my mind highly debatable — we are commanded to disregard errors and defects “ which do not affect the substantial rights of the parties ” (Code Crim. Pro., § 542). In the light of the record before us, it seems clear that this is not a case where the asserted error could have “ turned the scale in the minds of the jury to the disadvantage of accused.” (See People v. Slover, 232 N. Y. 264, 267.) Consequently, the ends of justice require an affirmance under the clear ¿mandate of the statute (Code Crim. Pro., § 542).

The judgment should be affirmed.

Lewis, Conway, Desmond, Thacher and Dye, JJ., concur with Loughran, Ch. J.; Fuld, J., dissents in opinion.

Judgments reversed, etc.


author: Conway, J.

text:
    Eva Salzman et al., as Administrators of the Estate of Morris Salzman, Deceased, Appellants, v. Prudential Insurance Company of America, Respondent.
    Argued February 19, 1947;
    decided April 17, 1947.

      John A. Millener and Charles P. Maloney for appellants.
    I. Plaintiff established a prima facie case. (Imbrey v. Prudential Ins. Co., 286 N. Y. 434.) II. Plaintiff established that the premium was paid in time. (Primean v. National Life Assn., 77 Hun 418, 144 N. Y. 716; McCluskey v. National Life

      Assn. of Hartford, 77 Hun 556, 149 N. Y. 616; Mitchell v. Vermont Copper Mining Co., 67 N. Y. 280; Germania Life Ins. Co. v. Potter, 124 App. Div. 814; Hirsch v. New York, Life Ins. Co., 267 App. Div. 404; Baxter v. Brooklyn Life Ins. Co., 119 N. Y. 450.) III. Plaintiff’s rights under the policy ripened prior to the due date of the premium. (Herschman v. John Hancock Mutual Life Ins. Co., 158 Misc. 263, 248 App. Div. 774; Shapiro v. Metropolitan Life Ins. Co., 151 Misc. 707; Boyett v. United States, 86 F. 2d 66.) IV. Plaintiff was not foreclosed by signing the application for reinstatement. (Hirsch v. New York Life Ins. Co., 267 App. Div. 404.)

      Balias C. Newton for respondent.
    I. Plaintiff was bound to prove his case in accordance with the allegations of his complaint. (Walrath v. Hanover Fire Ins. Co., 216 N. Y. 220; Way v. Prudential Ins. Co., 252 App. Div. 424; Todd v. Union Casualty & Surety Co., 70 App. Div. 52; Williams v. Fire Assn. of Philadelphia, 119 App. Div. 573; Black Co. v. London Guarantee & Accident Co., 190 App. Div. 218, 232 N. Y. 535; Kasarsky v. New York Life Ins. Co., 145 Misc. 732.) II. Payment of the premium due March 2,1942, was not waived in any way, and the policy lapsed. (Todd v. Union Casualty & Surety Co., 70 App. Div. 52; Epstein v. Mutual Life Ins. Co. of N. Y., 143 Misc. 587; Kasarsky v. New York Life Ins. Co., 145 Misc. 732.) III. There was no waiver by the claimed declaration of forfeiture occurring August 12, 1942. IV. There was no waiver by virtue of the fact that the inception of plaintiff’s disability occurred while the policy was in full force, viz., prior to the time the premium was due. (Levitt v. Prudential Ins. Co., 150 Misc. 754; Ginell v. Prudential Ins. Co., 237 N. Y. 554; Bergholm v. Peoria Life Ins. Co., 284 U. S. 489; New York Life Ins. Co. v. Chanson, 154 Misc. 643; Mutchnick v. John Hancock Mutual Life Ins. Co., 157 Misc. 598; Michelson v. Equitable Life Assurance Society, 161 Misc. 697.) V. Sending in a "check, "postdated April 3, 1942, was not payment of the premium which became due March 2, 1942. (Brady v. John Hancock Mutual Life Ins. Co., 53 F. Supp. 173, 139 F. 2d 697; People v. Mazeloff, 229 App. Div. 451; Hand v. Equitable Life Assurance Soc., 251 App. Div. 321; Marek v. Mutual Life Ins. Co., 244 App. Div. 346, 268 N. Y. 724; Struhl v. Travelers Ins. Co.,
      255 App. Div. 527, 281 N. Y. 584.) VI. Plaintiff entered into an agreement by which he agreed that the policy had lapsed and was not in force. (Struhl v. Travelers Ins. Co., 255 App. Div. 527, 281 N. Y. 584; Patent v. Travelers Ins. Co., 163 Misc. 520; Axelroad v. Metropolitan Life Ins. Co., 267 N. Y. 437; Levitt v. Prudential Ins. Co., 150 Misc. 754.) VIL Due proof of disability was never furnished to or received by defendant, and thus no liability exists for the payment of disability benefits. (Ginell v. Prudential Ins. Co., 205 App. Div. 494; Silverstein v. Prudential Ins. Co., 246 App. Div. 359; Finnessey v. John Hancock Mutual Life Ins. Co., 259 App. Div. 360; Rogers v. Metropolitan Life Ins. Co., 167 Misc. 129; Kaplan v. New York Life Ins. Co., 159 Misc. 763; Perlman v. New York Life Ins. Co., 234 App. Div. 359; Mutchnick v. John Hancock Mutual Life Ins. Co., 157 Misc. 598.)
   Conway, J.

The question presented involves the right of an insured to payments for total and permanent disability. In order to reach that question other problems must first be considered. The insured, who died after the action was tried, obtained from defendant in 1926 a policy of insurance upon his life in which were included provisions for payments in the event of disability and for waiver of payment of premium during continuance of such disability. The'insured paid the annual premiums required including the one which became due on March 2, 1941. When the next annual premium became due, he failed to pay it and permitted the grace period to expire. On the last day of grace, April 2, 1942, his son mailed a check which was dated April 3, 1942. That was one day too late (Struhl v. Travelers Ins. Co., 281 N. Y. 584). An automatic extended insurance clause (with no provision for disability) continued the life insurance far beyond the date of the death of the insured which occurred on January 4, 1945, and we are thus not concerned with payment of the face amount of the policy.

Whether or not the policy had lapsed or been declared forfeited by reason of the failure to pay the March, 1942, annual premium within the grace period was important in determining whether the insured was entitled to claim disability payments thereafter under the applicable policy provisions. Unless a proper notice had been sent to the insured in compliance with section 92 of the Insurance Law (now §§ 151, 208), the policy of insurance would not lapse and could not be declared forfeited within one year from the failure to pay the premium. As the policy was written in 1926, section 92 of the Insurance Law, as it then read, was deemed to have been a part of the insurance contract as though written into it. (Adam v. Manhattan Life Ins. Co., 204 N. Y. 357, 360.) If the notice under section 92 had been given, that would be the end of this litigation. If the notice were not given, the insured could have paid the premium within the year and saved his policy. The insured testified that he had not received such notice. The defendant, although it had pleaded the giving of the notice, made no proof of that fact but rested at the end of the plaintiff’s case. It was a matter for pleading and proof by the defendant (Baxter v. Brooklyn Life Ins. Co., 119 N. Y. 450, 456; Fischer v. Metropolitan Life Ins. Co., 167 N. Y. 178, 183; Imbrey v. Prudential Insurance Co., 286 N. Y. 434) and we must assume, therefore, that the notice was not given.

In that state of the record we consider now the occurrences subsequent to April 2, 1942. An agent of the defendant orally advised the insured that the policy had lapsed, and on April 8, 1942, obtained the signature of the insured on a form designated “ Application for Eeinstatement of an Ordinary Policy.” Thereafter the defendant deposited and received payment of the check dated April 3d. Upon examination by the doctor selected by the defendant, reinstatement was refused and still later the sum collected on the April 3d check was tendered back. All this is undisputed and we turn to a sentence in the application for reinstatement upon which defendant relies to establish that the policy had lapsed. That sentence is: “I hereby apply for the reinstatement of the above numbered policy, which was lapsed for non-payment of the premium due 3-2-42 and make the representations contained in my answers to the following questions ”.

Defendant contends that the insured by signing, was concluded as to the lapsing of the policy by expressly admitting it. Defendant phrases it thus: Plaintiff, by Exhibit 4, agreed that the policy ‘ was lapsed for non-payment of the premium due 3/2/42 ’, and that the ‘ policy shall not be in force ’ until the premium in arrears is paid and the application for reinstatement is approved.” Such is not the law. Putting aside the questions whether there was here a “ voluntary giving up of a known right ” and thus a waiver (Lord Constr. Co. v. Edison Portland Cement Co., 234 N. Y. 411, 415; Alsens American Portland Cement Works v. Degnon Contr. Co., 222 N. Y. 34, 37) and whether in fact the words merely purported to recite what the company asserted it had done, the general rule is that a statute such as the Insurance Law, section 92, is grounded on public policy formulated by the Legislature and that such statutory conditions precedent to lapse or declaration of forfeiture may not be waived by a policyholder. The rule is well expressed in Griffith v. New York Life Ins. Co. (101 Cal. 627) as follows: “ The statute in question (§ 92, N. Y. Ins. Law) is regarded as indicative of the legislative will that, as a matter of public policy, life insurance companies should be deprived of the power to declare policies forfeited for non-payment of premiums, except in the prescribed mode, and that, being deprived of the power so to do, a waiver on the part of the insured cannot be construed to confer such power in the face of the law which has taken it away. ” (See to the same effect 3 Couch, Cyclopedia of Insurance Law, § 670.)

Struhl v. Travelers Ins. Co. (281 N. Y. 584) relied upon by the majority in the Appellate Division, is not to the contrary. That case was tried on the theory that the notice required by the statute had been given by defendant and received by the insured. No argument concerning section 92 was presented in the Appellate Division, and no finding was requested as to the giving of notice thereunder either at Special Term or, upon reversal, in the Appellate Division. No question involving the section was therefore properly presented or passed upon by us in the Struhl case. No question as to compliance with section 92 was presented to this court in Teeter v. United Life Ins. Assn. (159 N. Y. 411) or in Perry v. Bankers’ Life Ins. Co. (47 App. Div. 567, affd. 167 N. Y. 607) since the defendant companies in those cases were life insurance corporations under article 6 of the Insurance Law (now art. IX-B) upon the co-operative or assessment plan and thus not affected by the provisions of section 92 (now §§ 151, 208).

Since, then, the policy had not in fact lapsed or been forfeited, the first two causes of action should not have been dismissed. They were to declare (1) that the policy remained in full force and effect and (2) that defendant’s attempt to lapse or forfeit the policy was wrongful and unlawful. We come then to the third cause of action which is to recover disability payments. We think Equity Term was correct in dismissing that third cause of action. Ho proof of total and permanent disability was given to the defendant prior to the entry of judgment at Equity Term on August 11, 1944, and we are of course not concerned here with any claim for disability payments thereafter up to the time of insured’s death. Under the provisions of the policy receipt of due proof of such disability ” was a condition precedent to recovery. The insured introduced the testimony, over objection, of a doctor who had examined him on December 23, 1941, and found him to be suffering from pulmonary tuberculosis and trachea vascular disease with hypertension. That doctor testified that the insured was totally and permanently disabled then and at the time of trial. Since the motion to dismiss was granted at the close of plaintiff’s case, we shall assume that the insured was totally and permanently disabled from December 23, 1941, until the entry of judgment herein. When the insured was examined on May 1,1942, when he applied for reinstatement, the doctor reported to thé defendant that the insured’s general appearance is not that of first-class health ” and that insured was a “ poor risk ”. The report did not show that insured was suffering from any disease at that time. While no proof of disability was given to defendant, the administrators of the insured argue that the examination of May 1, 1942, should have disclosed his total and permanent disability and that the defendant is bound by the failure of its doctor to discover it even though no claim of disability was then asserted. We do not think that that was the “ due proof ” of disability intended or required by the policy provisions. We are not now concerned with whether proof of disability was given subsequent to the judgment entered herein and prior to the death of insured.

The judgments should- be modified by reversing so much thereof as dismissed the first and second causes of action and granting a new trial thereof, and as so modified affirmed, with costs to appellant to abide the event.

Loughran, Ch. J., Lewis, Desmond, Thaoher, Dye and Fuld, JJ., concur.

Judgment accordingly.