text:
    Wainwright & Page, Inc., Appellant, v. Burr & McAuley, Inc., et al., Respondents.
    (Submitted October 9,1936;
    decided November 24, 1936.)

      Harold F. Smith for appellant.

      Marsden B. Candler for respondents.
   Crouch, J.

The complaint herein is attacked under rule 106 of the Rules of Civil Practice for insufficiency. Among other facts, it alleges that the plaintiff, a corporation engaged in the real estate brokerage business, introduced to the defendant Burr a certain Mr. and Mrs. Gordon B. Scott; that the introduction was made because of the plaintiff’s acquaintance with and reliance upon Burr, and with the purpose and intent, known to Burr, that she should perform brokerage services for the Scotts and thereby earn commissions for such services; that Burr was associated with MacDonald, Inc., a corporation also engaged in the real estate brokerage business, and would participate ip. any commissions earned by MacDonald, Inc., if acting as broker for the Scotts; that accordingly and because of Burr’s association with MacDonald, Inc., the Scotts were introduced by plaintiff to MacDonald, Inc., as well as to Burr; and an agreement in writing between MacDonald, Inc., and plaintiff was made whereby plaintiff should be paid one-half of any commissions earned by MacDonald, Inc., on Scott business; that thereafter certain commissions were so earned, in which Burr participated and of which plaintiff received its share; that later and on or about January 10, 1934, Burr severed her connection with MacDonald, Inc., and caused to be incorporated the corporate defendant herein to engage in the real estate brokerage business; that Burr was and is a stockholder, a director and an officer of said corporate defendant; that in the summer of 1935 Burr and the corporate defendant earned and were paid certain brokerage commissions on Scott business, but in disregard of their obligations arising from the facts above stated, have refused to pay plaintiff its share. The relief demanded is judgment for a certain sum of money only.

Regarding this suit as an action at law, the Appellate Division was perhaps right in holding that it could not be maintained upon the facts averred. But if those facts, expressly and by fair and reasonable intendment, state an equitable cause of action, the inappropriate relief demanded may be disregarded and the complaint may be sustained. (Emery v. Pease, 20 N. Y. 62; Milliken v. Western Union Tel. Co., 110 N. Y. 403, 408.)

Construing the complaint broadly and liberally, as we are bound to do upon a motion of this sort (Peterson v. Eighmie, 175 App. Div. 113,115), we think the allegations would warrant evidence of an understanding between the plaintiff and the defendant Burr amounting to a joint venture to exploit the Scott business on the basis of a one-half share of the proceeds to plaintiff and a one-half share to Burr and MacDonald, Inc., the latter being either a convenient or a necessary instrumentality to be used in carrying on the venture. We say necessary, since there is no allegation that Burr herself was a licensed broker. If some such relationship did in- truth exist between plaintiff and Burr, the “ animating principle ” (Meinhard v. Salmon, 249 N. Y. 458, 466) underlying many similar and analogous cases imposes a clear duty upon Burr and upon the corporate defendant — since it acted with knowledge of the existence of the venture — to account to plaintiff.

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

Crane, Ch. J., Lehman, O’Brien, Hubbs, Loughran and Finch, JJ., concur.

Judgment accordingly.


source: Caselaw Access Project

author: Crane, Ch. J.

license: Public Domain

text:
    N. Gist Lamdin, Respondent, v. Broadway Surface Advertising Corporation, Appellant.

      (Argued October 2, 1936;
    decided November 24, 1936.)

      Emil Weitzner, Samuel H. Kaufman and Eugene M. Parter for appellant.

      Nathan April for respondent.
   Crane, Ch. J.

The plaintiff sues for the balance of salary due him as director of sales of street car advertising. The defense is that the plaintiff, during this period of employment, was unfaithful to his employer and made secret profits in violation of his duties. The Trial Term dismissed the complaint. The Appellate Division reversed on the law and reinstated a verdict of $8,750, with interest and costs. We agree with the Trial Term that the conceded facts justify the dismissal.

As cash business for street car advertising commenced to slow up because of the widespread depression, the defendant, through its president, Barron Collier, introduced a substitute for cash in selling advertising. A due bill, in the form of scrip or letter of credit, was to be used by hotels and restaurants in payment for advertising space. These due bills or letters of credit could be used by the public in the nature of money or as a,medium in the payment for goods or services furnished by the issuer. When the system was inaugurated the defendant in receiving these due bills or scrip had to dispose of them in order to get real money. This was done through the medium of due bill brokers! The Associated Advertising Co., Inc., was the broker with whom the defendant did business, receiving for its due bills thirty per cent of their face value. This was the basic rate fixed by arrangement. The rates for car advertising were much higher to the customer who paid in due bills than to one who paid cash.

Naturally it was for the interest of the defendant to get as much cash as possible for these due bills and, although the increased cost of conducting business in this way was taken up in the charge for advertising which the customer had to pay, yet naturally the ability to procure advertising contracts depended in a measure upon the reasonableness of the advertising rates. Collier, therefore, in doing business in this way, was interested, financially interested, in getting as much cash as possible from the due bill broker or avoiding the taking of due bills in the payment for advertising if instead he could get cash from the customer. Cash was the practice, due bills the exception.

It is at this point the plaintiff failed to protect his employer’s interest. He put himself in a position where his own interests were advanced by procuring due bills instead of cash and, further, he took a commission on the side from the due bill brokers which might have gone to the defendant, or at least increased the basic rate at which the brokers bought the due bills.

The plaintiff, an employee of the defendant, was given charge of this due bill business. He had under him another employee of the defendant, named Benjamin H. Gordon, who received a flat salary of fifty dollars a week. The plaintiff proposed to Gordon .that he drum up the due bill business for which he, Gordon, would be paid by the brokers five per cent on all due bill business secured by him, of which he, the plaintiff, would take one-half. This scheme was carried out, and the evidence shows that between June, 1933, and July, 1934, Gordon was able to pay and did pay to the plaintiff out of his commissions from the Associated Advertising Company, the due bill brokers, $5,282.86. These same due bills were discounted by these same brokers on paying to the defendant the flat rate agreed upon. In other words, the brokers were paying thirty to forty per cent for the due bills to the defendant and at the same time paying Gordon, an employee, five per cent, of which the plaintiff got one-half.

These matters are not in dispute, as the plaintiff and Gordon frankly tell about them. In justice to these men it may be said that a custom in the advertising business is suggested as the basis for the arrangement. The evidence failed to prove any such custom known to or binding on this defendant. The plaintiff says that Gordon was to do extra work by procuring these advertising contracts at night, but even this would not justify, in our opinion, such an arrangement as the plaintiff had made with him, in the absence of any knowledge upon the part of the defendant amounting to acquiescence or agreement.

The fact that Mr. Lackey, one of the vice-presidents, may have known about it at one time in the course of the, transactions, did not amount to an acquiescence or an agreement by the defendant itself. In the first place Lackey, as vice-president, had no authority to employ, discharge or make contracts for employment or compensation on behalf of the defendant. Secondly, Mr. Barron Collier, the president, had his personal dealings with the plaintiff in these matters and gave him his instructions regarding them. He was the dominant and controlling figure in this company, and the plaintiff so concedes.

On the whole case we are of the opinion that the plaintiff in this instance fell below the standard required" by the law of one acting as an agent or employee of another. He is prohibited from acting in any manner inconsistent with his agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his duties.. Not only must the employee or agent account to his principal for secret profits but he also forfeits his right to compensation for services rendered by him if he proves disloyal. (Murray v. Beard, 102 N. Y. 505; Beatty v. Guggenheim Exploration Co., 223 N. Y. 294; Wendt v. Fischer, 243 N. Y. 439; Elco Shoe Manufacturers, Inc., v. Sisk, 260 N. Y. 100, 104; Byrne v. Barrett, 268 N. Y. 199.) This rule was expressed in the Murray case as follows: “An agent is held to uberrima fides in his dealings with his principal, and if he acts adversely to his employer in any part of the transaction, or omits to disclose any interest which would naturally influence his conduct in dealing with the subject of the employment, it amounts to such a fraud upon the principal, as to forfeit any right to compensation for services. (Story on Agency, §§ 31, 334; Story’s Eq. Jur. § 315; Ewell’s Evans on Agency, 268; Dunlap Paley on Agency, 105, 106; Carman v. Beach, 63 N. Y. 97, 100.) It is an elementary principle that an agent cannot take upon himself incompatible duties, and characters, or act in a transaction where he has an adverse interest or employment. (N. Y. Cent. Ins. Co. v. Nat. Pro. Ins. Co., 14 N. Y. 85; Ewell’s Evans on Agency, 14; Greenwood v. Spring, 54 Barb. 375; Neuendorff v. World Mut. Life Ins. Co., 69 N. Y. 389.) In such a case he must necessarily be unfaithful to one or the other, as the duties which he owes to his respective principals are conflicting, and incapable of faithful performance by the same person.” (pp. 508, 509.) (See, also, Trice v. Comstock, 121 Fed. Rep. 620; Little v. Phipps, 208 Mass. 331; American Law Institute, Restatement of the Law of Agency, § 469, comment a.)

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

Lehman, O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Judgment accordingly.


author: Hubbs, J.

text:
    In the Matter of the Claim of Nicolene Johansen, Respondent, against Staten Island Shipbuilding Company, Appellant. State Industrial Board, Respondent.

      (Argued October 5, 1936;
    decided November 24, 1936.)

      James Gillin and Henry W. Baird for appellant.

      John J. Bennett, Jr., Attorney-General (Leon Freedman of counsel), for State Industrial Board, respondent.
   Hubbs, J.

Andreas Johansen was accidentally killed on November 4, 1926, while in the course of his employment. He left him surviving his widow, the claimant, whom he married in Norway in 1904, and four children, three of whom were under the age of eighteen years. The claimant has never been in this country.

Claim was made under the Workmen’s Compensation Law (Cons. Laws, ch. 67) for death benefits, and on February 3, 1930, the Industrial Board made an award to the widow and three minor children, which award was commuted and paid under section 17 of that law, upon the theory that the widow and children were aliens.

About January 2, 1931, the Industrial Board reopened this case and made a new award to the claimant at the full rate on the ground that she and the children were citizens, the carrier being given credit for all moneys paid. The Appellate Division, by a divided court, affirmed the award.

The citizenship and prior residence within the United States for the required period for naturalization of Andreas Johansen are established by a decree of the United States District Court for the Eastern District of New York, entered November 7, 1900, admitting him to citizenship. That decree is conclusive and cannot be attacked collaterally. (McCarthy v. Marsh, 5 N. Y. 263; Spratt v. Spratt, 4 Pet. [U. S.] 393, 406; Johannessen v. United States, 225 U. S. 227, 236.) The claimant Nicolene Johansen acquired citizenship through her marriage to Andreas Johansen in 1904, as section 1994 of the Revised Statutes of 1874 then in force so provided.

The Board has found as a fact that Andreas Johansen never lost his citizenship by returning to Norway, the country of his birth, after his naturalization.

Appellant contends that the claimant Nicolene Johansen lost her citizenship by her continuous residence in Norway from the time of her marriage to the date of her husband’s death, and that if she had not then lost her citizenship, she did so through continued residence in Norway for more than two years from the date of his death to the date of the first award. In support of this contention we are referred to the provisions of the treaty signed May 26, 1869, and proclaimed January 12, 1872 (17 U. S. Stat. 809), which reads:

“ III. Relating to the third article of the convention. It is further agreed that if a Swede or Norwegian, who has become a naturalized citizen of the United States, renews his residence in Sweden or Norway without the intent to return to America, he shall be held by the government of the United States to have renounced his American citizenship.
“ The intent not to return to America may be held to exist when the person so naturalized resides more than two years in Sweden or Norway.”

We are also referred to the act of March 2, 1907, chapter 2534, section 2; 34 U. S. Stat. p. 1228, now section 17, title 8, U. S. Code, which provides: “When any naturalized citizen shall have resided for two years in the foreign state from which he came, or for five years in any other foreign state it shall be presumed that he has ceased to be an American citizen, and the place of his general abode shall be deemed his place of residence during said years. Such presumption may be overcome on the presentation of satisfactory evidence to a diplomatic or consular officer of the United States, under such rules and regulations as the Department of State may prescribe.”

Prior to that enactment, which we will refer to as the act affecting non-resident naturalized citizens, there was no presumption of loss of citizenship through residence abroad declared by act of Congress, though the treaty did raise the presumption. (United States ex rel. Anderson v. Howe, 231 Fed. Rep. 546.)

It was held, prior to that enactment, under statutes making an alien women a citizen through marriage to a citizen, that continued residence abroad did not affect the status of a woman thus acquiring citizenship. . (Burton v. Burton, [1864] 1 Keyes, 359; Renner v. Muller, [1879] 44 N. Y. Super. Ct. [12 Jones & S.] 535.) In so deciding, the courts did not depart from established principles. They merely gave expression to the fact that under the law as it then existed all naturalized citizens were entitled to retain their citizenship though resident abroad and held that a contrary rule was not applicable to women naturalized through marriage to a citizen.

To the above quoted act affecting non-resident naturalized citizens, since it does not except women whose citizenship depends upon their marriage to a citizen, should be given the interpretation that it is of general application and affects such women as well as other naturalized citizens, unless there is some controlling act which excludes them from its application. Congress, by section 4 of the act of March 2, 1907 (Ch. 2534, 34 U. S. Stat. p. 1229 [see U. S. Code, tit. 8, § 10]), provided that “ any foreign woman who acquires American citizenship by marriage to an American shall be assumed to retain the same after the termination of the marital relation if she continue to reside in theiUnited States, unless she makes formal renunciation thereof before a court having jurisdiction to naturalize aliens, or if she resides abroad she may retain her citizenship by registering as such before a United States consul within one year after the termination of such marital relation.”

That act, to which we will refer as the act with respect to retention of citizenship by a woman naturalized by marriage after termination of the marital relation, was repealed by chapter 411, section 6,42 U. S. Stat. p. 1022, enacted September 22, 1922, but the repealing statute provided that it should not terminate citizenship acquired or retained under the act repealed, nor restore citizenship lost thereunder. Thus, the claimant Nicolene Johansen, since she acquired citizenship prior to 1922, must be held entitled to any benefits afforded by the act last quoted, if applicable in view of her non-residence in the United States. If that act be given the interpretation that it applies to a woman who had resided for two years in her native land or five years in any other foreign state before termination of the marital relation, there is a direct conflict between that act and the act affecting non-resident naturalized citizens. If, on the other hand, it be given the interpretation that it applies only to such women, deemed citizens by reason of marriage to a citizen, as have not forfeited their right to citizenship prior to termination of the marital status by residence abroad within the provisions of the act affecting non-resident naturalized citizens, then effect may be given to both statutes without granting to an alien woman acquiring citizenship through marriage who continues to reside abroad rights which are not given to a person who comes to the United States, complies with the requirements for naturalization and then takes up residence in a foreign country. We believe that it was the intent of Congress that only a woman naturalized by marriage who has not lost her citizenship by reason of the statute affecting non-resident naturalized citizens is to be assumed to have retained her citizenship after termination of the marital relation within the meaning of the act with respect to such a woman then resident abroad.

We are not unmindful of the fact that a contrary determination was reached by the Appellate Division in Matter of Gorman v. National Aniline & Chemical Co. (214 App. Div. 746).

■ The claimant not only resided for two years after the death of her husband in Norway, the country of her birth, but as well for five years prior to her husband’s death she resided there. In order to establish her right to an award as a citizen it became incumbent upon her to prove her status as a citizen and in so doing to overcome the presumption prescribed in the act affecting non-resident naturalized citizens. Since the record is barren of proof of compliance with the provisions of that act by which the presumption to alienage may be overcome, and the burden of proof rested on the claimant, we may assume non-compliance therewith.

But it is contended that claimant was not a naturalized citizen. Such contention is based upon Matter of Hansen v. Corson Const. Corp. (233 App. Div. 326, 329), where the court said: But an examination of the provisions of the treaty discloses that it has no application here because it relates only to naturalized citizens of the United States. The widow, in the present case, is not a naturalized citizen. Her status as a citizen was created by her marriage to a citizen, not by her naturalization.”

Í We cannot subscribe to such a conclusion as applied to the facts of this case. There are two classes of citizens, native born citizens and naturalized citizens. Claimant was not born a citizen. She was, therefore, a naturalized citizen. (Leonard v. Grant, 5 Fed. Rep. 11; United States v. Kellar, 13 Fed. Rep. 82;U. S. Const., 14th Amendt. § 1.) Her naturalization occurred by virtue of the act which provided at the time of her marriage that she acquired citizenship through the naturalization of her husband.

Having reached the conclusion that the claimant Nicolene Johansen was an alien at the date of her husband’s death, we hold that the commutation of the award to her was proper.

As to the three children in behalf of whom claim has been made, a different conclusion must be reached. It is provided by section 6, title 8, U. S. Code, as follows: “ Section 6. Citizens; children of citizens born outside of United States. All children born out of the limits and jurisdiction of the United States, whose fathers may be at the time of their birth citizens of the United States, are declared to be citizens of the United States; but the right of citizenship shall not descend to children whose fathers never resided in the United States. All such children who continue to reside outside the United States shall, in order to receive the protection of this Government, be required upon reaching the age of eighteen years to record at an American consulate their intention to become residents and remain citizens of the United States and shall be further required to take the oath of allegiance to the United States upon attaining their majority. Duplicates of any evidence, registration, or

other acts required by this section shall be filed with the Department of State for record. (R. S. § 1993; Mar. 2, 1907, c. 2534, §§ 6, 7, 34 Stat. 1229.)”

These children, born in 1910, 1916 and 1919, were not naturalized citizens, but citizens by birth, though born without the United States. (U. S. Code, tit. 8, §§ 6, 7.) They had not, when their father died, attained the age of eighteen years when such children are required to take action, under section 6, to preserve their right to protection by the United States government. Since the fact of survival, not dependency nor residence within the United States, determines the right of a wife or children under the age of eighteen years to compensation, known as a death benefit, under section 16 of the Workmen’s Compensation Law if they are then citizens, these children became, upon the death of their father, entitled to a full award, not commuted under section 17 of the Workmen’s Compensation Law, as section 17 applies only to aliens.

The order of the Appellate Division and the award of the State Industrial Board should be reversed and the matter remitted to the State Industrial Board for an award affirming the original award and the commutation as to the widow and reversing so much of the original award as provides for commutation thereof under section 17 of the Workmen’s Compensation Law as to the children, with costs in this court and in the Appellate Division against the State Industrial Board.

Crane, Ch. J., Lehman, O’Brien, Crouch, Loughran and Finch, JJ., concur.

Ordered accordingly.


text:
    In the Matter of the Claim of Emil Otterbein, Respondent, against Babor and Comeau Company et al., Appellants. State Industrial Board et al., Respondents.
    (Argued September 30, 1936;
    decided November 24, 1936.)

      J. Vanderbilt Straub and Edward L. Johnson for appellants.

      Harry A. Dicker for Massachusetts Bonding Company, respondent.
   Hubbs, J.

The sole question here involved is whether the respondent, Massachusetts Bonding Company, with the Glens Falls Indemnity Company, appellant, should be held jointly hable for payment of the award.

The respondent Massachusetts Bonding Company issued a standard New York State compensation policy to the employer for the calendar year from January 1,1934, to January 1, 1935. Under date of April 19, 1934, the Massachusetts Bonding Company requested the employer to seek workmen’s compensation insurance in some other company. On April 26, 1934, the employer notified the Massachusetts Bonding Company that on and after May 1, 1934, the employer would be covered for workmen’s compensation by the Glens Falls Indemnity Company, the appellant herein, and that company did issue a standard New York State compensation policy as of May 1, 1934, which policy was in force at the time of the accident sustained by claimant on August 2, 1934. Under date of April 26, 1934, the employer executed a cancellation voucher and release whereby it accepted cancellation of the policy issued by the respondent Massachusetts Bonding Company as of the 1st day of May, 1934, which cancellation notice was delivered to the Massachusetts Bonding Company in substitution for a return of the policy. No notice of cancellation was sent to or filed with the Commissioner until August 2, 1934, the date of claimant’s accident. That notice stated that the policy in question was canceled as of May 1, 1934.

The appellant Glens Falls Indemnity Company concedes its liability for part of the loss but contends that the Massachusetts Bonding Company should be held equally liable and that half the award should be charged against that company on the ground that failure to file notice of cancellation as required by subdivision 5 of section 54 of the Workmen’s Compensation Law (Cons. Laws, ch. 67) kept its policy in force on the date of the accident. Subdivision 5 reads as follows:

“ 5. Cancellation of insurance contracts. No contract of insurance issued by an insurance carrier against liability arising under this chapter shall be cancelled within the time limited in such contract for its expiration until at least ten days after a notice of cancellation of such contract, on a date specified in such notice, shall be filed in the office of the commissioner and also served on the employer. Such notice shall be served on the employer by delivering it to him or by sending it by mail, by registered letter, addressed to the employer at his or its last known place of residence; provided that, if the employer be a partnership, then such notice may be so given to any one of the partners, and if the employer be a corporation then the notice may be given to any agent or officer of the corporation upon whom legal process may be served. Provided, however, the right to cancellation of a policy of insurance in the state fund shall be exercised only for non-payment of premiums.”

In determining the legislative intent as to when a contract of insurance shall be deemed canceled within the meaning of subdivision 5 of section 54, we may consider the accepted definitions of the words “ cancel ” and cancellation.” To cancel is “ to annul or destroy; to revoke or recall,” and, with respect to insurance, the word cancellation ” means the termination either by the insured or the insurer, or by both, of insurance in accordance with the terms of the cancellation clause of a policy.” (Webster’s New International Dictionary, 2d ed.)

Here there was an agreement between the carrier and the insured to void the existing contract. The effect intended was to annul or destroy; to revoke or recall ” the existing contract and thus an attempted cancellation thereof. If effective, such termination of the contract would release the carrier from liability arising under the Workmen’s Compensation Law. It must be assumed that in enacting subdivision 5 of section 54, the Legislature had it in mind that a contract of insurance might provide that the coverage of the policy could be terminated by act of the carrier, by act of the employer, or by agreement between the carrier and employer. Though subdivision 5 of section 54, if strictly construed, might be held to refer only to a cancellation by act of the carrier without acquiescence on the part of the insured, since it requires notice to the insured as well as to the commissioner, this court has already held that its application is not to be so restricted. In Matter of Passarelli v. Columbia Engineering & Contracting Co. (270 N. Y. 68, 73) it was said: “ The insurance company urges that, since the statute requires notice-to the employer as well as to the commissioner, it only applies where cancellation is sought by an insurance company and not where the employer seeks the cancellation. The section must be given a broader construction.”

There the employer, after the accident, had stated that he did not want the policy and that he wanted the company to waive its premiums. While there but one insurance company was involved and the attempted cancellation occurred after the accident, the real question was as to whether there could be a cancellation without notice to the Commissioner and it was held that such cancellation could not be had.

In Matter of Arner v. Manhattan Spring & Couch Co. (264 N. Y. 501), policies issued by three carriers were involved. All three carriers were held liable. One carrier contended that subdivision 5 of section 54 was not intended to apply to a cancellation accepted by the employer before any accident had occurred where other and valid insurance was in force at the time of the accident. The only distinguishing features between the situation of that particular carrier in the Arner case and the respondent Massachusetts Bonding Company in the case at bar, are that in the Arner case there was notice to the employer that the company was canceling its risk as of a specific date, while here the company had notified the employer that it desired to be released from the risk without specifying a date for termination of coverage, and in the Arner case an insufficient time had elapsed between the notice of cancellation and its effective date to make the notice effectual as against the employer, while here the question of insufficiency of time was involved only with respect to the notice filed with the Commissioner. Despite such distinguishing features, the fact remains that we there affirmed a decision holding liable companies which had not filed and served the notice required by the statute although other valid insurance was in force at the time of the accident.

The statute provides in concise terms the effect of failure to file notice of cancellation in the office of the Commissioner. Its purpose is to afford to the Commissioner an opportunity to see that new insurance is provided in place of the canceled insurance and thereby afford protection to employees. The statute cannot be interpreted to mean that a carrier attempting a cancellation is to be liable if, in fact, new insurance is not provided, and not hable if new insurance is provided. The carrier cannot avoid the plain requirement of the statute where the attempted cancellation is the act of the carrier alone. The statute applies as well to cases where the attempted cancellation is at the request of the employer or by agreement between the employer and carrier. Notice of cancellation must be given to the Commissioner in all cases in order to make an attempted cancellation effective. Cancellation of the policy is an act of the carrier whether it is brought about through act of the carrier alone, through request on the part of the employer, or by agreement between the parties. When a cancellation is attempted, the obligation rests upon the carrier to give the statutory notice if it is to be exempt from liability under its policy.

The order of the Appellate Division and the determination of the State Industrial Board should be modified by making the award against the claimant, the Glens Falls Indemnity Company, and the Massachusetts Bonding Company, and as so modified, affirmed, with costs in this court and in the Appellate Division to the appellants against the Massachusetts Bonding Company.

Crane, Ch. J., Lehman, O’Brien, Crouch, Loughran and Finch, JJ., concur.

Ordered accordingly.


text:
    Levy’s Store, Inc., Respondent, v. Endicott-Johnson Corporation, Defendant, and International Shoe Company, Appellant.
    iArgued October 7, 1936;
    decided November 24, 1936.)

      Harold Remington for appellant.

      Hiram S. Gans for respondent.
   Hubbs, J.

This is an action for malicious prosecution based on the allegation that the appellant maliciously and without-probable cause joined in a petition in involuntary bankruptcy filed against respondent. The defendant Endicott-Johnson Corporation has paid one-half of a $7,500 judgment entered upon the verdict of a jury in favor of the respondent. The defendant-appellant International Shoe Company appealed to the Appellate Division which affirmed the judgment, one justice dissenting and voting to reverse and dismiss the complaint.

One Henry J. Levy was president of the respondent. He had been doing a small retail mercantile business at Winter Haven, Florida, for a number of years prior to 1928, when the respondent was incorporated. Thereafter Levy bought goods and advertised not alone in the corporate name but as well in his individual name and in the name of Levy’s store. The defendant EndicottJohnson Corporation had continued to bill goods to Henry J. Levy and in August, 1930, commenced an action against the respondent and Levy to recover the purchase price of goods billed to Levy. Immediately thereafter, the American National Bank of Winter Haven commenced an action against the respondent and Henry J. Levy on a joint note made by them. Thereupon, Levy, on September eleventh advertised a going out of business sale which advertisement was signed “ Levy’s, Winter Haven, Florida,” and announced that the sale was in the hands of Morris Sales System. These advertisements were continued from time to time until October tenth, one being signed “ Levy’s, Inc.,” and two “ Levy’s Store, Inc.” Upon the publication of the first advertisement, the American National Bank of Winter Haven applied for a receiver of the respondent, not upon the ground of insolvency, but upon the ground that it believed that the respondent would fraudulently part with its property before judgment could be obtained against it. The order appointing a receiver permitted a continuation of the sale by the Morris Sales System, but directed that the proceeds be paid over to the bank on account of its claim. The appellant had a claim for goods sold to Levy’s Store, Inc., amounting to $171.78. On September 27, 1930, it received an R. G. Dun report announcing the institution of the suit by the bank, the appointment of the receiver, the issuing of an attachment and that the store was closed. Appellant placed its claim for collection with its general attorney who forwarded it to Allen & Dixon, attorneys at Tampa. They happened to be the attorneys who had instituted suit for Endicott-Johnson Corporation against the respondent and Henry J. Levy. They requested of respondent and EndicottJohnson Corporation authority to institute bankruptcy proceedings which authority was given and on October seventeenth an involuntary petition was filed against respondent which listed as petitioning creditors the appellant, the defendant Endicott-Johnson Corporation and other claims totalling slightly over $500. The petition recited the sale by Endicott-J ohnson Corporation to Levy, the transfer of the goods to Levy’s Store, Inc., and the assumption of the indebtedness by Levy’s Store, Inc.

In the action brought by Endicott-J ohnson Corporation, the respondent answered and interposed the defense that the account attached to the declaration showed no claim against the respondent. Thereafter, and subsequent to the filing of the bankruptcy petition, Allen & Dixon, as attorneys for the Endicott-J ohnson Corporation, stipulated a discontinuance of the action of that corporation as against the. respondent. To the bankruptcy petition the respondent answered, denying insolvency. The respondent’s property was released from the attachment upon the payment in full of the bank’s claim about November fourteenth, and at about the same time the corporation, respondent, borrowed $2,550, advising an indorser of the note that it owed only about $1,000 in excess of $800 still due the American National Bank and receiver’s bills not exceeding $100. It guaranteed to the indorser that it would pay all the obligations of the corporation out of the money borrowed. In such letter it included appellant’s claim as a debt of the corporation and with respect to the Endicott-Johnson Corporation’s claim stated as follows: Endicott Johnson Shoe Company, Endicott, New York claims a debt against the store of $195.31. I intend to contest this debt for I do not owe that much.”

Thereafter, evidently believing payment of appellant’s claim would be made, appellant’s attorneys permitted the bankruptcy proceeding to be dismissed for want of prosecution. The result of the dismissal was that there was no proof of insolvency and no proof that the EndicottJohnson Corporation’s claim had been assumed by the respondent.

The only evidence upon the question of lack of probable cause to be found in the record is the fact that appellant was represented by attorneys who knew that the EndicottJohnson Corporation’s claim was nominally against Henry J. Levy; that those attorneys stipulated a discontinuance of the action on that claim as against respondent; that they knew the bank based its application for a receiver upon a belief that the respondent would fraudulently part with its property and with that information recited in the bankruptcy petition that the receivership was had because of insolvency and the further fact that the attorneys'permitted a default in the bankruptcy proceedings. In view of the other undisputed facts in the case • — • the attachment of the respondent’s stock of merchandise by the bank, the consent on the part of the respondent to the appointment of a receiver, the advertisement of the property for purposes of sale indiscriminately as property of Levy’s, Levy’s Store and Levy’s Store, Inc., the fact that there was a levy by the sheriff as a result of which the store was closed and that an action had been instituted on the Endicott-Johnson Corporation’s claim before action was started by the bank — the evidence received for the purpose of proving lack of probable cause was insufficient as a matter of law to make a question of fact upon that issue.

The same evidence relied upon by respondent to show lack of probable cause for filing a petition in bankruptcy is also relied upon to establish the existence of actual malice. It is insufficient to present a question of fact. Since we hold it insufficient to show lack of probable cause, malice may not be inferred therefrom.

As stated in Rawson v. Leggett (184 N. Y. 504, 511): The propriety of defendant’s conduct * * * is to be decided by the facts as they appeared to be at the time the prosecution was instituted.” Judged by that standard, appellant was justified in believing in the insolvency of the respondent. Such would be the belief of a discreet and prudent person. Evidence of after events such as dismissal of the bankruptcy proceedings or want of prosecution and release of the property of the respondent from the receivership while indicating that appellant may have been mistaken in that belief, does not destroy the force of the facts as they appeared when the petition was filed. Moreover, especially in view of subsequent admissions of indebtedness by respondent, its act in borrowing money upon the indorsement of a third party with a guaranty of payment of its indebtedness, and its act in paying part of the claims against it, lead equally to a conclusion that failure of appellant to continue prosecution of the bankruptcy proceeding was due to its belief that its claim was about to be paid and that need for further action on its part did not exist. It is so apparent from the record as a whole that claims included in the bankruptcy petition which nominally were against Levy personally in fact represented indebtedness of the corporation that we may not assume that the proceeding would have been dismissed for a lack of a sufficiency in number and amount of claims. There are also too many indications of insolvency on the part of respondent to warrant a belief that the respondent could have avoided an adjudication on the ground that it was not insolvent.

It is true that where a proceeding has been determined in favor of the accused by judicial action of the proper court or official in any way involving the merits or propriety of the proceeding or by a dismissal or discontinuance based on some act chargeable to the complainant, as his consent or his withdrawal or abandonment of his prosecution, a foundation in this respect has been laid for an action of malicious prosecution. Where, however, the proceeding has been terminated without regard to its merits or propriety by agreement or settlement of the parties or solely by the procurement of the accused as a matter of favor or as the result of some act, trick or device preventing action and consideration by the court, there is no such termination as may be availed of for the purpose of such an action. The underlying distinction which leads to these different rules is apparent. In one case, the termination of the proceeding is of such a character as establishes or fairly implies lack of a reasonable ground for the prosecution. In the other, case, no such implication reasonably follows. (Halberstadt v. New York Life Ins. Co., 194 N. Y. 1.)

Here the conduct of the respondent was such as to give the appellant reasonable ground for believing that respondent had obtained credit which would permit payment of its indebtedness and its act in so doing was the real cause of appellant’s failure to prosecute in the bankruptcy proceeding. It is quite apparent from the record as a whole that it was the attachment proceeding and the receivership consented to by respondent and through which respondent’s store was closed, which caused the damage, if any, suffered by the respondent, and the institution of the bankruptcy proceeding was the only course apparently open to appellant to prevent loss through preference of the attaching creditor. To permit it to be mulcted in damages for pursuing that course is manifestly an injustice.

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

Crane, Ch. J., O’Brien, Crouch, Loughran and Finch, JJ., concur; Lehman, J.,-concurs in result. Judgments reversed, etc.


author: Loughran, J.

text:
    Sima Michelson, Appellant, Impleaded with Another, v. Clara W. Stuhlman, Respondent.
    (Submitted October 8, 1936;
    decided November 24, 1936.)

      Otho S. Bowling for appellant.

      Everett W. Bovard and Daniel Mungall for respondent.
   Loughran, J.

Plaintiff Sima Michelson was riding in an automobile operated by her husband when the vehicle collided with another driven by the defendant. She sued for personal injuries alleged thereby to have been caused through the negligence of the defendant. Her husband brought a companion action to recover for alleged consequent loss of her services. The actions were tried together. The jury returned a verdict for the defendant upon which judgment in her favor was entered against both plaintiffs. On appeal by both to the Appellate Division, the judgment was affirmed. Plaintiff Sima Michelson alone appeals to this court.

The jury were instructed that, if appellant’s husband was at fault and the collision was due to his failure to operate his car reasonably and carefully, then there must be two verdicts for the defendant.” In refusing to charge that as matter of law the appellant was not contributorily negligent, the trial judge said: In view of the respective claims, I say it is either one person’s fault or the other.”

These rulings, we think, were erroneous in the case of the appellant. Assuming that the issue of her contributory negligence was for the jury (Nelson v. Nygren, 259 N. Y. 71), she was not to be denied a recovery merely because both drivers were at fault. In Prindle v. Rock-land Transit Corp. (271 N. Y. 580) we approved a charge that recovery could be had for the death of the plaintiff’s intestate, a passenger, if the collision was due to the combined negligence of both drivers, that the negligence of the defendant’s employee did not have to be the sole cause. Our decision in the Prindle case controls this ease. (See, also, Burd v. Bleischer, 208 App. Div. 499.)

The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.

Crane, Ch. J., Lehman, O’Brien, Hubbs, Crouch and Finch, JJ., concur.

Judgments reversed, etc.


text:
    Helen Cherwien et al., Appellants, v. Philip J. Geiter, Respondent.

      (Argued October 20, 1936;
    decided November 24, 1936.)

      Milton Speiser and Joseph Speiser for appellants.

      John B. Doyle, Emmett McLoughlin, Jr., and Joseph E. McMahon for respondent.
   Hubbs, J.

Respondent is a minister who resides in the State of Pennsylvania. The automobile involved in the accident here in question was registered in that State. Respondent, having recovered from an illness, came to the city of Brooklyn to visit his son, Philip, Jr., and to rest. On the evening of the accident, his son asked him if he could have the use of his car to take the appellant Helen Cherwien for a ride to her uncle’s, who resided in New Jersey, and he consented. Appellant Helen Cherwien invited her mother, her sister Marion and Mrs. Jones to go with them. While in New Jersey an accident happened which resulted in the death of Philip, Jr., and injury to appellants.

The appellant Helen Cherwien was engaged to marry Philip, Jr. Her mother is the other appellant. This is an action to recover damages for personal injuries. The appellants were successful at the trial, but the judgment in their favor was reversed by the Appellate Division and the complaint dismissed. The Appellate Division decided that Philip, Jr., in operating the car, was not acting as his father’s agent; that the car was not a family car ” and that the respondent was not responsible for the negligence of his son. We are convinced that the proper decision was made. At the trial no testimony was given of the law of New Jersey applicable to this case. In the absence of such evidence, it is presumed that the common law of New Jersey is the same as the common law of this State. (Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N. Y. 284, 303; Weissman, v. Banque De Bruxelles, 254 N. Y. 488, 495.)

Section 391 of the Civil Practice Act, relating to statutes, decrees and decisions of another State or country, has not changed the law. That section refers to additional evidence and not to a case where no evidence was produced and where the case was not tried on the theory that the foreign law was different from our own.

Under the common law of this State, respondent is not liable for the negligence of his son while operating his car. At the time of the accident, Philip, Jr., was not acting as his father’s agent and was not engaged on his father’s business. He was engaged exclusively in his own affair. One who gratuitously loans his car to an adult member of his family, not known to be a negligent driver, for such driver’s personal pleasure or business, is not liable under the common law for damages growing out of the negligent act of the driver. (Van Blaricom v. Dodgson, 220 N. Y. 111; Fallon v. Swackhamer, 226 N. Y. 444.)

Section 59 of the Vehicle and Traffic Law (Cons. Laws, ch. 71) has changed the common law rule. It reads:

§ 59. Every owner of a motor vehicle or motor cycle operated upon a public highway shall be liable and responsible for death or injuries to person or property resulting from negligence in the operation of such motor vehicle * * * in the business of such owner or otherwise, by any person legally using or operating the same with the permission, express or implied, of such owner.”

Referring to the effect of that section, we have said: The statute created a liability where none existed before its enactment. The liability of the owner of' ,a car for the negligence of one to whom he has loaned it, rests solely upon the statute; it is a statutory liability. The statute has created a liability where none existed at common law.” (Gochee v. Wagner, 257 N. Y. 344, 347.)

That statute has no extraterritorial effect. The ■liability, if any, arising from the negligent operation of the car sounds in tort, (Henry v. Hudson & Manhattan R. R. Co,, 201 N. Y. 140.)

In the case of Miranda v. Lo Curto (249 N. Y. 191, 192) it was decided that where a resident of New York loaned his car in New Jersey to another and an accident happened in that State, section 282-e (now section 59 of Vehicle and Traffic Law) of our Highway Law (Cons. Laws, ch. 25) had no application. The decision was not placed on the ground that the loan was made in New Jersey, for we said: The accident happening in New Jersey, section 282-e of our Highway Law has no application,”

It is urged that as the transaction constituted a bailment entered into in this State, the law of this State governs. Undoubtedly, the law of this State governs the bailment and fixes the rights and obligations of the parties between themselves.

Section 59 of the Vehicle and Traffic Law has nothing to do with the bailment. That section imposes a strict measure of liability upon the owner of a motor vehicle while being operated upon a public highway of this State.

It does not fix the rights and liabilities of persons using the public highways of other States; that is a matter of policy for the other States.

The family car doctrine, urged by appellant, has no application as that doctrine has never been accepted in this State. (Van Blaricom v. Dodgson, supra.)

An interesting and ably written article by Daniel G. Yorkey is contained in volume XXI, page 303, of the Cornell Law Quarterly in which the cases upon the questions involved in this case are collated and reviewed. The judgment should be affirmed, with costs.

Crane, Ch. J., Lehman, O’Brien, Crouch, Loughran and Finch, JJ., concur.

Judgment affirmed.


author: O’Brien, J.

text:
    Bethlehem Fabricators, Inc., Respondent, v. Wills, Taylor & Mafera Corporation, Defendant, and The People of the State of New York, Appellant.

      (Submitted October 2, 1936;
    decided November 24, 1936.)

      John J. Bennett, Jr., Attorney-General (Isaac I. Marks of counsel), for appellant.

      Edwin S. Whit and Arthur Miller for respondent.
   O’Brien, J.

The State entered into a contract with defendant Wills, Taylor & Mafera Corporation for the construction of a building to be used in connection with the Rockland State Hospital. Plaintiff Bethlehem Fabricators, Inc,, furnished labor and material to the contractor amounting to $34,250. Of this sum the contractor paid plaintiff $17,635 and on October 1, 1934, plaintiff filed with the ComptroHer and the appropriate department a notice of Hen for $16,615. On the same day FeldmanMeyers, Inc., filed a notice of Hen for $6,083 and on the following day Radice Electric Company, Inc., filed for $1,406.06. The total of these three Hens aggregate $24,104.06, At that time there was in possession of the ComptroHer a sum appHcable to the contract far in excess of plaintiff’s claim and aU other claims prior to that of plaintiff. October 2, 1934, Upon appHcation of the contractor, WiUs, Taylor & Mafera Corporation, an order was entered, pursuant to section 21, subdivision 6, of the Lien Law (Cons. Laws, ch. 33), directing the Comptroller to retain the sum of $26,000 from the moneys estimated to be due the contractor and to pay over the balance of the estimate to the contractor. The order also directed the ComptroHer to hold the retained amount of $26,000 until the three Hens should be discharged as provided by the Lien Law. The finding is that, by that order of October 2, 1934, plaintiff’s Hen was discharged pursuant to section 21, subdivision 6, of the Lien Law, that its Hen was not otherwise discharged and that a fund is retained by the Comptroller pursuant to that subdivision sufficient to cover the amount of the Hen and interest for one year and costs in the enforcement of the lien. All other discharged liens arising out of this contract are seemed by specific separate funds deposited with or retained by the Comptroller or by specific undertakings or otherwise.

This action was instituted to obtain a judgment decreeing that plaintiff has a valid and subsisting lien for $16,615 together with interest and costs, against the $26,000 retained by the Comptroller pursuant to section 21, subdivision 6, of the Lien Law pending the discharge of this lien. Summary judgment was directed for plaintiff. The issue is whether the specific fund of $26,000 retained by the Comptroller is available, under section 25, subdivision 4, for distribution pro rata to undischarged liens filed subsequent to the liens filed by plaintiff and the two other lienors on October 1 and October 2, 1934. Feldman-Meyers, Inc., and Badice Electric Company, Inc., have by stipulation waived their right to become parties to this action or to be served with notice of any proceedings.

Section 21 of the Lien Law has the caption Discharge of lien for public improvement ” and has eight subdivisions defining the manner in which such a lien may be discharged. Subdivision 6 provides: “ 6. Where a contractor has to his credit with the state or with a municipal corporation, a sum of money by reason of an estimate due and payable to him, and where payment of such estimate is withheld because a notice of lien has been filed against his interest in said money, and where said money is in excess of the amount claimed in the notice of lien, the contractor may apply without notice to the supreme court of this state or to any justice thereof or to the county judge of any county, for an order directing the comptroller of the state or the financial officer or person with whom the lien is filed, to retain from such estimate a sum of money, which shall not be less than the amount claimed by the lienor, with interest thereon for one year and such additional amount as the justice deems sufficient to cover all costs and expenses and to immediately pay over the balance of such estimate to the contractor. The amount so retained shall be held by the comptroller * * * or other officer or person until the lien is discharged as otherwise provided in this section. * * Subdivision 4 provides for the deposit of a sum of money by the contractor with the Comptroller and the amount so deposited shall remain with the comptroller * * * until the lien is discharged as prescribed in subdivision one, two, three, five, six, seven or eight of this section.” Subdivision 5 provides for the execution of an undertaking by the contractor and except as otherwise provided herein the provisions of article five of title six of chapter eight of the code of civil procedure are applicable to an undertaking given for the discharge of a hen on account of public improvements.”

Appellant argues that plaintiff has no exclusive right to the fund retained pursuant to the order of October 2, 1934, and has no priority in distribution of the moneys retained under that order and relies upon this provision in section 25, subdivision 4, of the Lien Law: There shall be no priority among labor lienors, as a class or among other lienors as a class, and any moneys available for distribution among lienors of any class shall be distributed pro rata in accordance with their respective valid hens.”

The finding is that at the time that respondent’s hen and those of Feldman-Meyers and Radice Electric Company were discharged there was no other discharged hen which was not secured by separate funds retained specifically for each hen and having no relation to the fund retained for these three hens. The opinion of the AppeUate Division (248 App. Div. 331, 332) states: “ * * * all prior hens were discharged or secured by separate funds at the time the contractor made his application,” and appellant makes no contrary assertion. After the entry of the order of October 2, 1934, discharging these liens, several other liens were filed against the contractor. None of these subsequent lienors, however, appear to have made any effort to become parties to this action. The Assistant Attorney-General in his affidavit expresses the opinion that the subsequent lienors should be made parties to this action in order to protect their interests. The only parties are plaintiff and the defendant, general contractor, and the defendant State which is the only party appealing.

We have held, when a sum of money is deposited by the contractor pursuant to section 21, subdivision 4, for the purpose of freeing from the claim of the lienor the moneys due the contractor, that the lienor may have no other relief than payment of the sum deposited and may not recover from the general fund. (Arrow Iron Works, Inc., v. Greene, 260 N. Y. 330, 337, 338.) Since he may not participate with other lienors in the general fund, the statute must be deemed to intend that they may not partake of the specific fund. Otherwise the party whose hen is discharged pursuant to subdivision 4 would be placed at a disadvantage. After a hen has been discharged under subdivision 4 or 5 it is completely discharged against any general fund which may then exist or be later created. Appehant concedes such to be the law but argues that the effect of those two subdivisions differs essentiahy from the principle embodied in subdivision 6 and cites in support of its contention the decisions in Alberene Stone Co. v. Board of Education (153 Misc. Rep. 812; affd., 244 App. Div. 711) and International Harvester Co. v. Whelan (247 App. Div. 215). The distinction between subdivision 4 and subdivision 6 is that, pursuant to subdivision 4, money not connected with the contract is deposited and that, pursuant to subdivision 6, no new money is deposited but a portion of the earnings under the contract is withheld.

In the case at bar the Appellate Division has held that the purpose of subdivision 6 of section 21 is to create a special fund earmarked for the payment of specified liens which is entirely different from the general fund which is available for distribution among the other lienors. It would seem to be the legislative intent, in the absence of a declaration to the contrary, to protect a discharged lienor under subdivision 6 to the same extent as under subdivisions 4 and 5. A discharged lienor is not within the class of undischarged lienors within the meaning of section 25, subdivision 4, and no priority in favor of the lienor discharged pursuant to section 21, subdivision 6, can be said to exist in contravention of section 25, subdivision 4.

In this particular case where no other lienor has asked to be heard and in which no possible injury to them is shown, the issue of law propounded by the State seems to be no more than academic.

The judgment should be affirmed, with costs.

Crane, Ch. J., Lehman, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Judgment affirmed.


text:
    New York Dock Company, Respondent, v. Ernest W. Brown, Inc., Appellant.

      (Argued October 20, 1936;
    decided November 24, 1936.)

      Frank Sowers and Frank N. Qetman for appellant.

      Martin A. Schenck and William J. Carr for respondent.
   O’Brien, J.

Plaintiff owned a pier in Brooklyn which was insured by several insurance companies, not parties to this action, against loss or damage by fire in an amount not to exceed $324,300. The pier was damaged by fire and plaintiff collected from those insurers $300,000.

Defendant as attorney-in-fact for several underwriters, other than the primary insurers, issued a policy to plaintiff in an amount limited to $60,000 on this pier. This policy, which is the subject of this litigation, provides: u The purpose and intent of this insurance is to reimburse the assured for the difference between the amount collectible under policies of insurance covering above described property and the ascertained amount of loss and damage sustained by the assured, and also for the difference (if any) between the ascertained amount of loss and damage and the actual cost to the assured of repairing, restoring or rebuilding the structures damaged or destroyed with material of like kind and quality.” The other policies dealing with the primary insurance insure plaintiff to the extent of the actual cash value (ascertained with proper deductions for depreciation) of the property at the time of loss or damage, but not exceeding the amount which it would cost to repair or replace the same with material of like kind and quality within a reasonable time after such loss or damage * * *.” The policy in suit contains the same provision.

The complaint, as amended at the trial, alleges that the ascertained amount of loss and damage sustained by plaintiff as the result of the fire is $352,952.90 and that the difference between the amount collectible under the primary policies and the ascertained amount of loss or damage sustained by plaintiff is $52,952.90. A verdict for $52,941.17 was directed for plaintiff and the judgment has been affirmed.

The issue of law is whether the difference between the amount collectible under the policies relating to the primary insurance and the amount of loss and damage sustained by the assured has been ascertained in accordance with the terms of the contract between plaintiff and this defendant. The policy issued by this defendant provides that, if the parties shall fail to agree as to the amount of loss or damage, each shall, on the written demand of the other, select an appraiser. It also provides: “The amount of loss or damage for which ihis Company may be liable shall be payable sixty days after proof of loss, as herein provided, is received by this company and ascertainment of the loss or damage is made either by agreement between the insured and this company expressed in writing or by the filing with this company of an award as herein provided ” Defendant made demand upon plaintiff to submit to arbitration but plaintiff refused. The only other method provided by this contract for ascertaining the loss or damage is by agreement between plaintiff and this defendant.

After the fire, negotiations between plaintiff and representatives of the primary insurers were begun. Plaintiff asked for $311,000 and the primary insurer’s representatives offered $270,000. Finally, in the language of their report, they “ endeavored to effect a compromise by adding here and there and also splitting the difference on some items. * * * It was concluded at this meeting that it would be best to make settlement of $300,000 which we have done.” The $300,000 is said to represent the net figure after deduction of fifteen per cent for depreciation but it is the result of a compromise between plaintiff and the primary insurers after trading back and forth.

The amount upon which plaintiff and the. primary insurers compromise may be treated, as between them, as the amount collectible under the primary policies, but such a compromise agreement under those policies cannot be held binding upon this defendant under the terms of its policy as an ascertained amount of loss and damage sustained by the assured.” Defendant never consented to the compromise and never recognized the sum of $300,000 as eighty-five per cent of the total loss or, in other words, as the net amount after deduction of fifteen per cent for depreciation. It was a stranger to that compromise which was effected under policies to which it was not a party. It has a right to rely upon the terms of its own contract with plaintiff. (.Hathaway v. Orient Ins. Co,, 134 N. Y. 409, 413.)

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

Crane, Ch. J., Lehman, IIubbs, Crouch, LouGhran and Finch, JJ., concur.

Judgments reversed, etc,


author: Per Curiam.

text:
    In the Matter of the Application of The City of New York, Respondent, Relative to Acquiring Title to Real Property along Jamaica Bay, in the Borough of Brooklyn. Warren Leslie et al., Appellants.
    (Argued October 15, 1936;
    decided November 24, 1936.)

      John W. Davis, Daniel J. Kenefick and Luke W. Finlay for Warren Leslie et al, appellants.

      Francis S. Bensel, David Barnett and W. Frederick IKnecht for Central Hanover Bank and Trust Company et al., appellants.
   Per Curiam.

A single question of power in the Supreme Court is involved in the certified question.

Upon this record we find no abuse (as matter of law) of the discretionary power of the Supreme Court. (Hatch v. Central Nat. Bank, 78 N. Y. 487, 489; Matter of Tilden, 98 N. Y. 434, 439; Ladd v. Stevenson, 112 N. Y. 325.) This leads to an affirmance.

We leave the merits to be determined upon the new trial which has been granted.

The order should be affirmed, with costs, and the question certified answered in the affirmative.

Lehman, O’Brien, Hubbs, Crouch, Loughran and Pinch, JJ., concur; Crane, Ch. J., taldng no part.

Order affirmed, etc.


text:
    In the Matter of the Accounting of James L. Stoner et al., as Executors of John T. Welsh, Respondents. James L. Stoner et al., Appellants and Respondents; Mary Welsh, Respondent and Appellant; Julia R. Welsh et al., Respondents.
    (Argued October 13, 1936;
    decided November 24, 1936.)

      William F. Delaney and George J. Gillespie for Mary Welsh, respondent and appellant.

      Bertrand L. Pettigrew, Walter L. Glenney and Samuel S Yantis for James L. Stoner et al., appellants and respondents.

      William B. Butler and Robert Phillips for Josephine Gerling et al., respondents.
   Hubbs, J.

John Thomas Welsh, the testator, died October 9, 1929. He left a last will and testament which contained the following clauses:

Third. I hereby give and bequeath to my Trustees hereinafter named, and to the survivor or successors of them, the sum of three hundred and twenty-five thousand dollars ($325,000.00) to be held by them in the following separate trusts and to be by them invested and kept invested as they see fit and to pay the net income from $200,000.00 thereof to my sister, Mary Borgia from $25,000.00 thereof to my friend Josephine Gerling from $50,000.00 thereof to my brother-in-law, Frank L. Weaver from $25,000.00 thereof to my sister-in-law, Eugenia Browning from $25,000.00 thereof to my sister-in-law, Hortense Legg during the respective terms of the aforesaid persons natural lives, and upon their respective deaths or in the event of their predeceasing me, to pay over, deliver and distribute the principal fund held for each beneficiary hereinbefore named, to such person or persons, natural or corporate, as he or she, in and by his or her Last Will and Testament, shall have lawfully appointed and in the amounts and proportions so by him or her directed; and in default of such lawful testamentary appointment, the principal of the trust fund as it shall then consist, held for each beneficiary hereinbefore named, shall be transferred, paid over and distributed as though such beneficiary had died intestate, in accordance with the then laws of the State of New York, except that upon the death of my sister Mary Borgia, the principal of the trust fund herein created by me for her shall be transferred, paid over and delivered to my friend, James L. Stoner, or in the event of his predeceasing my said sister, to such persons as he may appoint by his Last Will and Testament, or in default thereof, as if he had died intestate, in accordance with the then laws of the State of New York.”

Seventh. All the rest, residue and remainder of my estate, including lapsed legacies, if any, shall be divided among and paid over to the beneficiaries hereinbefore named, excepting my said wife, or to such persons as shall constitute at my death, the heirs-at-law of any such deceased beneficiaries, according to the laws of descent of real property of the State of New York then in force, and in the proportion that their individual bequests bear to the net amount of my residuary estate.”

By paragraphs fourth, fifth and sixth of the will he gave specific legacies to James L. Stoner and Hume L. Brown, each of whom was named an executor of the will, and to Frank Maguire. As to each of said legacies, he provided that in the event the legatee should predecease him the bequest was to “ such persons as he may appoint by his last will and testament, or in default of such appointment as if he had died intestate, in accordance with the laws of the State of New York.”

Consideration of the fourth, fifth and sixth paragraphs is important only in connection with the construction to be placed upon the seventh paragraph of the will.

This proceeding was instituted by the executors on the accounting for a construction of the will in various particulars. The first question for our consideration is as to whether the sister of the testator, Mary Welsh, described in the will as Mary Borgia,” has power of appointment with respect to the principal of the trust of which she is the life beneficiary. Upon this point, the Surrogate determined that by the language of the paragraph the decedent expressly excepted his sister from those to whom he gave power of appointment. The decision of the surrogate upon this question has been affirmed by the Appellate Division, two justices dissenting for the reason that they were of the opinion that she was given such power of appointment. The first inquiry to be made is as to whether ambiguity exists in the language used. If it be found that there is no ambiguity, the only question is as to whether the courts below have placed upon the language used a proper construction.

The testator has provided with respect to each of the trusts created by the third paragraph of his will that the income thereof is to be paid to the beneficiaries during their natural life and upon the death of the beneficiaries or in the event of the beneficiary predeceasing the testator, he has directed his trustees “ to pay over, deliver and distribute the principal fund held for each beneficiary hereinbefore named, to such person or persons, natural or corporate, as he or she, in and by his or her- Last Will and Testament, shall have lawfully appointed and in the amounts and proportions so by him or her directed.” If this comprised the entire terms of the trust, it would be quite clear that “ Mary Borgia,” sister of the testator, is given a power of appointment by will,

Following the semicolon in the last quoted clause, the testator further provided in default of such lawful testamentary appointment ” that the principal of the trust fund as it shall then consist, held for each beneficiary hereinbefore named, shall be transferred, paid over and distributed as though such beneficiary had died intestate in accordance with the then laws of the State of New York except that upon the death of “ my sister Mary Borgia, the principal of the trust fund herein created by me for her shall be transferred, paid over and delivered to my friend, James L. Stoner, or in the event of his predeceasing my said sister, to such persons as he may appoint by his Last Will and Testament, or in default thereof, as if he had died intestate, in accordance with the then laws of the State of New York.”

A reading of this last quoted portion of the paragraph would seem to indicate, if effect be given to the semicolon by which it is separated from the original gift of the trust estates, including that given to Mary Borgia,” that it was the intent of the testator that should any one of the beneficiaries other than the sister fail to make testamentary appointment, the principal of the fund held for each such beneficiary should be paid over to those who would be distributees of the beneficiary had the beneficiary died intestate, and should the sister fail to make lawful, testamentary appointment, the principal cf the trust fund created for her should be transferred, paid over and delivered to Stoner, or, in the event of his predeceasing the sister, to such persons as he might appoint, or in default of an appointment by him to those who would be distributees if he died intestate.

The semicolon has not the effect of creating an ambiguity. The portion of the paragraph following the semicolon constitutes a reasonable and workable disposition of the various trust funds should they not be disposed of by will by the respective cestuis que trustent. To conclude that the sister is given no power of appointment is to assume that the testator intended to deprive his closest relative, named as one of the beneficiaries in the trust, of as full power over the principal of the fund as he gave to the others less closely related to him. The learned surrogate has said that to uphold the sister’s contention that she is given a power of appointment “ requires reading into the language of the exception a provision that in the event of her leaving no will appointing any person to receive the fund, the principal of the trust passes to Stoner.”

He overlooked the fact that by the first portion of the paragraph he did unqualifiedly give to her full power of appointment, and that testator prefaced the second portion with the words and in default of such lawful testamentary appointment.” To give to the exception the effect of depriving her of that right is to take away something already granted and to give it to another. The exception is as to what is to be done with the trust fund in the event of non-appointment by the life beneficiary. Thus read, the power of appointment given to the sister and the other beneficiaries is not taken away from the sister alone as decided by the Surrogate.

The second portion of the paragraph gives the principal of each trust, in the event no appointment is made by the life beneficiary, to certain specified persons or classes of persons. In the case of each beneficiary other than Mary Borgia ” such gift of the principal goes to the distributees of the life beneficiary and in the case of “ Mary Borgia,” if she fails to make an appointment, it goes to Stoner with a power of appointment, or, if he fails to survive the sister without making an appointment, to his distributees.

The paragraph is not ambiguous unless violence be done to the expressed intent of the testator, and is open to no construction other than that a power of appointment is given to the sister.

The learned Surrogate has determined that the use of the word “ beneficiaries ” in the seventh paragraph of the will refers to the beneficiaries named in the third paragraph, which has the result of excluding from participation in the residuary estate the legatees named in the fourth, fifth and sixth paragraphs who are not, in such last numbered paragraphs, described as beneficiaries. In this conclusion the Appellate Division has unanimously concurred. There is no error in such construction. There is a distinction between beneficiaries and legatees. The testator has used the word “ beneficiaries ” with respect to those persons taking the life estate under the trust. He has been careful to provide that in the event any of the beneficiaries named shall not survive him the share of_each such deceased beneficiary shall pass to the heirs at law rather than to the next of kin of the beneficiary. We find no ambiguity in the seventh paragraph of the will.

A question has been raised as to whether the testimony of the attorney who drew the will could be legally received in this proceeding for the purpose of assisting the Surrogate in resolving the ambiguity alleged to exist in the wording of the will. Since we have determined that no ambiguity exists in the wording of the will, it is unnecessary to pass upon that question as the only contention is that such testimony would be competent in case of an ambiguity.

The order appealed from should be affirmed so far as it adjudges and construes the rights and shares of the beneficiaries in the residuary estate and reversed in so far as it determines that Mary Welsh has no power of appointment under paragraph third of the will, and the matter should be remitted to the Surrogate for the purpose of a decree in conformity with this opinion.

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

Crane, Ch. J., Lehman, O’Brien, Loughran and Finch, JJ., concur; Crouch, J., taking no part.

Judgment accordingly.


author: Lehman, J.

text:
    The Mount Vernon Trust Company, Appellant, v. Clara Bergoff, Respondent.
    (Argued October 7, 1936;
    decided November 24, 1936.)

      Clinton T. Taylor and James D. Hopkins for appellant.

      Arthur C. Blatz and Samuel Rochlin for respondent.
   Lehman, J.

In October, 1932, Rose Bergoff, the mother of the defendant, owed the plaintiff bank the sum of $34,644.23 upon a promissory note which was fully secured by collateral deposited with the bank. At that time the defendant owned a bond and mortgage executed by Oakwood Gardens, Inc., on which the sum of $30,000 was due, with accrued interest amounting to $1,505. The mortgage was guaranteed by an additional bond executed by Milton Hall, an executive vice-president of the plaintiff bank, and two other persons. The defendant’s father, acting on her behalf and also on behalf of his wife, Rose Bergoff, had many conversations with the president of the plaintiff bank and with Hall in regard to the payment of the defendant’s bond and mortgage. The testimony in regard to what was said then about Hall’s guaranty is vague, but perhaps, as the respondent claims, it is sufficient to show that Hall said that in signing the guaranty he had been acting for the bank and that, upon the demand of the defendant’s father, the bank thereupon agreed to accept assignments of the bond and mortgage, together with the separate bond guaranteeing payment thereof, and credit the amount of $31,505 then due as part payment of the note of the defendant’s mother, Rose Bergoff. Accordingly these instruments were assigned to the plaintiff bank, and Rose Bergoff then executed a new note for $3,139.23, the difference between the amount due on her original note, and the sum of $31,505 credited thereon, and the original note and the original collateral securing it were then returned by the bank.

Then the defendant at the request of the bank executed and delivered the instrument upon which this action is based. At the same time she received back from the bank a letter in which the bank through its president wrote: “It is understood that the collateral note of $30,000 * * * this day executed by you and purchased by The Mount Vernon Trust Company is to be held by the Mount Vernon Trust Company only as additional evidence of the debt of Oakwood Gardens Inc. to The Mount Vernon Trust Company and collection of said note is not to be enforced as against you, anything contained in said note to the contrary notwithstanding, and further that the collection of said note will have to be made by the undersigned out of the collateral this day assigned as security therefor.” At the close of the evidence both sides moved for the direction of a verdict and the trial judge directed a verdict in favor of the defendant. The Appellate Division affirmed the judgment, holding that the defendant’s note was made without consideration and upon a condition precedent which prevented it from taking effect. It relied for authority largely upon the case of Higgins v. Ridgway (153 N. Y. 130, 132).

It may be conceded that what was said and, perhaps, even what was decided in that case tends to support the decision of the courts below. There a clerk employed by a firm of which a director of a bank was the senior member, executed a note for $15,000 to the order of the bank upon the promise or representation made to him by the president of the bank that you will get nothing for it, and I tell you that you will not be held on the note.” The court upon these facts sustained the defense of the maker of the note. In that case the bank had parted with nothing in consideration of the defendant’s execution of the note and the court, without considering whether any question of public policy was involved or whether a transaction with a bank is governed by the same considerations as a similar transaction between private persons, refused to enforce an instrument which was never intended to create an obligation.

Since that time it has become evident that the rule applied in the Ridgway case might become a cloak for fraud. So we pointed out in Bay Parkway Nat. Bank v. Shalom (270 N. Y. 172, 176) that an agreement to exempt the maker or indorser of a note from liability is not always enforceable. When one knows that his note is to be treated as an asset of a bank and, as a result, bank examiners are deceived and depositors continue their relations with the bank on the faith of an assumed solvency, then he is estopped from pleading the defense of no consideration.” In this case no witness, produced at the trial, testified as to the reason why a note was received, and at the same time a writing given, exempting the maker from liability. No explanation is necessary, for but one inference can be drawn from the testimony. The bank desired to conceal the substitution of a bond and mortgage, guaranteed by one of its officers, for a negotiable instrument which concededly was secured by ample collateral and could have been collected at that time. The defendant in making the note may have been ignorant of what the bank was trying to conceal. We are not told in this case whether the bank examiner was deceived, and indeed we do not know whether any one was deceived. A fictitious note delivered to a bank, intended to become part of its apparent assets, though not intended to be enforceable, is in itself a continuing falsehood calculated to deceive the public, and any person delivering such a note becomes a party to the falsehood.

In such case it is immaterial whether the note was based on good consideration or not. The stability of banks is a matter of such public concern that the State or Federal government regulates the affairs of each bank and periodically examines its apparent condition. The State cannot sanction any device intended to give a false appearance to a transaction or increase the apparent stability of a bank. The defendant may not have intended to deceive any person, but when she executed and delivered to the plaintiff bank an instrument in the form of a note, she was chargeable with knowledge that, for the accommodation of the bank, she was aiding the bank to conceal the actual transaction. Public policy requires that a person who, for the accommodation of the bank executes an instrument which is in form a binding obligation, should be estopped from thereafter asserting that simultaneously the parties agreed that the instrument should not be enforced. (Cf. Iglehart v. Todd, 203 Ind. 427; Denny v. Fishter, 238 Ky. 127; Bangor Trust Co. v. Christine, 297 Penn. St. 64; Cedar State Bank v. Olson, 116 Kan. 320; Mars Nat. Bank v. Hughes, 256 Penn. St. 75.)

The judgments should be reversed and judgment directed for the plaintiff, with costs in all courts.

Crane, Ch. J., O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Judgments reversed, etc.