text:
    Lillian Foley, Appellant, v. Equitable Life Assurance Society of the United States, Respondent.
    Argued March 1,1943;
    decided May 20, 1943.

      Emanuel Redfield for appellant.

      James D. Ewing and Eugene Z. Du Bose for respondent.
   Conway, J.

There is presented for our determination a question as to the power and authority, of a receiver in supplementary proceedings to make an election on behalf of an insured judgment-debtor to receive the cash surrender value or other designated cash value of certain insurance policies under applicable provisions of the policies.

The plaintiff was the wife of the debtor upon whose life twenty-four policies of insurance had been written by the defendant. Twelve of those policies may be designated as Class A policies and the other twelve as Class B policies. All twenty-four provided for a monthly life annuity payment to the debtor after he reached the age of sixty-five years or payment to his executors or administrators if he died before reaching that age.

In the Class A policies there were the following pertinent provisions: Within three- months after default in the payment of any premium after one full year’s premium has been paid, the Annuitant may surrender this contract and elect one of the following Options: (a) Cash Value. To receive the Cash Surrender Value as provided in Schedule ‘ C.’ (b) Paid-up Life Annuity. To purchase a non-participating paid-up Life Annuity with monthly payments * * * [after sixty-five]. If the Annuitant does not elect one of said Options within three months after such default, this contract will become a paid-up Life Annuity as provided under Option (b). * * *”

In the Class B policies the pertinent provisions were: “ Within three months after default in the payment of any premium after one full year’s premium has been paid, the Annuitant may surrender this contract and elect one of the following Options: (a) Cash Value. To receive the Cash Surrender Value as provided in Schedule ‘ C.’ (b) Paid-up Life Annuity. To purchase a non-participating paid-up Life Annuity with monthly payments * * * [after sixty-five]. Such paid-up Life Annuity may be surrendered by the Annuitant on any anniversary of the Register date of this contract for its cash value, which shall be an amount equal to the sum which would have been payable in event of the death of the Annuitant at the date of such surrender.

If the Annuitant does not elect one of said Options within three months after such default, this contract will become a paid-up Life Annuity as provided under Option (b). * * *”

It will thus be noted that to obtain the cash surrender value of a Class A or Class B policy the annuitant was required to surrender his policy within three months after default, following the payment of one full year’s premium, but that as to the Class B policies a paid-up Life Annuity policy could be surrendered and a cash value, as fixed in the policy, obtained on any anniversary of the Register date of the policy.

In 1934, plaintiff obtained a judgment against the debtor for $16,650. A subpoena was served upon the defendant in supplementary proceedings following the entry of judgment and thereafter an order was made appointing a receiver of the property of the debtor and of all his rights under the policies. On the return date of the motion for the appointment of the receiver, the brother of the debtor appeared and asserted that the policies had been assigned to him by the debtor by assignment dated November 23, 1935, and the debtor appeared and claimed that the policies were not subject to claims of his creditors under the laws of Pennsylvania of which he was a resident. Nevertheless a receiver was appointed on January 23, 1936, and he was directed, before entering upon the duties of his trust, to execute and file a bond to be approved by the court in a sum designated.

Plaintiff, who subsequently became assignee of the receiver so appointed, and the defendant appear to agree that the date to which the title of the receiver related back under Civil Practice Act, sections 807 and 808 is November 6, 1935, which was the return date of the subpoena served upon defendant, although the subpoena had been served prior thereto, and we shall take that as the appropriate date. (See Foley v. Equitable Life Assur. Soc., 173 Misc. 1031, 1032.) The receiver, however, although appointed by order dated January 23, 1936, did not have his bond approved until February 9,1937, and it was not filed until four days later.

In the meantime the attorney who represented both the plaintiff and the receiver, following defaults in payments of premiums by the debtor, made demands upon the defendant for the payment of the cash surrender values of the policies. Under applicable provisions of the Class A and Class B policies those demands were timely only as to four of the policies in each class in that they were made within three months after defaults.

In order to assist creditors the Legislature has provided by Civil Practice Act, sections 807 and 808 as follows:

§ 807. Vesting of property in receiver. The property of the judgment debtor, whether acquired before or any time after the appointment of a receiver, is vested in a receiver who has duly qualified, from time of filing the order appointing him or extending his receivership. * * *
“ § 808. Extension of receiver’s title to personal property. Where the "receiver’s title to personal property has become vested, as prescribed in the last section, it also extends back by relation, for the benefit of the judgment creditor in whose behalf the special proceeding was instituted, as follows: •Jr *sr
“ 2. Where an order, subpoena or warrant has not been served, as specified in the foregoing subdivision [on judgment debtor], but an order has been made or subpoena issued requiring a person to attend and be examined concerning property belonging, or a debt due, to the judgment debtor, the receiver’s title extends to the personal property belonging to the judgment debtor, which was in the hands or under the control of the person or corporation thus required to attend, at the time of the service of the order or subpoena, and to a debt then due to him from that person or corporation. * * * ”

The general rule is well stated in Clark on Receivers, section 223, as follows: ‘ ‘ The status of the property and the relations toward it of all parties interested in it, are fixed by the order appointing a receiver and the conditions are not changed by an order providing that the receiver shall give bond for the faithful discharge of his duties in order that the property may be bound and the rights of creditors therein secured. If the jurisdiction of the court over the property did not attach contemporaneously with the order appointing a receiver, the purpose of the court in appointing a receiver might be defeated by the failure of the person appointed receiver to accept the position, or his inability to give the bond required. Or, in the interim between the order appointing a receiver and his giving the required bond, a creditor might obtain an advantage by securing a confession of judgment, and in innumerable other ways. The order for the appointment of a, receiver, followed by the consummation of the appointment by the giving of a bond, vests the estate of the judgment debtor in such receiver as of the date of the order, without the execution of any transfer or assignment according to the New York law.” See to the same effect, Matter of Schuyler’s Steam Tow Boat Company, 136 N. Y. 169 (revd. on another point, sub nom. Moran v. Sturges, 154 U. S. 256, 283, 284); Matter of Christian Jensen Co., 128 N. Y. 550; Matter of Delaney, 256 N. Y. 315, 319.

It may well be urged that when the receiver finally qualified by the filing of a bond and his title related back, in this instance by seeming agreement of the parties to the return date of the subpoena served upon the defendant, that all the incidents of title, including the right of election, should also be related back to the same date. There are some difficulties, however, which militate against such a holding and which we think are determinative at least in this instance. Assuming that the right of election could he exercised by the receiver before his qualification, there would be no one to whom this defendant could have paid the cash surrender values of the policies. Non constat, the receiver might never file a bond or his appointment might be vacated or the proceeding for his appointment abandoned. In the meantime, if there were no person to whom this defendant could make payment of the cash surrender values of the policies, the defendant would have to consider the policies both as potentially paid-up Life Annuity policies and as contracts upon which cash surrender values were due because of an election to terminate the original contracts of insurance, as far as the four Class A and the four Class B policies were concerned. If that could be so for a year, as in the instant case, there is no reason in principle why it could not continue for a much longer period. It seems to us better and more in consonance with orderly procedure both in the administration of court proceedings and in the business of insurance to insist that where there is an election to be made there be prompt qualification by the receiver. We know as a matter of common knowledge that a receiver can qualify almost immediately upon his appointment and, if he be one who cannot so qualify, the court upon prompt application may select one who can, in the infrequent case where an election must be made.

That disposes of all of the Class A policies. These have now become paid-up Life Annuity policies as provided under Option (b). When we turn to the Class B policies a different situation prevails. As to all twelve of them an election could be made, after they had been transformed into paid-up Life Annuity policies, on any anniversary of the Register date of the insurance contract so that a cash value provided for therein might be obtained. Proper demand in writing as to the Class B policies was made on May 18, 1937, and was effective on the first anniversary of the Register date occurring thereafter. As of that anniversary date the nonparticipating paid-up life Annuity mentioned in Option (b) (supra) may be surrendered for its cash value, ‘ ‘ which shall be an amount equal to the sum which would have been payable in event of the death of the Annuitant at the date of such surrender.”

A preliminary question is raised as to the scope of the review here permitted. The Appellate Division reversed on the law and facts hut made no new findings of fact. Civil Practice Act, section 602 provided, at the time of the entry of judgment herein, as follows: “Upon an appeal to the court of appeals from a judgment reversing a judgment entered upon * * * a decision or a determination in the trial court, or from an order granting a new trial upon such a reversal, it must be conclusively presumed that the judgment was not reversed, or the new trial granted, upon a question of fact, unless the particular question or questions of fact upon which the reversal was made or the new trial was granted are specified and referred to by number or other adequate designation in the body of the judgment or order appealed from.”

The plaintiff has stipulated for judgment absolute and claims that the reversal was upon the law. We have held that ". if there is any question of fact from which opposing inferences can be drawn, the Appellate Division was free, in the exercise of its discretion, to order a new trial.” (World Exchange Bank v. Commercial Casualty Ins. Co., 255 N. Y. 1, 4.) H there be a question of fact, judgment absolute must be rendered. On the other hand, even though the Appellate Division stated that the reversal was on the law and the facts, should the evidence and inferences point in but one direction, to reverse upon the facts would constitute error of law and we may review the decision. Cohen, Powers of the New York Court of Appeals, page 185 and cases there cited. Here there is no conflicting testimony. The opinion of the Appellate Division indicated that that court considered a blanket demand for the proceeds of the policies as insufficient and that a separate demand for each policy was necessary. Whether or not that was correct under the circumstances is a question of law and judgment absolute should not be rendered thereon as matter of course.

We think that a sufficient demand was made both as to the Class A and the Class B policies. It has already been mentioned that the demand of May 18, 1937, was effective as to the Class B policies on the first anniversary of the Register date occurring thereafter. That demand will also be effective as to the Class A policies at such time in the future as payments become due thereon in accordance with the terms of the policies. In the stipulation in lieu of examination before trial it is stated that the attorney for the receiver " requested payment to the receiver of the alleged cash surrender value of the retirement annuity contracts ” and that he repeated his request to the said employee [of the defendant] for the payment of the cash surrender values.” Those demands were, it is true, made prior to the filing of the bond by the receiver. The letter of May 18, 1937, subsequent to the filing of the bond, demanded that defendant pay over the proceeds now due on the above-noted policies.” In view of the oral demands, correspondence and litigation the defendant unquestionably knew that payment upon 'each of the policies in the two classes was the subject of the demands. The purpose of a demand in an instance such as this, is to inform the party upon whom it is made of the act which it is desired that he perform. Here the defendant was clearly advised that the receiver, the plaintiff’s assignor, wished to obtain all the moneys to which the insured judgment debtor was entitled by reason of any action which could be taken by him. A separate demand for each policy was unnecessary under those circumstances.

Further, under the circumstances here, it was unnecessary as far as the defendant was concerned for the receiver to have possession of the policies so as to surrender them. The duties of a receiver in supplementary proceedings are to take possession of tangible property of the judgment debtor and convert it into money; to collect intangible assets; to bring any action relating to property rights that the judgment debtor could bring. The receiver takes the legal title to all the personal property of the debtor whether in the hands of the latter or in the possession of others and he has an equitable right to property fraudulently transferred by the judgment debtor. Thus, in Reynolds v. Aetna Life Ins. Co. (160 N. Y. 635) where a judgment debtor assigned life insurance policies between the time of the appointment of a receiver and the debtor’s death, we held that the receiver had legal title to the policies from the time of his appointment although he had no knowledge of the existence of the policies. We said: “ What the plaintiff acquired was the legal title to the policies and all the rights of the judgment debtor under them at the time of the plaintiff’s appointment.” (p. 648.) After the appointment of the receiver the possession of the policies by the judgment debtor was subject to the receiver’s title and he had no right to transfer them , nor to appropriate them to his own use.

The defendant further resists judgment upon the ground that the policies have not been surrendered as required by the contracts. The receiver, of course, could not surrender the policies since they were in the possession of the judgment debtor. However, both the debtor and his brother Arthur had appeared on the return of the motion for the appointment of a receiver,. January 3,1936. The debtor then asserted that the policies could not be reached by creditors under Pennsylvania law and his brother asserted that the policies had been assigned to him by assignment dated November 23, 1935, a date subsequent to the date to which the title of .the receiver was related back under Civil Practice Act, sections 807 and 808.

We have held in varying situations that the surrender of life insurance policies may be dispensed with, for instance, where the policy has been stolen (Wilcox v. Equitable Life Assur. Soc., 173 N. Y. 50), and where the policy has been wrongfully retained so that a proper transfer has been prevented. (Lahey v. Lahey, 174 N. Y. 146.) The condition of a policy, requiring its surrender, may be disregarded upon proof that performance of the condition is impossible and that the interest of the insurer will not be jeopardized by failure to receive the surrender of the policy. (Matter of Bartley, 255 App. Div. 992; Martin v. New York Life Ins. Co., 104 F. 2d 573.) Here all the rights of the judgment debtor have passed to the receiver. The only assignment claimed to have been made, when both the debtor and his brother were in court on January 3,1936, was one to the said brother on November 23, 1935. That assignment was too late to be valid, as we have seen, since it was made subsequent to the service of the subpoena upon the defendant. In the instant action, the defendant interposed an answer which contained affirmative defenses alleging that the policies in suit belonged to a third party by assignment and that they were exempt from the claims of creditors under the laws of Pennsylvania, the State in which the insurance contracts were made. Those two affirmative defenses were stricken out on motion of the plaintiff and an appeal from the order granting that relief has been abandoned. (See Foley v. Equitable Life Assur. Soc., 173 Misc. 1031.) There is here no beneficiary save the insured or his estate. The defendant cannot be subjected to a second payment under these policies. The surrender of the policies is unnecessary for the protection of the defendant.

Since it is not possible on a new trial to alter the facts determining the liability of the defendant the judgment should be modified in accordance [with this opinion with costs to appellant in this court and in the Appellate Division. (Freel v. County of Queens, 154 N. Y. 661, 665, 666; Heerwagen v. Crosstown Street Ry. Co., 179 N. Y. 99, 106; American Guild v. Damon, 186 N. Y. 360, 364.)

The order of the Appellate Division should be reversed and the judgment of the trial court modified in accordance with this opinion, and as so modified affirmed,, with costs to the appellant in this court and in the Appellate Division.

Lehman, Ch. J., Loughran, Rippey, Lewis and Desmond, JJ., concur; Finch, J., taking no part.

Ordered accordingly.


source: Caselaw Access Project

author: Rippey, J.

license: Public Domain

text:
    Yeckes-Eichenbaum, Inc., Respondent, v. Wilson McCarthy et al., as Trustees of the Property of Denver and Rio Grande Western Railroad, in Reorganization Proceedings, Appellants.
    Argued April 13, 1943;
    decided May 27, 1943.

      James D. Ewing, William R. McDermott and Eugene J. Du Bose for appellants appearing specially.

      Nelson Trottman of Chicago, Illinois, and John B. Doyle for Charles M. Thomson, as trustee of the property of Chicago and North Western Railway Company, amicus curiae, in support of appellants’ position.

      Bernard Tomson for respondent.
   Rippey, J.

The New York City Municipal Court Code (L. 1915, ch. 279, as amd.) provides, so far as material here, that a summons, in a case where the Municipal Court of the City of New York has jurisdiction of the subject matter of the action, may be served upon the defendant within the city of New York in like manner as though the summons issued out of the Supreme Court, provided, that it shall not be served by publication (§ 21) and that the summons, or the summons and complaint, if the complaint is served with the summons, must be filed with proof of service in the office of the clerk in the district where the action or proceeding is pending within three days after service except that, where the summons has not been filed within three days after service, plaintiff may obtain an order providing for the filing of the same nunc pro tunc (§ 22). It is also provided that an objection that the court has no jurisdiction of defendant may be taken before answer by filing with the clerk a notice of special appearance accompanied with an affidavit of the party stating in particular the grounds of his objection whereupon a hearing must be had on the objections and, if the objections are sustained by the court, the complaint must be dismissed (§ 88).

Service of the summons and complaint was attempted under the authority of section 229-b of the Civil Practice Act which, so far as material in the form in which it was in effect at the time of the attempted service, reads as follows: “ When any natural person or persons not residing in this state shall engage in business in this state, in any action against such person or persons arising out of such business, the summons may be served by leaving a copy thereof with the complaint with the person in charge of such business within this state, and any summons so served shall be of the same legal force and validity as if served personally on such nonresident person or persons so engaging in business in this state "within the territorial jurisdiction of the court from which the summons issues, provided that a copy of such summons and complaint together with a notice of such service upon such person in charge of such business according to the provisions of this section shall be forthwith sent to such nonresident person or persons by registered mail, return receipt requested.”

The plaintiff caused a copy of the summons and verified complaint to be left with William W. Hatton, who was asserted to be the person in charge of the business of the defendants within this State, at 37 Wall Street in the City of New York, on September 12, 1940, and caused to be sent by registered mail, return receipt requested, another copy of the summons and complaint, together with notice of the aforesaid service upon Hatton, addressed to the defendants at 554 Equitable Building, Denver, Colorado. Thereupon a notice of special appearance was filed by defendants, accompanied by affidavits stating the particular grounds of objections to the jurisdiction of the court with respect to the person of the defendants. It was asserted, among other things, that Hatton was not a person in charge of the business of the defendants within the State of New York, that the defendants did not engage in business in this State, that the causes of action referred to in the complaint did not arise out of any business transacted by the defendants in this State and that the defendants had no relation to or connection with the subject matter of the action and facts were presented to sustain such objections. Thereupon the plaintiff moved to dismiss the notice of special appearance. Pending a hearing on the motion, a copy of the summons and complaint was served upon one George R. Kenny, who was claimed by the plaintiff to be a person in charge of the defendants’ business in New York State. Later an affidavit was filed by the plaintiff which presented evidentiary facts which indicated only that The Denver and Rio Grande Western Railroad Company, of which the defendants were trustees, was doing business in New York State and that Kenny was its managing agent. It was then stipulated that an affidavit of such service might be filed in the offices of the Clerk of the Municipal Court nunc pro tunc as of September 12, 1940, with the same force and effect as if then filed. No claim appears here, directly or by inference, that any attempt has been made to make service upon The Denver and Bio Grande Western Bailroad Company, a foreign corporation. Upon the hearing, the objections of the defendants to the jurisdiction of the court were sustained and the complaint was dismissed. The Appellate Term reversed and overruled the objections and the Appellate Division affirmed the order of the Appellate Term.

The plaintiff is a domestic corporation with its principal place of business in the city of New York. The Denver and Bio Grande Western Bailroad Company was organized under the laws of the State of Colorado where its principal place of business is located and it was engaged in the carriage of freight and passengers in interstate commerce. Its lines are in the States of Colorado, Utah and New Mexico but do not connect with any railroad operating* within the State of New York or extend within that State. On November 1,1935, an order was made by the United States District Court for the District of Colorado approving the petition of the debtor railroad company in proceedings for reorganization under section 77 of the Bankruptcy Act (U. S. Code, tit. 11, § 205), pursuant to which the debtor was permitted to maintain and operate its property and railroad system pending the appointment of trustees. On November 18, 1935, said court appointed the defendants as trustees of the debtor, each of whom is a resident of the State of Colorado, by an order which gave them possession and control of the business and properties of the railroad company and imposed upon them all the duties and obligations of trustees under the Bankruptcy Act, including, but not by way of limitation, the duty and obligation under court supervision to maintain and operate the railroad system of the debtor. They immediately qualified as such trustees and entered upon the discharge of their duties as such and continued to act in that capacity to the time of the alleged commencement of this action. Neither trustee has a place of business within the State of New York. Neither the railroad company nor the trustees authorized Hatton or Kenny to accept service of process for them. There is no evidence that either the railroad company or the trustees had authority to do business within the State of New York.

The action is brought to recover from the defendants damages arising out of the alleged breach of contracts, made by defendants in the State of Colorado in August and September, 1938, to transport for four different consignors six car lots of cauliflower from three noncompeting points respectively in the State of Colorado and to deliver the same to specified consignees either at Denver, Colorado, or Kansas City, Missouri. During transit, new consignees were substituted for the original consignees and, in some cases, for the substituted consignees, and the shipments were diverted from time to time over railroad lines other than those of the initial carrier. Finally, at points outside of the State of New York, the plaintiff was substituted as consignee for all shipments and the cars were diverted to New York State where they were received by th"e plaintiff in due course. None of those transactions, other than the receipt of the cars, occurred within the State of New York.

The debtor corporation maintained a fiscal office at 37 Wall Street in the City of New York for the purpose of maintaining its corporate existence, the presence of its records and the registration and transfer of its stocks and bonds. Transaction of such business was" not within the province of the trustees but they bore the expense of continuing the maintenance of the office as an expense of administration. Hatton was the assistant secretary of the debtor in charge of that office but he was not employed by the trustees. He swore in his affidavit that the defendants were not engaged in business in this State and that he was not engaged in or in charge of any business of the defendants in the State. The positive testimony of Hatton, who was in .a position to know, must be accepted as conclusive testimony that he was in charge of no business for the defendants as against mere surmise sought from circumstances alone (Taylor v. Granite State Provident Assn., 136 N. Y. 343, 346). The office at 500 Fifth Avenue was maintained by the debtor and the defendants who engaged Kenny and others solely in the solicitation of freight and passenger business for competitive points outside New York State. That office handled no cash, sold no tickets and issued no bills of lading. Neither did the defendants' handle any cash in New York State in connection with transportation business. Assuming that the defendants as trustees stood in the same position as the railroad company, the faces shown here are insufficient to show that the defendants were doing business within the State of New York (Green v. Chicago, B. & Q. Ry. Co., 205 U. S. 530) or that Kenny was in charge of any business for them on the basis of which service of the summons on Kenny was sufficient to satisfy the requirements of section 229-b of the Civil Practice Act. The plaintiff was required to show not only that the defendants were doing a substantial part of their business in New York (Holzer v. Dodge Brothers, 233 N. Y. 216, 221), but that the agent in charge was invested with general powers involving judgment and discretion {Taylor v. Granite State Provident Assn., supra).

The mere fact that the plaintiff is a resident of New York State, while significant, is not conclusive (Michigan Central R. R. Co. v. Mix, 278 U. S. 492). This is no evidence as to where the loss occurred. The plaintiff alleges in the complaint only that the goods were received in good condition by the initial carrier in Colorado. The presumption is that they continued to be in the same good condition when they left the possession and control of that carrier (Chicago & Northwestern Ry. Co. v. C. C. Whitnach Produce Co., 258 U. S. 369). It is the undisputed fact that nothing the defendants or the Denver and Kio Grande Western Kailroad Company did or omitted to do in New York State occasioned the loss. There is merely an allegation that when the goods were received in New York City from the final carrier they were found not to be in the same good order and condition as when received by the initial carrier in Colorado and were then found to be in damaged condition. Accordingly, the requirements of section 229-b of the Civil Practice Act were not satisfied since the business, if any, which the defendants may have been doing within the State of New York did not give rise to the causes of action set out in the complaint.

In view of the conclusions reached, it is unnecessary to consider the question as to whether or not the entertainment of jurisdiction within the State of New York would constitute an undue burden upon interstate commerce or whether section 229-b is constitutional.

The order of the Appellate Division and that of the Appellate Term should be reversed and the judgment of the Municipal Court of the City of New York affirmed with costs in all courts. The first question certified is answered in the negative and the second question is not answered.

Loughran, Lewis, Conway and Desmond, JJ., concur; Lehman, Ch. J. and Finch, J., taking no part.

Ordered accordingly.


author: Desmond, J.

text:
    Rosario Castorina, Respondent, v. Max Rosen et al., Doing Business as Rose Street Garage, Appellants, et al., Defendants.
    Submitted April 14, 1943;
    decided May 27, 1943.

      Louis A. Breslerman for appellants.

      Karl C. Brett and Milton C. Jacobs for respondent.
   Desmond, J.

The complaint asserts that plaintiff left his automobile in storage with appellants, who are co-proprietors of a garage in New York City, on their undertaking that they would safely and securely keep the car and return it to plaintiff on demand. The further allegation of the complaint is that appellants did not take proper care of the car but returned it in a damaged or destroyed condition, to plaintiff’s loss.

The proof shows that plaintiff, who had been housing his car at appellants’ garage for more than a year, left it there, according to his custom, on May 4, 1939. When he called for it on May 7th, it was not to be found. The next day he saw it at a police station. It was badly damaged. As a result of disclosures made to plaintiff by the police, plaintiff made a complaint in a Magistrate’s Court against defendant Birgis, an employee, of appellants, accusing Birgis of a theft of the automobile.

There was testimony that Birgis had come into appellants’ "employ " well-recommended, ’ ’ about a year before the incident involving plaintiff’s car. Birgis worked alone at the garage every night. His duties included washing cars and' keeping watch and he had no authority to remove any car from the garage. On the morning that plaintiff’s car was missing from the garage, Birgis was missing, too. Later he admitted in plaintiff’s presence that he had driven plaintiff’s car away from the garage without permission and had damaged it. The testimony that Birgis was “ well-recommended ” at the time appellants hired him is the only thing in the record bearing in any way on the question of the exercise of due care by appellants themselves (as distinguished from the admitted fault of Birgis). Testimony as to appellants’ dealings with Birgis after the theft does not bear on this question.

The Appellate Division was of the opinion ‘ ‘ that sound principles of law and considerations of expediency combine to require that the bailee be held liable.” (265 App. Div. 315, 318). We think the settled law in this State is to the contrary. Schmidt v. Blood (9 Wend. 268), decided in 1832, stated the rule, ever since followed, that a bailee for hire “ is only bound to take the same care of the goods as of his own, and if they be stolen or embezzled by his servant, without gross negligence on his part, he is not liable * * (p. 271) “If he [the bailor] proves the demand upon the warehouseman and his refusal to deliver, these facts unexplained are treated by the courts as prima facie evidence of negligence;. but if, either in the course of his proof or that of the defendant, it appears that the goods have been lost by theft, the evidence must show that the loss arose from the negligence of the warehouseman.” (Claflin v. Meyer, 75 N. Y. 260, 264.) Cases involving common carriers, and cases where there is an entirely unexplained failure to return the bailed goods, are not in point. There is in the record before us no evidence at all of appellants’ negligence and no basis for any finding to that effect; indeed, the Appellate Division did not say there was.

It may be, as the Appellate Division says, “ not unreasonable ” that the garageman, and not his customer, should stand such a loss as this. Many cases in other states, it seems, so place the burden. But the law in this State has been otherwise for a long time, and not without reason. We limit a master’s liability for his servant’s torts to those tortious acts done by the servant while acting within the scope of his employment. When Birgis took the ear from the garage, he strayed outside that scope. So far as the record shows, he had never done any such thing before nor had there been any ground for suspicion that he was so inclined. “ Where there is no notice that an employee is in the habit of acting in a manner dangerous to others, there is no duty to control the actions of the employee outside the scope of his employment. Such limitations, at least, are dictated by fundamental principles of tort liability. Without them there would be no room for the doctrine that a person is responsible only for the result of his own fault or the fault of his servants, acting within the scope of their employment.” (Ford v. Grand Union Co., 268 N. Y. 243, 249.)

The Legislature, dealing in article 9 of the General Business Law wdth the rights and duties of warehousemen, has shown no inclination to change the traditional rules as to warehouse-men's liabilities (see §§ 95, 107). The courts should be slow to change such rules.

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

Loughran, Rippey, Lewis and Conway, JJ., concur; Lehman, Ch. J., and Finch, J., taking no part.

Judgments reversed, etc.


author: Desmond, J. Rippey, J.

text:
    Louis Hofferman, Respondent, v. Maurice Simmons, as Property Clerk of the Police Department of the City of New York, Appellant. Harry Rader, Respondent, v. Maurice Simmons, Individually and as Property Clerk of the Police Department of the City of New York, Appellant. Albert Rivera, Respondent, v. Maurice Simmons, as Property Clerk of the Police Department of the City of New York, Appellant. John Smith, Respondent, v. Maurice Simmons, as Property Clerk of the Police Department of the City of New York, Appellant.
    Argued April 9, 1943;
    decided May 27, 1943.

      Thomas D. Thacher, Corporation Counsel (Paxton Blair, James Hall Prothero and Nathan B. Silverstein of counsel), for appellant.

      Harry J. Harrison and Jerome J. Fendrick for Louis Hofferman, respondent.

      Arthur Morris and Morris Okoshken for Harry Rader, respondent.

      Jacob Siegfried for Albert Rivera, respondent.

      Jacob Siegfried for John Smith, respondent.
   Desmond, J.

Each of the four above-entitled actions is in replevin. In each action the plaintiff demands that the courts decree the return to him of money taken from him by New York City police officers and now held by the defendant, who is the property clerk of the New York City Police Department. In each case (except the Hofferman case, where there is a general denial only) the property clerk’s answer contains a denial that plaintiff is entitled to a return of the money, and a separate defense to the effect that the monies seized and held by the police are the proceeds of crime ”. Each plaintiff has heretofore pleaded guilty, in other proceedings, to a crime connected with gambling: Hofferman, to the crime of book-making (Penal Law, § 986); Rader, to the crimes of using a room for policy playing and possessing policy slips (Penal Law, § 974); and Rivera and Smith to the crime of possessing. policy slips (Penal Law, § 974). After these pleas had been entered and punishments had been meted out by the criminal courts, the plaintiffs demanded back from the property clerk the monies in controversy. He refused to surrender them, and these actions followed. Each plaintiff has been awarded judgment, plaintiff Hofferman after a trial without a jury in the Municipal Court of the City of New York, and the other plaintiffs on the granting of their motions for summary judgment, on affidavits. In each case a majority of the Appellate Division Justices held that neither the Penal Law (§§ 971, 977, 978, 979) nor the New York City Administrative Code (§ 435-4.0; L. 1937, ch. 929) nor any other controlling authority justified the continued retention of these monies by the property clerk. We shall discuss those statutes again later; we hold that their language and meaning is not determinative of the issues here.

Since these are replevin actions, we concern ourselves not so much with the defendant’s right to hold as with the plaintiff’s right to recapture. We must, therefore, examine the record to see whether the respective plaintiffs have conclusively established their rights to the monies or whether, on the other hand, enough appears to raise triable issues of fact on which the trial courts could decide against the plaintiffs. All the plaintiffs admit their arrests on the gambling charges, their pleas of guilty and the seizure of the monies at the times of the arrests. Plaintiff Hofferman, at the trial of his civil suit, admitted that the money he is suing for ($150) was taken by the police from a table in a room in which there were sixty people or more, that the money represented bets placed by those in the room and that after the seizure he (Hofferman) made good his customers’ losses by reimbursing to them the amounts of their bets. In the Rader case plaintiff, moving for summary judgment, merely avers that at the time of his arrest the moneys which are the subject of the action ($1,012.50) were taken by the policemen from plaintiff’s trousers pockets and from a closet, which the officers opened with a key taken from plaintiff. In the Rader case the answering affidavits of the police officers say that they found thousands of policy slips in a locked box in the apartment and that both Bader and the man found in the apartment with him had keys to that box. On Bader’s person, say the officers in their opposing affidavits, were slips of paper containing records of policy collections, and on the premises, affiants say, were other records showing that Bader had a number of policy collectors working for him who collected large sums daily. In the locked closet where some of the seized money was found there were found also, swear these officers, quantities of envelopes such as are used by policy collectors, a small adding machine, coin wrappers, etc. The affidavits contain further statements to the effect that plaintiff Bader admitted that he was a policy “ banker,” employing a number of collectors, also it is alleged that the apartment, though occupied by Bader, was leased under an assumed name and that Bader actually resided elsewhere, that the officers had had him under observation for a long time and had seen him meet the policy collectors on the street and hand to, and receive from those collectors, certain envelopes.

In the Smith and Rivera cases, the plaintiffs’ affidavits for summary judgment simply allege that certain stated sums of money were taken from plaintiffs by the police at the time of the arrests, that the property clerk has refused to return the monies, and that the answers of defendant are sham. The police officers, answering, filed affidavits in which they say that they had followed the two plaintiffs to an apartment, which they entered, finding Smith and Bivera sitting at a table counting money, that both plaintiffs admitted to the officers that the money was that day’s receipts from policy collectors, that a slip of paper found with the money contained the names and numbers of the policy collectors, and that each plaintiff admitted that he was a ‘ pickup ” man for those policy collectors.

We think it clear that these sworn statements of the police officers make it impossible to grant summary judgments, or judgments on the law, in favor of these plaintiffs. Beplevin is strictly a possessory action and plaintiff, to recover, must show a possessory right recognized by law. (Roach v. Curtis, 191 N. Y. 387, 390.) He must be the owner of the property, or lawfully entitled to its possession. (Rockwell v. Saunders, 19 Barb. 473, 482.) Where, as in these cases, the claim is not of wrongful taking, but of wrongful detention, it is for the plaintiff to plead and prove facts showing that the detention is wrongful. (Rule Civ. Prac. rule 271, Civ. Prac. Act, § 1096.) “ The plaintiff, seeking to take property out of the possession of the defendant, was bound to show title in himself, and the defendant could defend itself by showing that he [plaintiff] did not have title, and thus did not have the right to take from it [defendant] the possession which it had acquired.” (Griffin v. Long Island R.R. Co., 101 N. Y. 348, 354, see Seidenbach v. Riley, 111 N. Y. 560, 566; Kaufman v. Simons Motor Sales Co., 261 N. Y. 146, 149.) Plaintiffs may not recover “ unless entitled to the possession when they commenced their action.” (Wood v. Orser, 25 N. Y. 348, 350.) “ As the plaintiff therefore had no title to these notes, and no right to the possession of them when this action was commenced, it had no right to take them from the possession of the defendant, no matter how imperfect its [defendant’s] title was. * * * ” (Black River Ins. Co. v. New York State L. & T. Co., 73 N. Y. 282, 291.) A plaintiff in replevin must always show a wrongful detention, and unless plaintiff has that general or special property and right of immediate possession, it cannot be true that it [the chattel] is wrongfully detained from him.” (Scofield v. Whitelegge, 49 N. Y. 259, 261.) Such is the basis of the rule (54 C. J. p. 439) that he who gets possession only under and by virtue of an illegal transaction cannot recover. “ To hold otherwise would give a premium to a law-breaker.” (Desmare v. United States, 93 U. S. 605, 612.)

Assuming, for present purposes, the truth of the police officers’ statements, and applying thereto the settled rules governing replevin, we ask what right have the plaintiffs to demand that the courts get these monies back for them? What present title or possessory rights have they to show? The State Constitution itself outlaws the very acts these plaintiffs have pleaded guilty to. (Const. art. I, § 9.) The law affords a professional gambler no protection at all as to the monies he takes in (Penal Law, § 994, Bamman v. Erickson, 288 N. Y. 133.) This court has said that the professional gambler is an “ outlaw ” (Watts v. Malatesta, 262 N. Y. 80, 83) and that one who wagered with such a gambler never parted with the title to his money.” (People v. Stedeker, 175 N. Y. 57, 62.) The activities of the plaintiffs, assuming the truth of the answering affidavits, were completely illegal. From snch activities there could arise no rights at all. (“ Nemo allegans turpitudinem suam est audiendus ”— “ Nemo ex proprio dolo consequitur actionem ”.) To say that a professional gambler, running a betting room or supervising a squad of policy collectors, can invoke the aid of the courts to get back from the police monies which have been bet with the professional gambler in defiance of the law, is to say that the courts will recognize and protect an outlawed business, and give their sanction to titles and possessory rights founded only on lawbreaking (see Woodworth v. Bennett, 43 N. Y. 273, 276, Morgan Munitions Supply Co. v. Studebaker Corp., 226 N. Y. 94, 99, Gonch v. Republic Storage Co., 245 N. Y. 272, Flegenheimer v. Brogan, 284 N. Y. 268). “No one shall be permitted * * * to acquire property by his own crime. * * * He cannot vest himself with title by crime.” (Riggs v. Palmer, 115 N. Y. 506, 511, 513.) Plaintiffs here are not helped by cases like Lynch v. St. John (8 Daly 142) and Duboff v. Haslan (195 App. Div. 117), which command the return by the property clerk to its lawful owner of stolen property after the trial, or require the property clerk to return to its owner property seized on suspicion of having been stolen but not thereafter shown to have been so stolen. (See Simpson v. St. John, 93 N. Y. 363.)

It is true that Penal Law sections 977, 978 and 979, authorizing the seizure and destruction of gambling implements, contain no directions as to the disposition of monies seized from gamblers by the police (see, however, Penal Law, § 985-a, which does deal with the disposition of monies found in slot machines). But the omission from the statutory law of specific rules governing the conduct of police officials with respect to seized monies does not enlarge the rights of professional gamblers. The failure of the Legislature to complete the statutory scheme as to gambling by providing for the ultimate disposition of monies seized from professional gamblers does not make lawful the possession of such monies by such persons or confer on them legal title thereto. “ However, whatever may or may not be done with the money in the custody of the court, the power of our courts, either at law or in equity, cannot be invoked in aid of one showing a violation of the law, to complete the illegal transaction and secure to the violator the fruits of his outlawry.” (Dorrell v. Clark, 90 Mont. 585, 592.) For similar reasons and because we are here passing on the rights of the plaintiffs and not delimiting the duties of the property clerk we need not now construe section 435-4.0 of the Administrative Code of the City of New York. The language of that part of the Administrative Code, taken from sections 331 to 335 of the former New York City Charter (L. 1901, ch. 466) deals, among other things, with money alleged * * * to be the proceeds of crime.” There was a difference of opinion in the Appellate Division, in these cases, as to whether monies seized from a professional gambler in a gambling place are to be considered the “ proceeds of crime ” within the meaning of the Administrative Code, the doubt arising because the headings and some of the language of the Administrative Code suggest that only stolen property is referred to. Nonetheless no one of these plaintiffs may recover if, upon a trial of the facts in his case, it shall appear that his only claim to these moneys arises from his receipt of them in the form oi bets made with him while he is doing business as a professional gambler.

In the Hofferman action the judgments should be reversed and a new trial granted with costs to the appellant to abide the event; in the other three actions (Bader, Bivera and Smith) the judgments should be reversed and the motions for summary judgment denied, with costs in all courts.

Rippey, J.

(dissenting). I dissent in the Hofferman case and vote to affirm the judgment for plaintiff. It has been found, after a trial of the issues, that the moneys in question were not the proceeds of crime, nor the instruments of a gambling process and were the property of plaintiff to which he was entitled to immediate possession. This court has no power to disturb the facts so found and affirmed by the Appellate Courts below. I concur in the result in the Rader, Rivera and Smith cases on the ground that triable issues of fact were presented by the pleadings which could not be resolved on motions for summary judgment.

Lehman, Ch. J., Loughran, Lewis and Conway, JJ., concur with Desmond, J.; Rippey, J. dissents as to the Hofferman action, and concurs in the result in the Rader, rivera and Smith actions in a separate opinion; Finch, J., taking no part.

Judgment accordingly.


author: Fisch, J.

text:
    Joseph G. Browne, Appellant, v. Fenton G. Hibbets, as President of Local Union No. 584, Unit No. 3, International Brotherhood of Teamsters, Chauffeurs, Stablemen and Helpers of America, Respondent, et al., Defendants.
    Argued March 9, 1943;
    decided April 15, 1943.

      John F. X. Browne for appellant.

      Samuel J. Cohen for respondent.
   Fisch, J.

Whether plaintiff, expelled from a labor union and not being able to obtain a hearing upon his appeal within a reasonable time, may resort to the courts for redress, despite the defense that he has not exhausted his remedies within the union, is the primary question presented by this appeal.

Plaintiff had been employed for ten years as a milk route salesman by the Sheffield Farms Company, Inc. On September 29, 1939, the executive board of his local union found plaintiff guilty of refusing to participate in a labor parade and of advising others to disregard the orders of the executive board contrary to the provisions of section 91, article 3 of the International By-Laws. This section provides that anyone found guilty of violating its provisions may, upon conviction, be punished by reprimand, fine, suspension or expulsion.” A fine of fifty dollars was imposed by the board, and the chairman of the board informed plaintiff that the fine had to be paid within thirty days.

On October 14th, pursuant to the provisions of section 4 of the International Constitution and By-laws, plaintiff appealed to Joint Council No. 16 from the decision of the executive board of the Local. Joint Council No. 16 is the superior union organization in New York City, composed of 147 delegates from 21 local unions. In this letter of appeal, plaintiff inquired and said he would assume if he did not hear from the Joint Council to the contrary, that he would not have to pay the fine pending the disposition of the appeal. On October 30th, the thirtieth day after the imposition of the fine, plaintiff was informed by his employer that he was discharged, effective one week from that date, by reason of the demand of the Local. This demand was contained in á letter from Zeisler, secretary-treasurer of the local union, stating that plaintiff had been expelled from union membership for failure to pay the fifty dollar fine and that, pursuant to its collective bargaining agreement with the union, the company was required to discharge plaintiff. No notice of this demand was given to plaintiff by the Local, and this demand for his discharge, moreover, was made despite the fact that on appeal to the Joint Council, plaintiff could have suffered no worse penalty than affirmance of the fifty dollar fine.

• Immediately a letter was sent to the Local on plaintiff’s behalf, stating that he had been advised by the employer of his discharge and enclosing a check for fifty dollars in payment of the fine under protest. With this letter was enclosed a copy of the letter of October 14th to the Joint Council, calling its attention to the prior request of plaintiff concerning the necessity for the payment of the fine pending the appeal. The local replied through Zeisler, its secretary-treasurer, that plaintiff had been expelled for failure to pay the fine, the check was returned, and the letter added, “ There is nothing further we can do in the matter.” At the same time that the above letter was sent to the Local, another letter was written to the Joint Council on plaintiff’s behalf, complaining to the latter body about the Local’s action in demanding dismissal of plaintiff, and enclosed therein were a copy of the letter to the Local and another copy of the original letter of October 14th. This second letter, like the first, was ignored by the Joint Council.

The shop steward of the Local testified that after the expulsion he suggested to plaintiff that the latter go to union headquarters to make an application for reinstatement, but that plaintiff declined. On the stand plaintiff denied that the shop steward had made this suggestion to him. It further appeared that the relations between these two men were Hot friendly and that they had had a personal encounter after plaintiff’s expulsion.

After his discharge by his employer, plaintiff waited for almost a month in the hope that either the Joint Council or the Local would take some action on his appeal. No action having been taken, and there having been no indication that any action would ever be taken by the Joint Council, plaintiff, being unable to obtain any information whatever concerning his appeal, commenced this action on December 1st. By this action plaintiff sought to compel his reinstatement as a member of the union, to require his employer to rehire him, to recover damages for his expulsion, and to vacate proceedings before the executive board of the union which found him guilty of anti-union conduct. In his complaint plaintiff alleged that the Joint Council had arbitrarily refused to hear his appeal or take any action with respect thereto, and, as confirming the neglect by the Joint Council of the appeal of plaintiff, further alleged in his complaint that the Joint Council had also arbitrarily refused to take any action on numerous other appeals from decisions of the Local which had been pending before the Joint Council for as long as six months, and, on information and belief, that the Joint Council would continue to refuse to take any action on his appeal and that, therefore, he had no adequate remedy within the union. In this connection, it was admitted on the trial by the acting secretary of the Joint Coun-’ cil that no appeals whatever had been heard for at least ten months prior to that time, although appeals had been pending before the Joint Council undisposed of for at least nine months.

Special Term granted judgment directing the reinstatement of plaintiff in the Local and directing the latter to withdraw its demand on the employer for his discharge, and further directing the Joint Council to hear the appeal which plaintiff had taken from the decision of the local executive board. Special Term, however, dismissed the complaint in so far as it sought damages for wrongful expulsion and the annulment of the proceedings before the trial board. Plaintiff appealed to the Appellate Division from that part of the judgment which dismissed his complaint as to damages and denied vacation of the proceedings before the executive board. The defendant Local cross-appealed from that part of the judgment which granted relief to plaintiff. Defendant Joint Council did not appeal from that part of the judgment which directed it to hear the appeal of plaintiff from the decision of the Local or from any other part of said judgment. The employer, defendant Sheffield Farms, Inc., did not appeal.

The Appellate Division holding that plaintiff had failed to exhaust his remedies within the union prior to the commencement of this action, and that the union had at all times acted in good faith, reversed the judgment of the Special Term on the facts and the law to the extent that it had granted relief to plaintiff and dismissed the complaint on the law. Plaintiff took an appeal to this court from each and every part of the judgment entered on the order of the Appellate Division, but now abandons the appeal from that part of the judgment which dismissed the complaint in so far as it sought a determination vacating the proceedings before the local executive board.

There are three questions to be determined upon this appeal, first, whether plaintiff’s expulsion was wrongful, second, if his expulsion was wrongful whether he exhausted his remedies within the union before appealing to the courts, and third, whether he is entitled to damages for expulsion from union membership.

It would seem clear that plaintiff’s expulsion from the union was unlawful. Plaintiff’s expulsion was based upon his nonpayment of fine within thirty days. However, article 7, section 1, of the Local By-laws- expressly provides: " All fines and assessments to be classed as dues ” and section 2 of the same article provides in effect that a member may not be expelled for nonpayment of dues unless he has been in arrears for three months and then only after two weeks’ notification from the union. Defendant Local contends that the aforesaid provisions of the By-laws were not intended to tie the union’s hands in the imposition of fines, but were designed to set a time limit for the payment of fines only where no other time limit was imposed by the executive board. So narrow a construction of these provisions would not, however, seem to be warranted by the broad language employed therein. These provisions are expressly made applicable to " all fines and assessments.” The broad language of article 4, section 1 of the Local By-laws, conferring in general terms upon the executive board the power to dispose of charges against any member of the local union, must be read in connection^ with the more specific provisions of article 7, sections 1 and 2, limiting the power of the executive board with reference to the imposition of fines. The obvious purpose was to protect from expulsion union members who bad incurred fines for small offenses not warranting expulsion and whose financial ability to pay was not equal to any expense out of the ordinary. Plaintiff was expelled from the union for non-payment of a comparatively small fine which apparently he was ready to pay if necessary before the appeal was heard. He not only did not receive two weeks’ notification, but no notification at all and this despite the fact that three months had not expired from the time of the imposition of the fine. Tinder these circumstances his expulsion was in disregard of the By-laws and hence unlawful.

We are thus brought to the consideration of the main question involved, that is, whether plaintiff, having been unlawfully expelled, has exhausted his remedies within the union so that he is now free to resort to the courts in order to obtain reinstatement. (Havens v. King, 221 App. Div. 475, affd. 250 N. Y. 617.) A brief review of the facts sufficiently demonstrates that plaintiff used all reasonable means to obtain redress from the union organization before resorting to the courts. From the action of the executive board imposing the fifty dollar fine upon him, plaintiff took an appeal to the Joint Council pursuant to section 4 of the International Constitution and By-laws. No action was taken upon this appeal and the evidence discloses, apparently without contradiction, that the Joint Council was remiss in acting promptly upon appeals of this kind although clearly under the International Constitution and By-laws it had an obligation to act with reasonable promptness. Before the time allowed by the By-laws for payment of the fine, plaintiff found himself wrongfully expelled from union membership and within a week thereafter deprived of his means of livelihood. He complained to the Joint Council about this unlawful action of the Local but again there was no response from the appellate body. After waiting for a reasonable length of time and still receiving no word from the Joint Council, and having no means of compelling that body to take action upon his case, he concluded properly that his means of redress within the union organization were at an end, and instituted the present action.

It is now contended by the defendant Local that plaintiff had a further right to appeal to the union membership from his expulsion pursuant to article 7 of the Local Constitution and By-laws. There is testimony by the shop steward of the Local that, after plaintiff’s expulsion, he urged the latter to seek reinstatement. Plaintiff denied that the shop steward had made this suggestion and his denial is entitled to weight in view of the fact that he had a physical encounter with the shop steward so that the latter inferably entertained feelings of animosity toward plaintiff. At any rate, plaintiff’s right to appeal to the union membership as a whole would not have been an adequate remedy because, so far as appears from the evidence in the case at bar, reinstatement by the membership would have left standing against his record his expulsion from the union for failure to pay his fine despite the fact that such expulsion had taken place in violation of the By-laws of the Local. In People ex rel Deverell v. Musical Mutual Protective Union (118 N. Y. 101, 108) this court held that a union member who had been wrongfully expelled could resort to the courts without taking action under a similar provision for reinstatement because the remedy provided therein was inadequate.

Furthermore, after his expulsion, plaintiff was informed by Zeisler, secretary-treasurer of the Local, that ‘ ‘ There is nothing further we can do in the matter.” It would seem that this refusal by a union officer justified plaintiff in concluding that his hope of relief from the organization itself was at an end. The obligation imposed upon a union member is no more than to use all reasonable means to make use of the remedies available to him within the union organization before resorting to the courts. But the law does not require a man who has been left without means of subsistence through the wrongful action of the union to make continued futile efforts beyond a reasonable time within which to obtain relief. (People ex rel. Deverell v. Musical Mutual Protective Union, supra.) Failure of an appellate tribunal to consider within a reasonable time the appeal of a member is the equivalent of no further adequate remedy within the union in the absence of an effective means of appeal to the membership as a whole, and permits an application to the courts by a member who has been expelled. Unless this were so, there would be a denial of the contractual rights conferred by the By-laws upon all the members of the union equally. (Polin v. Kaplan, 257 N. Y. 277, 281.) Through delay by the appellate board, accompanied by a stoppage of subsistence, a hearing would be effectively denied to the union member, and when the latter attempted to obtain a hearing through the courts, defendant could then set up as a defense a failure to exhaust remedies within the Local, with the result that a member would be effectively denied any hearing.

It would appear, therefore, that plaintiff, having used every reasonable means within a reasonable time to obtain redress from the union organization, properly resorted to the courts, and, since the proof is clear that his expulsion was a violation of the Local Constitution and By-laws, he is, therefore, entitled to reinstatement. (Polin v. Kaplan, supra.)

The final question to be considered is whether plaintiff is entitled to damages for loss of wages during the period he has been unemployed as a result of the wrongful action of the Local. Since this is an action brought by plaintiff against the union in the name of its president under section 13 of the G-eneral Associations Law, plaintiff’s right to recover damages depends upon proof of facts rendering all the members of the association liable for the sum claimed. (Schouten v. Alpine, 215 N. Y. 225.) In the absence of allegations and proof of fraud or bad faith on the part of the membership as3a whole, no recovery of damages may be obtained. (People ex rel. Solomon v. Brotherhood of Painters, 218 N. Y. 115, 123.) In the case at bar, the Appellate Division has found that defendant union acted in good faith in expelling plaintiff from membership. This finding is certainly not against the weight of evidence and is in accord with the finding at Special Term that this dispute between plaintiff and the Local was the result of misunderstandings. It appears that the Local acted upon the assumption made in good faith, that the executive board had complete freedom in imposing a time limit upon the payment of fines, whereas the Local Constitution and By-laws gives union members a three months’ period of grace before expulsion for non-payment of fines. Under such' circumstances plaintiff, although entitled to reinstatement, may not claim damages for loss of employment.

It follows that the judgment of the Appellate Division, in so far as it denies plaintiff’s prayer for reinstatement, should be reversed and the judgment of Special Term affirmed in so far as it directs plaintiff’s reinstatement, and that the Joint Council proceed with the hearing of his appeal upon his deposit of the fifty dollar fine; in all other respects the judgment should be affirmed, with costs to plaintiff in all courts. (See 290 N. Y. 919, 920.)

Lehman, Ch. J., Lohghran, Rippey, Lewis, Conway and Desmond, JJ., concur.

Judgment accordingly.


author: Finch, J.

text:
    In the Matter of B. H. Inness Brown et al., Individually and as Copartners under the Name of Kellogg, Emery and Inness-Brown, et al., Respondents. John Gerdes et al., as Trustees of Reynolds Investing Company, Inc., Appellants.
    Argued February 23, 1943;
    decided April 22, 1943.

      John Gerdes, Mary-Chase Clark and James D. Carpenter, Jr., for appellants.

      George Zolotar, John F. Davis, W. Crosby Roper, Jr., and David Ferber for Securities and Exchange Commission, amicus curiae in support of appellants’ position.

      David Paine, Lawrence S. Greenbaum, Theodore S. Jaffin and James F. Dwyer for respondents.
   Finch, J.

The question raised by this appeal is whether a State court may fix the fees of attorneys appointed by a Federal court subsequent to the filing of the reorganization petition of a debtor under chapter VIII (§ 77 B) of the Bankruptcy Act (TJ. S. Code, tit.' 11) to bring suit in a State court upon causes of action constituting assets of the estate of the debtor.

The controversy arose in the course of the administration of the assets of the Reynolds Investing Company, Inc., a debtor, in proceedings then pending under the National Bankruptcy Act in the United States District Court for the District of New Jersey. The reorganization proceeding was commenced under chapter VIII (§ 77B), but was continued under chapter X after that chapter became effective. Petitioners-respondents, hereinafter called the attorneys, were appointed by the Federal court subsequent to the filing of the reorganization petition, to render services in the administration of the estate under the National Bankruptcy Act. The services rendered were in the collection of claims, and were undertaken subject to the provisions of the Bankruptcy Act. The issue is whether the State court in which the suits were brought has jurisdiction to fix the fees of the attorneys in reducing the claim to judgment, or whether exclusive jurisdiction is in the Federal court in bankruptcy which appointed these attorneys and which alone can have adequate knowledge of the assets of the estate on the one hand, and on the other the total of costs, expenses and fees with the resultant proportionate percentage for cost of administration, and which is subject to the elaborate machinery established by the Congress in the Bankruptcy Act for the fixing of allowances.

It is submitted that the Federal court in a reorganization proceeding has exclusive jurisdiction to award fees to attorneys appointed by it in payment of services to the bankrupt estate in the collection of claims in a State court. The Congress has power to make uniform laws upon the subject of bankruptcy. (U. S. Const., art. I, § 8, clause IV.) In the National Bankruptcy Act the Congress has set up a comprehensive system of bankruptcy administration and conferred exclusive jurisdiction upon the Federal courts. Chapter X of the Act (Bankruptcy Act, §§ 111, 114 [U. S. Code, tit. 11, §§ 511, 514]), under which this reorganization is proceeding expressly confers upon the United States District Court 11 exclusive jurisdiction of the debtor and its property, wherever located.” This is re-enforced by the specific provision that State courts shall have no jurisdiction over bankruptcy matters. (Federal Judicial Code, § 256 [U. S. Code, tit. 28, § 371]; see, also, Gross v. Irving Trust Co., 289 U. S. 342, Isaacs v. Hobbs Tie & Timber Co., 282 U. S. 734, Thompson v. Magnolia Petroleum Co., 309 U. S. 478.) Not only does chapter X specifically confer exclusive jurisdiction of the debtor and its property upon the Federal court, but in addition there is specifically given exclusive jurisdiction to determine costs, expenses and reasonable compensation for services rendered in reorganization proceedings (Bankruptcy Act, §§ 62, 241-250 [U. S. Code, tit. 11, §§ 102, 641-650]), and there are set forth numerous meticulous provisions designed to make effective the control of the Federal court over fees and expenses. Allowances under chapter X may be made only after a hearing upon notice to the debtor, the creditors, stockholders, indenture trustees, the Securities and Exchange Commission, and such other persons as the judge may designate (§ 247). No longer are allowances fixed in a hearing confined solely to the attorneys in interest, but under chapter X interested parties enjoy the statutory right to appear and be heard (§ 206 [U. S. Code, tit. 11, § 606]). In addition, attorneys seeking compensation must file a statement under oath showing whether they have acquired or transferred claims against or stock of the debtor after the commencement of the proceeding, and no compensation can be allowed to any attorney who, after assuming to act in that capacity, has purchased or sold claims or stock of the debtor (§ 249). Also an attorney seeking compensation must by affidavit inform the Federal court whether he has made any agreement with any person for a division of his compensation (§ 62). If allowances and fees could be awarded in the State courts, all these elaborate provisions for a notice and hearing to all the parties interested, and prohibition against attorneys dealing in claims against the estate of the debtor could be evaded, and fees in as many State courts as there were assets of the debtor which should be collected therein, would be fixed without regard to the amount of the total expenses and assets as a whole, since the State court is dealing only with particular claims and cannot have adequate knowledge of what will comprise the entire estate as to assets and total costs, expenses and fees. Also, since these attorneys were appointed by the court in this reorganization proceeding and nothing was said as to fees, the services of the attorneys were undertaken subject to all the provisions of the Bankruptcy Act with respect to the compensation for such services. Any attempted surrender of jurisdiction by the United States Court, even if that were possible, would have to be implied. This court has ruled that there may be no implied surrender of the jurisdiction of the Federal court over a matter arising in the course of a bankruptcy proceeding. (Palmer v. Larchmont Manor Co., 284 N. Y. 288.) Under such circumstances, even if no exclusive jurisdiction had been given to the Federal court, the attorneys would in the normal course return to have their compensation fixed by the court by whom their appointment had been made. Where attorneys have been appointed in a reorganization proceeding to deal with an asset belonging to the debtor, it is difficult to see how a provision of the New York Judiciary Law (§ 475) could constitutionally provide for a lien upon these assets. (Kalb v. Feuerstein, 308 U. S. 433, 439.)

The control provided by the Bankruptcy Act over costs and expenses of administration, particularly including fees and allowances, is an important part of the entire reorganization and bankruptcy system. The system aims to provide maximum protection and relief for embarrassed or insolvent debtors consistent with protection and fairness to creditors and security holders. If the system is to work with satisfaction, there must be a proper balance giving on the one hand fair remuneration to those who administer the system, on the other hand a limitation upon the total cost of administration, so that the Act in operation does not become too expensive. Centralized control over expenses incident to reorganization in bankruptcy to supplant State and Federal equity procedures, so as to reduce the cost of corporate reorganization, was one of the forces making for the enactment of the reorganization and bankruptcy statutes. (Callaghan v. Reconstruction Finance Corp., 297 U. S. 464.) The importance of this centralized control over expenses incident to reorganization is seen in the provision of the Act (§ 258 [U. S. Code, tit. 11, § 658]) providing that administration allowances for services rendered in State or Federal court proceedings, later supplanted by a reorganization proceeding, must be determined not in the court’ supervising the prior proceeding but in the reorganization court. (Matter of Keystone Realty Holding Co., 117 F 2d 1003.)

The Bankruptcy Act and chapter X show congressional intent to treat a reorganization proceeding not as ordinary litigation between private parties, but as involving rights and interests of many members of the general public who are usually unrepresented or inadequately represented in the proceeding. As the Supreme Court of the United States has indicated, these statutory provisions are designed to facilitate the participation of these various interests in matters in which they have a vital concern, and in any event to furnish so far as possible, safeguards for their protection. (Securities & Exchange Commission v. U. S. Realty & Improvement Co., 310 U. S. 434.)

If we are correct in holding that the jurisdiction of the Federal court to determine these fees is exclusive, then it would seem clear that no waiver by the Federal court under the circumstances in the case at bar has been attempted. It is unnecessary to consider whether it was within the power of the court to surrender this jurisdiction, since it would appear that both as a matter of law and as a matter of fact the retainer of these attorneys was subject to the condition that the amount of any fees would be fixed by the United States District Court. From first to last the trustees herein have insisted upon their claim that in the case at bar jurisdiction to make allowances to these attorneys did not reside in the State court but resided in the Federal court. The stipulation of July 9,1941, not only did not constitute a surrender of jurisdiction by the United States District Court, but contained the following specific reservation: 7. Nothing herein shall constitute a waiver of the rights of petitioners or respondents to question the jurisdiction of the courts of the State of New York, or the United States District Court for the District of New Jersey, with respect to the determination of the existence, nature or extent of respondents’ liens and the payment of their fees and disbursements in connection with the aforesaid litigation.”

Respondents rely upon the cases of Sherman v. Buckley (119 F. 2d 280, cert. den., 314 U. S. 657) and Cup Craft Paper Corp. v. Federal Paper Board Co., (262 App. Div. 91, appeal dismissed, 288 N. Y. 529). In neither of these cases were the attorneys appointed by the Bankruptcy Court, but they were retained and their services were rendered to the bankrupts and the liens arose, before the bankruptcy. While it is true that in Sherman v. Buckley (supra) the attorney continued as an attorney of record after the bankruptcy, there is nothing in the record to show that any services were rendered by him after the bankruptcy and before the substitution of attorneys, and no claim was made by him for services after the initiation of the bankruptcy proceeding. In addition, the attorneys in both of these cases were discharged and not permitted to complete the services for which they had been employed under a single contract of contingent retainer, whereas the attorneys herein were permitted fully to perform the services for which they were appointed, namely to reduce the claims to judgment. Also in the Sherman and Cup Craft cases the claims for services were provable as debts of the bankrupt and were not within the statutory provisions regulating allowances for services in the administration of a reorganization or bankruptcy estate. As already noted, in the case at bar the attorneys were appointed by the court pending the reorganization proceeding to perform services as agents and appointees of the court. The allowances for the attorneys were administration expenses covered by the allowance provisions of the Bankruptcy Act.

It follows that the orders appealed from should be reversed and the proceeding dismissed without costs.

Rippey, Lewis and Desmond, JJ., concur; Lehman, Ch. J., Loughran and Conway, JJ., dissent (see Sherman v. Buckley, 119 F. 2d 280; certiorari denied, 314 U. S. 657).

Orders reversed, etc.


author: Per Curiam.

text:
    The People of the State of New York, Respondent, v. Gordon Cooke and Winston A. Sealy, Appellants.
    Submitted May 17, 1943;
    decided May 27, 1943.

      Oliver D. Williams, Philip J. Jones and Ben Shorr for motion.

      Walter R. Hart opposed.
   Per Curiam.

The trial court had power to make a new assignment of counsel after sentence, but before notice of appeal was filed. (People v. Price, 262 N. Y. 410.) The motion made by the original counsel to be assigned by this court to prosecute the appeal is denied, but without prejudice to a motion by the defendant for good cause for a change of assigned counsel.

Motion denied, etc.


author: Lewis, J.

text:
    The People of the State of New York, Respondent, v. Edgar Bearden, Appellant.
    Argued April 8, 1943;
    decided June 10, 1943.

      Sydney Rosenthal and Benjamin J. Jacobson for appellant.

      Charles P. Sullivan, District Attorney (Henry W. Schober of counsel), for respondent.
   Lewis, J.

The appellant challenges the legal sufficiency of evidence upon which he has been convicted of criminal negligence in the operation of an automobile.

At one-thirty in the morning of January 1, 1941, at the intersection of Skillman Avenue and 47th Street in the Borough of Queens, New York City, two passengers in a taxicab were fatally injured when the cab was overturned by "a collision with a. private automobile. The identity of the driver of the private car has never been the subject of proof by direct evidence. The defendant stands convicted, however, solely upon circumstantial evidence, under an indictment which charged that, in violation of Penal Law § 1053-a, he “ * * * drove an automobile in a reckless or culpably negligent manner, whereby [two persons named therein] were killed * * The judgment of conviction was affirmed unanimously at the Appellate Division. The case is here, under section 520, subdivision 3, of the Code of Criminal Procedure, upon a certificate that a question of law is involved which ought to be reviewed by this court.

Such a question of law may be the subject of review by this court whenever a criminal charge against a defendant has been submitted to a jury against the defendant’s objection and exception upon evidence which falls below the standard of rebutting the presumption of the defendant’s innocence and of proving his guilt beyond a reasonable doubt. (People v. Gluck, 188 N. Y. 167, 171, 172; Code Crim. Pro., § 389; and see People v. Buchalter, 289 N. Y. 181, 223.) Where, as in the present case, the defendant’s conviction rests solely upon circumstantial evidence, we examine the record in the light of the rule that the facts from which the inference of defendant’s guilt is drawn must be established with certainty — they must be inconsistent with his innocence and must exclude to a moral certainty every other reasonable hypothesis. (People v. Harris, 136 N. Y. 423, 429; People v. Razezicz, 206 N. Y. 249, 272; People v. Giordano, 213 N. Y. 575, 580; People v. Galbo, 218 N. Y. 283, 293; People v. Suffern, 267 N. Y. 115, 127; People v. Lewis, 275 N. Y. 33, 39.)

Skillman Avenue, to which reference will be made as the Avenue,” is an east-and-west thoroughfare. At the point where the accident occurred 47th Street meets the Avenue from the south forming a T-shaped intersection.

Referring first to the evidence which describes the accident: It appears that at about one-thirty in the morning of January first, a taxicab driven by the People’s witness Juilfs was proceeding northerly toward the Avenue along 47th Street. There is no traffic light at that intersection, the traffic on the Avenue being controlled by lights at the intersections next to the east and west, viz., at 46th and 48th Streets respectively. Observing that traffic on the Avenue was “ against ” him, Juilfs stopped his cab on 47th Street before entering the intersection. When the lights changed he looked to the east and to the west along the Avenue and seeing no car approaching from either direction, he started his cab forward. He had proceeded a distance of twelve feet into the intersection and was turning to his left to go west on the Avenue when the cab was struck on its left rear fender by an automobile which had come from the west. The collision overturned the cab and caused fatal injuries to its two passengers. Juilfs had not seen the car which later struck his cab until it was a distance from him of 150 to 175 feet. It is his testimony that the on-coming car, with its dim headlights “ on,” was then approaching through a darkened section of the block west of 47th Street. Under conditions prevailing at that point Juilfs could not tell the “ make ” of the on-coming car — only " the outline ’ ’ being then visible to him. However he did describe it as a “ private car ” and he testified that at the only time he saw it — at a distance 150 to 175 feet from him — it was approaching at a speed of fifty miles an hour. No witness except Juilfs saw the collision and neither Juilfs nor any other witness saw the “ private car ” or its driver after the cab had overturned. A short time after the accident local police officials who had been assigned to investigate its cause, found on the Avenue within the boundaries of the intersection of 47th Street, a piece of iron and the top of a broken bolt.

As to evidence bearing upon the operation by the defendant of his automobile on the early morning of the accident, it appears that after keeping an engagement at West 57th Street and Ninth Avenue in Manhattan, he drove to his home in the Borough of Queens — a distance of three miles. He left Manhattan a few minutes after midnight, his homeward route being by way of Queensborough Bridge and Skillman Avenue. It is his testimony that as he passed along the Avenue an automobile — which darted out ” from a side street on his side, at an intersection which he was unable to locate — struck the left front fender of his car and went on its way without stopping. The defendant, who had stopped momentarily after the impact, proceeded to .his home where he arrived about half an hour after midnight. As to the time of his arrival at his home his testimony is corroborated by his mother and by a woman tenant in the house who had been calling upon his mother.

In support of the judgment of conviction the People point to the defendant’s admissions that he operated an automobile along the Avenue about an hour before the time when the fatal accident occurred; that while passing along the Avenue he came into collision with another automobile under circumstances which, it is said, do not differ widely from those depicted by the People’s witness Juilfs as descriptive of the collision which caused his cab to overturn. The prosecution contends that these admissions by the defendant, with inferences fairly to be drawn therefrom, constitute evidence properly to be considered by the jury on the question whether it was a car driven by the defendant which collided with Juilfs’ taxicab. Upon that subject the People also place emphasis upon evidence of a “ smear ” of paint which was found on the apron inside the radiator grill of the defendant’s car and which, according to the testimony by the People’s expert, was of the same consistency as paint from the front of Juilfs’ cab and from its rear fender. The prosecution also stresses testimony by the People’s expert that the top of the broken bolt and the piece of iron, found after the accident at the intersection of 47th Street and the Avenue, were from a Chevrolet automobile — that being the make of car which was owned and driven by the defendant on the date of the accident.

Assuming, without deciding, that there was evidence before the jury which was sufficient in law to support a finding that the defendant drove the “ private car ” which is claimed to have become involved in the fatal accident, we conclude that there was a, failure of other proof which was essential to the defendant’s conviction under the penal statute which the People have invoked in this case.

The section of the Penal Law under which the defendant was indicted and convicted provides: § 1053-a. Criminal negligence in operation of vehicle resulting in death. A person who operates or drives any vehicle of any kind in a reckless or culpably negligent manner, whereby a human being is killed, is guilty of criminal negligence in the operation of a vehicle resulting in death.”

The word reckless ” and the phrase “ culpably negligent manner,” as employed in the penal statute quoted above connote something more than the slight negligence necessary to support a civil action for damages. Both word and phrase import a disregard by the accused of the consequences of his act — an indifference to the rights of others. (People v. Angelo, 246 N. Y. 451, 457; People v. Grogan, 260 N. Y. 138, 144, 145; and see People v. Gardner, 255 App. Div. 683, 685.)

We find no evidence from which the jury could infer that the manner in which the defendant operated his car as he drove homeward along the Avenue showed a disregard by him of the consequences of his act and an indifference to the rights of others. There is no evidence that the defendant was intoxicated in the slighest degree — all inferences fairly to be drawn from the record being to the contrary. Nor is there evidence that the defendant disregarded a red light as a traffic signal at any point on the Avenue west of the place where the accident occurred. True, there is testimony by Juilfs that when he saw what he described as a “ private car ” at a distance from his cab of 150 to 175 feet, the speed of that approaching car was fifty miles an hour. Such a feat of observation, made under the conditions described by Juilfs himself, is one which strains credulity. The weight to be given to that single item of testimony, however, was for the triers of the fact — but even if believed by them it was not enough, without more, to warrant a finding of the defendant’s guilt under Penal Law, section 1053-a. (People v. Grogan, supra, p. 144; People v. Angelo, supra, p. 457. See, also, People v. Gardner, supra, p. 687.) Proof of speed under certain conditions may lead to civil liability. In our examination of the record at hand, however, we have given heed to the admonition by Chief Judge Cullen that — A distance separates the negligence which renders one criminally liable from that which establishes civil liability.” (People v. Rosenheimer, 209 N. Y. 115, 123; Cf. Brown v. Shyne, 242 N. Y. 176, 182, 183; People v. Pace, 220 App. Div. 495, 497.)

The judgments should be reversed and a new trial ordered.

Lehman, Ch. J., Loughran, Rippey, Conway and Desmond, JJ., concur; Finch, J., taking no part.

Judgments reversed, etc.