text:
    In the Matter of the Accounting of John M. Lyon et al., as Committee of the Property of Emma E. Merritt, an Incompetent Person, et al., Respondents; Howard M. Banks, Individually and as Administrator of the Estate of Emma E. Merritt, Deceased, Appellant.
    Submitted April 12, 1938;
    decided May 24, 1938.

      Carl O. Hoffmann and Irving Rainer for appellant.
    The real estate of the incompetent was not received, distributed or delivered pursuant to subdivision 5 of section 285 of the Surrogate’s Court Act. (Matter of Otis, 101 N. Y. 580; Matter of Rasmussen, 147 Misc. Rep. 564; Matter of Avchin, 285 N. Y. Supp. 762; Matter of Runic, 181 App. Div. 461; Matter of Salomon, 252 N. Y. 381; Matter of Barker, 230 N. Y. 364; Matter of Ludwig, 112 Misc. Rep. 676; Matter of McCarthy, 145 Misc. Rep. 556; Matter of Greer, 123 Misc. Rep. 909; Matter of Bartel, 263 N. Y. Supp. 411; Matter of Wanninger, 120 App. Div. 273; 190 N. Y. 527; Matter of Slater, 137 Misc. Rep. 54.)

      Robert P. Smith and Arthur R. Wilcox for John M. Lyon, as committee, et al., respondents.
    The committee is entitled to commissions on the value of the real estate. (Pharis v. Gere, 110 N. Y. 336; Civ. Prac. Act, § 1376; Surr. Ct. Act, § 285; Matter of Notman, 103 App. Div. 520; Matter of Barker, 230 1ST. Y. 364; Farmers Loan & Trust Co. v. Turner, 242 N. Y. 240; Matter of Potter, 106 Misc. Rep. 113.)
   Rippey, J.

Emma E. Merritt, at the age of seventy-two, was declared incompetent and John Lyon and George A. Slater were appointed committee of her person and property on June 3; 1914. They duly qualified as such and continued to act ’ jointly as such committee until July 12, 1920, when John Lyon died and John M. Lyon, his son, was appointed in his place. The incompetent died on February 25, 1936. Decrees were entered at various times down to January 17, 1935, judicially settling the accounts of the committee, at which times allowances were made to the committee of commissions for handling her personal estate and certain allowances were made for legal services to Mr. Slater, who was an attorney, but, it is claimed, no allowances were ever made for extraordinary services performed by them outside of their general duties as committee.

Upon the death of the incompetent, John Haviland Smith and Howard M. Banks were appointed administrators of her estate. Both administrators were among her heirs. The proceedings of the committee and their accounts from the date of their last previous accounting on January 1, 1935, came on before the Supreme Court for consideration and final judicial settlement. The committee asked for an allowance for commissions on both the real and personal estate of the incompetent and, Judge Slater, for additional compensation for extraordinary services rendered during his term of office.” Mr. Smith did not then or since make any objection to such request. Administrator Banks, however, objected to any allowance for commissions on real estate because the real estate of the incompetent was neither received, distributed nor delivered by the committee and to any allowance for extraordinary services on the ground that Judge Slater had previously been allowed on previous accountings for all additional services performed for the incompetent from the time of his appointment to December 31,1934. The Special Term allowed commissions on the real estate but refused to grant additional compensation for services performed on the ground that it feels it is precluded therefrom by reason of the allowances made in the prior decrees in the accountings of this committee.” From the decree settling the accounts of the committee no appeal was taken by the committee, but Banks appealed from so much of the decree as allowed commissions on real estate. The Appellate Division affirmed by a divided court and Banks now brings the case here.

The sole authority for the allowance of compensation to a committee of an incompetent person is found in section 1376 of the Civil Practice Act. There it is provided that A committee of the property is entitled to the same compensation as an executor, administrator or testamentary trustee. But in a special case where his services exceed those of an executor or administrator, the supreme court or a county court within the county may allow him such an additional compensation for such additional services as it deems just. The compensation of a committee of the person must be fixed by the court and paid by the committee of the property, if any, out of the funds in his hands. The additional compensation authorized by this section may be allowed to the committee upon any judicial settlement.” It is further provided that he may also receive commission on income, but that is not material here.

Under the provisions of section 285 of the Surrogate’s Court Act, an executor or administrator is allowed commissions only on moneys received and paid out, but subdivision 5 of that section allows commissions on the value of real estate when received, distributed or delivered.”

The committee is a mere custodian and conservator of the real property of the incompetent. He has no right to use or dispose of it except under the direction of the court. The legal title is in the incompetent (Matter of Otis, 101 N. Y. 580, 585). He does not stand in the position of an executor who has the power of sale under a will or where there was of necessity, under the terms of the will, an equitable conversion. The committee neither receives, distributes nor delivers the real property of the incompetent within the meaning of those terms so used in subdivision 5 of section 285 of the Surrogate’s Court Act.

The order of the Appellate Division and the decree of the Special Term, so far as appealed from, should be reversed, without costs.

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

Ordered accordingly.


source: Caselaw Access Project

author: Hubbs, J.

license: Public Domain

text:
    Hazel Cote, as Ancillary Administratrix of the Estate of Joseph A. Cote, Deceased, Respondent, v. Boston and Maine Railroad, Appellant.
    Argued April 19, 1938;
    decided May 24, 1938.

      Charles E. Nichols for appellant.
    No cause of action exists under section 232 of chapter 160 of the General Laws of Massachusetts for an accident occurring at a private crossing, and hence this action for causing death in Massachusetts can be maintained only under section 3 of chapter 229 of the General Laws of that State. (Wooden v. Western N. Y. & P. R. R. Co., 126 N. Y. 10; Cuba R. R. Co. v. Crosby, 222 U. S. 473; Foynes v. N. Y. C. R. R. Co., 276 Mass. 89; Berube v. N. Y., N. H. & H. R. R., 234 Mass. 415; Davis v. N. Y., N. H. & H. R. R., 272 Mass. 217.) Invitation or inducement to the public to use a private crossing does not change it into a public highway requiring statutory signals but only imposes the duty of giving reasonable warning. (Simpson v. Boston & Maine R. R., 176 Mass. 359; Klegerman v. N. Y., N. H. & H. R. R., 290 Mass. 268; Coaldey v. Boston & Maine R. R., 159 Mass. 32; Berube v. N. Y., N. H. & H. R. R., 234 Mass. 415; Davis v. N. Y., N. H. & H. R. R., 272 Mass. 217; Sypher v. Director General, 243 Mass. 568; Murphy v. Avery Chemical Co., 240 Mass. 150.) The complaint should have been dismissed because of deceased’s contributory negligence and his violation of law. (Cotter v. Boston R. R. Co., 237 Mass. 68; Gaffney v. Bay State Ry., 221 Mass. 457; Crough v. N. Y. C. R. R. Co., 260 N. Y. 227; Schrader v. N. Y. C. & St. L. R. R. Co., 254 N. Y. 148; Miller v. N. Y. C. R. R. Co., 226 App. Div. 205; 252 N. Y. 546; Brown v. D. & H. Co., 231 App. Div. 570; Fitch v. N.. Y. C. R. R. Co., 233 N. Y. 356; Barnasky v. N. Y., O. & W. Ry. Co., 226 N. Y. 435; Mailhot v. N. Y., N. H. & H. R. R., 273 Mass. 277; Pigeon v. Massachusetts, etc., Ry. Co., 230 Mass. 392; Dolfini v. Erie R. R. Co., 178 N. Y. 1; Hagglund v. Erie R. R. Co., 210 N. Y. 46; O’Meara v. Boston & Maine

      R. R., 277 Mass. 315; Gaboriault v. N. Y., N. H. & H. R. R., 289 Mass. 36.) Violation by deceased of a duty imposed upon him by statute required a dismissal of the complaint. (Jones v. N. Y., N. H. & H. R. R. Co., 275 Mass. 139; Tazzini v. Boston & Maine R. R., 277 Mass. 108; Fortune v. N. Y., N. H. & H. R. R. Co., 271 Mass. 101; Davis v. N. Y., N. H. & H. R. R. Co., 272 Mass. 217; Anthony v. Boston & Maine R. R., 276 Mass. 392; O’Meara v. Boston & Maine R. R., 277 Mass. 315; Carcione v. Boston R. R. Co., 278 Mass. 357; Gaffney v. Bay State Ry. Co., 221 Mass. 457; Klegerman v. N. Y., N. H. & H. R. R. Co., 290 Mass. 268; Cuba R. R. Co. v. Crosby, 222 U. S. 473.)

      James A. Leary and Walter A. Fullerton for respondent.
    The accident occurred at a public crossing. (Heskell v. Auburn L., H. & P. Co., 209 N. Y. 86; Ticknor Bros., Inc., v. Barley, 149 App. Div. 871; Layer v. City of Buffalo, 274 N. Y. 135; Schwier v. N. Y. C. & H. R. R. R. Co., 90 N. Y. 558; Hanks v. Boston & Albany Railroad, 147 Mass. 495; Johanson v. Boston & Maine Railroad, 153 Mass. 57; Murphy v. Boston & Albany Railroad, 133 Mass. 121; Skzypek v. Long Island R. R. Co., 245 App. Div. 309 ; 249 App. Div. 629; 275 N. Y. 508.) Defendant was negligent. (Volkmar v. M. R. Co., 134 N. Y. 418; O’Flaherty v. Nassau Electric R. R. Co., 34 App. Div. 74; Thompson v. N. Y. C. & H. R. R. R. Co., 110 N. Y. 636; Baker v. Lehigh Valley R. R. Co., 248 N. Y. 131; Barnett v. N. Y. C. R. R. Co., 227 App. Div. 636; Spitzer v. N. Y. C. R. R. Co., 211 App. Div. 332; Greany v. Long Island R. R. Co., 101 N. Y. 419; Henavie v. N. Y. C. & H. R. R. R. Co., 166 N. Y. 280; Browne v. N. Y. C. & H. R. R. R. Co., 87 App. Div. 206; 179 N. Y. 582; King v. Weitzman, 267 Mass. 447; Broughton v. Boston & Maine Railroad, 290 Mass. 80.) Decedent was not negligent. (Fitzpatrick v. International Ry. Co., 252 N. Y. 127; Sackhein v. Pigueron, 215 N. Y. 62; O’Connell v. McKeown, 170 N. E. Rep. 402; Broughton v. Boston & Maine Railroad, 290 Mass. 80; Sylvia v. N. Y., N. H.

      & H. R. R. Co., 6 N. E. Rep. [2d] 359; Smith v. N. Y. C. & H. R. R. R. Co., N. Y. 224; Rush v. Bauland Co., 82 App. Div. 506; Green v. Long Island R. R. Co., 131 App. Div. 277; Eisenhauer v. Boston & Maine Railroad, 285 Mass. 439; Horton v. N. Y. C. R. R. Co., 237 N. Y. 38; Hanks v. Boston & Albany Railroad, 147 Mass. 495; Lewis v. Long Island R. R. Co., 162 N. Y. 52; Kujek v. Goldman, 150 N. Y. 176; Texas & Pacific Ry. Co. v. Harvey, 228 U. S. 319; King v. Weitzman, 267 Mass. 447.)
   Hubbs, J.

It is unnecessary to consider whether the charge was erroneous since we reach the conclusion that the decedent was clearly guilty of contributory negligence as a matter of law. The Massachusetts statutes differ from our own in that, with respect to railroad crossings at grade which are public, contributory negligence sufficient to bar a recovery must be gross or willful negligence as opposed to our own rule of lack of reasonable care. Chapter 1602 section 232, of the General Laws of Massachusetts provides, in substance, that if a person is injured by collision with the engines or cars of a railroad company which neglects to give signals at a public crossing in the manner prescribed by orders of the department, and which neglect contributed to the injury, the corporation shall be liable, “ unless it is shown that, in addition to a mere want of ordinary care, the person injured or the person who had charge of his person or property was, at the time of the collision, guilty of gross or wilful negligence, or was acting in violation of the law, and that such gross or wilful negligence or unlawful act contributed to the injury.”

It seems to be the rule that statutory signals are not necessary under the Massachusetts statutes at a private way but if a railroad invites or induces a person to treat a private way as a public way, then the railroad is required to use reasonable care as to such invitees. Section 15 of chapter 90 of the General Laws of Massachusetts provides: “ Except as hereinafter otherwise provided, every person operating a motor vehicle, upon approaching a railroad crossing at grade, shall reduce the speed of the vehicle to a reasonable and proper rate, and shall proceed cautiously over the crossing. * * * Whoever violates any provision of this section shall be punished by a fine of not less than ten nor more than fifty dollars.”

Violation of that provision of the statute has been held such a violation of law as to preclude a recovery under section 232 of chapter 160. (Fortune v. N. Y., N. H. & H. R. R. Co., 271 Mass. 101.)

Thus, whatever the effect of the statute requiring proof that a person injured at a public crossing was guilty of gross or willful negligence in a case where the crossing is semi-public, a violation of law on his part contributing to the injury excepts the injured person from the benefit of that rule and makes applicable the rule that he may not recover if not in the exercise of ordinary care or if not proceeding cautiously.

The accident which resulted in the death of respondent’s intestate occurred on a private crossing which, however, had been planked by the appellant and over which persons were accustomed to pass in vehicles to attend ball games held on a field owned by the Barber Leather Company and for about twenty years prior to the accident used as a ball park. At the place in question the railroad ran east and west. On the north side of appellant’s tracks there was a railroad station, known as Blackinton, with a road leading to it from a main highway running parallel to the railroad and some distance to the north. This crossing was just west of the westerly end of the railroad station and from the crossing a dirt road ran to the ball park which was some distance southeast of the station. Respondent, her intestate and their daughter, thirteen years old, had attended a ball game at the park. They left before the game was over at about four-fifteen p. m. of a bright, clear day. The deceased drove a Plymouth coupe with his wife and daughter in the seat with him, the daughter being in the middle. At a distance of twenty-five feet from the south rail of the east-bound track of appellant’s road there is a gateway. The road from that point continues on about a seventeen per cent upgrade, passing over the tracks at a slight angle to the northeast direction.

It is fifteen feet from the south rail of the east-bound track to the south rail of the west-bound track, measuring along the center line of the crossing. There is evidence from photographs admitted and testimony relative thereto that at least after passing through the gateway it was possible to see for a considerable distance east and west along the track. Such evidence would indicate that at a point twenty-five feet south of the south rail of the west-bound track, which would be ten feet south of the south rail of the east-bound track, the view to the east is 3,260 feet. It appears that the deceased, when reaching the gateway, was traveling at five miles per hour when he shifted into second gear and continued upgrade to the tracks, the grade being approximately a seventeen per cent grade, and that when his front wheels were just over the south rail of the eastbound track his wife saw the train approching from the east on the west-bound track about 200 feet away. She yelled to her husband that there was a train coming, opened the door, jumped from the car, pulling her daughter with her and both of them landing on the eastbound track. The train was traveling at a speed of approximately thirty-five miles per hour. The automobile continued on and was struck on the west-bound track and thrown a distance of 118 feet to the west.

Upon the question of care exercised by the deceased, it appears that as they came toward the fence or gateway, the wife looked to the right or east in the direction from which the train came, and the husband looked to the left or west; that after he shifted into second gear, husband, wife and daughter all looked both ways and that the wife and daughter saw nothing until they were on the eastbound track when the train was about 200 feet away. It is quite clear that the train was in view from the time they left the gateway unless their view was obstructed by brush between the gateway and the track and that certainly it was in view when they reached the east-bound track. There is testimony which the jury might have believed that there were weeds and brush between the fence and the track ten or twelve feet high. The wife testified that there were weeds and brush on the bank of the railroad probably ten or twelve feet high. However, if the view was obstructed, the duty rested upon the deceased to “ reduce the speed of the vehicle to a reasonable and proper rate, and * * * proceed cautiously.” (General Laws of Massachusetts, ch. 90, § 15.)

Even assuming that the view of deceased was obscured by trees and bushes, “ He was heedless of ordinary precaution in a place which he must have known to be dangerous or he would not have driven on the tracks immediately in front of the train * * * He could not, except, at his own risk, drive on the railroad track, relying on not having seen a train or heard a signal and taking no further precaution. If the crossing is dangerous, the care should be commensurate with the obvious risk.” (Crough v. New York Central R. R. Co., 260 N. Y. 227, 231.)

To the same effect is the rule under the decisions of the Massachusetts courts: “ If, by reason of darkness or for any other reason the plaintiff’s view of the track was obstructed so that he was unable to see the approaching car and engine, it was his duty to act with reasonable care and caution and to stop until he could ascertain whether he could cross safely.” (O’Meara v. Boston & Maine R. R., 277 Mass. 315, 319. See, also, Gaboriault v. N. Y., N. H. & H. R. R. Co., 289 Mass. 36.)

Here, after deceased reached the east-bound track, he had a clear view for a long distance. There he could have stopped in safety, but either he did not have his car -under such control that he could stop, or he elected to proceed. In either event, he failed to exercise the degree of care he should have exercised, and having failed so to do, there can be no recovery in this action.

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

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

Judgments reversed, etc.


author: Finch, J.

text:
    City of New York, Respondent, v. Wilson & Co., Inc., Appellant.

      Argued March 15, 1938;
    decided May 24, 1938.

      Charles J. Nehrbas, William R. Brown and Paul Ware for appellant.
    Defendant established title to the land by undisputed evidence of adverse possession, and the court should have directed a verdict in its favor. (Matter of City of New York [West Tenth St.], 267 N. Y. 212; Belotti v. Bickhardt, 228 N. Y. 296; Ottinger v. Strasburger, 33 Hun, 466; 102 N. Y. 692; Matter of City of New York, 166 App. Div. 106; 217 N. Y. 1; People v. Ladew, 237 N. Y. 413; Reid v. City of New York, 274 N. Y. 178; Dodge v. Gallatin, 130 N. Y. 117; Sherman v. Kane, 86 N. Y. 57; Baker v. Oakwood, 123 N. Y. 16; Timpson v. Mayor, 5 App. Div. 424; Knapp v. City of New York, 140 App. Div. 289; Argotsinger v. Vines, 82 N. Y. 308; Eggler v. N. Y. C. R. R. Co., 207 App. Div. 120.) No statute prevents the acquisition of title by adverse possession against the city where possession commenced prior to 1898. (Mayor v. Hart, 95 N. Y. 443; Timpson
      v. Mayor, 5 App. Div. 424; Knapp v. City of New York, 140 App. Div. 289; Matter of City of New York, 217 N. Y. 1; Muller v. Mayor, 63 N. Y. 353; Langdon v. Mayor, 93 N. Y. 129; Scallon v. Manhattan Ry. Co., 185 N. Y. 359.) The trial court erred in charging the jury that lapse of time together with negligence on the part of the city’s officials does not establish adverse possession against the city. (Timpson v. Mayor, 5 App. Div. 424; Knapp v. City of New York, 140 App. Div. 289; Matter of City of New York, 217 N. Y. 1; Reid v. City of New Yoik, 274 N. Y. 178; Powlowski v. Mohawk Golf Club, 204 App. Div. 200.) Plaintiff’s claim is barred by the Statute of Limitations, and the court should have directed a verdict on that ground. (Timpson v. Mayor, 5 App. Div. 424; Humbert v. Trinity Church, 24 Wend. 587; Towle v. Remsen, 70 N. Y. 303; Sherman v. Kane, 86 N. Y. 57; Plet v. Willson, 134 N. Y. 139; Baker v. Duff, 136 App. Div. 13; 202 N. Y. 570; 213 N. Y. 649; Good v. Brown, 181 App. Div. 808.) Regardless of the question of title, defendant has riparian rights over the property in question and cannot be ejected. (Town of Brookhaven v. Smith, 188 N. Y. 74; Hinkley v. State, 234 N. Y. 309; Matter of City of New York [West 205th St.], 240 N. Y. 68; White’s Bank of Buffalo v. Nichols, 64 N. Y. 65; Matter of Del Balso Holding Corp. v. McKenzie, 271 N. Y. 313; City of New York v. Swift & Co., 162 Misc. Rep. 581; Burns Bros. v. City of New York, 178 App. Div. 615; 232 N. Y. 523.) Plaintiff failed to prove its claim of title. (Beers v. Hotchkiss, 256 N. Y. 41; Jarvis v. Lynch, 157 N. Y. 445; People v. Inman, 197 N. Y. 200; Shinnecock Hills & Peconic Bay Realty Co. v. Aldrich, 132 App. Div. 118; 200 N. Y. 533; Maier v. Joslin, 46 Minn. 228; Oakes v. DeLancey, 133 N. Y. 227.) The plaintiff’s muniments of title fail to locate bhe property with sufficient definiteness to entitle it to a judgment in ejectment. (Jarvis v. Lynch, 157 N. Y. 445.) Plaintiff’s map exhibits were erroneously admitted in evidence. (Scholie v.
      Mayor, 25 N. Y. St. Rep. 847; 119 N. Y. 613; Webber v. Gillies, 112 N. Y. Supp. 397.)

      William C. Chanter, Corporation Counsel (William S. Gaud, Jr., and Arthur Bruan of counsel), for respondent.
    The property is filled land under water, record title to which is in the city. (People ex rel. Blakeslee v. Commissioners, 135 N. Y. 447; Hinkley v. State, 234 N. Y. 309; Saunders v. N. Y. C. & H. R. R. R. Co., 144 N. Y. 75)Harway Improvement Co. v. Partridge, 203 App. Div. 174; 236 N. Y. 563; Pope v. Hanmer, 74 N. Y. 240; Voight v. Meyer, 42 App. Div. 350; Sage v. Mayor, 154 N. Y. 61; Williams v. Mayor, 105 N. Y. 419.) The defendant has not proved title to the property through adverse possession. (Hinkley v. State, 234 N. Y. 309; Heller v. Cohen, 154 N. Y. 299; Belotti v. Bickhardt, 228 N. Y. 296; Rathbunville Union Cemetery Assn. v. Betson, 208 N. Y. 364; Kneller v. Lang, 137 N. Y. 589; St. Vincent Female Orphan Asylum v. City of Troy, 76 N. Y. 108; Burbank v. Fay, 65 N. Y. 57; Slingerland v. International Contracting Co., 169 N. Y. 60; Knickerbocker Ice Co. v. Shultz, 116 N. Y. 382; People v. Baldwin, 197 App. Div. 285; 233 N. Y. 672; People v. Shipley, 229 App. Div. 21; Kingsland v. Mayor, 110 N. Y. 569; Matter of City of New York [Piers Old Nos. 8-11], 228 N. Y. 140; American Ice Co. v. City of New York, 217 N. Y. 402; Matter of Mayor, 135 N. Y. 253; Langdon v. Mayor, 133 N. Y. 628; Grimmer v. Tenement House Department, 204 N. Y. 370; City of New York v. New York City Ry. Co., 193 N. Y. 543; Adamson v. Schreiner, 176 App. Div. 95; Harway Improvement Co. v. Partridge, 203 App. Div. 174; 236 N. Y. 563; Consolidated Ice Co. v. Mayor, 166 N. Y. 92; New York City Employees’ Retirement System v. Eliot, 267 N. Y. 193; New York Telephone Co. v. Board of Education, 270 N. Y. 111.) The defendant has no riparian rights which bar a possessory judgment in favor of the city. (Hinkley v. State, 234 N. Y. 309; Whiting v. Edmunds, 94 N. Y. 309; Bedlow v. New York Floating Drydock Co., 112 N. Y. 263; Bradt v. Church, 110 N. Y. 537; Gates & Co. v. City of

      New York, 259 N. Y. 534; Town of Brookhaven v. Smith, 188 N. Y. 74; Thousand Island Steamboat Co. v. Visger, 179 N. Y. 206.)
   Finch, J.

This is an action in ejectment brought by the city of New York. The city alleges that it is the owner in fee simple and entitled to immediate possession of all the property within the block bounded by Forty-fifth street, Forty-sixth street, First avenue and East river to the extent that it lies outshore of the “ original high water fine of the East River.” Judgment was demanded for the possession of the property and for the value of its use and occupation from 1926. The answer denied the material allegations of the complaint, set forth defenses of adverse possession and the Statute of Limitations, the exercise of riparian rights, and, with respect to the claim for damages, the six-year Statute of Limitations.

This action was tried previously, before Mr. Justice Church without a jury. At the close of the trial he entered judgment for the plaintiff declaring it to be the owner of the property and awarded the city damages of approximately two hundred and fifty thousand dollars. The Appellate Division reversed and granted a new trial upon the ground that the defendant had been wrongfully deprived of its right to a jury trial (249 App. Div. 391). At the close of this jury trial, three questions were submitted to the jury which it answered as follows:

I. Who has the title in fee of the property in suit, plaintiff or defendant? Answer: Plaintiff.
" II. If you have answered the first question in favor of the plaintiff, which fine on Plaintiff’s Exhibit 32 indicates the original mean high water mark of the East River? Answer: The original mean high water line as claimed by the City of New York, indicated by the red fine on Plaintiff’s Exhibit 62.
“ III. If you answer the first question in favor' of the plaintiff, what, if anything, is the amount of damages the plaintiff is entitled to recover as damages for the use and occupation of the premises in question for the period from August 1st, 1928 to March 1st, 1937? Answer: None.”

The Appellate Division, one justice dissenting, affirmed the judgment entered on the verdict of the jury.

The property involved is now covered by substantial brick buildings used for slaughtering and dressing meat, and by a pier bulkhead and platform along the water.

In view of the affirmance by the Appellate Division we must affirm unless there is no evidence to sustain the verdict of the jury or unless there are errors of law in the charge or in the refusal to dismiss the complaint.

The city maintains that the property involved is filled in land formerly under water and that it has title to such land under water or formerly under water.

1. Title of the City.

All the land around Manhattan between the low-water mark and the high-water mark was granted to the city in 1686 by the Dongan Charter. The title thereby obtained was subsequently ratified by the Montgomerie Charter of 1730 and by the several Constitutions of the State. In short we may assume that the colonial charters and State grants gave title to all land under water to the city. The city’s title to these several grants has been considered at length in Sage v. Mayor (154 N. Y. 61, 70, 81).

The defendant attempted to show that the property involved in the case at bar had been granted by one Kieft, Director General, to George Homs and another, prior to the Dongan Charter. A reading of the grant by Kieft, however, .shows that it did not include land under water. That grant covers “ * * * a certain piece of land lying on the island of Marihattans extending in breadth from Teutel bay along the East river till to the Bull of Schepmoes where the Beach tree lies over the water and then in its length from the said River straight into the woods and of the same breadth all along the water one hundred rods (of Thirteen feet to the rod) * * *."

This language obviously does not include land under water. First, the description of the property is land lying on the island of Manhattans ” — not land under water; secondly, the property is described as extending from Teutel bay.” Turtle bay (spelled Teutel bay in the grant) was an indentation two city blocks in length and the grant extended from Turtle bay and did not include Turtle bay. Finally the property granted is said to stretch along the East river and along the water and it is well settled that when lands are described in a deed or grant as being bounded by a tidal river the title ends at the high-water mark. (Sage v. Mayor, 154 N. Y. 61, 69, 70.)

In the absence of proof to the contrary it must be presumed that this land under water was conveyed as part of the Dongan grant. The city’s claim of title to land under water from the time of the Dongan grant to the present is clear. Thus the city had title to the land xmder water at the time of the Dongan grant and still has such title unless title has been conveyed or lost by adverse possession.

Before taking up the question of conveyance or adverse possession, it is necessary to determine whether the land involved was land under water. The record contains much evidence showing that there has been extensive filling in along the waterfront. The evidence concerning the precise extent of this filling is conflicting. The jury has found that the original high-water mark is shown by the red line on the map identified as Exhibit 62.

This finding concerning the original high-water mark and the effect and the extent of the filling is binding unless all evidence is lacking to support it. Examination shows ample evidence in support of this finding. The red line of Exhibit 62 is identical with the high-water line shown on the Turtle bay farm map of 1835. This map was filed in the New York County Registrar’s office in 1835 and is peculiarly relevant to this controversy. It is admitted that the defendant owned the upland above the high-water mark and we find that the earliest deed of the defendant’s claim of title in evidence on this trial refers to the property conveyed as being a part of a piece of land known as Turtle bay farm. Like references are found in most of the record deeds introduced by the defendant. There are two other maps introduced by the defendant, showing lines which apparently represent the high-water line and these lines coincide almost exactly with the red line of Exhibit 62. Furthermore there are specific descriptions contained in the defendant’s deeds describing that part of the Turtle bay farm conveyed as extending along the shore of the East river. When these locations are plotted (using the specific measurements contained in the deeds) the shore line referred to in the deeds as a boundary accords with the line fixed by the jury. In addition numerous other maps were introduced by the city to support its contention that the original high-water line was well inshore of the present line.

The defendant insists that these maps were improperly admitted. Under sections 389, 389-a of the Civil Practice Act, however, such maps are made admissible where they have been filed for more than twenty years and are made presumptive evidence of their contents.

2. The Right of the City to Being This Action.

It is argued that under section 34 of the Civil Practice Act the city cannot maintain an action to recover real property unless it “ was seized or possessed of the premises in question within fifteen years before the commencement of the action.” This overlooks section 35 of the Civil Practice Act which provides that the person who establishes a legal title to the premises is presumed to have been possessed thereof within the time required by law,” and that the occupation by another person is deemed to have been under and in subordination to this legal title unless such other person has held possession of the premises adversely for fifteen years before the commencement of the action. Since the city has legal record title to these premises, it may maintain this action unless the defendant can show that it has had adverse possession for the required period.

3. The Adverse Possession of the Defendant.

The question of adverse possession must be divided into two periods of time — the period before 1871 and the time thereafter. The city contends that by statute enacted in 1871 the land under water became inalienable and, therefore, the adverse possession, if the claim is to be sustained, must be shown to have existed prior to 1871.

The defendant’s proof of adverse possession consisted of the testimony of living witnesses and documentary proof. None of the living witnesses recalled the period prior to 1873. Therefore, proof of possession prior to 1871 must rest on the documentary evidence. This evidence in so far as it antedates 1871 consists of (1) an application to the Building Department in 1868 for a permit to construct a building, (2) evidence that taxes were paid on this land from 1860 to 1875, and (3) certain leases commencing in 1865.

The application for the permit to erect a building has little value, if any, in proving adverse possession. Any person whether he be fee owner or lessee or licensee of the city must obtain a permit before erecting a building or waterfront structure. Nor is it material that he states wrongfully that he is the owner of the premises in his application, since the jurisdiction of the Building Department does not extend to the examination of titles. Likewise proof of payment of taxes is not conclusive proof of adverse possession nor is it binding on the city (Consolidated Ice Co. v. Mayor, 166 N. Y. 92, 101; Harway Improvement Co. v. Partridge, 203 App. Div. 174, 178; affd., 236 N. Y. 563), although payment of taxes if coupled with other acts may constitute some evidence of hostile possession. (See People v. Ladew, 237 N. Y. 413, 425.) Moreover, statements of city officials do not estop the city and, therefore, cannot constitute conclusive evidence of adverse possession. (New York City Employees’ Retirement System v. Eliot, 267 N. Y. 193; New York Tel. Co. v. Bd. of Education, 270 N. Y. 111.)

This brings us to the question of leases. Most of the leases referred to obviously related to upland and not to land under water. Of the two leases which, because of the vagueness of the description, might be urged as applying to the locus in quo, we have in the first an express reservation of all the right, title and interest of the city in and to the land lying below the high-water mark in the East river. The second of these leases does not cover the same property as the first. Just what property it does cover is by no means clear by reason of the vagueness of the description. A complete answer to the contention based upon this lease is that, owing to the vagueness of the description, the location of the property covered by the lease presented a question of fact for the jury to decide, and its decision on this issue cannot be disturbed.

From the above it seems clear that the defendant did not offer proof which would permit us to find as a matter of law that a predecessor in title had adverse possession prior to the year 1871. Some evidence of such adverse possession there was, but the question was properly left to the jury, which has found against the defendant.

A great deal of evidence tending to show adverse possession subsequent to 1871 is to be found in the record. This includes testimony of living witnesses that the defendant or predecessors in title were in actual possession from 1873 to date and much documentary evidence. This evidence was sufficient to raise a question for the jury and might even be sufficient to justify a determination of adverse possession as a matter of law, if the property was alienable. The question however, was not submitted to the jury, on the ground that after the year 1871 there could be no adverse possession of this property.

This raises the most important question in the case. Did the legislation of 1871 and 1873 make this property inalienable and, therefore, prevent the defendant from obtaining title by adverse possession?

As already shown, there was ample evidence to sustain the finding of the jury that this property originally was land under water.

Land originally under water is treated as land under water even after it is filled. (People ex rel. Blakslee v. Commissioners of Land Office, 135 N. Y. 447, 450; Hinkley v. State, 234 N. Y. 309, 319.) When property of the State or city is inalienable, title cannot be obtained by adverse possession. (Burbank v. Fay, 65 N. Y. 57, 66; Hinkley v. State, 234 N. Y. 309, 315; Knickerbocker Ice Co. v. Shultz, 116 N. Y. 382, 388.) The theory upon which this decision rests has been well expressed in the Burbank case where we said: “ the whole theory of prescription depends upon a supposed grant. No such grant can be presumed where a grant would be unlawful or contrary to law * * * where no express grant can be allowed, the law will not resort to the fiction of an implied grant so as to create a prescriptive right. If it would, the whole policy of the prohibitory statute might be subverted by the supineness or willful fraud of public officers, and the State deprived of most important rights.” (Burbank v. Fay, 65 N. Y. 57, 66, 67.)

This brings us to the question whether chapter 574 of the Laws of 1871 made land under water inalienable. This statute authorized the Department of Docks to lease the city’s waterfront only for a period of ten years. It specifically provided that the “ terms ‘ property ’ and ‘ wharf property,’ whenever used therein, shall be taken to mean not only all wharves, piers, docks, bulkheads, slips, and basins, but the land beneath the same, and all rights, privileges, and easements thereto.” (§ 6 [§ 99, subd. 12].) (Italics interpolated.)

Two years later another statute was enacted which provided among other things that the Commissioners of the Sinking Fund might sell any city property “ except wharves and piers.” (Laws 1873, ch. 335, § 102.) Significantly this later statute, though repealing a great many earlier statutes, expressly saved from repeal section 6 of the act of 1871 which gave the Department of Docks the powers referred to above and defined property and wharf property as including land under water.

This section 6 also specifically provided that the Department of Docks in the city of New York shall have exclusive charge and control, subject to certain rights of the Commissioners of the Sinking Fund, not only of all wharves, piers, bulkheads, structures and waters adjacent thereto, but also all slips, basins, docks, waterfronts, land under water, and structures thereon. In addition the Department of Docks was directed to make a sole plan for solid filling of the waters surrounding the city and for extending piers into the waters and erecting bulkheads, and said Department of Docks was authorized to acquire in the name and for the benefit of the city, any and all wharf property in the city to which the corporation of the city then had no right or title.

In Matter of City of New York (Piers Old Nos. 8-11) (228 N. Y. 140), the court said that this chapter 574 of the Laws of 1871 and chapter 335 of the Laws of 1873 have been held by the courts to recognize and affirm the purposes of the Legislature to make the property of the city constituting its waterfront inalienable. This case also reviews the other cases, reaching a like result. It refers to Kingsland v. Mayor (110 N. Y. 569) where the court, referring to chapter 574 of the Laws of 1871, says: The city charter of the previous year was amended so as to change the whole dock system of the harbor. The law provided for a plan which should girdle the city with new wharves and piers, belonging wholly to the municipality, and ending all private ownerships along the waterfront. The wharves of private owners were to be purchased by agreement, or taken in the ordinary manner by proceedings under the right of eminent domain ” (p. 578). In Williams v. Mayor (105 N. Y. 419), the court, referring to the act of 1871, says: “* * * and the old plan of wharves and piers owned by individuals is to be swept away” (p. 437). In Langdon v. Mayor (133 N. Y. 628) the court said: “ The Legislature * * * by the enactment of chapter 574 of the Laws of 1871, inaugurated a radical and sweeping change of policy upon the subject. Private ownership of wharves and wharfage rights were from that time subjected to a process of extinction ” (p. 635). The court, after discussing these cases, reached the conclusion: The courts at different times have recognized and affirmed that the purpose of the legislatures of 1871 and since has been to make the property of the city constituting its waterfront inalienable.” (Matter of City of New York [Piers Old Nos. 8-11], 228 N. Y. 140, 150.) While it may be possible to confine this case in its actual decision to the question of whether piers and wharves rather than land under water were inalienable, it is very clear from a reading of the opinion that when the court construed the statutes of 1871 and 1873, it was construing them not in terms of their application to piers and wharves alone, but their intent and purpose as a whole. In view of the manifest intent shown when chapter 574 of the Laws of 1871 is read in its entirety and the adoption of this intent by this court in the numerous cases indicated, which holds land under water as well as the piers and wharves inalienable from 1871 on, we are not bound by the reports of an engineer in the Dock Department of the City of New York in 1922, or of the Corporation Counsel in 1910 to the effect that the defendant had acquired adverse possession. Nor are we bound by the fact, that subsequent to 1871, the city made a number of grants of land under water. The city is not estopped from asserting its rights by these inconsistent acts, since the errors of law of city employees and officers are not binding upon the city. (New York City Employees’ Retirement System v. Eliot, supra; New York Tel. Co. v. Bd. of Education, supra.)

4. Charge to the Jury.

After the court had fully charged the jury concerning adverse possession it granted a request of the plaintiff to charge that mere lapse of time furnished no defense for encroachment of a public right and that the jury should not consider that the city had lost any rights because its public officers sat by and failed to exercise due diligence. The appellant contends that this was equivalent to taking the question of adverse possession out of the case entirely. A reading of the entire charge to the jury and the requests to charge shows that the only impression this could have made on the jury was that intended by the court, that is, that the defendant could acquire title by adverse possession if such adverse possession commenced prior to 1871, but that mere lapse of time during which the officials of the city failed to take action did not estop the city from asserting its rights and did not take the place of proof of an adverse possession prior to 1871.

5. Riparian Rights of the Defendant.

The defendant contends that the judgment giving possession of the property to the city is erroneous in that it disregards defendant’s riparian rights. Riparian rights are rights of navigation, boating, fishing and the like, including the right of access to the water for such purposes.

We thus come to the question of the pier and the platform of piles which is located outshore of the present high-water mark.

Since 1907 the defendant has occupied a pier under leases and permits granted by the Dock Department and has paid rent to the city for this privilege. The term of the last of these leases and permits expired in 1925. In these instruments the defendant acknowledged the city’s right to possession. This alone may prevent the defendant from claiming access to this pier.

In addition under section 41 of the Civil Practice Act, where there has existed a relationship of landlord and tenant and there has been no surrender of possession, the possession of the tenant is deemed the possession of the landlord until the expiration of fifteen years after the last payment of rent. In a somewhat similar case we affirmed a dismissal of the complaint on the ground that the lessee is estopped from challenging the city’s title. (Gates & Co. v. City of New York, 259 N. Y. 534.)

Nevertheless the defendant contends that as owner of the upland it is entitled to riparian rights which include the right to erect and maintain wharves and piers. This is the general rule, but it is subject to a well-recognized exception that where the land has been appropriated to some public use, the riparian rights of the upland owner may be restricted. (Trustees of Town of Brookhaven v. Smith, 188 N. Y. 74, 87.)

In Matter of Del Balso Holding Corp. v. McKenzie (271 N. Y. 313) this court said: “ If the petitioner is an upland owner, it has the well-settled riparian right of access by means of a pier to navigable, water in front of its upland, subject to the rights of the public” (p. 316). Thus the defendant, as the owner of the original upland, has riparian rights of access to navigable water in front of its original upland. Referring to riparian rights, this court, in Matter of City of New York (West 206th Street) (240 N. Y. 68), said: “ In general terms they connote the right and profit to the owner of the upland arising from its connection with the water, such as the easements of passage and use, subject, however, to governmental regulation for the improvement of navigation [citing cases]. They are not dependent upon ownership of the shore and are the same whether or not the riparian owner owns the soil under water ” (p. 72).

Such riparian rights may not be impaired by reason of an illegal fill extending beyond the upland ownership. (Tiffany v. Town of Oyster Bay, 234 N. Y. 15.)

It may well be that the defendant has no right to use this pier on piles which it had leased if there remains otherwise available to this defendant such access to navigable water, and it would seem from the photographs and exhibits in the case at bar that there is plenty of room for such access outside of this pier. Accordingly the mere leasing of this pier by the defendant from the city would not abrogate the riparian rights of this defendant. Because the defendant sought to increase its rights by the lease of this pier, no valid reason appears why this should be held to cancel the riparian right of access which it already had. Evidently, what it was endeavoring to do was to increase its riparian rights, and not to lose what it had. If the city desires to abrogate this riparian right to reach navigable water belonging to defendant as the owner of the original upland, the city would have to take the same in condemnation for just compensation.

The city further contends that because, by the enactment of chapter 574 of the Laws of 1871 and chapter 335 of the Laws of 1873, heretofore referred to, the Legislature has made this land inalienable, therefore this waterfront has been dedicated wholly to the public and the riparian right of access belonging to this defendant has been thereby abrogated. To sustain its contention the city cites Trustees of Town of Brookhaven v. Smith (188 N. Y. 74), where Judge Gray, writing for the court, said: The right of access is conceded to be a valuable one and, unless the foreshore has been appropriated by the general government to some superior, and lawful, public use, as for example, by a grant to a municipality, or for navigation purposes, it is entitled to the protection of the law ” (p. 87). This contention of the city is likewise without merit. Chapter 574 of the Laws of 1871 made explicit provision for the Department of Docks to acquire rights not then owned by the city either by purchase or condemnation. This defendant, through its predecessors, as the owner of the upland, owned also this valuable right of access at that time. It was not possible then or now for the Legislature or the city to deprive this defendant of this valuable right save for just compensation in condemnation. The city admits that twice this court has sustained the right of an upland owner to maintain a pier outshore of an illegal fill extending beyond his upland ownership, citing Tiffany v. Town of Oyster Bay (234 N. Y. 15) and Harway Improvement Co. v. Partridge (203 App. Div. 174; affd., 236 N. Y. 563), but seeks without avail to distinguish these cases. It follows that the defendant is still possessed, as the owner of the original upland, of riparian rights which entitle it to access to navigable water.

We conclude, therefore, that the court properly charged the jury on the question of the location of the mean high-water mark line, adverse possession and the effect of the statutes of 1871 and 1873. The jury returned a verdict in favor of the city, which on all points is supported by ample evidence. The Appellate Division having affirmed, we cannot disturb this judgment except for errors of law. The only error of law is the failure to recognize that this defendant, being concededly the owner of the original upland, still owns a right of access to navigable water with the right to maintain a pier for this purpose if desired. As already noted, the plaintiff is entitled on the merits to an affirmance of the judgment appealed from except for the right of reasonable access to navigable water remaining in the defendant. The judgment appealed from is modified so that nothing contained therein shall be construed to abrogate the right of the defendant, as owner of the original upland, to have access to navigable water.

The judgments should be modified in accordance with this opinion and as so modified affirmed, without costs. (See 278 N. Y. 702.)

Crane, Ch. J., O’Brien, Hubbs, Loughran and Rippey, JJ., concur; Lehman, J., dissents on the ground that the defendant proved as a matter of law adverse possession beginning before 1871.

Judgment accordingly.


author: Finch, J. Lehman, J.

text:
    State Street Trust Company, Appellant, v. Alwin C. Ernst et al., Copartners, under the Firm Name of Ernst & Ernst, Respondents.

      Argued January 26, 1938;
    decided May 24, 1938.

      William F. Bleakley, Frank A. Fritz, Arthur C. Patterson and Winthrop G. Brown for appellant.
    The trial court, having denied defendants’ motions to dismiss the complaint and having found that there was evidence to go to the jury, should not have directed a verdict for defendants. (Bergman v. Scottish Union & National Ins. Co., 264 N. Y. 205; Bank of United States v. Manheim, 264 N. Y. 45; 264 N. Y. 511; Bagley v. Bowe, 105 N. Y. 171; McDonald v. Metropolitan St. Ry. Co., 167 N. Y. 66; Matter of Case, 214 N. Y. 199; Getty v. Williams Silver Co., 221 N. Y. 34; Schmulewitz v. Cohen, 243 App. Div. 744; Ultramares Corporation v. Touche, 255 N. Y. 170; O’Connor v. Ludlam, 92 Fed. Rep. [2d] 50.) There was ample credible evidence to go to the jury. (Smith v. Brooklyn Savings Bank, 101 N. Y. 58; President of D. & H. Canal Co. v. Pennsylvania Coal Co., 50 N. Y. 250; Matter of London General Bank, [1895] 2 Ch. 673; Mullen v. Quinlan & Co., 195 N. Y. 109; Matter of Kingston Cotton Mills, [1896] 2 Ch. 279; Ochs v. Woods, 221 N. Y. 335; Laska v. Harris, 215 N. Y. 554; Ehrgott v. Mayor, 96 N. Y. 264; Voak v. Northern Central Ry. Co., 75 N. Y. 320; Twomley v. Central Park, N. & E. R. R. R. Co., 69 N. Y. 158; Wagner v. International Ry. Co., 232 N. Y. 176; Norske Ameriekalinje Actiesselskabet v. Sun Printing & Pub. Assn., 226 N. Y. 1; Berguist v. Kriedler, 158 Minn. 127.)

      Frederick J. Moses, Thomas E. Wing, Burt D. Whedon and Clan Crawford for respondents.
    The denial of defendants’ motion to dismiss did not preclude the court from directing a verdict for the defendants. (Bail v. N. Y., N. H. & H. R. R. Co., 201 N. Y. 355; Matter of Case, 214 N. Y. 199.) There were no misrepresentations in defendants’ balance sheet. (Matter of London & General Bank, L. R. [1895] 2 Ch. 673; Kountze v. Kennedy, 147 N. Y. 124.) Defendants made no misrepresentation as to accounts receivable. (Reno v. Bull, 226 N. Y. 546; Bernheimer v. Bindskopf, 116 N. Y. 428.) The “ allowance for discounts ” was not inadequate and there is no evidence that it was inadequate. (Lamb v. Union Ry. Co., 195 N. Y. 260; Buppert v. Brooklyn Heights Ry., 154 N. Y. 90.) The criticism of the allowance for doubtful accounts is not justified. (Roberts v. N. Y. E. R. R. Co., 128 N. Y. 455.) The Ernst balance sheet did not prove the Greenstein balance sheet to be substantially correct and the trust company did not rely on that balance sheet in making any one of the time loans. (Bank of United States v. Manheim, 264 N. Y. 45.) There was no evidence of damage. (Urtz v. N. Y. C. & H. R. R. R. Co., 202 N. Y. 170; Ochs v. Woods, 221 N. Y. 335; Reno v. Bull, 226 N. Y. 546; Wemple v. Hildreth, 10 Daly 481; 94 N. Y. 644; N. Y. Land Improvement Co. v. Chapman, 118 N. Y. 288; Martin v. Clark, 19 App. Div. 496; Graham v. Peale, 173 Fed. Rep. 9.) The trust company’s negligence in discounting new notes was a succeeding and independent cause of its loss and not concurrent with the alleged fraud. (Deyo v. Hudson, 225 N. Y. 602.)
   Finch, J.

Was the evidence introduced by plaintiff so inadequate that, resolving all contested issues and drawing all possible inferences in plaintiff’s favor, a jury could not find that defendants were guilty of gross negligence raising an inference of fraud, and that plaintiff relied upon the certified balance sheet prepared by defendants, thereby suffering damage? , ..

The Pelz-Greenstein Company was organized in 1922 to engage in the business of financing wholesalers or mills. Its sole business was lending money, taking back, as collateral, inventory of the borrower and assignments of accounts receivable. Each borrower was referred to as a department.” Advances were made by Pelz-Greenstein to its borrowers to enable them to purchase or manufacture merchandise. Pelz-Greenstein was repaid in large part by the assignment of accounts receivable resulting from the sales of such merchandise. The collectibility of these advances thus depended in the first instance on the salability of the merchandise manufactured or purchased by the funds so advanced. If the merchandise failed to sell, not only was the repayment of the advances jeopardized, but likewise the income of Pelz-Greenstein, for its major item of income, to wit, commissions, was a percentage of the assigned accounts.

On January 19, 1929, the president of Pelz-Greenstein applied to plaintiff for a line of credit and a loan of $300,00,0. He presented an estimated balance sheet of the business as of December 31, 1928, and stated that defendants, a firm of accountants, were making an audit of the condition of the company as of that date and that a balance sheet certified by defendants would be submitted to plaintiff when it had been prepared. Plaintiff refused to grant the application of Pelz-Greenstein for a time loan until it had received the certified balance sheet of defendants and had found that it substantially corroborated the estimated balance sheet. Pending the receipt of the certified balance sheet of defendants plaintiff made a demand loan to Pelz-Greenstein of $300,000.

This certified balance sheet prepared by defendants was dated April 2, 1929, and issued in ten counterparts. The defendants admit that they knew it was to be used to obtain credit., On April 9 a copy was given by Pelz-Greenstein to plaintiff. Plaintiff found that the certified balance sheet substantially corroborated the estimated balance sheet. The demand note was then surrendered and a three months’ time note taken in its place. This note was renewed for three months’ periods, the last renewal being made January 9, 1930. Morgan, the lending officer of plaintiff, testifies that he relied upon this certified balance sheet in passing upon the application for the loan and in making the renewals. On April 26, 1930, Pelz-Greenstein was petitioned into bankruptcy. Plaintiff has received back only a portion of its loan and brings this action for the difference.

With the certified balance sheet defendants issued the following certificate:

“ We hereby certify that we examined the books of account and record pertaining to the assets and liabilities of Pelz-Greenstein Co., Inc., New York City, as of the close of business December 31, 1928, and, based on the records examined, information submitted to us, and subject to the foregoing notes [not here material], it is our opinion that the above condensed statement shows the financial condition of the company at the date stated and that the related income and surplus account is correct.”

On May 9, 1929, a month after supplying ten copies of the balance sheet to be used, to the knowledge of the defendants, to obtain credit, defendants sent a letter to the Pelz-Greenstein Company containing comments on and explanations of the balance sheet. Apparently only one copy of this letter was sent, and it did not come to the attention of plaintiff nor, so far as the evidence shows, to any one else until after the bankruptcy of Pelz-Greenstein. This accompanying letter contained statements of facts discovered by defendants in the course of their audit, and, therefore, known to them when they prepared the original certified balance sheet, but which were not mentioned therein. One of the defendants testified before trial that the certified balance sheet was subject to the comments contained in the letter and the letter was sent for the purpose of trying to prevent any one from using this balance sheet without knowing the scope of the examination which was made.

At the close of plaintiff’s case defendants moved to dismiss the complaint. The trial judge reserved decision. Defendants thereupon rested without calling any witnesses, although there would naturally be available the men who made the audit, those who prepared or supervised the preparation of the working papers or the certified balance sheet and experts to refute the testimony offered by the experts called by plaintiff. Defendants renewed their motion to dismiss and also moved for a directed verdict. The court reserved decision and submitted the case to the jury. After the jury rendered a verdict for plaintiff the trial judge denied the reserved motion to dismiss, but granted a motion to set aside the verdict, and directed a verdict for defendants. The Appellate Division has unanimously affirmed, and the appeal is here by permission of this court.

In the brief of respondents, Pelz and Greenstein are denominated as deliberately dishonest. It is there conceded that they made old and probably uncollectible accounts appear good by causing payments to be made' to Pelz-Greenstein, Inc., by another corporation owned by themselves, which payments, credited to such old accounts, made it appear as if the debtors had been paying their debts. They induced one Saqui, who freely admitted his own dishonesty and testified on behalf of plaintiff, to furnish false inventories and to assign to Pelz-Greenstein large numbers of false and fictitious accounts. In one account of $800,000 there were $300,000 of wholly fictitious sales. At the time Pelz-Greenstein was hopelessly insolvent.

To what extent may accountants be held liable for their failure to reveal this condition? We have held that in the absence of a contractual relationship or its equivalent, accountants cannot be held liable for ordinary negligence in preparing a certified balance sheet even though they are aware that the balance sheet will be used to obtain credit. (Ultramares Corp. v. Touche, 255 N. Y. 170.) Accountants, however, may be liable to third parties, even where there is lacking deliberate 'or, active fraud. A representation certified as true to the knowledge of the accountants when knowledge there is none, a reckless misstatement, or an opinion based on grounds so flimsy as to lead to the conclusion that there was no genuine belief in its truth, are all sufficient upon which to base liability. A refusal to see the obvious, a failure to investigate the doubtful, if sufficiently gross, may furnish evidence leading to an inference of fraud so as to impose liability for losses suffered by those who rely on the balance sheet. In other words, heedlessness and reckless disregard of consequence may take the place of deliberate intention.

In Ultramares Corp. v. Touche (255 N. Y. 170) we said with no uncertainty that negligence, if gross, or blindness, even though not equivalent to fraud, was sufficient to sustain an inference of fraud. Our exact words were: In this connection we are to bear in mind the principle already stated in the course of this opinion that negligence or blindness, even When not equivalent to fraud, is none the less evidence to sustain an inference of fraud. At least this is so if the negligence is gross ” (p. 190).

To emphasize our holding that active and deliberate fraud was not necessary to create liability, and that gross negligence, and even blindness to the obvious may be evidence to sustain an inference of fraud, we were careful to point out that the language in Kountze v. Kennedy (147 N. Y. 124), saying that misjudgment, however gross, or want of caution, however marked, is not fraud, must be confined to the facts of that case, where the trier of the facts had found the defendants guiltless, and the ruling “ amounted merely to a holding that a finding of fraud did not follow as an inference of law.” (Ultramares Corp. v. Touche, supra, p. 191.)

The defendants, however, contend that they may escape all liability by insisting that the balance sheet merely purported to reflect the condition of the books and that it did this correctly. The balance sheet, however, did not correctly reflect the condition of the company even as shown by the books, as will later appear. Nor is the duty of an accountant in preparing a balance sheet confined to a mere setting up of the items from the books. Such duties have been defined.

His [the auditor’s] business is to ascertain and state the true financial position of the company at the time of the audit, and his duty is confined to that. But then comes the question, ‘ How is he to ascertain that position?’ The answer is, ‘ By examining the books of the company.’ But he does not discharge his duty by doing this without inquiry and without taking any trouble to see that the books themselves shew the company’s true position. He must take reasonable care to ascertain that they do so. Unless he does this his audit would be worse than an idle farce. • Assuming the books to be so kept as to shew the true position of a company, the auditor has to frame a balance-sheet shewing that position according to the books and to certify that the balance sheet presented is correct in that sense. But his first duty is to examine the books, not merely for the purpose of ascertaining what they do shew, but also for the purpose of satisfying himself that they shew the true financial position of the company.” (Matter of London & General Bank, [1895] 2 Ch. 673, 682.)

The record is, indeed, replete with evidence, both oral and documentary, to make a prima facie case against the defendants. In the first place, we have these accountants guilty of an act which is the equivalent of active misrepresentation. On April 2, 1929, they sent to Pelz-Greenstein the certified balance sheet, with ten additional copies, knowing that it was to be used to obtain credit. “ Nothing was said as to the persons to whom these counterparts would be shown or the extent or number of the transactions in which they would be used * * * The range of the transactions in which a certificate of audit might be expected to play a part was as indefinite and wide as the possibilities of the business that was mirrored in the summary.” (Ultramares Corp. v. Touche, 255 N. Y. 170, 174.) Not until thirty days later did the accountants send to Pelz-Greenstein a letter of explanation of this balance sheet, and then apparently only one copy. So important was this covering letter in the minds of defendants that, although the balance sheet attached to the covering letter was in other respects substantially identical with the original balance sheet, it containedthe following notation, which did not appear at all on the original balance sheet released thirty days earlier: “ This balance sheet is subject to the comments contained in the letter attached to and made a part of this report.” One of the copartners, testifying before trial, said: “ We want to try to prevent anyone using this balance sheet, without knowing the scope of the examination which we made, which is set forth in paragraph 2 of the full report. * * * We have had cases where our entire covering letter had been deleted from these reports and just the balance sheet used.” Yet, in effect, these defendants themselves did just this. They held back this covering letter for thirty days and issued the balance sheet alone to the world of possible lenders. The loan by the plaintiff was made long before this important covering letter was even sent.

The above act of the accountants, in placing in circulation a certified balance sheet which they practically conceded should not be used without knowing the scope of the examination set forth in the covering letter, and then allowing a period of thirty days to elapse before 'sending the covering letter, and then only one copy, whereas there had been ten copies of the certified balance sheet issued, was itself gross negligence and an important piece of evidence raising an inference of fraud.

The certified balance sheet, outside of capital, showed a small surplus of $83,000. According to the evidence and the reasonable inferences deductible therefrom, a jury might have found that instead of a surplus of $83,000 the balance sheet should have shown a deficit and impairment of capital of over half a million. A jury could also have found that in addition over $768,000 of its commission accounts were in a condition indicating the likelihood of substantial losses.

Turning now to .the specific items. The second largest item in the balance sheet was the item:

“ Commission Accounts Receivable — secured by merchandise
Advances..........................$2,043,337 81 Less allowance......................$ 19,767 15 2,023,570 66 ”

The above item represented the advances made by Pelz-Greenstein to its borrowers to finance their operations in the purchase or manufacture of merchandise. These accounts, amounting to over one-fourth of Pelz-Greenstein’s total assets, were shown on the certified balance sheet as good after deducting the $19,000 allowance. Yet, to the knowledge of defendants, according to their own statement, in the delayed covering letter, a very large proportion of these commission accounts receivable were comparatively inactive during the year and appeared slow of collection.” Out of the total of $2,043,000 an aggregate of $768,000, or over 38 per cent of the total amount, had unpaid advances at the end of the year 1928, amounting to 125 per cent of the total sales during the year. This meant that these borrowers owed Pelz-Greenstein more money at the end of the year than their total sales during the year by 25 per cent, thus indicating stagnation of inventories. Not only did these stagnant accounts represent over 38 per cent in amount, but they included 27 out of 55 borrowers. The defendants had knowledge of this condition as shown by the delayed covering letter, and this knowledge was brought home to them by their report for the prior year, when •they referred in the following manner to similar accounts, although the percentage of advances to sales then was only 65 per cent, as compared with 125 per cent in 1928: The following accounts had excessive advances as measured by their sales volume which indicated probably excessive or slow moving inventories.” It was conceded that this was the third consecutive audit by the defendants of the books of Pelz-Greenstein. ■

One of the experts for the plaintiff testified without contradiction that the percentage of unpaid advances, amounting to 125 per cent of sales, indicated that the accounts were in an over-extended condition and were badly out of proportion to the amount of merchandise sold during the year, indicating that the inventories were either excessive, slow moving or unsalable. In his opinion this condition indicated the likelihood of excessive losses. Furthermore, this expert testified unequivocally that the financial condition of Pelz-Greenstein could not be truthfully expressed without mention of this condition in the balance sheet. Professor Cole, the other expert called by plaintiff, testified that proper accounting practice required that defendants either establish a very large allowance for uncollectible accounts or indicate, in connection with the balance sheet, the existence of approximately $768,000 with a ratio of advances to sales of 125 per cent. The best corroboration of the testimony of both these experts is what defendants themselves said of this condition in the delayed covering letter. In spite of this a reserve of a mere $19,767.15 was set up against this account. This was to cover not only those accounts of $768,000, showing the stagnation of inventories described above, but all other commission accounts in a total of over $2,000,000.

This small reserve of $19,000 was practically absorbed in the one account of W. K. Wardener, which had gone into bankruptcy in 1924 and from which account Pelz-Greenstein had received nothing since May, 1924. Even if the accountants had not been informed that the Wardener account was in bankruptcy yet a warning that this account required a substantial reserve was given to them by the fact that an account upon which nothing had been received since May, 1924, was being padded year after year by monthly interest charges. From a failure to note on the balance sheet the stagnant condition of over three-quarters of a million of these accounts and the setting up of a totally inadequate reserve, a jury might reasonably draw the inference that these defendants had no genuine belief in these figures in the balance sheet to which they certified.

We next come to a very substantial item entitled Commission Account Advances — Inactive and in Liquidation..........................$215,124 72.” This item appeared on the certified balance sheet without any reserve. The books of Pelz-Greenstein showed on their face that many of the accounts included in this item had had no transactions for many years, neither sales nor realizations upon security. Furthermore, within this time the books showed systematic inflation of these accounts by steadily increasing interest charges. In fact, these charges were added to one account, even though the account appeared on the face of the books to have been in bankruptcy. The covering letter set forth the real condition of these accounts in detail, thus showing full knowledge on the part of the defendants. Defendants seek to sustain the integrity of this item on the ground that they placed it below the fine ” and characterized it as “ inactive and in liquidation.” The only evidence in the record concerning the effect of these acts is the uncontradicted evidence of the accounting experts that placing an item below the line means only that it is not current but that otherwise it will be realizable in full. Furthermore, these expert witnesses testified that the failure to set up a reserve against an item, whether it is placed above or below the fine, according to the rules of accountancy which any one must apply in reading a balance sheet, means that the accountants represent that they have no knowledge which would indicate to them that these accounts are worth less than “ full value ” and “ that the people certifying to this balance sheet indicate this is the value.” The experts went on to testify without contradiction that from the facts as shown on the face of the books a reserve of at least $150,000 should have been set up against these accounts unless investigation showed them to be of full value.

The defendants urge that these defendants were excused from investigation because of a letter from Leon S. Pelz, treasurer of Pelz-Greenstein, in which he stated that Pelz-Greenstein had in its possession “ sufficient salable merchandise to completely liquidate ” these accounts. In other words, defendants were content to certify a balance sheet knowing it would be used to secure bank credit which contained an item of over $125,000 of apparently dead accounts on the uninvestigated and unsupported statement of the party seeking the credit that these accounts were amply secured, although it appeared on the face of the books that there had been no realization upon this security for years. Where the books indicate the likelihood of a substantial loss, a failure to indicate this on the balance sheet can be justified only by an actual check-up. It does not suffice to rely instead upon the statement of an officer of the firm the books of which are being examined. If an accountant may disregard a situation Which indicates substantial losses because he is informed by the person whose books are being examined that there is adequate security, the balance sheet issued by the accountant, by its failure to point this out, contains a misrepresentation. The very purpose of the bank in seeking the balance sheet prepared by the accountant is to check any possible fraud on the part of the person seeking the loan. Yet these accountants contend that they may accept as true a statement by the party whose books are being examined, make no check-up or investigation on their own part, and issue a statement omitting entirely any mention of the reason why investigation of the security was omitted.

We have explicit expert testimony, uncontradicted, that under these circumstances it was improper accounting practice for defendants to accept a letter from Pelz-Greenstein, and that they should have investigated these accounts very fully to ascertain whether the companies were still in business and to ascertain definitely and independently what security, if any, Pelz-Greenstein held for the payment of these accounts.

We next come to an item which is not as large as those which have gone before, but as to which there was obvious gross negligence. In the “ Accounts Receivable ” item of $3,200,000, protected only by a reserve of $15,000, was a group of accounts totaling over $72,000 denominated by defendants on their work sheet as Ocean Bankrupt Accounts.” Defendants stated that the failure to set up a reserve against this $72,000 of bankrupt accounts was justified because they were covered by policies of credit insurance. A mere cursory examination of the policies shows that over $32,000 of these accounts were not covered by the policies at all. Thus the reserve was shown to be inadequate by this one account alone. In addition, defendants’ own work sheets showed that $14,000 of these bankrupt accounts had been with the insurance company from three years 'to fifteen months without action. There was expert testimony which a jury was at liberty to believe that a reserve of at least $46,000 should have been established against this account.

We find, also, a $10,000 demand note listed as part of the assets without reserve although it had been overdue and in the hands of an attorney, who had been unable to collect, for two years.

In connection with the foregoing items we have been concerned with evidence from which a jury might find that defendants had actual knowledge that the condition of the items in the balance sheet was not as represented. In the account of E. Heller & Bros., on the other hand, plaintiff contends that the evidence was sufficient to justify a jury in finding that there were circumstances appearing on the books which were so unusual and suspicious that proper accounting practice required defendants to maize an investigation. The Heller account involved over $800,000 of the assets of Pelz-Greenstein. During the first eleven months of 1928 sales by the Heller Company never exceeded $191,000 a month, and averaged about $129,000. In December, just preceding the report of the accountants, sales were listed in the books as having jumped to $491,000. The amount included $300,000 of wholly fictitious sales. Plaintiff contends that this sudden increase of approximately $300,000 for the month should have put defendants on notice that something was wrong. Investigation was at least called for and would have disclosed the fictitious accounts.

We come now to evidence from which a jury could find that these defendants were at least heedless and reckless in purporting to reflect the condition of the books. We have an allowance of $101,000 for doubtfuls ” and discounts,” $86,000 of this $101,000 being for discounts and $15,000 for doubtfuls in the item of Accounts Receivable for $3,200,000. There was evidence that these figures for doubtfuls and discounts were arrived at, not by computation on the basis of business done during the year 1928, but by accepting the figures used for the year 1927. The working papers used by defendants for 1927 showed that in that year the amount of discounts had been based originally upon usual accounting practice, and was much larger than the final figure adopted by the accountants. Also, the original allowance for doubtfuls was greater than the final figure. On the basis of these higher figures, however, the profit for the year 1927 was less than the amount of dividends declared for that year. The reserves for discounts and for doubtfuls were then reduced so as to establish a profit in excess of the dividends for the year. The haphazard method used in arriving at these figures and the failure to follow usual accounting practice supports the contention urged by plaintiff, without answer or explanation upon this record, that defendants, in preparing this balance sheet, were negligent to such an extent as to amount to a reckless disregard for the accuracy necessary for a balance sheet to give the proper reflection of the condition of the business.

The record contains many other important items of evidence to enumerate which would unduly extend this opinion, now beyond reasonable limits.

The foregoing presents abundant evidence from which a jury could find that defendants knew facts which vitally affected the financial worth of Pelz-Greenstein, and which defendants totally suppressed .on the certified balance sheet but disclosed to Pelz-Greenstein alone in the one copy of the covering letter sent thirty days later. The jury further could have found that the computation of reserves on the certified balance sheet was a misrepresentation which did not reflect the facts as known to defendants, and which they in good faith should have revealed. Where the record shows acts on the part of the accountants, as outlined above, we cannot say, as a matter of law, that plaintiff has failed to make out a case for the jury.

This brings us to the question of reliance. Defendants contend that the difference between the estimated balance sheet furnished by Pelz-Greenstein and the certified balance sheet prepared by them was such that as a matter of law plaintiff must have disregarded their certified balance sheet in making the loan and decided to make the loan solely on the basis of the estimated balance sheet of Pelz-Greenstein. In so contending defendants disregard the uncontradicted evidence that the certified balance sheet substantially corroborated the estimated balance sheet, the differences being only those which an audit would ordinarily produce. A mere comparison of the two balance sheets discloses that there was ample evidence from which a jury could find that the certified balance sheet was a substantial corroboration of the estimated balance sheet. When the items of cash receivable, commission accounts receivable and subscriptions on the two balance sheets are totaled they show a total for the estimated balance sheet of $7,760,000 and for the certified balance sheet of $7,650,000,. the latter figure being net after deducting reserves of about $121,000. As the estimated balance sheet showed no reserves, the actual discrepancy in assets between the estimated and certified balance sheet was only about $11,000. Furthermore, the only substantial difference between the balance sheets was that defendants listed a number of items as non-current assets which the estimated balance sheet had listed as current assets. It cannot be said, therefore, that there was no evidence that the certified balance sheet substantially corroborated the estimated balance sheet. It is undoubtedly true that, in making the loan, there was reliance upon the then reputations of Pelz and Greenstein. But this does not preclude reliance also upon defendants’ certified balance sheet. Evidence of such reliance is to be found in the uncontradicted testimony of the witnesses testifying for the plaintiff. Also it is to be found in the fact that the plaintiff would not make any but a demand loan until receipt of the certified balance sheet, and that it was only after it had received and examined the certified balance sheet that it made the time loan. The fraudulent misrepresentations on the part of defendants need not be the sole inducing cause of the damage. It is sufficient if such representations be an inducing cause. (Oohs v. Woods, 221 N. Y. 335; Laska v. Hams, 215 N. Y. 554.)

In addition the defendants rely on the fact that plaintiff renewed the note on several occasions so as to extend it for more than a year, and that when the precarious condition of Pelz-Greenstein "Company was discovered plaintiff agreed to participate in a pooling of assets agreement with several other banks. Defendants knew that Pelz-Greenstein Company was seeking a line of credit from plaintiff and that the original note, if granted, 'vould be extended subsequently. There is abundant evidence to show that these extensions were made in reliance upon the certified balance sheet, and, although other factors may have been considered, they do not constitute a sole and independent cause which brought about the loss rather than the misstatements in the balance sheet. (See Hotaling v. Leach & Co., 247 N. Y. 84, 93.) The pooling agreement was to plaintiff’s advantage and helped to minimize the loss.

Finally, defendants argue that plaintiff was not damaged by reason of the balance sheet because at the time it was issued plaintiff already had made a demand loan of $300,000, and the company, according to plaintiff’s allegations, was insolvent at that time. There can be no doubt that if at the time the balance sheet was issued plaintiff had been informed of the true condition of Pelz-Greenstein Company it would have insisted upon immediate payment of the demand loan, and there is evidence from which it can be foun’d that at that time full payment of the loan could have been obtained.

Upon all the evidence it cannot be said as a matter of law that plaintiff has failed to make out a prima facie case against defendants.

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

Lehman, J.

(dissenting). The defendants, a firm of accountants, were employed by the Pelz-Greenstein Company to examine the books of the company and to prepare a certified balance sheet of its financial position. To their employers they owed a duty to perform their work with care and with the skill which they represented they had, as professional accountants. They owed no such duty to persons who might deal with Pelz-Greenstein Company, upon the basis of the certified balance sheet prepared by the defendants. To such persons they owed only the duty to refrain from making any fraudulent misrepresentations. (Ultramares Corp. v. Touche, 255 N. Y. 170.) The courts below have held, without dissent, that the evidence is insufficient to permit an inference of fraud as defined in that case.

The only representations made by the defendants are contained in the balance sheet which they prepared after examining the books of account of the Pelz-Greenstein Company and the certificate appended thereto. The certificate states: We hereby certify that we examined the books of account and record 'pertaining to the assets and liabilities of Pelz-Greenstein Co., Inc., New York City, as of the close of business December 31 1928, and, based on the records examined, information submitted to us, and subject to the foregoing notes [not material here], it is our opinion that the above condensed statement shows the financial condition of the company at the date stated and that the related income and surplus account is correct.”

To prepare a balance sheet, accountants must, of course, examine the books and accounts submitted to them, and from such examination and any other information which may be furnished to them, they must prepare a balance sheet which, in their opinion, reflects the true financial position of the business. The certificate of the defendants constitutes an express representation of fact that they have “ examined the books of account and record pertaining to the assets and liabilities of Pelz-Greenstein Co., Inc.” The balance sheet itself represents and was understood to represent only the opinion ” of the defendants based on the records examined ” and on information presented to the defendants.

It is undisputed that the defendants did examine the books and accounts of Pelz-Greenstein Company and that the balance sheet is based upon entries in those books and accounts. It is also undisputed that the balance sheet did not show the true financial position of the business. According to the balance sheet, the corporation had assets of about $8,000,000 and debts of less than $5,000,000; its capital of over $3,000,000 was unimpaired and it had_, a surplus of about $83,000. In fact the corporation was insolvent; its liabilities exceeded the fair value of its assets. The defendants did not, however, warrant, or certify, the accuracy of the balance sheet; they represented only that the balance sheet was in then opinion ” correct. May they be held responsible for loss caused to the bank by reliance on this expression of opinion? That is the problem presented upon this appeal.

The defendants are not liable for error of judgment; they are not liable even for lack of care in arriving at their opinion. They are liable only if the opinion expressed was not only erroneous, but was fraudulently expressed. Actual bad faith and intent to deceive is not always, it is true, an essential element in a cause of action for deceit. Such a cause of action may be established against the defendants without proof that they expressed an opinion which they knew was incorrect; at least, however, there must be evidence of a ruthless disregard of whether the opinion was correct or not — the expression of an opinion where the grounds supporting it are so flimsy as to lead to the conclusion that there was no genuine belief back of it.” (Ultramares Corp. v. Touche, supra, p. 186.)

In that case we said that negligence or blindness, even when not equivalent to fraud, is none the less evidence to sustain an inference of fraud. At least this is so if the negligence is gross ” (p. 190). That rule was not new; it had been applied in earlier cases cited in the opinion. Again and again, however, in that opinion, as in the cases cited, the court pointed out that even gross negligence is not equivalent to fraud. It may, in proper case, furnish sufficient evidence to justify an inference of fraud, but that is true only when the proof of gross negligence shows that the grounds supporting the opinion are in fact “ so flimsy as to lead to the conclusion that there was no genuine belief back of it. Further than that this court has never gone.” (Italics are mine.) ( Ultramares Corp. v. Touche, supra, p. 186.)

Judge Finch has, in his opinion, referred to the evidence upon which he bases his conclusion that it. establishes fraud. I shall try to avoid repetition of that evidence. The most important of the alleged errors in the balance sheet is the failure to provide sufficient reserves for the collection of “ commission accounts receivable.” The amount of reserves which should be set aside to take care of loss that may be suffered by reason of inability to collect such accounts is a matter of judgment. The defendants knew of circumstances which it is said pointed clearly to the conclusion that a reserve of $21,000 is insufficient to take care of these accounts of over $2,043,337.81. Perhaps the defendants here showed a lack of caution. Their letter sent thirty days after the certified balance sheet was sent, shows that they knew that the reserve might prove insufficient. None the less, the amount of probable loss even with these circumstances known remained uncertain; the estimate of one per cent loss was doubtless over-optimistic, yet the estimate was based on facts which were not so flimsy as to lead to the conclusion that there was no honest belief back of it (p. 186).

The" next error which, it is argued, shows negligence so gross as to indicate a lack of honest belief based on substantial grounds is that no allowance was made for “ commission account advances.”. Many of these accounts were old. Again there are circumstances which perhaps should have acted as a warning signal to a cautious accountant. The defendants saw the signal — that is shown by the supplementary letter — but decided, nevertheless, to make no allowance. Again it would, doubtless, have been better if the defendants had given to those who might rely upon the balance sheet, the warning signal they had seen. They did, however, give notice on the balance sheet that accounts were “ inactive and in liquidation ” and they removed them from the current assets of the business and placed them “ below the line.” The owners of the business, men who at that time had a fine reputation, assured the defendants that they had sufficient security to liquidate these dead accounts. I can find here no justification for any argument that a balance sheet which shows that no allowance or reserve has been made for inactive accounts in liquidation may be held to be a fraudulent representation that no allowance or reserve is necessary.

I agree that the jury might find gross negligence in failure to provide a reserve of $46,000 against a group of bankrupt accounts aggregating $72,000. Even gross negligence in regard to an item of $46,000 in a balance sheet showing assets of almost $8,000,000 can hardly be regarded as substantial evidence of fraudulent misrepresentation. I do not take up in detail the other items where it is said the jury might find gross negligence. Each one involves the exercise of judgment; in none does it appear that there was no ground for honest exercise of judgment.

Certainly there is here no deliberate intention to deceive, no statement of fact made without actual knowledge, no statement of an opinion which the defendants did not honestly hold; nor, with the possible exception of the one item of $46,000, is there any evidence of an expression of opinion made by a person careless as to whether it was based on sufficient knowledge. The case is entirely different from that presented by Ultramares Corp. v. Touche (supra). There the defendants certified that the balance sheet corresponded with accounts which the jury might find had not been examined by the defendants, or had been disregarded by them; and the court pointed out “ that in certifying to the correspondence between balance sheet and accounts ” (p. 192), the defendants made a statement as true to their own knowledge, when they had, as a jury might find, no knowledge on the subject.

Here the defendants examined adequately the books and data which they certified they had examined, and they are not charged with either bad faith or even negligence in making their examination. The balance sheet corresponds with the books and if the defendants were negligent, their negligence, whether gross or slight, com sisted only in failure to give to the information, which they obtained through such examination, the effect which expert witnesses testify should, in their opinion, be given to it. The defendants realized that this information might reasonably affect their judgment. The explanatory letter which they sent later shows that. The jury might find that the defendants’ judgment was bad, but the court pointed out in the Ultramares case that liability cannot be predicated upon error however great in the exercise of judgment. The error of judgment does not indicate a willful expression of a false opinion, or an expression of opinion based on grounds so flimsy that the jury might conclude that the opinion was not based on genuine belief. To permit recovery in a case where the evidence does not sustain such a conclusion is to wipe out the distinction which this court has always drawn and which it reiterated in the Ultramares case.

The judgment should be affirmed.

O’Brien, Loughran and Rippey, JJ., concur with Finch, J.; Lehman, J., dissents in opinion in which Crane, Ch. J., concurs; Hubbs, J., taking no part.

Judgments reversed, etc. (See 278 N. Y. 704.)