author: O’Brien, J. Crane, J. (concurring only in result).

text:
    Lewis H. Joseph, Respondent, v. Henry A. Schatzkin et al., Appellants.
    (Argued March 21, 1932;
    decided June 1, 1932.)

      William L. Cohn for appellants.
    An infant cannot recover moneys lost to him by his own acts. (Crummey v. Mills, 40 Hun, 370; Green v. Green, 69 N. Y. 556; Wheeler & Wilson Co. v. Jacobs, 2 Misc. Rep. 236; Pierce v. Lee, 36 Misc. Rep. 870; Lown v. Spoon, 158 App. Div. 900; Sparandera v. Staten Island Garage, Inc., 117 Misc. Rep. 780.)

      Osmond K. Fraenkel, amicus curiæ.

    An infant is not entitled to rescind a transaction executed by his agent. (Crummey v. Mills, 40 Hun, 370; Pierce v. Lee, 36 Misc. Rep. 870; Welch v. Welch, 103 Mass. 562; Casey v. Kastel, 237 N. Y. 305.)

      Julius Steinberg and Harry Dubinsky for respondent.
    An infant may repudiate his transactions with a stockbroker and recover the money deposited by him. (Mordecai v. Pearl, 18 N. Y. Supp. 543; 136 N. Y. 625; Ruehl v. Kardos, 204 App. Div. 499; Heath v. Mahoney, 7 Hun, 100; Falk v. MacMasters, 197 App. Div. 357; Beardsley v. Hotchkiss, 96 N. Y. 201; New York Building Loan Co. v. Fisher, 23 App. Div. 365; Casey v. Kastel, 237 N. Y. 305; Stafford v. Roof, 9 Cow. 626.) The damages were properly assessed. (Mordecai v. Pearl, 18 N. Y. Supp. 583; 136 N. Y. 625; Casey v. Kastel, 237 N. Y. 305.)
   O’Brien, J.

At a time when American stocks and other securities were selling at grossly inflated prices on all the exchanges of the world, plaintiff, a youth lacking a few months of the attainment of his majority, opened a speculative account with a firm of brokers in New York. He transferred that account to defendants, another brokerage firm, and on November 1, 1928, he caused to be delivered to them four hundred shares of three different issues which his former brokers had carried for him and which then possessed a market value of $17,250. Defendants paid the debit balance of $13,907.91 to those brokers, leaving to plaintiff on that day an interest or equity of $3,342.09 in these stocks. Prior to the date of this transaction, defendants were carrying a marginal account with plaintiff. It was continued with numerous purchases and sales until it was closed April 2, 1929, by payment to him of the sum of $70.99. While yet in his minority, plaintiff rescinded his agreement with his brokers and disaffirmed the entire transaction. This action is for the recovery- of the amount which he alleges to represent the value of his equity in the four hundred shares of stock November 1, 1928, minus the sum paid to him on the closing of his account.

The contract between defendants and their infant customer was not void. At his election it was merely voidable. (Casey v. Kastel, 237 N. Y. 305.) If the series of transactions growing out of his marginal trading had resulted in profit, he candidly admits the obvious truth that he would have been content with his contract and would have accepted its advantages. Whatever may be the individual opinion respecting the commercial ethics of one who, after loss instead of profit in speculation, rescinds the agreement into which he voluntarily entered, the rule is clear that the property of a minor is tenderly safeguarded by the law (Green v. Green, 69 N. Y. 553) and it confers upon him the right to discard liability toward those who in good faith have dealt with and trusted him. At their peril merchants and traders and all others maintain financial relations with that type of minor who is willing to avail himself of his legal prerogative to repudiate engagements which many regard as moral obligations. In a case such as the one before us, courts are limited to the function of ascertaining and declaring the rule relating to the measure of damage.

Since this contract is voidable only, it cannot be made void ab initio by the mere act of rescission. Prior to avoidance no tort is committed (Casey v. Kastel, supra) and in this case no tort by the brokers was at any time committed. Acts by defendants, if authorized by the infant, were not wrongful. All their acts were authorized by him. After disaffirmance, the infant is not entitled to be put in a position superior to such a one as he would have occupied if he had never entered into his voidable agreement. He is not entitled to retain an advantage from a transaction which he repudiates. The privilege of infancy is to be used as a shield and not as a sword.” (Kent, vol. 2, p. 240; Rice v. Butler, 160 N. Y. 578.) If he has reaped a benefit, he must return it or its value. (Rice v. Butler, supra; but see contra, Green v. Green, supra.) In a case of marginal trading, however, where nothing has been received, nothing need be restored. (Mordecai v. Pearl, 63 Hun, 553; affd., 136 N. Y. 625; Meyer, The Law of Stock Brokers and Stock Exchanges, § 125.) This plaintiff had title to the certificates for the four hundred shares of stock delivered on November 1 to defendants but he never took possession,. Against them defendants merely had a lien for the unpaid balance of their purchase price. Always, until their sale, they remained with the brokers. The small balance due and paid to plaintiff on the closing of his account has been deducted from the value of his equity at the time his shares were delivered to defendants. It is plain, therefore, that in this case no benefit was derived and, therefore, there is nothing for plaintiff to restore. In seeking the rule which determines the measure of damage, the question is whether the value of plaintiff’s interest or equity in the four hundred shares at the date of their delivery to defendants or its value at the date of plaintiff’s disaffirmance of the agreement is controlling.

The stability of plaintiff’s interest or, if the term may be accurately used, his equity in these securities was less firmly established than would be such property right as he might have had in a cash credit, if money instead of stocks had been deposited as margin. The value of cash, or of credit based upon a deposit of cash, would have remained constant. As the market price of the stocks which were purchased for him rose or fell, the margin between their prices and the value of a credit founded upon a cash deposit would have expanded or contracted but the standard of value represented by the cash deposit would have continued immutable. Not so in respect to the value of the stocks which were pledged as security for the unpaid balance of their own market price and also as collateral for those other stocks which were later acquired and which were included within plaintiff’s account. The value of this collateral security, unlike cash, was subject to constant fluctuation and, of course, it did in fact vary from day to day. Two decisions in the former General Term are cited by the adverse parties at bar. They are in conflict but, although the actual determination of one was affirmed without opinion by this court, neither controls the rule to be applied by us. (Crummey v. Mills, 40 Hun, 370; Mordecai v. Pearl, 63 Hun, 553; affd., 136 N. Y. 625.) We are free to accept or reject the argument of either opinion. In the Crummey case the infant originally deposited stock and, later from time to time, money as margin for the purchase of stock. The market price of all his shares declined and when he was sold out he was indebted to his brokers. In his action to recover both his stock.and his money he was granted no relief. There was no appeal to this court. In the Mordecai case the infant’s margin consisted exclusively of money and his adversary conceded that he was entitled to recover it, provided he returned whatever he had received under the contract. The essential part of the decision is that he had never received any benefit and, therefore, under the concession, he was entitled to recover the fixed sums of money without deduction. There the thing, deposited as margin was static, here it was variable and fluctuating. In neither case was any benefit received by the infant. If, in the case at bar, the series of transactions had been void or if the infant’s disaffirmance could be held to operate retroactively and to relate back to the date of the delivery of the securities to defendants, plaintiff would be entitled to recover the value of his equity in them as of that date. Until disaffirmance, however, the agreement was entirely valid and all action taken under it was wholly regular and, therefore, until disaffirmance no cause of action arose. If a fixed sum of money had been deposited, then at the date of disaffirmance plaintiff would probably have become .entitled to recover that amount. The same date must be assigned for his right to the return of such stock as had been delivered to defendants as security, subject to defendants’ hen, if that stock still. remained with them. Since plaintiff’s four hundred shares had been sold at his order prior to disaffirmance and the proceeds of the sale credited to his account, they were no longer in defendants’ possession. Plaintiff had the right to receive only his proportion of their value as of the date when otherwise he would have been entitled to obtain the shares themselves upon payment of defendants’ lien on them.

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, J. (concurring only in result).

In the result arrived at by Judge O’Brien I agree, but I have a different view regarding the recovery permitted the plaintiff. As an infant repudiating his transactions with the stockbrokers he can receive no benefit whatever from his bargain. He must repudiate or confirm in toto from the beginning of his dealings in the transaction. From this speculation in stocks he can derive no benefit. He cannot accept part of the profits and repudiate all the losses. (1 Williston on Contracts, § 236; Anson on Contracts [3d Amer. ed. by Corbin], p. 184, § 161b; Meyer, The Law of Stock Brokers and Stock Exchange, § 125, p. 496; see Myers v. Hurley Motor Co., 273 U. S. 18, 21; Benson v. Tucker, 212 Mass. 60; Casey v. Kastel, 237 N. Y. 305.)

Applying this rule to the present facts, all the infant can get back on this transaction which he has repudiated is the amount of the margin which he deposited with Leopold Spingarn & Co. With this brokerage house he had opened a margin account which they carried for him. He could not obtain the stocks which he had purchased on margin without paying to them the amount due. This he never paid. He procured these defendants to take over the account by paying to Leopold Spingarn & Co. $13,907.91. These defendants, at the plaintiff's request, were merely substituted for the first brokers. It was all one transaction. The only money ever parted with by the infant was the amount he put up with Leopold Spingarn & Co. He cannot confirm his transaction with Spingarn & Co. and repudiate it with these defendants. To do so would permit him to recover a profit which he never took, and was never entitled to receive until he had met the conditions by paying up his margin of $13,907.91. From the beginning of his dealings with the first brokerage firm until his account was sold out, he, as an infant, had only lost that which he first parted with. If the courts give him more it is to give him the profits on a transaction to which he was never entitled without confirmation of his dealings and a payment by him of the margin due. When these defendants took over the account and advanced that margin to Leopold Spingarn & Co., the apparent profits or increase in the value of the stocks was not the absolute money of this plaintiff; he could not get it even from these defendants without confirming the transaction by repaying to them the amount they had advanced. On the very day these defendants took over his account, he could only have recovered the actual amount parted with by him; he could not recover profits without confirming his dealings.

Consequently, all that this plaintiff is entitled to is the actual money, with interest, which he parted with to Leopold Spingarn & Co. The record does not show us the amount of this deposit. While there must be a reversal and new trial, I am of the opinion that the infant is entitled to the return of this money, and no more.

Pound, Ch. J., Lehman and Hubbs, JJ., concur with O’Brien, J.; Crane, J., concurs in result in memorandum; Kellogg, J., not sitting.

Judgments reversed, etc.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    The John Forsythe Company, Inc., Respondent, v. The Forsythe Shoe Corporation, Appellant.
    (Argued May 3, 1932;
    decided June 1, 1932.)

      Abraham N. Davis and Paul J. McCauley for appellant.
    The injunction should not prevent the appellant from using the name “ Forsythe ” outside the State of New York. (Ball v. Broadway Bazaar, 194 N. Y. 429.)

      Maurice Deiches and James Allan Bernson for respondent.
   Per Curiam.

The judgment appealed from should be modified so as to read:

Ordered, adjudged and decreed that the defendant be restrained and enjoined from continuing the use of the name ‘ The Forsythe Shoe Corporation ’ in connection with its business in New York State as hereinafter provided.
Ordered, adjudged and decreed that the defendant be restrained and enjoined from continuing to use the name Forsythe ’ as a part of its corporate name in connection with the acts hereinafter restrained, and it is further
Ordered, adjudged and decreed that the defendant be restrained and enjoined from continuing in New York State to use the name Forsythe ’ or Forsythe Shoes ’ as names descriptive of its stores or goods and that the defendant be restrained and enjoined from maintaining any signs, window prints or lettering on any or all of its stores, in which the word ‘ Forsythe ’ appears, on its or any of its stationery, catalogues, labels, advertisements, placards, signs or in any manner whatever, and it is further
Ordered, adjudged and decreed that plaintiff is entitled to recover of the defendant for such damages as plaintiff has sustained or suffered by reason of the wrongful acts of the defendant herein, and for the purpose of ascertaining and assessing the amount thereof, it is hereby referred to Hugh Wallace Reid, Esq., of 110 Broadway, to assess such damages as aforesaid, and it is further
“ Ordered, adjudged and decreed that upon the final assessment and award of such damages, final judgment be entered herein, in favor of the plaintiff and against the defendant, enjoining it, their agents, employees, successors and assigns, as hereinabove provided, and further awarding the plaintiff the recovery from the defendant of the amount so assessed or awarded, together with costs, which costs, together with disbursements, are hereby awarded to the plaintiff,” and as so modified affirmed, with costs to the respondent.

The questions certified are answered: No. 1 in the affirmative; No. 2 in the negative.

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

Judgment accordingly.


author: Hubbs, J. Pound, Ch. J. (concurring in result). Crane, J. (concurring in result). Lehman, J. (concurring in result).

text:
    Robert Reiner, Appellant, v. North American Newspaper Alliance, Respondent.
    (Argued March 24, 1932;
    decided June 1, 1932.)

      John A. Kelly for appellant.
    Plaintiff’s contract with the defendant or its performance is not a fraud upon the public or any one else, is not illegal or immoral, and is not contrary to public policy. (Johnston v. Fargo, 184 N. Y. 379; Converse v. Sharpe, 161 N. Y. 571; Moss v. Cohen, 158 N. Y. 240; Hollis v. Drew Theological Seminary, 95 N. Y. 166.)

      Charles E. Kelley and Christian S. Lorentzen for respondent.
    A contract which is contrary to public policy and good morals is unenforceable. (Holman v. Johnson, 1 Cowp. 341; Gray v. Hook, 4 N. Y. 449; Atcheson v. Mallon, 43 N. Y. 147; Da Costa v. Jones, 2 Cowp. 729; Grudberg v. Midvale Realty Co., 119 Misc. Rep. 558; Bell v. Leggett, 7 N. Y. 176; Arnot v. Pittston & Elmira Coal Co., 68 N. Y. 558; Sirkin v. Fourteenth Street Store, 124 App. Div. 384; Materne v. Horwitz, 101 N. Y. 469; Southard v. Jump Co., 43 Misc. Rep. 104; Sprague v. Webb, 168 App. Div. 292; 225 N. Y. 685; Ridgely v. Keene, 134 App. Div. 647; Barry v. Mulhall, 162 App. Div. 749.) A contract which involves the breach of a contract made by the plaintiff with a third person is against public policy and good morals, and is, therefore, unenforceable. (Jackson v. Duchaire, 3 T. R. 551; Coventry v. Barton, 17 Johns. 142; Stone v. Hooker, 9 Cow. 154; Bolton v. Amsler, 95 N. Y. Supp. 481; Sayres v. Decker Automobile Co., 239 N. Y. 73; Hocking Valley Ry. Co. v. Barbour, 190 App. Div. 341; Woodstock Iron Co. v. Richmond & Danville Extension Co., 129 U. S. 643.)
   Hubbs, J.

The plaintiff-appellant in this action on contract alleges that in October, 1928, he engaged passage to fly from Germany to New York as a passenger on the Graf Zeppelin; that he entered into a contract to send radio messages from the said Graf Zeppelin to friends in the United States in reply to messages sent to plaintiff by his friends and the defendant promised and agreed to pay the plaintiff $5,000 therefor;” that the defendant agreed to make all necessary arrangements for the sending of messages to plaintiff by his friends, and for the collection of the reply messages sent by the plaintiff.”

The complaint further alleges that plaintiff, while a passenger on the Graf Zeppelin, sent messages to his friends in the United States in reply to messages received by him from them; that he has fully performed the contract on his part but that the defendant has failed to pay him according to the terms of the contract and demands judgment for the amount unpaid.

The answer sets up as a defense:

“ Third. The contract alleged in the complaint was made in violation of the terms of the contract by which the plaintiff engaged passage to fly from Friedrichshafen, Germany, to New York upon the dirigible Graf Zeppelin, in that the plaintiff knew that the exclusive news rights of the flight of the said dirigible had been acquired by a third party and the plaintiff, accordingly, had agreed, as a condition of,being given passage on the said dirigible, that he would give no interviews and send no reports' of the said passage while en route and for eight days after the completion of the flight.
“ Fourth. The messages sent by the plaintiff, as alleged in the complaint, were reports of the flight of the said dirigible and constituted news thereof to be distributed by the defendant to newspapers for publication as news all over the United States.
Fifth. The contract alleged in the complaint and the performance thereof by the plaintiff was, therefore, a fraud upon the owners, managers and operators of the said dirigible and upon the owner of the exclusive news rights of the passage of the said dirigible from Friedrichshafen to New York, and a fraud upon the public, and was illegal, void, and against public policy and unenforcible at law or in equity.”

Reading the complaint and answer together, the fair import is that the plaintiff entered into the contract with defendant with full knowledge that the exclusive news rights of the flight had been acquired by a third party by contract; that, knowing such fact, the plaintiff had agreed as a condition of obtaining passage on the dirigible that he would not send any reports of the flight; that the plaintiff in violation of the contract between the owners of the Graf Zeppelin and a third party and in violation of the contract between himself and the owners of the Zeppelin, contracted and arranged that, through a pretense of answering messages from his friends, he would secretly and in violation of the terms of those contracts send news messages to be used by the defendant for publication in newspapers in the United States.

The plaintiff moved to strike out the separate defense contained in the answer. The motion was denied and the order was affirmed at the Appellate Division by a divided court. The Appellate Division has certified the following question to this court: “Is the separate defense set out in paragraphs Third, Fourth and Fifth of the answer sufficient in law on the face thereof ? ”

Assuming, as we must, the truth of the allegations contained in the answer, it appears that the conduct of the plaintiff was unconscionable, in violation of his contract of passage, and in violation of the exclusive privilege which, to his knowledge, had been granted to a third party.

Plaintiff, when he entered into the agreement with the defendant, was seeking to obtain for himself the promised advantage which had been contracted to another. That his conduct was vicious and has an evil tendency cannot be questioned. Did it have the effect of rendering his contract with the defendant unenforceable?

It has become the settled law of this State that an action will lie for intentionally and knowingly, and without reasonable justification or excuse, inducing a breach of contract. (Hornstein v. Podwitz, 254 N. Y. 443; Lamb v. Cheney & Son, 227 N. Y. 418; Campbell v. Gates, 236 N. Y. 457.)

The-law endeavors to protect the interest of parties in existing contractual relations from intentional and wrongful interference by strangers. The principle constitutes a limitation upon the doctrine of freedom of contract, which courts have imposed in an attempt to promote justice and fair dealing and to prevent wrongs.

The plaintiff is undoubtedly fiable to the parties in the exclusive rights contract for all damages caused by his wrongful conduct. Such an action would sound in tort. The gravamen of the action would be plaintiff’s wrongful conduct in making it impossible for the third party to reap the full benefits of the contract with the owners of the Graf Zeppelin.

Plaintiff caused the failure of that contract, not by persuading the owners of the Graf Zeppelin to refuse to carry it out, and by entering into a like contract with him, as is usual in cases of this nature, but by his conduct making it impossible for the third party to receive the full benefits of the exclusive contract rights, as the news of the voyage could no longer be exclusive after he had caused the publication of the news items through his contract with the defendant. By such conduct he became liable to the same extent as he would if he had induced the breach of the third party contract by other means.

Under these authorities, if the Omaha Company had by its wrongful conduct simply induced the Portage Company to break its contract with Angle, it would have been liable to him for the damages sustained thereby. A fortiori, when it not only induces a breach of the contract by the Portage Company, but also disables it from performance.” (Angle v. Chicago, St. Paul, etc., Ry. Co., 151 U. S. 1, 15.)

We do not mean to say that in all cases one who knowingly causes a breach of contract between others is hable' for the damage caused by such breach. Whether liability will attach for causing such a breach of contract depends upon whether there exists sufficient justification. For a detailed discussion of. that question see 36 Harvard Law Review, 663. It is sufficient for the decision of this case that no such justification .-xists.

The exclusive privilege contract with a third party vested in the parties thereto rights which the law protects, contract rights. It would be strange indeed if the law should protect such contract from wrongful interference by a stranger, but after such interference assist the stranger in reaping the fruits of his unjust and illegal act.

The wrongful acts of the plaintiff constituted a tort. The contract between plaintiff and defendant was a part of the scheme which resulted in the breach of the contract of passage entered into by plaintiff and interfered with the contract between the owner of the Graf Zeppelin and the third party. It was in effect a contract to commit a tort.

The plaintiff’s act in entering into the contract cannot be said to have been negligent, incidental or foreign to the purpose of the contract with the third party. It was made with full knowledge of the third party contract. Not only did plaintiff have knowledge of that contract, but in his contract of passage he had expressly agreed not to do anything to prevent the carrying out of that contract. In utter disregard of both contracts, he entered into the agreement with defendant, knowing that the effect of the contract would be to nullify the third party contract and make its fulfillment impossible and at the same time breach his contract of passage. By his contract with the defendant, the plaintiff robbed the third party of the exclusive right to the news rights of the voyage and attempted to take for himself the advantage which had been contracted to the third party.

. A court will not lend aid to a party who has committed a tort to enable him to recover from another the price agreed to be paid for his wrongful act. The defense is allowed not as a protection to a defendant, but as a disability to the plaintiff. (Beekman v. Marsters, 195 Mass. 205; Roberts v. Criss, 266 Fed. Rep. 296; s. c., 11 A. L. R. 698, with note; Woodstock Iron Co. v. Richmond & Danville Extension Co., 129 U. S. 643; 27 Harvard Law Review, 273; Rhodes v. Malta Vita Pure Food Co., 149 Mich. 235; 3 Williston on Contracts, § 1738; Proposed Final Draft of the Restatement of Contracts by The American Law Institute, § 571; Wanderers Hockey Club v. Johnson, [Brit. Col.] 25 Western Law Rep. 434.)

The principle involved is somewhat analogous to that involved in a contract which constitutes a fraud upon a third party. (Horbach v. Coyle, 2 Fed. Rep. [2d] 702.)

The fact that plaintiff might be able to establish a prima facie case without requiring the disclosure of the elements which made the contract void would not prevent the defendant from proving that the contract in issue resulted from, was directly connected with, and was entered into for the purpose of enabling plaintiff to destroy the two contracts previously entered into with the owners of the Graf Zeppelin. (Horbach v. Coyle, supra; 3 Williston on Contracts, § 1753.)

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

Pound, Ch. J. (concurring in result).

If the contract in suit put defendant in the position of one who had conspired with plaintiff to induce a breach of the plaintiff’s contract of passage with the Graf, the case would be simple.

On the pleadings, however, we have the bare facts (a) of the contract of passage; (b) of the contract in suit. Evidence may develop guilty conduct on the part of defendant but we may not assume it.

The only question is whether the contract sued on is, on the face of the pleadings, a bargain on the part of plaintiff to commit a tort.

The case is one where plaintiff, having secured passage on the Graf under conditions which precluded him from sending out information, makes the contract in suit. Obviously plaintiff intended to breach the contract of passage when he made such contract. Defendant’s intentions do not appear. How is the case to be differentiated from cases where A, having contracted to sell a horse to B, sells the horse to C? One has the power, if not the right, to breach such a contract) It is not a “ wrong ” to breach such a contract. A mere breach of contract is not a “ wrong,” the sole remedy being damages for breach. I am unable to see how the rights of the public are involved or interfered with. It is a mere matter of private right.

To bargain to commit a tort, however, is illegal. Therefore, we must seek our answer here by inquiring whether plaintiff bargained to commit a tort. Was it a “ wrong,” independent of the breach of contract, to the Graf for him to go on board, intending to breach and actually breaching his contract of passage?

The Graf had no reason to believe that plaintiff would breach his contract of passage when he went on board. He impliedly represented that he would not. Having obtained a strategic position with a fraudulent intent, he did a wrong to the Graf when he broke the terms of his contract of passage. The contract with defendant, therefore, contemplated a “ wrong ” to the Graf independent of the breach of the contract of passage. It was, therefore, illegal and the defense pleaded is good.

Otherwise, plaintiff was guilty of no wrong independent of contract but of a mere breach of contract and he made no bargain to commit a tort. (See Rich v. N. Y. C. & H. R. R. R. Co., 87 N. Y. 382, 397; 3 Williston on Contracts, § 1738; American Law Institute, Restatement of Law of Contracts, § 571.) It is not right to break one’s contract (See " The ‘ Right ’ to Break a Contract,” by Barbour, 16 Mich. Law Rev. 106; Selected Readings on the Law of Contracts, 500), but it is only a breach of duty which the parties have fixed for themselves and it cannot be turned into a torf.

Crane, J. (concurring in result).

The plaintiff has brought an action against the North American Newspaper Alliance to recover the agreed price of ten radio messages sent by him from the dirigible Graf Zeppelin, while it was en route from Friedrichshafen, Germany, to New York, in October, 1928. The defendant pleads the fraudulent or illegal conduct upon the part of the plaintiff in obtaining his information, which, it is said, will prevent the courts from affording him any relief. The allegations in the answer on this appeal must be taken as true, in order to determine whether the defense be good. The matter pleaded reads as follows: The contract alleged in the complaint was made in violation of the terms of the contract by which the plaintiff engaged passage to fly from Friedrichshafen, Germany, to New York upon the dirigible Graf Zeppelin, in that the plaintiff knew that the exclusive news rights of the flight of the said dirigible had been acquired by a third party and the plaintiff, accordingly, had agreed, as a condition of being given passage on the said dirigible, that he would give no interviews and send no reports of the said passage while en route and for eight days after the completion of the flight. * * *

“ The contract alleged in the complaint and the performance thereof by the plaintiff was, therefore, a fraud upon the owners, managers and operators of the said dirigible and upon the owner of the exclusive news rights of the passage of the said dirigible from Friedrichshafen to New York, and a fraud upon the public, and was illegal, void, and against public policy and unenforcible at law or in equity.”

In my judgment, if these allegations be true, they afford an absolute bar to the plaintiff’s right of action. The doctrine of Lamb v. Cheney & Son (227 N. Y. 418) and Campbell v. Gates (236 N. Y. 457) has nothing to do with this case. The defendant did not induce the plaintiff to break his contract with a third party or conspire with him to that end. There is no such allegation in the answer. This is not a case, therefore, where the defendant would be hable for procuring the plaintiff to break his contract with another. The reason the plaintiff cannot recover is because the courts will not aid him in his fraud and deception. His own conduct has been such as to close the doors of justice to his plea.

The Graf Zeppelin was about to make a record flight from Germany to America and the events happening from start to finish would be of extreme interest to the news reading public. To obtain this, news it was necessary to travel in the ship. While in transit the news was a secret, known only to those making the flight. The owners of the ship, therefore, had the right to keep this news to themselves the same as they had the right to possess any other property, at least, until the landing of the ship. Those in authority could impose as a condition for taking passage the promise and agreement not to reveal, by radio or otherwise, these secrets, these matters of news interest. The plaintiff obtained permission to go aboard the ship and to fly across the Atlantic upon his promise and agreement that he would not give out any accounts of the journey or the happenings on the passage. He was trusted; he was believed; he obtained the confidence and the secrets of the Graf Zeppelin people. And this he did, it is alleged, for the very purpose of betraying that confidence, defrauding the owners and violating his trust. He now comes into court and asks the judiciary of this State to help him recover money from the defendant for his fraudulent and deceitful conduct. The defendant, he says, promised to pay him for his betrayal.

From a very early day the law has refused to aid plaintiffs in similar situations. While the law does not approve the defendant’s conduct yet, being called upon to choose between two evils, it prefers to permit the defendant to retain the benefits of such an unlawful contract than to aid a plaintiff in enforcing it. As stated by Lord Mansfield in the case of Holman v. Johnson (1 Cowp. 341, 343): “ The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say. The principle of public policy is this: ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. * * * It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring this action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault, potior est conditio defendentis.”

Fraud, deceit, breach of trust, are general terms covering divers situations and circumstances, and seldom yield to definition or limitation; in other words, the facts differ in every case, but the principle remains the same. Thus, an agreement to divide the profits of a fraudulent scheme, or to carry out some object, in itself not unlawful, by means of an apparent trespass, breach of contract or breach of trust, is unlawful and void. (Pollock on Contracts, 342; Salmond & Winfield, Contracts, p. 145; Harrington v. Victoria Graving Dock Co., 3 Q. B. D. 549.) Where a confidential agent, having been discharged and having in bis possession correspondence of his former employer, tending to show an illegal attempt to influence legislation, agrees to give to a third person half the profits arising from a sale of the correspondence to newspapers, the contract is immoral and will not be enforced by the courts, even though the illegality be not pleaded. Such a contract is opposed to good morals and sound public policy. (Barry v. Mulhall, 162 App. Div. 749.) See the same principle applied in Woodstock Iron Co. v. Richmond & Danville Extension Co. (129 U. S. 643); Gray v. Hook (4 N. Y. 449); Arnot v. Pittston & Elmira Coal Co. (68 N. Y. 558). A seller cannot recover the price of goods sold where he has paid a commission to an agent of the purchaser (Sirkin v. Fourteenth Street Store, 124 App. Div. 384); neither could the agent recover the commission, even at common law and before the enactment of section 384-r of the Penal Law (now § 439). (Harrington v. Victoria Graving Dock Co., 3 Q. B. D. 549.)

The basis for such decisions is the immorality of such agreements and the policy of the State against enforcing them. The betrayal of trust or confidence, the obtaining of secrets by trick and deceit, cannot form the basis of a contract to pay for such immoral acts. The public policy of this State, as gathered from the decisions, insists upon fair dealing and honest transactions, for the law does not aid in fraud and deceit. (See, further, Materne v. Horwitz, 101 N. Y. 469; Ridgely v. Keene, 134 App. Div. 647; Rhodes v. Malta Vita Pure Food Co., 149 Mich. 235; Driver v. Smith, 89 N. J. Eq. 339.)

The defense, as pleaded, brings the plaintiff under the condemnation of this law. Trusted upon his promise not to give out the news of the air exploration undertaken as a scientific adventure, he agreed to breach the confidence reposed in him, and reveal the secrets to others for pay. The law leaves the plaintiff to be judged by his own standards; his complaint that the defendant treated him as he treated others falls upon deaf ears; the law is silent; it has nothing to say.

The order appealed from should be affirmed, and the question certified answered in the affirmative.

Lehman, J. (concurring in result).

We must assume upon this appeal that the allegations of the answer are true; we may not draw from these allegations any inference of fact which does not follow from them as a necessary and irrefutable conclusion. It may be true that the defendant at the time it made the contract knew of the terms and conditions of the plaintiff’s contract of passage on the Graf Zeppelin, and conspired with the plaintiff to avail itself of expected benefits from that contract and to disregard the restrictive conditions without which those benefits could not be obtained. If the defendant had alleged knowledge of that contract, then upon proof of facts from which knowledge might be inferred a trial court might find a wrongful conspiracy. The court may consider upon a motion for judgment on the pleadings only the allegations of the pleadings, and may not make any findings of fact to» supplement these allegations, particularly where, as in this case, the pleader has carefully refrained from alleging that it is a party to an alleged wrong against a third person, (de Cordova v. Sanville, 165 App. Div. 128; revd. on dissenting opinion of Ingraham, J., 214 N. Y. 662.) The questions presented here are whether the plaintiff has wronged the third party through the performance of his contract with the defendant and whether the defendant, who has, even though innocently, obtained benefits flowing from such wrong, must pay to the wrongdoer the stipulated compensation for such benefits.

General duties imposed by the statute or common law restrict at many points the freedom of the individual. These duties have their roots in some public policy of the State, and the same public policy out of which they arise refuses to sanction any contract or act in breach of such duties. Additional duties not rooted in any public policy may be assumed by the individual through voluntary contract. Such duties are narrow. They are limited by contract and are owed only to parties to the contract, and concern these parties rather than the State. The courts grant redress for failure to perform a contractual duty through award of damages and in some cases may decree specific performance of a contractual obligation; but denial of the benefit which would be derived from performance of a contractual obligation voluntarily assumed concerns the public policy of the State remotely, if at all. At least until the present time, the courts of this State have not held that a breach of such obligation in itself contravenes the public policy of the State or carries with it other consequences than liability for damages for breach of contract.

The situation may be different where from relations arising out of the contract the law imposes a duty upon one party more general than the duty assumed by contract. The plaintiff could not obtain passage upon the Graf Zeppelin except by concealing himself as a stowaway upon the dirigible or entering into a contract for passage upon terms and conditions acceptable to those in charge. If he had obtained passage by concealment he would not have been under any contractual duty to refrain from giving out reports of the passage. None the less the giving out of such reports would have constituted an additional wrong to those in charge of the Zeppelin for which he would have been liable. The situation is not materially different because he chose to go on the dirigible as a passenger, accepting the conditions and restrictions attached to his status. Failure to abide by those conditions was more than the denial of a stipulated benefit. He used the contract to obtain a benefit for himself. The restrictions were imposed to prevent t'he plaintiff from availing himself of that benefit in a manner which might work injury to the party that furnished the transportation! Though the State imposes no duty upon a passenger to refrain from sending reports of the passage, it does impose a general duty upon all to refrain from doing willful injury to others. Exceptions to the general rule are difficult to formulate and classify, but the rule itself is firmly established in the public policy of the State. At common law there- was a cause of action whenever one person did damage to another wilfully and intentionally, and without just cause and excuse.” (Skinner & Co. v. Shew & Co., [1893] 1 Ch. 413.) “ Nor does the mere fact that a wilful injury does not fall within the four corners of some known form of action seem to be included in any natural meaning of ' just cause or excuse.’ ” (Pollock on the Law of Torts [13th ed.], p. 22.) The problem here is whether, in the circumstances arising from the contract of passage, the law imposes a general duty upon a person, in the situation of the plaintiff, to refrain from injuring the parties controlling the Graf Zeppelin, by using the benefit derived from his contract with them and disregarding the restrictions imposed by that contract for the very purpose of avoiding such injury.

That problem should not be complicated by questions of the form of action for breach of such duty or of whether the narrow contractual duty supersedes the more general duty, if it exists. Determination of public policy must rest upon broad principles. If the plaintiff is seeking to recover compensation for an act which constitutes a breach of a general duty to refrain from willful, intentional injury to another without just cause or excuse, then public policy must deny him recovery. The public policy of the State is no less outraged by willful injury caused to another by the act of the plaintiff, though the defendant was not a party to a conspiracy, and the wrong to the injured party and the State is not mitigated by the fact that the instrument of injury was a contract.

In considering distinctions between a narrow contractual duty and a general common-law duty, this court, through Cardozo, Ch. J., has said: If conduct has gone forward to such a stage that inaction would commonly result, not negatively merely in withholding a benefit, but positively or actively in working an injury, there exists a relation out of which arises a duty to go forward. * * * The query always is whether the putative wrongdoer has advanced to such a point as to have launched a force or instrument of harm, or has stopped where inaction is at most a refusal to become an instrument for good.” (Moch Co. v. Rensselaer Water Co., 247 N. Y. 160, 167.) There we considered a general liability in tort to any person injured by failure to perform a contract. Here we are considering whether the wrong to a party to a contract arises solely from the contract. In the final analysis the determinative factor in both cases is whether performance of the contract has advanced to a point where refusal or failure to go further launches an instrument of injury.

Doubtless matters of degree may often enter into the final determination. The test proposed in Moch Co. v. Rensselaer Water Co. (supra) may not always be applicable. Perhaps eventually the more elastic rule may be evolved that a breach of contract is against public policy whenever it shocks the conscience of the court and falls below the general moral standards of business affairs. Even now the law has evolved at least to the point where on grounds of public policy it should refuse to a suitor all remedy upon a contract which could be performed only by the suitor’s using a contract made with a third party as an instrument of injury to the third party.

In such cases the performance of the contract between the plaintiff and the defendant is possible only through performance, partial or complete, of an earlier contract by a third party, and such performance by the third party could be obtained only upon the assumption that the plaintiff would on his part comply with the conditions upon which performance by the third party could be required. If at the time when such performance was rendered, the plaintiff had already entered into a contract which could be performed only by repudiation of those conditions, then it may be said that there was fraudulent concealment. (See Roberts v. Criss, 266 Fed. Rep. 296; Foley Mfg. Co. v. Sierra Nevada Lumber Co., 172 Fed. Rep. 197.) Nothing more need be decided in this case than that a contract is against public policy where performance is possible only through inducement to a third party to proceed with the performance of another contract by fraudulent concealment of the fact that the other party to that contract intends to repudiate the terms and conditions upon which that performance is rendered; thus causing intentional injury to the third party. Any broader rule indicated in this opinion is intended only as a warning that other contracts or acts, in breach of contracts made with third parties, may similarly outrage public policy. The contract in suit may have been made before the contract of passage on the Graf Zeppelin, yet performance of the contract in suit could be made only through fraudulent concealment of the fact that the plaintiff would repudiate the stipulations of the contract of passage. The injury might be no less, and the breach of duty analogous if, after the earlier contract was performed wholly or in part by one party, the other party causes intentional injury by repudiation of the conditions which he agreed to observe in order to give assurance against such injury. Disregard of a contractual duty after performance of the contract has been begun may be a source of injury to the other party. The contract itself may fashion the instrument by which such harm is wrought. Where that instrument is used to cause injury willfully, intentionally and without just cause or excuse, the wrong is more than failure to perform a contractual duty, it constitutes a breach of a general duty imposed by law.

O’Brien and Crouch, JJ., concur with Hubbs, J.; Pound, Ch. J., Crane and Lehman, JJ., concur in result in separate opinions; Kellogg, J., not sitting.

Order affirmed, etc.


author: Lehman, J. Kellogg, J. (dissenting).

text:
    Rebecca G. Bowen, Respondent, v. Paul A. Horgan et al., Defendants; Dina K. Poole, Respondent. Samuel Goldinger et al., Appellants.
    (Argued April 25, 1932;
    decided June 1, 1932.)

      Lewis Goldinger and Lloyd B. Kanter for appellants.
    The assignee of the purchaser at a judicial sale succeeds to the title and all of the rights and liabilities of the purchaser. (Archer v. Archer, 155 N. Y. 415; Hale v. Clauson, 60 N. Y. 339; Proctor v. Farnam, 5 Paige, 614; 16 R. C. L. §§ 53, 81.) A defaulting purchaser at a judicial sale against whom an order of resale has been entered charging him with liability for a deficiency, is entitled to come in and to complete the terms of sale at any time before the actual resale. (Robertson v. Skelton, 13 Beav. 91; Langevin v. Garon, 2 Lower Can. Rep. 125; Denison v. Denison, 4 Ch. Chambers, 37.) The order for a resale did not effect a rescission of the purchaser’s bid and the property is resold as the property of the purchaser. (Andrews v. O’Mahoney, 112 N. Y. 567; Requa v. Rea, 2 Paige, 339; Hegeman v. Johnson, 35 Barb. 200; Virginia Fire & Marine Ins. Co. v. Cottrell, 85 Va. 857; Hurt v. Jones, 75 Va. 341; Matter of Ludwig, 74 Pa. Super. Ct. 250; Banes v. Gordon, 9 Penn. 426; Blakeley v. Hughes, 140 Ky. 174.) There were no laches on the part of the purchaser or its assignees. (Pomeroy’s Eq. Juris. [4th ed.] § 1442; Mealey v. Page, 41 Md. 172.)

      Fred L. Gross for plaintiff-respondent.
    The assignees of the purchaser who defaulted in its purchase have no legal right to come in at any time suitable to themselves, and demand a deed of the property sold. (Batchelar v. Batchelar, 244 N. Y. 274; Chase v. Joiner, 88 Tenn. 761; McComb v. Clyne, 2 N. Y. Supp. 570; 5 N. Y. Supp. 64; 115 N. Y. 654.)

      James M. Brooks and Charles Halsted for defendant-respondent.
    When it appears, owing to the delay of the purchaser or its assignees, the situation of the parties or property has so changed, or there has been a change of circumstances or value as to make it inequitable to compel performance, the court will not compel and direct conveyance to the assignees. . (Merchants Bank v. Thomson, 55 N. Y. 7; Weston Realty Co. v. Kelley, 143 App. Div. 488; Kummer v. Kummer, 112 Neb. 200; Weber v. Wiley, 111 Neb. 587; 63 A. L. R. 975.) An unreasonable delay on the part of the purchaser or its assignees to complete their bid will defeat their purchase. (Jackson v. Edward, 7 Paige, 386; 22 Wend. 498; Batchelar v. Batchelar, 244 N. Y. 275; Arnett v. Anderson, 12 Ky. 897; Knapp on Partition, p. 420.) Assignees of a purchaser take their right subject to equities against the assignor. (Reeves v. Kimball, 40 N. Y. 299; Brunswick Cons. Co. v. Burden, 116 App. Div. 468; Epstein v. Gluckin, 233 N. Y. 490.)
   Lehman, J.

The question here presented is, I think, not whether the court should order a rescission of the contract of sale, but rather whether the assignees of a purchaser who has for two years failed and refused to complete his purchase and has successfully resisted the efforts of the seller to compel performance of the contract of sale, may compel the seller to complete after, fortuitously, the value of the property has increased. A party to a contract can sue neither for breach of contract nor for specific performance without proof of performance or, at least, willingness to perform on his part, or of waiver of a default. Continued insistence by one party to a contract upon performance by the other party, even after default, may constitute a waiver of such default. Here the sellers of the property did insist upon performance even after default by the purchaser. So long as they insisted, they waived the default. Even on February 10th, 1931, when this court affirmed the order of Special Term compelling the purchaser to take title, the purchaser might have insisted upon its correlative right to have the property conveyed to it. The purchaser, however, was unable or unwilling to complete its purchase, and then the sellers sought in effect to hold it in damages for its default. They still held title to the property. The judgment in partition required a judicial sale, and since the first sale had not been consummated, it was necessary to obtain an order for a resale, and it is said that because that order provided that, should the property sell for less than at the previous sale, the vendee should be required to pay the deficiency, an assignee of the vendee may insist even at this late date upon conveyance of title under the original sale to it. We assume that the original vendee may avoid liability for a deficiency by paying, before resale, the amount of its original bid with interest, costs and expenses, and thus acquire title to the property. Nevertheless, if a resale is held it would be the title of the owners and not the title of the original purchaser that would pass, for the original purchaser has no legal title to the property. It can hardly be doubted that the original purchaser could not compel a resale under that order, at least without tendering the original purchase price, interest, costs and expenses, if the sellers preferred not to proceed further under that order. The vendee’s default has been final and complete. All that the vendors are seeking is to be reimbursed for their consequent loss, and in all fairness they should be permitted to abandon these efforts if they see fit. The assignees are, at least, in no better position than their assignor would be, and in one sense they are in a less good position, for by the assignment they assumed no obligation to take title to the property, and no obligation to pay any deficiency upon a resale. They are affected by the order of resale only to the extent that the order modifies or extinguishes the right of the purchaser upon the original sale. All that was assigned to them was a speculative chance that the property might before resale become so enhanced in value that a profit could be made by the purchaser in default through the long delay which the purchaser had occasioned. Even the original purchaser could insist on a conveyance to it only so long as the seller asserted rights under the original sale or the order of resale. There would be, perhaps, basis for a claim by the original purchaser that unless the sellers abandoned insistence upon performance by it of any obligation under the original contract of sale, it must be permitted to perform that obligation; then equity might require that in spite of the purchaser’s laches and default, the seller should be compelled to perform, or the order for a resale vacated and the purchaser’s obligations terminated by legal decree. The assignees are entitled to no such relief, for they have assumed no obligation, and the purchaser is asking no such relief. In fact, however, the order of the Appellate Division would have the effect of terminating any rights which the sellers might have against the original purchaser for payment of a deficiency upon a resale, for that order is based upon a finding that the sellers are abandoning the resale.

I find nothing in the cases cited from other jurisdictions that is contrary to these views. I cannot find that Robertson v. Skelton (13 Beav. 91) is in point. From the incomplete statement of facts in the report, it appears that two lots ” had been sold at a judicial sale. One consisted of a reversionary interest subject to a life tenancy. .The purchaser having failed to complete his purchase' of these lots, the seller obtained an order of resale. When he discovered that one lot was worth more than the sum bid originally, he applied for an order withdrawing that particular lot from the resale, though otherwise insisting upon his rights under the order of resale. That the master of the rolls held could not be done without discharging the purchaser or permitting him to complete his purchase of the lot which the seller desired to withdraw. Here the sellers are asking no favor of the court, and are not seeking to enforce any rights under the order of resale. They maintain only that they should not be compelled to proceed under that order when they prefer to abandon it.

The order should be affirmed, with costs.

Kellogg, J. (dissenting).

The Trachson Building Corporation, on May 9th, 1929, purchased the premises sought to be partitioned herein, and paid to the referee appointed to make the sale a sum equal to ten per cent of its bid. On June 10th, 1929, the day appointed for the closing, the corporation declined to complete its bid, on the ground that title to the premises was defective. On January 15th, 1930, the Supreme Court, at Special Term, made an order directing the purchaser to take title and pay the balance of its bid. On appeal, the order was affirmed by this court on the 10th of February, 1931. Thereafter, on the day fixed for closing by the Special Term, and upon all subsequent days to which the closing was adjourned, the purchaser failed to complete the sale. On the 31st day of March, 1931, on the application of the plaintiff, the- Special Term directed a resale of the premises, providing in its order that the purchaser should be charged with any deficiency arising therefrom. This order was not appealed from and has never been vacated or modified. Thereafter the purchaser, Trachson Building Corporation, assigned its bid and all its rights thereunder to Samuel Goldinger and Philip Kanter. These assignees, asserting their willingness to make payment in accordance with the terms of sale, soon after made an application to the Supreme Court at Special Term for an order directing and requiring the referee to complete the sale. On the 14th day of July, 1931, the Special Term made an order denying the application. From an order of the Appellate Division affirming such order this appeal is taken.

The bid made by the Trachson Building Corporation at the referee’s sale and its acceptance by the referee constituted a contract for the sale of real estate to which the court was a party as vendor and the Trachson Corporation was a party as vendee. (People v. New York B-L. Banking Co., 189 N. Y. 233.) The corporation became the equitable owner of the property; the court, or those for whom it acted, retained the legal title, but for no other purpose than to secure the payment of the bid. (Matter of City of New York [Edgewater Road], 138 App. Div. 203; 199 N. Y. 560.) The refusal of the corporation to complete its bid, and its long delay in tendering payment, might well have authorized the court to declare a rescission of the contract, in which event the rights of the corporation would have come to an end. This, however, was not the course pursued. On the contrary, an order was obtained for a resale, which expressly provided that, should the property sell for less than at the previous sale, the vendee, Trachson Corporation, should be required to pay the deficiency. Here was not rescission but enforcement; not abandonment of the contract but reliance thereupon. In such case, the former sale is not set aside, but the land is resold as the land of the purchaser and at his risk.” (Hurt v. Jones, 75 Va. 341.) Accordingly, if the premises bring more upon a resale than formerly, the vendee is entitled to the surplus. (Virginia Fire & Marine Ins. Co. v. Cottrell, 85 Va. 857; Blakeley v. Hughes, 140 Ky. 174.) Notwithstanding the long delays of the Trachson Corporation, when enforcement of its contract obligations was sought, necessarily recognition was given to its contract rights, for surely the contract could not be in force for one purpose and extinguished for some other purpose. Such rights as the Trachson Corporation had were transferred to these assignees, who, as the owners of an equitable estate, became entitled to enforce them as fully as their assignor would have been.

The case of Robertson v. Skelton (13 Beav. 91) is a case singularly in point. There Higinbotham purchased, at a judicial sale, a reversionary interest subject to a life tenancy. He failed to complete, and a resale was ordered, the order providing that Higinbotham should be charged for the deficiency. Before the resale the fife tenant died, and the property became worth far more than the sum bid at the sale. On application to the court it was held that the purchaser might complete his purchase. The Master of the Rolls thought that the purchaser, not having been discharged, was still entitled to complete his purchase. He ordered, that on payment into court of the purchase-money within four days, and upon payment of all the costs of his default, Higinbotham should be allowed the purchaser.”

The order should be reversed, with costs, and the motion for leave to complete the terms of sale should be granted.

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

Order affirmed.


author: Lehman, J.

text:
    In the Matter of the Estate of Lilly E. Leopold, Deceased. Lydia A. McCann et al., Appellants; Joseph W. Leopold, Individually and as Administrator of the Estate of Lilly E. Leopold, Deceased, Respondent.

      (Argued March 14, 1932;
    decided June 1, 1932.)

      Sydney A. Syme for Lydia A. McCann, appellant.
    The Surrogate’s Court had power to authorize the compromising or compounding of the claim as an established debt under section 210 of the Surrogate’s Court Act and to direct its payment. (Matter of Dorland, 100 Misc. Rep. 236; Murray v. Blatchford, 1 Wend. 583; Douglass v. Satterlee, 11 Johns. 16; Barry v. Lambert, 98 N. Y. 300; Wheeler v. Wheeler, 9 Cow. 34; Bogart v. Hertell, 4 Hill, 492; Matter of Bradley, 25 Misc. Rep. 261; 42 App. Div. 301; Heath v. Grenelle, 61 Barb. 190; Chambers v. Cruikshank, 5 Dem. 414; Matter of Gillman, 92 App. Div. 462; 178 N. Y. 606; Matter of Prince, 56 Misc. Rep. 222; Matter of Miles, 170 N. Y. 75; Matter of Murray, 128 Misc. Rep. 198; McQuaide v. Perot, 223 N. Y. 75.)

      Philip F. Farley for Paul C. Schnitzler, appellant.
    The Surrogate’s Court had the power to make the order appealed from. (Matter of Dorland, 100 Misc. Rep. 236; Matter of Warrin, 56 App. Div. 414; Surrogate’s Court Act, § 210; Matter of Miles, 170 N. Y. 75.)

      Thomas G. Prioleau for respondent.
    The Surrogate’s Court was without power to compel the objecting administrator to settle the action. (Chouteau v. Suydam, 21 N. Y. 179; Matter of Bronson, 69 App. Div. 487; Matter of Corbin, 227 App. Div. 87.) One administrator is not vested by law with the power to compromise or settle a claim against the estate over his co-administrator’s objection, even with the sanction of the court. (Matter of Dorland, 100 Misc. Rep. 236; Matter of Ehret, 70 Misc. Rep. 576; Matter of Johnson, 123 Misc. Rep. 834.)
   Lehman, J.

An action against the decedent was pending at .the time of her death. Thereafter negotiations were initiated to compromise the claim in suit. One of the administrators of the decedent’s estate is willing to enter into an agreement to settle and compromise the claim on terms satisfactory to the plaintiff, subject to the approval of the Surrogate. His co-administrator refuses to join in such agreement. The administrator who is willing to enter into the compromise agreement has petitioned the Surrogate to authorize and approve the compromise agreement and to direct his co-administrator to join with him in its payment.

“An executor or administrator has the power to settle or compromise claims for or against the estate (Murray v. Blatchford, 1 Wend. 583) and a settlement made by him can be set aside only upon proof of bad faith or fraud.” (Scully v. McGrath, 201 N. Y. 61, 64.) It is the duty of an administrator to settle the affairs of the estate and payment, compounding and adjusting of claims are steps in the performance of such duty. True, a representative of an estate who, without compulsion of judicial decree, compromises and pays a claim, is subject to the risk of being charged with the amount in the settlement of the estate if the claim is invalid or the settlement imprudent. The purpose of section 213 of the Surrogate’s Court Act is to protect fiduciaries if they choose to seek the approval of the Surrogate before consummating a settlement. (Matter of Corbin, 227 App. Div. 87.) The petitioning administrator seeks to avail himself of the provisions of that section for his own protection and to compel his co-administrator to join in payment of the claim in accordance with the compromise agreement which, it is claimed, is for the best interests of the estate.

The Surrogate granted the application. The Appellate Division reversed on the ground that the Surrogate had no power to approve a compromise where one administrator refuses to join in it. At the same time it held that the evidence justified the conclusion that in all probability the best interests of the estate would be subserved by the settlement as proposed rather than by the continuation of the protracted and expensive litigation.” (233 App. Div. 412, 413.)

The administration of a decedent’s estate requires the exercise of judgment and discretion. The Surrogate has power to review that discretion, but not to substitute his own discretion for the discretion of those upon whom the duty has been cast of settling the affairs of the estate. Section 213 of the Surrogate’s Court Act empowers the Surrogate to review the discretion of the fiduciaries in advance of an accounting and thus to protect fiduciaries against a charge that they had injured the estate by negligence or bad judgment. By approval in advance of a compromise agreement, the Surrogate can afford protection to an administrator compromising a claim. He cannot compel a co-administrator to join in the compromise if the co-administrator deems it ill-advised. That is the ground for the decision of the Appellate Division. It assumes that a compromise of a claim by one of several executors or administrators cannot bind the estate, because a compromise of a claim involves an exercise of discretion, and a single administrator can, without the co-operation of his co-administrator, act for the estate only when performing his ministerial duties.

That assumption is not in accord with the rule which is well established in this State and in other jurisdictions. It is true that decision whether a claim should be contested, adjusted, or paid in full calls for the exercise of judgment. Otherwise, there would be little, if any, purpose in providing that the Surrogate may approve of a compromise or payment in advance of an accounting. Nevertheless it is the general rule that any one of several executors or administrators may collect, discharge or compound a debt. (2 Woerner on The American Law of Administration [3d ed.], § 353.) So in Murray v. Blatchford (1 Wend. 583, 591) (cited with approval in Scully v. McGrath, supra) the court after an exhaustive examination held that one administrator may release, pay or compromise a debt in spite of “ the actual and known dissent of the co-administrator. * * * The power of each administrator, in law, is full and entire, and though he acts at his peril, and subject to an accounting, yet what he does, stands good in law, unless fraud is shown, which will invalidate every transaction.”

The Surrogate’s Court Act has provided the means by which that peril may be avoided. One administrator shows that a compromise, which he desires and has power to agree to, would serve the best interests of the estate. The dissent of the co-administrator cannot affect the force of the compromise agreement, nor can it deprive the Surrogate of power to approve of the agreement for the settlement of the claim. Any other rule would be anomalous and serve only to impede the administration of the estate. The objecting co-administrator is not directed to join in the compromise; the compromise agreement is valid in spite of his dissent. He is directed only to pay, and the Surrogate has unquestioned power to compel payment out of the estate of a claim which has not been rejected.

The order of the Appellate Division should be reversed, and the order of the Surrogate’s Court affirmed, with costs in this court and in the Appellate Division to the appellants, payable out of the estate.

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

Ordered accordingly.


text:
    The People of the State of New York, Respondent, v. I. Silvan Galpern, Appellant.
    (Argued January 11, 1932;
    decided June 1, 1932.)

      Raphael Galpern and I. Silvan Galpern for appellant.
    The offense of disorderly conduct tending to a breach of the peace was not proven. (People ex rel. Clark v. Keeper, 176 N. Y. 465; People v. Nixon, 248 N. Y. 182; People v. Arko, 199 N. Y. Supp. 402; People v. Fogel, 167 App. Div. 550; People v. Phillips, 245 N. Y. 401; People ex rel. Potter v. Board of Managers Wayside House, 119 Misc. Rep. 428; People ex rel. Frank v. Keeper, 38 Misc. Rep. 233; People v. Schroedeman, 232 N. Y. Supp. 303.)

      Thomas C. T. Crain, District Attorney (Robert Daru of counsel), for respondent.
    The conduct of the defendant was such as may have occasioned a breach of the peace, and regardless of intent to provoke a breach of the peace, it was a violation of section 722 of the Penal Law. (People v. Nixon, 248 N. Y. 182.) The judgment was proper under section 1459 of the New York City Consolidation Act (L. 1882, ch. 410). (People v. Nixon, 248 N. Y. 182; Callan v. Wilson, 127 U. S. 540; Natal v. Louisiana, 139 U. S. 621; Steinert v. Sobey, 14 App. Div. 505; People ex rel. Parker v. Mother Superior, 212 App. Div. 169; People ex rel. Burke v. Fox, 205 N. Y. 490; People v. Loewendahl, 178 N. Y. Supp. 55; People s. Hovell, 180 N. Y. Supp. 255; Tenement House Department v. McDevitt, 215 N. Y. 160; People v. Fogel, 167 App. Div. 550; People s. Lipshitz, 200 N. Y. Supp. 269; Cohen v. Warden of Workhouse, 150 N. Y. Supp. 596; People v. Gertner, 124 Misc. Rep. 114; People v. Most, 171 N. Y. 423.)
   Lehman, J.

The defendant was charged by a police officer with using threatening, abusive and insulting behaviour, with intent to provoke a breach of the peace, and whereby a breach of the peace might be occasioned; that the said defendant did then and there obstruct the sidewalk with a number of unknown men and refused to move on when ordered.” Although the magistrate found that “ the defendant used no threatening, abusive or insulting language ” and “ that his behaviour was not insulting or threatening, and he had no intent to provoke a breach of the peace,” he, nevertheless, found the defendant guilty of disorderly conduct and suspended sentence.

The ground of the defendant’s conviction, as stated by the magistrate, was that the defendant obstructed the sidewalk with a number of other unknown men, and refused to move on when ordered by the police officer, and that the officer * * *, was acting within his rights in placing the defendant under arrest.” The record shows that the arrest arose out of a dispute, conducted on each side quietly and without disorder, between a citizen, in this case a member of the bar, who asserted a right to stand upon the sidewalk of a street in quiet orderly conversation with a group of friends, and a police officer, who asserted a right to direct those who use the sidewalk to move on ” when in his opinion they were obstructing the sidewalk.

The defendant doubtless believed that the officer’s direction to move on was arbitrary. Failure to obey was, we may assume, not intended as a defiance of the authority of the officer enforcing the law, but rather as a vindication of the rights of the individual against what the defendant believed was an arbitrary assertion of authority which the officer did not have.

Our liberties might be seriously threateneu if an individual could be punished for refusal to obey an order of a policeman or other officer of the State transcending his lawful authority. The Legislature has not so decreed. Police officers are not the final arbiters of the rights of citizens. The duty of police officers, it is true, is not merely to arrest offenders but to protect persons from threatened wrong and to prevent disorder. In the performance of their duties they may give reasonable directions.” (People v. Nixon, 248 N. Y. 182, 188.) Then they are called upon to determine both the occasion for and the nature of such directions. Reasonable discretion must, in such matters, be left to them, and only when they exceed that discretion do they transcend their authority and depart from their duty. The assertion of the rights of the individual upon trivial occasions and in doubtful cases may be ill-advised and inopportune. Failure, even though conscientious, to obey directions of a police officer, not exceeding his authority, may interfere with the public order and lead to a breach of the peace. Then the Legislature may determine whether such conduct is “ disorderly ” and shall subject the individual to punishment.

The Legislature has defined the offense of disorderly conduct. The problem here presented is whether the defendant’s conduct falls within such definition. The Legislature has recognized that, upon the streets and in public places of a populous city, conduct may be offensive and tend to create disorder though it might be inoffensive elsewhere. So, long ago, the Legislature provided that in the city of New York a person ‘‘ shall be deemed guilty of disorderly conduct that tends to a breach of the peace, who shall in any thoroughfare or public place in said city ” commit certain specified offenses which would not be punishable if committed elsewhere. (New York City Consolidation Act, § 1458; L. 1882, ch. 410.) The defendant concededly has not committed any of these specified offenses, but it is urged that his conviction is justified under the next section of the Consolidation Act, which provides: Whenever it shall appear, on oath of a credible witness before any police justice in said city and county, that any person in said city and county has been guilty of any such disorderly conduct as in the opinion of such magistrate tends to a breach of the peace, the said magistrate may cause the person so complained of to be brought before him to answer the said charge.” (§ 1459.)

The question whether section 1459 was intended to be merely an administrative and auxiliary provision, enabling the courts to deal with offenses elsewhere defined (People ex rel. Potter v. Bd. of Managers, Wayside House, 119 Misc. Rep. 428), or whether it was intended as an extension of other definitions of disorderly conduct (People v. Lipschitz, 120 Misc. Rep. 633), has not been authoritatively decided by this court. (People v. Nixon, supra.) There is authority of weight that, under its terms, “ disorderly conduct ” may constitute a penal offense though it does not fall within the legislative definition of other specified offenses and was not cognizable as an offense at common law. (Case of the Twelve Commitments, 19 Abb. Pr. 394; People v. Mansi, 129 App. Div. 386.) Certainly conduct, which is not otherwise prohibited by law, cannot, under the terms of that section, however construed, constitute a penal offense, without proof of circumstances which would form a logical basis for the opinion ” of the magistrate that it “ tends to a breach of the peace.”

The Legislature, perhaps because of the expressed doubt as to whether any conduct not included in the offenses defined and specified in section 1458 of the Consolidation Act could be punished as “ disorderly conduct ” under any other provision of law, enacted section 722 of the Penal Law (L. 1923, ch. 642). That section provides a new catalogue of acts which if committed in cities of five hundred thousand inhabitants or over with intent to provoke a breach of the peace, or whereby a breach of the peace may be occasioned ” constitute guilt of “ disorderly conduct ” and are punishable as such. Though the Legislature specifically provided in that statute that other statutes were not thereby repealed, its enumeration of acts which may constitute disorderly conduct if thereby a breach of the peace may be occasioned,” left little if any scope for section 1459 of the Consolidation Act except as an administrative provision of law. (People v. Nixon, supra.) Included in that enumeration is "congregates with others on a public street and refuses to move on when ordered by the police.” The defendant’s conviction can be sustained, if at all, only under that subdivision.

Certainly the evidence shows that the defendant did congregate ” with five or six friends on a public street, even if he did so in an orderly and inoffensive way. They had been attending a meeting together, and some of them desired to enter a restaurant on East Fourteenth street. Before separating,' they stood momentarily on the sidewalk at the entrance to the restaurant in social conversation. Their act was probably not unreasonable. At least so the defendant thought. It was near midnight on a summer evening. Other groups were standing nearby. Doubtless the sidewalk was then used mainly for recreation, yet it was the duty of the police officer to see that its use for pedestrian passage was not unreasonably obstructed. The evidence sustains a finding that the police officer’s direction to these groups to move on was given in performance of that duty.

Even if we should find that the police officer’s interference was unnecessary and in the circumstances ill-advised, we could not find that it was unauthorized. The defendant, knowing the character and standing of his group of friends and that they would not willingly annoy or offend others, might conclude that the interference was officious; the police officer without such knowledge might conclude that it was a useful precaution to avoid possible disturbance. The law authorized the officer to use his judgment. Friends may congregate on the sidewalk in an orderly group for a short conversation, without creating disorder or unduly offending or obstructing others, but they must “ move on ” when a police officer so directs for the purpose of avoiding possible disorder which otherwise might ensue. The Legislature has provided that failure to obey such direction in itself is disorderly conduct. That provision tends to preserve public order on the streets of a great city. A refusal to obey such an order can be justified only where the circumstances show; conclusively that the police officer’s direction was purely arbitrary and was hot calculated in any way to promote the public order. That is not the case here. The courts cannot weigh opposing considerations as to the wisdom of the police officer’s directions when a police officer is called upon to decide whether the time has come in which some directions are called for.

The judgment should be affirmed.

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

Judgment affirmed.

       Cardozo, Ch. J., heard the argument but resigned before the decision.


text:
    Richard H. Clarke, as Committee of the Estate of David Rosenhaus, an Incompetent Person, Respondent, v. The Public National Bank and Trust Company of New York, Appellant.

      (Argued March 28, 1932;
    decided June 1, 1932.)

      Sam L. Cohen and Felix A. Fishman for appellant.
    There is no proof of any diversion of the proceeds of the checks in suit and the defendant-was not placed under the duty to make any inquiry by the form of the checks in suit and the deposit thereof in the individual account of the committee. (Brooklyn First Nat. Bank v. Wallis, 150 N. Y. 455; Casco Nat. Bank v. Clark, 139 N. Y. 307; Moss v. Livingston, 4 N. Y. 208; Jenkins v. Phillips, 41 App. Div. 389; Hills v. Bannister, 8 Cow. 31; Bischoff v. Yorkville Bank, 218 N. Y. 106; Whiting v. Hudson Trust Co., 234 N. Y. 394; Empire Trust Co. v. Cahan, 274 U. S. 473; Manufacturers Trust Co. v. U. S. Mortgage & Trust Co., 122 Misc. Rep. 726; 244 N. Y. 550; Clifford v. U. S. Trust Co., 203 App. Div. 160; Matter of Hutkoff, 124 Misc. Rep. 703; Gould v. Gould, 126 Misc. Rep. 54; Maryland Casualty Co. v. City Nat. Bank, 29 Fed. Rep. [2d] 662.) Defendant had no notice, either actual or constructive, of the order requiring the committee to deposit the funds of the estate in the Empire Trust Company. (Clifford v. U. S. Trust Co., 203 App. Div. 160; Perry on Trusts, § 122-n.) The diversion of funds by the removed committee was in no way facilitated by the defendant. (Whiting v. Hudson Trust Co., 234 N. Y. 394; Bischoff v. Yorkville Bank, 218 N. Y. 106; Empire Trust Co. v. Cahan, 274 U. S. 473; Wilds v. Lebanon Nat. Bank, 219 App. Div. 597; 245 N. Y. 629; Eyre v. Coal & Iron Nat. Bank, 208 App. Div. 686; Martindale v. De Kay, 101 Misc. Rep. 728; Ward v. City Trust Co., 192 N. Y. 61; Wilson v. Met. E. Ry., 120 N. Y. 145; Manufacturers Trust Co. v. U. S. Mortgage & Trust Co., 122 Misc. Rep. 726; 244 N. Y. 550.)

      Richard H. Clarke and Nicholas A. Donnelly for respondent.
    The bank was placed upon its inquiry by the form of the checks. (Forbell v. Denton, 53 App. Div. 402; Bischoff v. Yorkville Bank, 218 N. Y. 106; Hulburt v. Walker, 258 N. Y. 8; Susquehanna Line, Inc., v. Auditore, 223 App. Div. 585; Weissman v. Banque De Bruxelles, 254 N. Y. 488; Epstein v. Chatham & Phenix Nat. Bank & Trust Co., 138 Misc. Rep. 765; Wagner Trading Co. v. Battery Park Nat. Bank, 228 N. Y. 37; Squire v. Ordamann, 194 N. Y. 394; Powell v. Freeport Bank, 200 App. Div. 432; McCauley v. Georgia R. R. Bank, 245 N. Y. 245; Niagara Woolen Co. v. Pacific Bank, 141 App. Div. 265; Rochester & Charlotte Turnpike Road Co. v. Paviour, 164 N. Y. 281; Ward v. City Trust Co., 192 N. Y. 61; Cohnfeld v. Tanenbaum, 176 N. Y. 126.) The defendant had notice of the existence of the order appointing the committee which directed him to deposit the funds in the Empire Trust Company. (Fidelity & Deposit Co. v. Queens County Trust Co., 226 N. Y. 225; Powell v. Pangborn, 161 App. Div. 453; Exchange Bank v. Thrower, 118 Ga. 433; Standard Steam Specialty Co. v. Corn Exchange Bank, 220 N. Y. 478; United States Fidelity & Guaranty Co. v. Peoples Bank, 127 Tenn. 720; Bank of Hickory v. McPhearson, 102 Miss. 852.)
   Lehman, J.

Louis Rosenhaus was appointed, in 1919, committee of the estate of his son David Rosenhaus who was adjudged an incompetent. In January, 1926, Louis Rosenhaus was removed as such committee by order of the Supreme Court, and this plaintiff appointed substituted committee in his stead. Louis Rosenhaus thereafter filed his accounts showing that as committee he had received from the United States government compensation awards ” in the sum of $7,845.16, and insurance awards ” in the sum of $4,887.50, making a total of $12,732.66. The order appointing the committee directed him to deposit in the Empire Trust Company all funds which may come into his possession. In 1923 Louis Rosenhaus opened an individual deposit account in the defendant bank in his own name. Between November, 1923, and November, 1925, the committee received twenty-six monthly checks made out to the order of “Louis Rosenhaus, Committee of David Rosenhaus,” or, in a few instances, to Louis Rosenhaus, Guardian of David Rosenhaus.” They showed on their face that they were sent by the Veterans Bureau for war insurance. Between April 1, 1924, and December, 1925, the committee also received twenty-one similar monthly checks from the bureau for disability compensation. The bank accepted these checks from Rosenhaus for deposit in his individual account or in a few instances for deposit in the account of another individual. On the ground that the defendant bank thereby aided the committee in appropriating to his own use moneys received in a fiduciary capacity for the incompetent, the plaintiff, as substituted committee, has recovered judgment against the bank for the amount of all checks so received, aggregating the sum of $3,600.57, with interest.

We may assume that the checks on their face gave notice to the bank that they were received by Louis Rosenhaus in a fiduciary capacity for an incompetent veteran. Even so, deposit by the fiduciary in his individual account would not itself constitute a conversion. “ Trust funds do not lose their character as such by being deposited in a bank for the individual credit and account of the person who is a trustee.” “A fiduciary may legally deposit the trust funds in a bank to his individual account and credit. Knowledge on the part of the bank of the nature of the funds received and credited does not affect the character of the act. The bank has the right to presume that the fiduciary will apply the funds to their proper purposes under the trust.” (Bischoff v. Yorkville Bank, 218 N. Y. 106, 111.) Thus to establish the plaintiff’s cause of action there must be proof that the original committee did not thereafter apply the funds, deposited in his individual account, “ to their proper purposes under the trust ” and that the defendant had notice or knowledge not only that the moneys were received for a trust purpose but also that they were diverted from that purpose. We find no such proof in this record.

It is true that upon the accounting of the original committee the committee was allowed credits of only $478.07 and was surcharged ” with the amount of $12,254.59, the difference between the credits allowed and the moneys received from the United States government from 1919 to 1926. Judgment for the amount of the surcharge against the committee was recovered, and $1,500 was collected on the surety company bond filed by the committee. Otherwise no substantial amount has been collected. We may, for the moment, disregard the fact that the defendant bank was not a party to the accounting proceeding or to any proceeding or action brought against the original committee, for even against the original committee the decrees and judgment establish only that the committee failed to show by satisfactory proof, fortified by proper vouchers, the amount that he did actually expend for the incompetent. Indeed, the referee in his report found that the committee’s delinquencies were due rather to ignorance than intent, and that he spent some money for the incompetent though no estimate of the amount was possible. Certainly upon this record it is impossible to find any basis for a finding that the original committee has converted to his own use the particular moneys received from the government which were deposited in the defendant bank. In effect the bank has been required to assume the burden which rests upon a trustee in an accounting proceeding of showing affirmatively that the moneys deposited by the committee in his individual account were not misappropriated and diverted from the proper purposes of the trust.

No such burden rests upon a bank in this jurisdiction. “ The transactions of banking in a great financial center are not to be clogged, and their pace slackened, by over-burdensome restrictions.” (Whiting v. Hudson Trust Co., 234 N. Y. 394, 406. Cf. Empire Trust Co. v. Cahan, 274 U. S. 473.) Concededly the committee, at least unless restricted by the terms of the order of his appointment, could without legal wrong indorse or cash checks received as fiduciary and apply the proceeds to the support of the incompetent and might even deposit such checks for convenience in his individual account. Concededly a bank dealing with a fiduciary is not bound to inquire whether the fiduciary is applying the fund to the purposes of the trust, unless the bank has some notice of threatened misappropriation, and, with that notice, aids the misappropriation. (Bischoff v. Yorkville Bank, 218 N. Y. 106; Sagone v. Mackey, 225 N. Y. 594.)

In those cases it does not appear that the trustee was forbidden, by the terms of the instrument from which he traced his powers, to deposit trust funds in his individual account. The deposit, though unseemly, was not wrongful. Here the order appointing the committee contained the direction that the committee should deposit money that came into his possession in thé Empire Trust Company. That direction he disobeyed. The Appellate Division has held that the defendant bank, before receiving for deposit the checks to the order of Louis Rosenhaus, should have inquired as to the committee’s authority to make such deposit, and that its failure to discover the direction contained in the order of appointment constitutes negligence which makes the bank a participant in any wrong done by the committee.

In Whiting v. Hudson Trust Co. (supra) this court left open the question whether later statutes (Surr. Ct. Act, § 231) which expressly prohibit every executor, administrator, guardian or testamentary trustee ” from depositing in his own name the funds or property received from the estate of a deceased person had, as to such officers, changed the general rule that a deposit made by a trustee of trust moneys in his individual account does not constitute a conversion, and had, in effect, enlarged the liability of a bank which with notice or knowledge accepted a deposit in that form. In Manufacturers Trust Co. v. United States Mortgage & Trust Co. (244 N. Y. 550) we decided that it had no such effect. The statute imposed no new penalties for conduct which in Bischoff v. Yorkville Bank (supra) was held to be merely unseemly and improper. It did not transform the impropriety into embezzlement or conversion. Certainly no greater effect may be given to the order directing a committee to deposit trust funds in a particular depositary. If there was subsequent conversion, the defendant did not participate in it. The committee, if unfaithful, could have converted the fund if deposited in the Empire Trust Company as readily as he could when deposited in his individual account.

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

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

Judgment accordingly.