author: Hiscock, Ch. J.

text:
    In the Matter of the Application of the People of the State of New York, by Francis R. Stoddard, Jr., as Superintendent of Insurance, for an Order to Take Possession of the Property and Assets of Norske Lloyd Insurance Company, Ltd. Norwegian Receiver of Norske Lloyd Insurance Company, Ltd., et al., Appellants; Standard Marine Insurance Company et al., Respondents.
    Corporations — insurance companies —■ insolvency — debtor and creditor — appeal — distribution of assets of insolvent foreign insurance company by Superintendent of Insurance —• when Insurance Law does not classify in different degrees those entitled to protection decision that certain claims should be subordinated to others a holding that such claimants are not entitled to protection at all — question of interpretation not presented to Court of Appeals even though included in questions certified — rights of insurance company governed by law in force when securities deposited — deposit made for protection of “policyholders in the United States ” — ■ individuals who reside in United States having policies of company issued in foreign country not included — amendments to Insurance Law long after deposits were made not applicable — application of funds in hands of Superintendent to payment in full of local creditors before transmission to domiciliary receiver not authorized — Superintendent an ancillary receiver and should act in aid of primary receivership — surplus funds transmitted to primary receiver on condition that domestic creditors be allowed to prove their claims in this country.
    1. Inasmuch as the Insurance Law (Cons. Laws, ch. 28), which requires a foreign insurance company to make a deposit of securities for the protection of policyholders in the United States, does not classify in different degree of preference those who are entitled to its protection and claimants are entitled to equal protection of the statute or to none at all, where the courts, in considering questions arising in connection with the distribution of assets of an insolvent foreign insurance company, in possession of the Superintendent of Insurance, have decided that certain claimants should be first paid out of the proceeds of the property deposited and that creditors having claims upon policies issued abroad should be subordinated thereto and included in a second class payable only out of any surplus left after payment of the first class, they necessarily have held that such second class were not protected by the statute and were not entitled to share in the distribution made thereunder and where none of such creditors have taken any appeal from the orders which were made thus interpreting the statute, it is questionable whether such interpretation is presented to this court for review even though included in questions certified by the Appellate Division.
    2. The various amendments to the statute enacted since the time the deposits in question were made have not substantially changed its meaning in respect of the question submitted for review. If they had the rights of the insurance company would be governed by the provisions in force when its securities were deposited.
    3. In considering the specific question whether the words “ policyholders in the United States ” or “ within the United States ” include individuals who reside in the United States having policies issued elsewhere or only indicate those persons who, being citizens or residents of the United States, old - policies issued in that country, the Insurance Law as now written and as an entirety i dicates a purpose and policy in dealing with foreign insurance c mpanies doing business in this country which are so definite and plain that they fix upon the words under consideration an interpretation which cannot fairly be avoided. The Legislature in allowing these foreign companies to do business in this State and country intended to treat the domestic agency largely as a complete and separate organization, to place it on a parity with domestic corporations, to supervise and regulate it as such and to require it by the deposit of prescribed assets to set up within this country a capital corresponding to that of domestic corporations and „which should be security for business transacted by it here and not elsewhere. Such deposit constitutes its capital and it is so denominated in the words of the statute. It corresponds to the capital of domestic companies engaged in doing domestic business and since it is required as a condition of doing business here it is the fair presumption that the Legislature intended to adjust the amount of this capital to domestic business and to the risks incurred in issuing policies here and not to those which might be incurred by issuing policies abroad even though in some cases to persons who were residents of this country.
    4. A suggestion that the Legislature by amendment in the year's 1920 and 1923 of section 45 of the Insurance Law has expressed its intention that some other interpretation should be placed upon the statute, cannot be sustained. These amendments were not intended to affect the provisions of the Insurance Law relating to the question under discussion and if they were so intended would not affect the deposits involved in these proceedings which were made long before the amendments in question and which would be governed by the law prevailing when and in accordance with which they wore made.
    5. There is no principle of equity, comity or public policy which authorizes the application of the funds in the hands of the Superintendent of Insurance to payment in full of local creditors before transmission of any surplus to the primary or domiciliary receiver, which, under the circumstances of this case, is recognized by our courts. The Superintendent is an ancillary receiver who has come into possession of the insolvent’s property before any hen was acquired thereon by creditors, and he should act in aid of the primary receivership. The ordinary rule of distribution of the assets of an insolvent is equality amongst creditors of the same class and this rule requires transmission of the funds In the hands of the Superintendent as ancillary receiver and not subject to any particular claim or hen to the primary receiver for distribution pro rata amongst the creditors of the insurance company. There is, however, another rule to the effect that domestic assets will not as against domestic creditors be transmitted to a foreign receiver or liquidator if there is any danger that the latter’s distribution thereof will be made in a manner unfair to the domestic creditors, and in view of the fact that the claims against the insurance company are so small that they will scarcely bear the expense of proving them in a foreign country it will be proper for our courts to provide as a condition of transmission of the funds held’by the Superintendent of Insurance that domestic creditors shall be allowed in some proper manner to prove their.claims in this country as against and for the purpose of distribution of assets by the foreign receiver. (People v. Granite State Provident Assn., 161 N. Y. 492; Russian Reinsurance Co. v. Stoddard, 240 N. Y. 149; First Russian Ins. Co. v. Beha, 240 N. Y. 601; Andre v. Bella, 240 N. Y. 605; Willitts v. Waite, 25 N. Y. 577, distinguished; Matter of People [City Equitable Fire Ins. Co.], 238 N. Y. 147, followed; Frowert v. Blank, 205 Penn. St. 299, 304, disapproved.)

      Matter of People (Norske Lloyd Ins. Co.), 214 App. Div. 777, modified.
    (Argued January 11, 1926;
    decided February 24, 1926.)

      Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the first judicial department, entered June 19, 1925, which unanimously affirmed an order of Special Term confirming in part a report of the Superintendent of Insurance of the State of New York and directing distribution of the assets of an insolvent foreign insurance company doing business in this State.
    The following questions were certified:
    “ 1. Did the Supreme Court of the State of New York have jurisdiction in the above-entitled proceeding to make the order appealed from* authorizing, directing and permitting the New York liquidator to pay from the United States assets of the Norske Lloyd Insurance Company, Ltd., the allowed and approved claims of claimants described in the order appealed from as claimants of the second class?

      “ 2. Are the surplus assets in the United States that should be transmitted to the Norwegian liquidator, in the case at bar, those assets of the Norske Lloyd Insurance Company, Ltd., which remain after payment of the New York liquidator of (1) the expenses of the New York liquidation, and (2) all allowed and approved claims, in full with interest of claimants described in the order appealed from as claimants of the first and second classes?”

      Charles E. Hughes, Clarence B. Smith and Wendell P. Barker for appellants.
    The Insurance Law creates a trust which requires the Superintendent of Insurance to remit the balance abroad as soon as the creditors protected by the statute are paid. (Matter of People [City Equitable Fire Ins. Co.], 238 N. Y. 147.) Equitable principles require that the surplus assets after payment of the claims of class one shall be remitted to the foreign liquidator. (Matter of People [City Equitable Fire Insurance Co., Ltd.], 238 N. Y. 147; People v. Granite State Provident Assn., 161 N. Y. 492; Mitchell v. Banco

      de Londres y Mexico, 192 App. Div. 720.) The claimants embraced within class two under the order appealed from are not within the class protected by the statute. (Matter of Throckmorton v. Norske Lloyd Ins. Co., Ltd., 210 App. Div. 848.) An insurance company authorized to do business here is for many purposes treated as a domestic company. The authorities on this point are clear. (Comey v. United Surety Co., 217 N. Y. 268; Lockwood v. U. S. Steel Corp., 209 N. Y. 375; Martine v. International Life Insurance Society, 53 N. Y. 339.) The Insurance Law, considered section by section, shows a purpose to protect the American branch. (Lancashire Ins. Co. v. Maxwell, 131 N. Y. 286.)

      Alfred C. Bennett and Clarence C. Fowler for Superintendent of Insurance, respondent.
    The decisions and precedents in this State and in the United States are in support of that portion of the order appealed from directing payment in full to creditors of the second class after creditors of the first class are paid in full. (Andre v. Beha, 211 App. Div. 380; 240 N. Y. 605; Russian Reinsurance Co. v. Stoddard, 240 N. Y. 149; First Russian Ins. Co. v. Beha, 212 App. Div. 841; 240 N. Y. 601; Mabon v. Ongley Electric Co., 156 N. Y. 196; Willitts v. Waite, 25 N. Y. 577; Comey v. United Surety Co., 217 N. Y. 268; James v. Second Russian Insurance Co., 239 N. Y. 248; N. Y. Life Ins. Co. v. Statham, 93 U. S. 24; Mygatt v. N. Y. P. Ins. Co., 21 N. Y. 53; 1 Joyce on Ins. 114; Booth v. Clark, 17 How. [U. S.] 322; Runk v. St. John, 29 Barb. 585; Dike v. Erie Railway, 45 N. Y. 113, 118; Kelly v. Crapo, 45 N. Y. 86.)

      Oscar R. Houston and M. P. Betels for Standard Marine Insurance Company et al., respondents.
    An insurance company becomes a resident of a State in which it is licensed to transact business. (German Bank v. American Fire Ins. Co., 83 Ia. 491; Martine v. International Life

      Ins. Society, 53 N. Y. 339; Morgan v. Mutual Benefit Life Ins. Co., 189 N. Y. 447; Matter of Wilcox, 123 App. Div. 86; Lockwood v. U. S. Steel Corp., 209 N. Y. 375; Comey v. United Surety Co., 217 N. Y. 268; McClement v. Sup. Court, Ind. Order Foresters, 88 Misc. Rep. 475.) United States branches of alien insurance companies should participate in the United States liquidation of the Norske Lloyd. (Martine v. International L. Ins. Co., 53 N. Y. 339; Morgan v. M. B. L. Ins. Co., 189 N. Y. 447; Comey v. United Surety Co., 217 N. Y. 268.)

      William H. Hotchkiss for Staples Transportation Company et al., respondents.
    The order appealed from was right so far as it directed payment of approved claims of the second class out of the funds in the hands of the liquidator charged with the public and private trusts. (Ruggles v. Chapman, 59 N. Y. 163; Lancashire v. Maxwell, 131 N. Y. 286; Blake v. McClurg, 172 U. S. 239.) The court at Special Term had jurisdiction to direct distribution of the whole fund and to hold that part of the fund which was not charged with the trusts until the rights of local creditors were determined. (People v. Granite State Provident Assn., 41 App. Div. 257; 161 N. Y. 492; Willitts v. Waite, 25 N. Y. 577.)

      Louis J. Wolff and David Bumsey for United States policyholders and creditors, respondents.
    There is neither reason nor authority for classifying the claims of United States policyholders and creditors upon the basis of the origin of such claims. (Seaver v. Lindsay Light Co., 233 N. Y. 273; Standard Casing Co. v. California Casing Co., 233 N. Y. 413; Dwane v. Weil, 199 App. Div. 719; 235 N. Y. 527; Matter of People [City Equitable Fire Insurance Co., Ltd.], 238 N. Y. 147; Willitts v. Waite, 25 N. Y. 577.)

      Frank A. Bernero for J. Aron & Co. et al., respondents.
    The assets of the' Norske Lloyd Insurance Company, Ltd., were intended by law to be applied to the payment of claims of United States policyholders and creditors, including claims of United States creditors based on policies issued abroad. Both the trust fund and the so-called free assets are subject to the claims of policyholders and creditors in the United States. (Matter of People [City Equitable Fire Ins. Co.], 238 N. Y. 147.)

      Willard U. Taylor and Irving Mariash for American claimants, respondents.
    The Insurance Law specifically provides for the payment of “ all policyholders and creditors within the United States ” regardless of where the policy was written. (Cons. Laws, ch. 28, §§ 13, 27, 28, 63.) The Insurance Law specifically provides that the distribution of the local assets of a foreign insurance company shall follow the mode of distribution in an ordinary ancillary receivership. Local creditors are to be paid before remitting anything to the domiciliary or foreign liquidators. (1 Wharton on Conflict of Laws [3d ed.], 837; 1 Clark on Receivers, 496; White on Corporations [9th ed.], 491; 5 Cook on Corporations [8th ed.], 3944.)

      Noah A. Stancliffe and Charles J. Hardy, Jr., for Woodin Transportation Company, respondent.
   Hiscock, Ch. J.

We are called on to decide important questions arising in connection with the distribution of assets of an insolvent foreign insurance company now in the possession of the Superintendent of Insurance in accordance with the Insurance Law (Cons. Laws, ch. 28). The Norske Lloyd Insurance Company, Limited, was organized under the laws of Norway. Several years ago it undertook to do business in this State and in accordance with the provisions of our statute it made a deposit of securities with the Superintendent of Insurance and also with the Guaranty Trust Company under deeds of trust. Subsequently it became insolvent and a domiciliary or primary receiver was appointed in Norway and a liquidator in England and, in proceedings duly authorized by our statute, the Superintendent of Insurance took possession of the securities deposited as hereinbefore stated, of securities deposited in trust with the authorities of the State of Ohio and of all other assets found within our jurisdiction which' he thereafter held in accordance with the definition and provisions of the statute as an ancillary receiver of a foreign corporation. In due season he presented to the Supreme Court a report showing the amount of assets which had thus come into his possession and so far as ascertained the amount of claims based on policies issued by said Insurance Company. „ These claims were allocated to three general classes. They were those based, first, upon policies issued to residents or citizens by agencies of said Insurance Company doing business in this country; second, upon policies issued by said Insurance Company outside of this country to persons residing within this country; and third, upon policies issued to non-residents of this country by foreign agencies of the Insurance Company. His report recommended that the property deposited with the Insurance Department or in trust with the Trust Company should be applied to the payment of all claims included in the first class and concluded that creditors upon policies issued without the United States were not entitled . to be paid from the assets in his possession, leading to the inference that, in his opinion, any surplus of assets or proceeds thereof remaining after payment of creditors of the first class should be transmitted to the domiciliary receiver in Norway. The courts below have approved this report and recommendation to the extent of providing that the proceeds of the deposited funds and assets should be first applied to the payment of all claims based upon policies issued in this country by agencies of said Insurance Company. They then have gone farther, however, and provided that any surplus of assets after such payments should be applied to the satisfaction of claims held by citizens and residents of this country, based upon policies issued by the company through foreign agencies. The third class of creditors was eliminated from consideration in the distribution of these assets.

The Norwegian or domiciliary receiver and the British liquidator have appealed from this disposition and have thereby presented the question whether the assets in the hands of the Superintendent of Insurance should be applied otherwise than in accordance with the statute providing for deposits with the Insurance Department and in trust hereinbefore referred to and which they claim permits the application of such assets only to the satisfaction of claims on policies issued by agencies doing business within this country and excludes claims upon policies issued abroad. They do not urge that there are any persons or corporations included in the first class who, although holding policies issued in this country, ought to be excluded under the statute because of non-residence. The respondents not only claim that the statute authorizes satisfaction of claims held by persons residing in or citizens of this country upon policies issued outside of it, but also insist that under general principles of equity and public policy it is the duty of the Superintendent having these assets in his possession to apply them to the satisfaction of claims of domestic creditors.

While the questions certified to us by the Appellate Division are in terms broad enough to include an interpretation of the statute under the opposing contentions thus made, we nevertheless have serious doubts whether such interpretation is before us. If the statute is to be construed as including residents and citizens of this country having claims upon policies issued abroad they could not have been placed in a second class by the orders before us. The statute does not classify in different degrees of preference those who are entitled to its protection. They are all in the same class; claimants are entitled to equal protection of the statute or to none at all and when, therefore, the courts decided that certain claimants should be first paid out of the proceeds of the property deposited and that creditors having claims upon policies issued abroad should be subordinated thereto and included in a second class payable only out of any surplus left after payment of the first class, they seem to us necessarily to have held that such second class were not protected by the statute and were not entitled to share in the distribution made thereunder and none of such creditors have taken any appeal from the orders which were made thus interpreting the statute. Since, however, all of the counsel have argued the interpretation of the statute and since possibly there may be some aspect of the proceedings not made plain to us which renders its construction desirable, we shall consider its meaning.

Various amendments have been enacted of the statute as it stood at the time the deposits in question were made. We do not think that any of these substantially change its meaning in respect of the question under review. If they did the rights of the Insurance Company would be governed by the provisions in force when its securities were deposited.

The crucial words of the provisions which fix the rights of policyholders are few in number. Originally they were to the effect that the securities deposited with the Insurance Department or in trust with the Trust Company should be for the benefit of the policyholders in any of such states or the United States ” or “ for the general benefit and security of all its policyholders in the United States.” Some of these provisions have now been amended so as to provide that the deposits shall be held for the protection of “ policyholders and creditors within the United States ” but we do not regard these amendments as changing the meaning of the statute for in this case, at least, the creditors are such because policyholders. The deeds of trust executed by this particular Insurance Company after referring to the provisions of section 27 of the statute and stating that they are executed to the end that the statute might be fully complied with, provide that the trustee shall hold the deposited property for the purpose of paying “ all lawful and valid claims or demands of policyholders or creditors in the United States.” Of course the meaning of the language used in these deeds is to be interpreted in harmony with the language of the statute which was being complied with. The specific question, therefore, is whether the words “ policyholders in the United States ” or “ within the United States ” include individuals who reside in the United States having policies issued elsewhere or only indicate those persons who, being citizens or residents of the United States, hold policies issued in that country. Stated broadly in another form the question is whether the qualifying words “ policyholders in the United States ” refer to the origin of the policy and, therefore, are intended to protect our citizens or residents doing business in this country or whether these words are intended also to protect those who for any reason go abroad to procure their insurance.

We are referred to various prior provisions and amendments of our Insurance ■ Law and to various reports of Superintendents of Insurance and opinions of Attorneys-General which, it is argued, point to an interpretation to be placed upon these words in favor of the respondents. Possibly under other conditions some inferences might be drawn from them which would be influential. But here, in our opinion, the Insurance Law as now written and as an entirety indicates a purpose and policy in dealing with foreign insurance companies doing business in this country which are so definite and plain that they fix upon the words under consideration an interpretation which cannot fairly be avoided. We think that the Legislature in allowing these foreign companies to do business in this State and country intended to treat the domestic agency largely as a complete and separate organization, to place it on a parity with domestic corporations, to supervise and regulate it as such and to require it by the deposit of prescribed assets to set up within this country a capital corresponding to that of domestic corporations and which should be security for business transacted by it here and not elsewhere. It is of course impractical to support this view by quotation of all of the provisions of the statute, but reference may be made to some which especially seem to make it clear that such was the purpose of the Legislature.

The deposit which a foreign company is required to make here obviously constitutes its capital and it is so denominated in the words of the statute. It corresponds to the capital of domestic companies engaged in doing domestic business and since it is required as a condition of doing business here it is the fair presumption that the Legislature intended to adjust the amount of this capital to domestic business and to the risks incurred in issuing policies here and not to those which might be incurred by issuing policies abroad even though in some cases to persons who were residents of this country. This presumption is sustained and emphasized by various significant provisions relating to such capital. It is to consist of the deposits required by section 27 plus certain other enumerated assets “ after taking from such aggregate value the same deductions for losses, debts and liabilities in this and the other states of the United States and for premiums upon risks therein not yet expired as is authorized or required by the laws of this State or the regulation of its insurance department with respect to fire insurance companies organized under the laws of this State,” and the provision for revocation of a certificate of authority issued to a foreign corporation is based upon the fact that its capital stock thus computed is impaired. Reports and advertisements made and issued by these foreign companies as required until recent amendments hereinafter to be considered, were governed by this same principle of domestic business, domestic assets and domestic policies and liabilities. The report made to the Superintendent of Insurance shall only contain a statement of the business done and assets held by or for it within, the United States for the protection of all policyholders residing within the United States and shall not contain any statement in regard to its assets and business elsewhere.” Advertisements, circulars, etc., are permitted to exhibit as capital and as assets only the capital and assets held by its United States branch, the liabilities, including therein the premium and loss reserves required by law, and the amount of net surplus of assets over all-liabilities actually available for the payment of its losses and claims and held for the protection of its policyholders in the United States.” The limitation upon risks to be assumed and which in its amended form seems to apply to foreign as well as domestic corporations naturally again suggests ddmestic business as the subject of consideration and regulation for there would be such practical difficulties in the way of regulating the amount of foreign risks, written for instance in Norway, and in detecting violations, that it is not to be assumed that such supervision was contemplated. The provision for examination is the same as that provided for domestic corporations and naturally it assimilates itself to the theory that the Superintendent of Insurance was expected to probe conditions as tested by the relationship between domestic assets and liabilities and that while he had the right to go to the home office it was not anticipated that he would ordinarily or customarily investigate the general responsibility of these corporations by examination in the various countries of the world of their assets and foreign risks. Our view that the purpose of the statute as evidenced quite clearly by the sections which we have quoted is to consider domestic agencies of foreign corporations as separate organizations and to create domestic capital as security for domestic business finds support in the interpretation of the Insurance Department. It is stated in the brief of counsel for the Superintendent of Insurance, without any dispute so far as we are able to discover, that “ for over forty years it has been the policy of the State, to require foreign insurance companies to make deposits and to treat their assets in this country as invested capital for the security of policyholders and creditors who might deal with the company in the United States.” It adopted that view in this very proceeding and it is quite inconceivable that if the Legislature intended that some other interpretation such as is now claimed should be placed upon the statute it would not have said so by proper amendment making the intention plain beyond any reasonable controversy.

It is suggested that it has done this by amendment in 1920 and 1923 of section 45 of the Insurance Law whereby it is provided that a foreign insurance company shall incorporate in its annual report a statement of all of its transactions outside of the United States with insured corporations, partnerships, associations or individuals resident within the United States and affecting risks resident, located or originating in the United States, notwithstanding such transactions were not done through an attorney, manager or agent of such corporation within the United States; and such insurance corporation shall, as to all such transactions, report premiums, pay taxes thereon, and hold reserves thereon and such corporation shall be charged with the same duties and liabilities and its policyholders resident within the United States shall have the same rights as if such transactions had been done through its attorney, manager or agent within the United States.” We do not think that these amendments were intended to affect the provisions of the Insurance Law to some of which we have referred as relating to the question under discussion. Statements contained in the brief of counsel for the Superintendent of Insurance, more especially in the court below, make it quite clear that they were adopted in response to a report of the Superintendent of Insurance and for purposes of taxation and to prevent the unfair competition which would be inflicted upon domestic insurance companies if foreign companies were permitted through foreign agencies to issue policies to residents of this country without taxation such as was imposed on business done by domestic companies. The clauses pertaining to the rights and duties of insurance companies and of policyholders are very general in their terms. They were doubtless inserted to safeguard some unforeseen possibility and imder general rules of construction we ought not' to interpret them as altering or repealing the many specific provisions of the Insurance Law in the absence of words ■ indicating a plain intention on the part of the Legislature to effect this result. Farther than that, these amendments even if having such a meaning as is claimed in respect of the application of deposits made by foreign insurance companies would not affect those involved in these proceedings, which were made long before the amendments in question and which would be governed by the law prevailing when and in accordance with which they were made.

We do not take time to discuss the complications and dangers which would beset holders of domestic policies if' deposits here made for their security were to be depleted by claims on policies issued in foreign countries. As we have pointed out We do not think it would be possible in any complete or effective way to inventory, estimate and regulate such foreign risks and while, as is argued by one of respondent’s counsel, the Legislature might have power to safeguard against these perils by further legislation we cannot escape the feeling that if it can fairly be done we ought to interpret legislation already adopted in such a manner as to avoid these dangers rather than leave them to be eliminated by further legislative action.

The case of People v. Granite State Provident Association (161 N. Y. 492) does not in any manner conflict with the interpretation which we have placed upon the provisions of the Insurance Law. That case involved the distribution of the proceeds of assets deposited with the Banking Department by a foreign corporation which became insolvent. The Banking Law provided (sec. 14) that such a corporation as a condition of being allowed to do business should deposit with the Superintendent of Banks certain assets “ as security for the depositors with and creditors of such corporation ” and provided further (sec. 33) that a receiver appointed of such funds should distribute the same “ among the creditors and shareholders of the corporation, company or association residing in this State ” in the manner therein specified. There Was no contest concerning the persons entitled to such distribution if these provisions were valid and applicable; the contest was entirely over other questions.

By these views in reference to the statute we are brought to the proposition, upon which respondents must rely for affirmance of so much of the order appealed from as provides for payment to the second class of policyholders, that there is some principle of equity, comity or public policy which authorizes the application of the funds in the hands of the Superintendent to payment in full of local creditors before transmission of any surplus to the primary or domiciliary receiver. We know of no such principle which, under the circumstances of this case, is recognized by our courts. The present question is not one between a foreign receiver and local creditors who have acquired a specific lien by attachment or otherwise. It is a question of the duty of a conceded ancillary receiver who has come into possession of the insolvent's property before any lien was acquired thereon by creditors. The word ancillary ” defines a receiver who has been appointed in aid of and in subordination to a foreign receiver for the purpose of collecting and taking charge of the assets of the insolvent corporation in the jurisdiction where he is appointed. This conception of such a receiver indicates that he will act in aid of the primary receivership and not to the end of thwarting its purposes. The ordinary rule of distribution of the assets of an insolvent is equality amongst creditors of the same class and this rule requires, subject to the consideration hereinafter discussed, transmission of the funds in the hands of the Superintendent as ancillary receiver and not subject to any particular claim or hen as hereinbefore discussed, to the primary receiver for distribution pro rata amongst the creditors of the Insurance Company. (Blake v. McClung, 172 U. S. 239; Central, etc., Co. v. Farmers, etc., Co., 113 Fed. Rep. 405; affd., 125 Fed. Rep. 1001.) Such is the disposition which, as matter of fact, has been required by our courts under identical or analogous circumstances, by decisions which are controlling in this proceeding. In People v. Granite State Provident Association (supra) the court dealt with two funds in the hands of the Superintendent of Banks. One consisted of the proceeds of general assets of the insolvent corporation; the other of the proceeds of a special deposit which had been required under the Banking Law before the corporation could transact business here. The latter fund which has already been mentioned was subject to rights of creditors similar to those given to the first class of policyholders in this proceeding and it was so applied. . The first fund was subject to no specific claims or liens statutory or otherwise and it was held that it should be transmitted to the foreign receiver of the corporation to be administered and distributed at the home of the corporation,” and it was said: “ All creditors of a corporation wherever residing are entitled in case of insolvency to have the general assets distributed among them upon principles of perfect equality. The courts of one State have no right to favor domestic creditors in the distribution but it must be made upon the principle that equality is equity.”

The recent case of Matter of People (City Equitable Fire Insurance Company) (238 N. Y. 147) is controlling of the question here presented. In that case as here the Superintendent of Insurance had in his possession a fund consisting of the deposits made by a foreign insurance company as a condition of doing business and also derived from free ” assets and a foreign creditor desired leave to attach the presumptive surplus of these funds over and above the claims against them by policyholders entitled to payment therefrom. It was held that this should not be permitted but should be denied for reasons which are applicable to the present situation. That case did not present the question which arises here between the foreign receiver and different classes of policyholders and, therefore, did not call for such a precise definition of the policyholders entitled to protection under sections 27 and 28 of the Insurance Law as has been required here. But the opinion starting with the statement that the trust funds and securities held by the State Superintendent of Insurance were for the purpose of paying all legal and valid claims of its [the insolvent corporation] policyholders in the United States as provided by sections 27 and 28 of the Insurance Law ” then stated that the Superintendent held the property not “ solely for the benefit of creditors or policyholders in this State or in the United States but for the interest of all its policyholders, creditors and stockholders wherever they may be,” and that, having satisfied the claims of policyholders from the funds deposited with the Superintendent * * * for the benefit of its policyholders in the United States,” thereby of course referring to the provisions of the Insurance Law already enumerated, it was his duty as ancillary receiver to transmit the surplus to the primary receiver. The entire opinion makes it clear that the surplus which it was thus held should be transmitted to the primary receiver was the surplus remaining after payment simply of policyholders as provided in sections’ 27 and 28 of the Insurance Law excluding any other policyholders.

No authorities of course could be cited from other jurisdictions which would be accepted as overruling our own decisions on this question. With possibly one exception no authorities either of text books or decisions are cited which do contradict the rule that it is the duty of an ancillary receiver in possession of property of a foreign corporation, subject to no specific lien or claim either by statute or process, to transmit that property under safeguarding regulations if necessary to the primary receiver for equitable distribution amongst all the creditors rather than to apply it first in full payment of local creditors. The so-called Russian casés (Russian Reinsurance Company v. Stoddard, 240 N. Y. 149; First Russian Ins. Co. v. Beha, 240 N. Y. 601, and Andre v. Beha, 240 N. Y. 605) have no application to the present question. In the first case we refused to permit a judgment in favor of plaintiff on the ground that in view of proceedings taken by the Soviet Government against plaintiff there was doubt of plaintiff’s capacity to sue and also danger that the defendant would be subjected to a double recovery. There was no consideration of the claims of local creditors. In the second case we affirmed a judgment against the Superintendent of Insurance on the ground that the findings unanimously affirmed established “ the continued existence of the corporation and the authority of the directors ” and that there was no danger of a double recovery. In the third case we affirmed a judgment dismissing the complaint upon the express ground that plaintiff Was not the real party in interest and could not maintain the action.

Willitts v. Waite (25 N. Y. 577) simply held that creditors within this State having acquired a lien under our laws upon property of a foreign insolvent corporation within the State, would not on the demand of foreign receivers be sent to a foreign State to seek such portion of the insolvent estate as the laws of that State would upon distribution give them. No question was involved of the duties of an ancillary receiver appointed in this State of property upon which local creditors had no specific lien or claim to transmit funds to the primary receiver for distribution. Other authorities cited by respondents such as Pomeroy’s Equity Jurisprudence (sec. 682), Cook on Corporations (vol. 5 [8th ed.], p. 3944, note), Mabon v. Ongley Electric Co. (156 N. Y. 196) and Schloss v. Metropolitan Ins. Co. (Sup. Ct. of Iowa, 128 N. W. Rep. 384), do not lay down any rule in the case of ancillary receivers having funds subject to no specific claim or lien in favor of local creditors any different than is here being announced; some of them expressly recognize and confirm it. If the case of Frowert v. Blank (205 Penn. St. 299, 304) is to be regarded as laying down any different rule as prevailing in the State of Pennsylvania we decline to follow its views.

There, still remains to be considered one rule of administration which may be applied in favor of domestic creditors in respect of the funds in the hands of the ancillary receiver. This is to the effect that domestic assets will not as against domestic creditors be transmitted to a foreign receiver or liquidator if there is any danger that the latter’s distribution thereof will be made in a manner unfair to the domestic creditors. (Matter of People [City Equitable Fire Ins. Co.], supra.) There is nothing now before us to indicate that our domestic creditors would suffer from any unfair methods adopted by the foreign receiver. It is, however, the fact that a large number of the domestic claims here involved are respectively of such small amount that they would scarcely bear the expense of presentation and proof abroad and, therefore, we think that under a proper extension of the principles above referred to it would be proper for our courts to provide as a condition of transmission of the funds held by the Superintendent of Insurance that domestic creditors should be allowed in some proper manner to prove their claims in this country as against, and for the purpose of distribution of assets by, the foreign receiver. (New York Security & Trust Co. v. Equitable Mortgage Co., 71 Fed. Rep. 556.)

The orders appealed from should be reversed so far as they provide for payment from the assets in the hands of the Superintendent of Insurance of claims of policyholders and creditors included in the second class and the matter remitted to the Supreme Court for further proceedings in accordance with this opinion, with costs to the appellants in all courts. The questions certified to us are answered in the negative.

Pound, McLaughlin, Crane, Andrews and Lehman, JJ., concur; Cardozo, J., absent.

Ordered accordingly.


source: Caselaw Access Project

author: McLaughlin, J.

license: Public Domain

text:
    Peter Beickert, an Infant, by John J. Beickert, His Guardian ad Litem, Respondent, v. G. M. Laboratories, Inc., Appellant.
    Negligence ■ — New York city — infant injured from burning of films picked up near defendant’s plant and carried away — no recovery unless article inherently dangerous — result or cause of accident not reasonably to be anticipated — ordinance of city of New York forbidding storage of scraps of nitrocellulose not applicable.
    1. Plaintiff, an infant, who was burned by the ignition of some pieces of film, which he and another small boy had picked up in a lot in the rear of defendant’s plant, cannot recover therefor against defendant, where it appears that the films had been taken there by its servant for the purpose of destroying them by burning, during the course of which small pieces escaped into the air and finally settled down upon the ground and that the plaintiff and his companion, who had not been invited there, picked up these small pieces without leave of defendant, carried them away and either by accident or design lighted them. Such a result could not have been reasonably anticipated by defendant. Furthermore, the rule is settled that a plaintiff cannot recover in cases of this character unless the article which causes the injury is inherently dangerous. These pieces of films were not inherently dangerous and only became so when ignited. (Travell v. Banner-man, 174 N. Y. 47, distinguished.)
    2. Section 2 of article 9 of the Code of Ordinances of the city of New York forbidding the storing or keeping of scraps of nitro-eeilulose products in quantities greater than three hundred and fifty pounds has no application. The films were not stored in the lot and there was no proof of their weight or that they were nitro-cellulose products within the meaning of the ordinance.

      Beickert v. G. M. Laboratories, Inc., 213 App. Div. 834, reversed.
    (Argued January 18, 1926;
    decided February 24, 1926.)
    Appeal from an order of the Appellate Division of the Supreme Court in the second judicial department, entered March 27, 1925, reversing a judgment in favor of defendant entered upon a dismissal of the complaint by the court at a Trial Term and granting a new trial.

      John Godfrey Saxe, James J. Mahoney and Karl W. Kirchwey for appellant.
    There is not a scintilla of evidence in the record that the films were in any respect inherently dangerous. Plaintiff cannot recover from another for injuries caused by his misuse of articles which he does not and cannot prove to have been inherently dangerous. (Walsh v. Fitchburg Railroad Co., 145 N. Y. 301; Hall v. N. Y. Telephone Co., 214 N. Y. 49; Flaherty v. Metro Stations, Inc., 202 App. Div. 583; 235 N. Y. 605; Beetz v. City of Brooklyn, 10 App. Div. 382; Coleman v. Graves Co., 39 Misc. Rep. 85; Fitzgerald v. Rodgers, 58 App. Div. 298; Powers v. Owego Bridge Co., 97 App. Div. 477; Middleton v. Reutler, 141 App. Div. 517; Kane v. Erie R. R. Co., 110 App. Div. 7; Kelly v. Smith, 29 App. Div. 346; Hall v. International Ry. Co., 227 N. Y. 619; Maloney v. Kaplan, 233 N. Y. 426; Parkes v. New York Tel. Co., 120 Misc. Rep. 459.)

      Olin A. Foster and B. J. Lynam for respondent.
    The placing of the film, attractive to children, in a lot adjoining defendant’s premises, where children were in the habit of congregating, and where they saw it burned, established prima facie the negligence of the defendant. (Travel v. Bannerman, 174 N. Y. 51.) The violation of the Code of Ordinances of the city of New York is negligence in itself. (New York City Code of Ordinances, art. 19, § 2; Martin v. Herzog, 228 N. Y. 6; Clark v. Doolittle, 205 App. Div. 697.)
   McLaughlin, J.

Action on behalf of an infant, by guardian ad litem, to recover damages for personal injuries alleged to have been caused by defendant’s negligence.

The infant, whose age at the time of the accident is not disclosed by the record, was burned by the ignition of some scraps or pieces of motion picture films. The facts connected with the burning of these pieces of films are substantially as follows: It is claimed that on the 6th of June, 1921, Peter Beickert, the infant who was injured, with one Tommy O’Brien, aged seven years, went to a vacant lot adjacent to and in the rear of the defendant’s plant in Long Island City and there picked up some loose pieces of motion picture films and put them in a tin can. The two boys then went back to the yard adjoining the house in which the O’Brien boy lived, and there they were joined by Tommy’s brother Stephen, aged nine years. In this yard the boys had constructed a rude sort of a tent into which they went. While in the tent, according to the testimony of the infant plaintiff, a piece of film was lighted and after it had been ignited it fell into the can where the other pieces were. There is a sharp conflict between the testimony of the infant plaintiff and Stephen O’Brien as to how the pieces of films in the can were ignited. Peter testified that the lighting of the films in the can was accidental; that a match was lighted for the purpose of enabling the boys to see the pictures on the films; that while they were in the act of doing so, a piece of film caught fire and fell into the can, and thus the ignition took place. Stephen O’Brien testified that the films were deliberately lighted for the purpose of making smoke.

The plaintiff’s witness Powers, who had been discharged by the defendant or, as he stated, laid off,” testified as to just how these films came to be in the vacant lot. He stated that while he was employed by the defendant at its plant, his duties were, in part at least, the sweeping of different rooms each morning; that he put in a fibre container in each room any pieces or scraps of films which he found; that he then dumped the contents of these containers into a large container and took the large container out into the vacant lot and burned the films; that the purpose of burning the films was to reclaim silver which had been used in making the films; that in the process of burning small pieces of the films would sometimes be carried into the air and would then settle down on the vacant lot. It was these pieces of films that the boys picked up.

The judges of the Appellate Division, it would seem, misapprehended the force of this testimony and a majority of them held, as appears from the opinion, that the defendant was liable because it stored the films in this lot without taking any precaution to prevent injury to young boys who might be playing therein. The uncontradicted evidence is that the defendant did not store films in the vacant lot. On the contrary, its purpose was to burn them and thereby reclaim whatever silver had been used in the making of them.

There was no evidence that the films were of themselves inherently dangerous; in fact, they were not dangerous unless brought in contact with fire. If that were done, of course they would be easily ignited.

There was evidence to the effect that there was in the immediate vicinity another plant and vacant lot of the same character as the defendant’s to which the boys were accustomed at times to go and gather film scraps, though it is a fair inference that the scraps in question were picked up in the vacant lot used by the defendant. .....!IT -

After a careful consideration of the record I am unable to see any basis for a judgment holding the defendant liable-for the injuries sustained by the infant plaintiff on the ground that the same were caused by defendant’s negligence. The rule seems to be thoroughly settled, at least in this State, that a plaintiff cannot recover in cases of this character unless the article which causes the injury is inherently dangerous. These pieces of film were not inherently dangerous, and only became so when they were ignited. .

In Flaherty v. Metro Stations, Inc. (202 App. Div. 583; affd., 235 N. Y. 605) the defendant had two large oil tanks in an open lot about one hundred and twenty-five feet from the street. One of these tanks was used for gasoline. The tank's were not inclosed. There was a private right of way leading to the tanks, and delivery wagons were from time to time filled from them. In addition, the defendant'kept an open milk can, which was filled with gasoline, on a platform near the tanks. There was evidence to the effect that young boys were in the habit of playing in the lot near the tanks and on the platform and that on occasions they had taken gasoline from the open milk can and had used it to start fires. The evidence also showed that the defendant’s superintendent knew or should have known that young boys were in the habit of going there and doing what they did. The plaintiff, nine years of age, with two other small boys built a bonfire. They then went to the defendant’s lot and took some gasoline from the milk can and carried it away in a can which they found in that vicinity. On their way back to the bonfire, they threw some gasoline on each other’s clothing and when they reached the fire they poured some gasoline on it. The gasoline flashed up and set the plaintiff’s clothing on fire, and in that way he was injured. The Appellate Division reversed the judgment entered upon a verdict for the plaintiff, and dismissed the complaint on the ground that the defendant was not liable, and this court affirmed that determination. That action was brought and, at the Trial Term, maintained on the theory that it was negligent for the defendant to leave gasoline in the open milk can at a place where boys were in the habit of going. This court held that the action could not be maintained; that the facts did not establish that the defendant was negligent in any respect.

In Hall v. New York Telephone Co. (214 N. Y. 49) the defendant’s employees left a bottle of denatured alcohol in the public highway. The plaintiff’s brother, aged seven years, saw defendant’s employees use the alcohol in an alcohol lamp. Shortly thereafter he and the plaintiff, aged nine years, found the bottle, took it home, poured some of the alcohol on the grass, plaintiff’s brother lighted the grass, the grass flamed up and burned the plaintiff. A judgment in favor of the plaintiff, affirmed by the Appellate Division, was reversed, this court saying: “ The contention of the plaintiff appears to be that the act of the servants of the defendant in leaving the bottle of alcohol in the highway constituted negligence. It must be conceded, however, that the alcohol left untouched by the boys was not of necessity dangerous. Neither was it such an apparatus or article as would induce or allure children to play with it. In order to hold the defendant responsible for the result of this accident it must be found that the accident was the natural and probable consequences of the act of the servant in having left the alcohol upon the highway. The law requires that the injury must so directly result from a wrongful act that, according to common experience and the usual course of events, it might under the particular circumstances have reasonably been expected.” (See, also, Walsh v. Fitchburg R. R. Co., 145 N. Y. 301; Beetz v. City of Brooklyn, 10 App. Div. 382; Fitzgerald v. Rodgers, 58 App. Div. 298; Perry v. Rochester Lime Co., 219 N. Y. 60.)

The facts in the instant case do not show that the result or cause of the accident could have been reasonably expected by the defendant. It had a right to burn the films in the vacant lot. It was not there storing such films. No person could reasonably be expected to foresee that while the films were being burned small pieces would be carried into the air and later settle upon the ground; that they would be picked up by small boys who had not been invited there, carried away, and then either by accident or design lighted. To hold defendant liable under such circumstances would be contrary to the great weight of judicial authority, and contrary to reason and common sense.

In reaching the foregoing conclusion I have not overlooked Travell v. Bannerman (174 N. Y. 47). That case is clearly distinguishable from the present one. There it appeared that the defendant was the proprietor of a gun and ammunition factory and adjoining the factory was an unfenced lot, which was and for some time had been used as a playground by the plaintiff, and other small boys; that the defendant stored or placed in this lot a cake of gunpowder and a cannon primer; that one of the boys found the powder and primer and proceeded to extract the brass imbedded in it and in doing so it exploded, and he was injured. Obviously, the defendant could not expose young children to such a risk. He knew the boys were in the habit of playing in this lot and he knew, or was bound to know, of the dangerous character of the material if force were applied to it.

In the present case, as already indicated, the films-were not stored in the lot in question; they were taken there for the purpose of destroying them, and as a mere incident to the destruction small pieces escaped into the air and finally settled down upon the ground. The plaintiff was not invited there; he was where he ought not to have been; he and his companion picked up these small pieces without leave of the defendant, carried them away and, either by accident or design, lighted them. These results the defendant was not bound to anticipate.

It is also urged that article 9, section 2, of the Code of Ordinances of the city of New York was violated. This ordinance reads: “No person shall store or keep scraps, cuttings, shavings, sawdust or other refuse material of nitro-cellulose products in quantities greater than three hundred and fifty pounds, and all such scraps, cuttings, shavings, sawdust and refuse material shall be immediately removed and transported beyond the city limits.” This ordinance has no application. The films were not stored in this lot. There is no proof that they weighed three hundred and fifty pounds nor, in fact, is there any proof bearing on that subject or that they were material of nitro-cellulose products within the meaning of the ordinance.

The order 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.

Hiscock, Ch. J., Bound, Crane, Andrews and Lehman, JJ., concur; Cardozo, J., absent.

Ordered accordingly.


author: Lehman, J. Crane, J.

text:
    Clara E. Brown, Respondent, v. Francis T. Shyne, Appellant.
    Negligence — malpractice — trial — charge — action to recover for improper medical treatment — chiropractor claiming to possess skill requisite for diagnosis and treatment of disease may be held to skill and care which he claimed to possess — evidence sufficient to sustain finding of negligence — erroneous charge that practice of medicine in violation of law is in itself some evidence of negligence.
    1. Though the defendant held himself out, and the plaintiff consulted him, as a chiropractor and not as a regular physician, where he claimed to possess the skill requisite for diagnosis and treatment of disease, in the performance of what he undertook to do, he may be held to the degree of skill and care which he claimed to possess. Where, therefore, in an action to recover for his negligence, the plaintiff gave testimony in regard to the manner in which she was treated and supplemented it by evidence that the treatment was not in accordance with recognized theory or practice, that it produced the injury which followed and that a person qualified to treat disease should have foreseen that the treatment might have such result, though her testimony was contradicted, the jury might well have resolved the conflict in her favor.
    2. It was error, however, for the trial court to charge the jury that it might infer negligence, on the part of defendant, which produced injury to the plaintiff, from the fact that in treating the plaintiff, defendant was engaged in the practice of medicine contrary to and in violation of the Public Health Law of the State. In order to show that the plaintiff has been injured by defendant’s breach of the statutory duty, proof must be given that defendant in such treatment did not exercise the care and skill which would have been exercised by qualified practitioners within the State, and that such lack of skill and care caused the injury. Failure to obtain a license as required by law gives rise to no remedy if it has caused no injury.
    3. A contention that even if neglect of the statutory duty does not itself create liability, it tends to prove that injury was caused by lack of skill or care, cannot be sustained. Breach or neglect of. duty imposed by statute or ordinance may be evidence of negligence only if there is logical connection between the proven neglect of statutory duty and the alleged negligence. (Karpeles v. Heine, 227 N. Y. 74; People v. Meyer, 239 N. Y. 608, distinguished.)

      Brown v. Shyne, 214 App. Div. 755, reversed.
    (Argued January 20, 1926;
    decided February 24, 1926.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered May 25, 1925, unanimously affirming a judgment in favor of plaintiff entered upon a verdict.

      Leo 0. Coupe and James Coupe for appellant.
    The trial court erred in submitting to the jury the proposition that the failure of the defendant to obtain a license to practice medicine and surgery in New York was evidence that defendant negligently performed a chiropractic adjustment on the plaintiff when there was no evidence to show that it was the proximate cause of the injury complained of. (Clark v. Doolittle, 205 App. Div. 697; Knupfle v. Knickerbocker Ice Co., 84 N. Y. 488; Weinberger v. Kratzenstein, 71 App. Div. 155; Hyde v. McCreery, 145 App. Div. 729; Silman v. Lewis, 49 N. Y. 383; Kock v. Fox, 71 App. Div. 288; Brazil v. Isham, 12 N. Y. 9; N. Y. C. Ins. Co. v. Nat. Prot. Ins. Co., 20 Barb. 486; Newell v. Salmons, 22 Barb. 647; Clark v. Post, 113 N. Y. 17; Hall v. U. S. Reflector Co., 30 Hun, 375; Antowill v. Friedman, 197 App. Div. 230; Brown v. Goffe, 125 N. Y. 458.)

      William R. Lee for respondent.
    The trial court committed no error prejudicial to defendant in his charge to the jury on the proposition of the effect of his failure to possess a license to practice medicine in New York State on the question of negligence. (Knupfle v. Knickerbocker Ice Co., 84 N. Y. 488; Cummings v. R. R. Co., 104 N. Y. 669; Donnelly v. Rochester, 166 N. Y. 315; Meyers v. Barrett, 167 App. Div. 170; Massoth v. D. & H. C. Co., 64 N. Y. 532; McRickard v. Flint, 114 N. Y. 222; Marino v. Lehmaier, 173 N. Y. 530; Amberg v. Kinley, 214 N. Y. 535; Beisegel v. N. Y. C. R. R. Co., 14 Abb. Pr. [N. S.] 29; Hoffman v. U. F. Co., 47 N. Y. 176; Platz v. City of Cohoes, 89 N. Y. 219; Martin v. Herzog, 228 N. Y. 164.)
   Lehman, J.

The plaintiff employed the defendant to give chiropractic treatment to her for a disease or physical condition. The defendant had no license to practice medicine, yet he held himself out as being able to diagnose and treat disease, and under the provisions of the Public Health Law (Cons. Laws, ch. 45) he was guilty of a misdemeanor. The plaintiff became paralyzed after she had received nine treatments by the defendant. She claims, and upon this appeal we must assume, that the paralysis was caused by the treatment she received. She has recovered judgment in the sum of $10,000 for the damages caused by said injury.

The plaintiff in her complaint alleges that the injuries were caused by the defendant’s negligence. If negligence on the part of the defendant caused the injury, the plaintiff may recover the consequent damages. Though the defendant held himself out, and the plaintiff consulted him, as a chiropractor and not as a regular physician, he claimed to possess the skill requisite for diagnosis and treatment of disease, and in the performance of what he undertook to do he may be held to the degree of skill and care which he claimed to possess. At the trial the plaintiff gave testimony in regard to the manner in which she was treated. She supplemented this testimony by evidence that the treatment was not in accordance with recognized theory or practice, that it produced the injury which followed and that a person qualified to treat disease should have foreseen that the treatment might have such result. Though her testimony was contradicted, the jury might well have resolved the conflict in her favor, and if the only question submitted to the jury had been whether or not this evidence showed that plaintiff’s injury was caused by the defendant’s negligence, the defendant could not complain of any substantial error at the trial. Indeed, it would seem that in some respects the rulings of the trial judge may have been too favorable to the defendant.

At the close of the plaintiff’s case the plaintiff was permitted to amend the complaint to allege “that in so treating the plaintiff the defendant was engaged in the practice of medicine contrary to and in violation of the provisions of the Public Health Law of the State of New York in such case made and provided, he at the time of so treating plaintiff not being a duly licensed physician or surgeon of the State of New York.” Thereafter the trial judge charged the jury that they might bring in a verdict in favor of the plaintiff if they found that the evidence established that the treatment given to the plaintiff was not in accordance with the standards of skill and care which prevail among those treating disease. He then continued: “This is a little different from the ordinary malpractice case, and I am going to allow you, if you think proper under the evidence in the case, to predicate negligence upon another theory. The public health laws of this State prescribe that no person shall practice medicine unless he is licensed so to do by the Board of Regents of this State and registered pursuant to statute * * *. This statute to which I have referred is a general police regulation. Its violation, and it has been violated by the defendant, is some evidence, more or less cogent, of negligence which you may consider for what it is worth, along with all the other evidence in the case. If the defendant attempted to treat the plaintiff and to adjust the vertebrae in her spine when he did not possess the requisite knowledge and skill as prescribed by the statute to know what was proper and necessary to do under the circumstances, or how to do it, even if he did know what to do, you can find him negligent.” In so charging the jury that from the violation of the statute the jury might infer negligence which produced injury to the plaintiff, the trial justice in my opinion erred.

The provisions of the Public Health Law prohibiting the practice of medicine without a license granted upon proof of preliminary training and after examination intended to show adequate knowledge, are of course intended for the protection of the general public against injury which unskilled and unlearned practitioners might cause. If violation of the statute by the defendant was the proximate cause of the plaintiff’s injury, then the plaintiff may recover upon proof of violation; if violation of the statute has no direct bearing on the injury, proof of the violation becomes irrelevant. For injury caused by neglect of duty imposed by the penal law there is civil remedy; but of course the injury must follow from the neglect.

Proper formulation of general standards of preliminary education and proper examination of the particular applicant should serve to raise the standards of skill and care generally possessed by members of the profession in this State; but the license to practice medicine confers no additional skill upon the practitioner; nor does it confer immunity from physical injury upon a patient if the practitioner fails to exercise care. Here, injury may have been caused by lack of skill or care; it would not have been obviated if the defendant had possessed a license yet failed to exercise the skill and care required of one practicing medicine. True, if the defendant had not practiced medicine in this State, he could not have injured the plaintiff, but the protection which the statute was intended to provide was against risk of injury by the unskilled or careless practitioner, and unless the plaintiff’s injury was caused by carelessness or lack of skill, the defendant’s failure to obtain a license was not connected with the injury. The plaintiff’s cause of action is for negligence or malpractice. The defendant undertook to treat the plaintiff for a physical condition which seemed to require remedy. Under our law such treatment may be given only by a duly qualified practitioner who has obtained a license.

The defendant in offering to treat the plaintiff held himself out as qualified to give treatment. He must meet the professional standards of skill and care prevailing among those who do offer treatment lawfully. If injury follows through failure to meet those standards, the plaintiff may recover. The provisions of the Public Health Law may result in the exclusion from practice of some who are unqualified. Even a skilled and learned practitioner who is not licensed commits an offense against the State; but against such practitioners the statute was not intended to protect, for no protection was needed, and neglect to obtain a license results in no injury to the patient and, therefore, no private wrong. The purpose of the statute is to protect the public against unfounded assumption of skill by one who undertakes to prescribe or treat for disease. In order to show that the plaintiff has been injured by defendant’s breach of the statutory duty, proof must be given that defendant in such treatment did not exercise the care and skill which would have •been exercised by qualified practitioners within the State, and that such lack of skill and care caused the injury. Failure to obtain a license as required by law gives rise to no remedy if it has caused no injury. No case has been cited where neglect of a statutory duty has given rise to private cause of action where it has not appeared that private injury has been caused by danger against which the statute was intended to afford protection, and which obedience to the statute would have obviated. It is said that in the case of Karpeles v. Heine (227 N. Y. 74) this court held that liability per se arises from breach of the statute which prohibits employment of a child under sixteen years of age, but in that case this court merely decided that the statute was intended to protect the child against danger arising from its own lack of foresight in the course of such employment, and that, therefore, an action against the employer by a child unlawfully employed “for injuries arising in the course of such employment and as the proximate result thereof cannot be defeated by his contributory negligence.” In that case the court was considering the legal effect of the proven negligence of the child who was unlawfully employed; only upon proof in the present case of negligence on the part of the chiropractor would any analogy be apparent.

It is said that the trial justice did not charge that plaintiff might recover for defendant’s failure to obtain a license but only that failure to obtain a license might be considered “some evidence” of defendant’s negligence. Argument is made that even if neglect of the statutory duty does not itself create liability, it tends to prove that injury was caused by lack of skill or care. That can be true only if logical inference may be drawn from, defendant’s failure to obtain or perhaps seek a license that he not only lacks the skill and learning which would enable him to diagnose and treat disease generally, but also that he lacks even the skill and learning necessary for the physical manipulation he gave to this plaintiff. Evidence, of defendant’s training, learning and skill and the method he used in giving the treatment was produced at the trial and upon such evidence the jury could base finding either of care or negligence, but the absence of a license does not seem to strengthen inference that might be drawn from such evidence, and a fortiori would not alone be a basis for such inference. Breach or neglect of duty imposed by statute or ordinance may be evidence of negligence only if there is logical connection between the proven neglect of statutory duty and the alleged negligence.

Our decision in the case of People v. Meyer (239 N. Y. 608) is not in conflict with these views. The defendant there was charged with causing death by “culpable negligence.” Negligence was shown by independent evidence, but the charge of manslaughter could be sustained only if the defendant’s negligence reached beyond the bounds of lack of skill and foresight where civil liability begins to a point where criminal liability is imposed because the negligence is not merely venal but is “culpable,” involving fault for which the State may demand punishment. We held that the circumstance that the defendant practiced medicine without those qualifications which the law demands as a prerequisite to practice was relevant and material upon the question whether the defendant’s proven negligence was venal or culpable. We did not hold that the absence of license tended to prove negligence itself.

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

Crane, J.

(dissenting). The defendant is a chiropractic practitioner in Utica, N. Y. The plaintiff, a woman about forty-six years of age, in March of 1923, was his patient. Through treatment received, the plaintiff claims to have become paralyzed, and has brought this action to recover damages. A judgment in her favor has been unanimously affirmed by the Appellate Division, which, however, granted leave to the defendant to come to this court, certifying that in its opinion a question of law was involved which we should review. At the túne mentioned, Miss Brown had been suffering from laryngitis, and went to the defendant’s, Dr. Shyne’s office for treatment. She went there nine times. It was the last treatment that was injurious.

The theory of the chiropractics is that most, if not all, diseases come from pressure on the nerves caused by vertebra deviating from the normal. The treatment consists in restoring the vertebra which is out of alignment to its proper place to relieve the pressure. This is done by palpitating the spinous processes and pushing or manipulating the vertebrae into place. The chiropractic claims to be able to treat and cure many diseases in this way. One of the defendant’s chief experts in this ease stated that the treatment consists entirely of adjusting the vertebrae which are found out of alignment to normal position. In this way, he stated, cancer of the stomach and liver can be cured, tuberculosis, smallpox, diphtheria, scarlet fever, diabetes and heart disease. The chiropractic does not believe in the germ theory of disease.

We readily see, therefore, that the chiroprabtic doctor holds himself out to treat and cure sickness and disease by the readjustment of the spinal column and the proper alignment of the vertebrae.

This was the kind of treatment that the defendant was giving the plaintiff; and the theory accords with the practice, according to the plaintiff’s testimony. She says of the ninth treatment, which was the same as the others, but a little harsher: I lay down on the couch, face downward, and the support was removed from under my abdomen, and he began working on the spine, and from the neck, way down to the waist and back again. He pressed very hard, so that it made me flinch, especially up through the shoulders. One spot was hurt especially bad. It seemed as if it was his thumbs that he was pressing down hard, and that it hurt, it made me flinch. And then he took a hold of my head, both sides of my head, and gave it a very violent turn, twist one way and then back, which gave a very bad snap, more noticeable than any of the other treatments. And it hurt.”

Q. Where was the pain located that you experienced? A. Right from the base of the neck or head, down, midway down the back.”

Q. Had you ever experienced any pain up to that time, in your spinal column before? A. No, sir.”

The plaintiff left the doctor’s office, returned to her home, and immediately thereafter her arms and limbs became numb and powerless; she was confined to her bed for a period of fifteen weeks, under the care of nurses; was obliged to wear a brace, and has been partially paralyzed ever since.

The Public Health Law (sect. 161) enacts:

“No person shall practice medicine, * * * unless licensed by the regents and registered as required by this article.”

The practice of medicine is defined by section 160 as follows:

“A person practices medicine within the meaning of this article, except as hereinafter stated, who holds himself out as being able to diagnose, treat, operate or prescribe for any human disease, pain, injury, deformity or physical condition, and who shall either offer or undertake, by any means or method, to diagnose, treat, operate or prescribe for any human disease, pain, injury, deformity or physical condition.”

By section 174 any person who, not being then lawfully authorized to practice medicine within this State, and so registered, according to law, shall practice medicine in violation of the article, shall be guilty of a misdemeanor.

The defendant was violating this law. He was practicing medicine in this State without a license. He was guilty of a misdemeanor. (People v. Ellis, 162 App. Div. 288; People v. Mulford, 140 App. Div. 716; People v. Meyer, 209 App. Div. 908, affd., 239 N. Y. 608.)

The plaintiff’s complaint, as amended on the trial, alleged the negligence of the defendant, and his violation of the Public Health Law. The defendant upon the trial and his witnesses testified that his treatment of vertebrae alignment was according to the established practice and methods of chiropractors, and that by such treatment it was impossible to cause the plaintiff’s injuries. There was some evidence to show that the defendant may have been unusually severe and harsh.

The charge of the court to the jury treated the case as one in negligence, and stated the law as applicable to duly licensed physicians, that is, that they were bound to exercise that degree of care and skill generally possessed by members of the profession in the locality where the doctor practiced. The defendant’s negligence, he stated, would consist in failing to meet this standard. He further stated to the jury the above requirements óf the Public Health Law, and charged: “Its violation, and it has

been violated by the defendant, is some evidence, more or less cogent, of negligence which you may consider for what it is worth, along with all the other evidence in the case. If the defendant attempted to treat the plaintiff, and to adjust the vertebrae in her spine, when he did not possess the requisite knowledge and skill as prescribed by the statute to know what was proper and necessary to do under the circumstances, or how to do it, even if he did know what to do, you can find him negligent.”

This is the part of the charge which‘is now challenged as being error, requiring a reversal of the judgment. The point is presented that the violation of the Public Health Law by the defendant, and his practicing medicine without a license, had nothing to do with this case; was not competent evidence; and should not have been considered by the jury as some evidence of negligence. With this view I do not agree.

The judge fully and completely charged the jury that the defendant was not liable for any of the plaintiff’s injuries unless they were the direct and proximate cause of his acts. The evidence was abundant to prove that the plaintiff’s paralysis and injuries resulted from the defendant’s manipulation and treatment of her back, neck and head. The jury were justified in finding that whatever he did, whether it were proper or improper, resulted in the plaintiff’s painful condition. We start, therefore, the consideration of this point with the fact that the defendant’s acts were the direct and proximate cause of the injury. The next question arises as to whether or not the acts were negligent.

As I have stated, the judge charged the jury as if this were the ordinary malpractice case, furnishing for the defendant a standard of the legally authorized physician. It is difficult for me personally to follow this reasoning and the logic of the situation. I think this rule all too liberal to the defendant. What he did was prohibited by law. He could not practice medicine without violating the law. The law did not recognize him as a physician. How can the courts treat him as such? Provided his act, in violation of the law, is the direct and proximate cause of injury, in my judgment he is liable, irrespective of negligence. It seems somewhat strange that the courts, one branch of the law, can hold up for such a man the standards of the licensed physician, while the Legislature, another branch of the law, declares that he cannot practice at all as a physician. The courts thus afford the protection which the Legislature denies.

The judge in this case, however, did not go this far. He charged for the defendant’s benefit the ordinary rules of negligence in malpractice cases, and then stated that the violation of the Public Health Law was some evidence of negligence, leaving the whole question to the jury. It is this much milder form of ruling which is challenged. The defendant must be treated, so the appellant claims, as if he were a duly licensed physician, and in this action for damages, resulting from his act, he is only liable if a duly licensed physician would have been hable. Such is the effect of excluding evidence of the defendant’s practicing medicine without a license. If it were competent to prove that he were practicing medicine without a license, the corollary must be true, that such evidence may be considered by the jury as bearing upon the question of his negligence.

What is the rule which is to guide us in determining whether a violation of a statute or ordinance is evidence of negligence? It is no answer to say that the statute provides a penalty, and, therefore, no other consequences can follow. Such is not the law. We are to determine it, as I read the authorities, from the purpose and object of the law, and also from the fact whether a violation of the law may be the direct and proximate cause of an injury to an individual. As was said in Bourne v. Whitman (209 Mass. 155, 166): “It is universally recognized that the violation of a criminal statute is evidence of negligence on the part of the violator, as to all consequences that the statute was intended to prevent. * * * A criminal statute in the usual form is enacted for the benefit of the public. It creates a duty to the public. Every member of the public is covered by the protecting influence of the obligation. If one suffers injury as an individual, in his person or his property, by a neglect of this duty, he has a remedy, not because our general criminal laws are divided in their operation, creating one duty to the public and a separate duty to individuals; but because as one of the public in a peculiar situation, he .suffers a special injury, different in kind from that of the public generally, from the neglect of the public duty.”

The prohibition against practicing medicine without a license was for the very purpose of protecting the public from just what happened in this case. The violation of this statute has been the direct and proximate cause of the injury. The courts will not determine in face of this statute whether a faith healer, a patent medicine man, a chiropractor, or any other class of practitioner acted according to the standards of his own school, or according to the standards of a duly licensed physician. The law, to insure against ignorance and carelessness, has laid down a rule to be followed, namely, examinations to test qualifications, and a license to practice. If a man, in violation of this statute, takes his chances in trying to cure disease, and his acts result directly in injury, he should not complain if the law, in a suit for damages, says that his violation of the statute is some evidence of his incapacity.

At this point the appellant cites those cases dealing with the failure of chauffeurs to have a license. The principal case is Clark v. Doolittle (205 App. Div. 697). There are a number of other cases upon his brief, all of which I have examined. It was the claim in these cases that the failure to have a license to run a car absolutely prevented all recovery by the driver for injuries received, although the lack of the license had nothing whatever to do with the defendant’s negligence. It is self-evident that the violation of a statute must have something to do with the case; that it must in some way bear upon proximate cause. Even in the Doolittle case it was said: “The fact that the driver was at the time engaged in a violation of some law may have had an important bearing upon plaintiff’s right to recover. It may be evidence against him * * * and if the fault lay in such violation may prevent recovery.” All the case decided was that such violation was not an absolute bar.

But to proceed with the main discussion. The Public Health Law was intended to guard individual members of the public from the injuries which might result from resorting to unexamined practitioners. The violation of the law in this case has brought about the very thing which the Legislature has tried to prevent. In Dent v. West Virginia (129 U. S. 114, 122) the United States Supreme Court said regarding these Public Health Laws:

“Few professions require more careful preparation by one who seeks to enter it than that of medicine. It has to deal with all those subtle and mysterious influences upon which health and life depend, and requires not only a knowledge of the properties of vegetable and mineral substances, but of the human body in all its complicated parts, and their relation to each other, as well as their influence upon the mind. The physician must be able to detect readify the presence of disease, and prescribe appropriate remedies for its removal. Every one may have occasion to consult him, but comparatively few can judge of the qualifications of learning and skill which he possesses. Reliance must be placed upon the assurance given by his license, issued by an authority competent to judge in that respect, that he possesses the requisite qualifications. Due consideration, therefore, for the protection of society may well induce the State to exclude from practice those who have not such a license, or who are found upon examination not to be fully qualified.”

These words seem quite appropriate to our present Public Health Law. The defendant held himself out as a doctor, able to cure laryngitis. He had an office where his name appeared, as though he were a duly licensed physician. The plaintiff could not tell whether or not the doctor was licensed according to the Health Law; she was not obliged to look up the records before going to him; nor was she expected to understand all the requirements of the Regents. She was one of that public which the law sought to protect by declaring that the so-called doctor was forbidden to do the very thing he did do, and which resulted in injury. Proximate cause in connection with the violation of a city ordinance was before the court in Monroe v. Hartford Street Ry. Co. (76 Conn. 201). The court said: “It is apparent that the illegal act was not necessarily a mere independent concomitant or condition of the collision, but might well be a contributing cause, and might be, according as the jury should find the attendant or surrounding circumstances, a proximate cause of the injury. ‘Cause’ and ‘consequence’ are correlative terms. One implies the other. When an event is followed in natural sequence by a result it is adapted to produce, or aid in producing, that result is a consequence of the event, and the event is the cause of the result.”

In recent times the difficulty with these statutes in the courts has been to determine whether the violation was negligence per se, or only some evidence of negligence. I have not been able to find any case where the violation of a statute or an ordinance was not at least some evidence of negligence, where the violation was the direct and proximate cause of the injury, that is, that the act done resulting in injury, was prohibited, and the aim and purpose of the statute or ordinance was to prevent such injuries by such prohibition. In Willy v. Mulledy (78 N. Y. 310) the charter of the city of Brooklyn imposed a duty upon the owners of tenement houses to have fire escapes thereon. It was said that where a statute imposes a duty upon a citizen, any person having a special interest in the performance thereof may sue for a breach causing him injury. In Massoth v. Delaware & Hudson Canal Co. (64 N. Y. 524) the violation of a city ordinance regulating the speed of trains through the city was taken as some evidence of negligence.

A statute of Colorado required the operators of coal mines to fence the ground around their slack coal so as to prevent loose cattle or horses from having access to such slack pile. A child strayed on an unfenced slack pile, and the owner was held liable. (Union Pacific Railway Co. v. McDonald, 152 U. S. 262.) The court said: “Primarily, that statute was intended for the protection of cattle and horses. But it was not, for that reason, wholly inapplicable to the present case upon the issue as to negligence. * * * The duty is due, not to the city as a municipal body, but to the public, considered as composed of individual persons; and each person specially injured by the breach of the obligation is entitled to his individual compensation, and to an action for its recovery. The nonperformance by the railroad company of the duty imposed by statute, of putting a fence around its slack pit, was a breach of its duty to the public, and, therefore, evidence of negligence, for which it was liable in this case, if the injuries in question were, in a substantial sense, the result of such violation of duty.

The same thing holds true here. The defendant was under an obligation, a command, a duty, not to practice medicine. By failing to heed this command and duty plaintiff received injury. The statute and his breach is at least some evidence of negligence. To the same effect we have Fluker v. Ziegele Brewing Co. (201 N. Y. 40); McRickard v. Flint (114 N. Y. 222).

In his dissenting opinion in Marino v. Lehmaier (173 N. Y. 530, 540) Judge O’Brien mentions a number of violations of statutes and ordinances which would not be considered evidence of negligence in the particular case for the reason that the violation of such ordinance or statute, did not constitute the proximate cause of the accident, that is, was in no way the cause of it. Quoting from Thompson on Negligence, he gives the rule to be applied, as follows: “And it may be stated as a general proposition, though there may be difficulty in some cases in applying it, that the violation of a statute or municipal ordinance is not of itself a cause of action grounded upon negligence in favor of an individual unless the statute or ordinance was designed to prevent such injuries as were suffered by the individual claiming the damages and often not then, the question depending upon judicial theories and surmises.” The Public Health Law was designed to prevent such injuries as were suffered by the plaintiff in this case, through the illegal practice of medicine. Judge O’Brien cites the instances of taking fish out of season, of smuggling, as not preventing a recovery for injury inflicted upon the violator. Within this category may be placed the instance of a person injured through negligence while violating the Sunday Law. (Platz v. City of Cohoes, 89 N. Y. 219.) Likewise, the failure to register an automobile was in no way the cause of an accident, and did not prevent recovery for another’s negligence. (Hyde v. McCreery, 145 App. Div. 729.)

We now come to three cases holding that the violation of statutes created negligence per se. Amberg v. Kinley (214 N. Y. 531) related to the Labor Law (Cons. Laws, ch. 31), which required fire-escapes on factory buildings. The action was for death caused in a fire, where the factory had no such fire-escapes. This court said: “In a suit upon a cause of action thus given by statute, it is not necessary for the plaintiff to prove negligence on the part of the defendant, because the failure to observe the statute creates a liability per se, or, as is otherwise and with less accuracy sometimes said, is conclusive evidence of negligence. * * * Whether a statute gives a cause of action to a person injured by its violation, or whether it is intended as a general police regulation, and the violation made punishable solely as a public offense must to a great extent depend on the purview of the Legislature in the particular statute and the language which they have there employed.’ ”

In my judgment there can be no doubt as to the intent of the Legislature in passing the Public Health Law as herein stated by me. It was to prevent injury to people from ignorant and incompetent practitioners, unqualified men. No one can practice unless examined and licensed. That the danger was one to be guarded against; that such legislation was necessary, is apparent in this case.

Karpeles v. Heine (227 N. Y. 74) also related to the Labor Law, which provided that no child under sixteen years should operate a freight or passenger elevator. Here was a prohibition disqualifying certain persons from doing an act, in the same way that the Public Health Law disqualifies unlicensed persons from practicing medicine. This court held the case one of liability per se, following Amberg v. Kinley (supra).

Martin v. Herzog (228 N. Y. 164) related to the Highway Law (Cons. Laws, ch. 25) requiring lights on wagons after sundown. We held that the unexcused omission of the statutory signals was more than some evidence of negligence; it was negligence itself.

In view of these authorities, I am convinced that the plaintiff in this case was a part of that public for whose benefit the Public Health Law in this particular was passed. It was to prevent injury to such as she that the Legislature forbade the unlicensed practice of medicine. The plaintiff was injured through the defendant’s disobedience of the law. He was treating her for laryngitis by pushing her vertebra. In pushing her vertebra and twisting her head, that is, by doing the very thing the law said he must not do, he caused paralysis. Thus by these authorities, the plaintiff could prove in connection with his acts that he was practicing medicine without a license, and such violation was, to say the least, some evidence of negligence. This is as far as the trial judge went in charging the jury. Personally, I am of the opinion that where an injury is the direct and proximate result of practicing medicine without a license, a recovery can be had, as for an act negligent per se; but we do not need to go so far in this case.

Could the defendant in this case have sued the plaintiff for his services, and recovered? Clearly he could not have maintained such an action. (Steed v. Henley, 1 Carr. & P. 574; Allison v. Haydon, 4 Bing. [C. P.] 619; Accetta v. Zupa, 54 App. Div. 33, 35.) “We cannot permit a recovery of compensation for doing an act which this statute declares to be a misdemeanor.”

We have recently had a case in this court where these principles have been applied (People v. Meyer, 209 App. Div. 908; affd., 239 N. Y. 608). The defendant was there prosecuted for manslaughter, in causing the death of a child about five years of age, through his culpable neglect. The defendant was a chiropractor, and he sought to treat the child for diphtheria. The treatment was the same as given Miss Brown in this case — that is, by the manipulation of the spinal cord. The child died. The defendant was not a licensed physician.

If the defendant was to be measured simply by the standard of licensed physicians, or of his own school, the Public Health Law had nothing to do with the case. Negligence is negligence (the same in civil as in criminal proceedings), and culpable negligence is merely accentuated negligence. The defendant’s negligence had to be proved. The prosecution did not rest with merely showing that the defendant was neglectful from the licensed physician’s standpoint. The People proved his acts and omissions, and also the fact that the Public Health Law had been violated, that is, that the defendant was illegally practicing medicine. The judge made this an important part of his charge, for he read to the jury section 160 of the Public Health Law, and said: “I charge you, gentlemen, that the practice of chiropractic is practicing medicine under this law as I have read it to you.” He then read section 161 of the Public Health Law, and continued as follows: Now, gentlemen, the charge in this case is not that the defendant violated the provisions of this law I want that clearly in your minds. It is not brought on that theory. The defendant is not brought into court and is not on trial now for practicing in violation of this statute, for which another penalty is prescribed. That is an entirely separate and distinct offence. The charge in this case is culpable negligence, under the law as I have read it to you; and in connection with that and in reaching your conclusions and coming to your decision you may consider this law that I have just read to you. * * * So, as I have charged you, if the act is in violation of a statute intended and designed to prevent injury to the person and is in itself dangerous — that is, the act itself — and is liable to result in death by reason of omission or commission, and death ensues, then the person may be guilty of culpable negligence.”

We affirmed the conviction in that case. The jury were authorized to consider the violation of the statute as bearing upon the question of negligence. In this case we also have the question of negligence, and as bearing upon it the judge permitted the jury to consider together with all the other facts the practice of medicine without a license.

The ruling was correct, and the judgments below should be affirmed, with costs.

Hiscock, Ch. J., Pound and Andrews, JJ., concur with Lehman, J.; Crane, J., writes dissenting opinion, in which McLaughlin, J., concurs; Cardozo, J., absent. Judgments reversed, etc.