author: Conway, J. Desmond, J.

text:
    New York Credit Men’s Adjustment Bureau, Inc., as Trustee in Bankruptcy of W. F. Irish Co., Inc., Bankrupt, Respondent, v. Milton M. Weiss et al., Appellants.
    Argued November 17, 1952;
    decided January 15, 1953.

      Robert I. Ruback for Milton M. Weiss, appellant, and Sydney Basil Levy for Louis Amsterdam, appellant.
    I. The assets of an insolvent corporation may be sold to pay debts and minimize further loss to stockholders. (Matter of Timmis, 200 N. Y. 177; Murrin v. Archibald Cons. Coal Co., 232 N. Y. 541; Rhea v. Newton, 262 F. 345; Bassett v. City Bank & Trust Co., 116 Conn. 617; Clapp v. Allen, 20 Ind. App. 263; Barr v. Bartram Mfg. Co., 41 Conn. 506; O’Brien v. O’Brien, 246 Mass. 411; Phillip v. Providence Steam Eng. Co., 21 R. I. 302; Halpern v. Grabosky, 296 Pa. 108; Sewell v. East Cape Co., 50 N. J. Eq. 717; Bowditch v. Jackson Co., 76 N. H. 351; Shaw v. Robinson Co., 50 Nev. 403; Int. Life Ins. Co. v. Vaughan, 114 Ark. 26; Kavanaugh v. Kavanaugh Knitting Co., 226 N. Y. 185; Matter of American Tel. & Cable Co., 139 Misc. 625.) II. The trust fund doctrine is inapplicable and does not restrict the right to sell. (Wood v. Dumar, 3 Mason 308; Bartlett v. Drew, 57 N. Y. 587; Giles Dyeing Mach. Co. v. Klauder-Walden Dyeing Mach. Co., 212 App. Div. 771, 243 N. Y. 547; Hurd v. New York & Commercial Steam Laundry Co., 167 N. Y. 89; Buckley v. Stansfield, 155 App. Div. 735, 214 N. Y. 679; Giles Dyeing Mach. Co. v. Klauder-Walden Dyeing Mach. Co., 198 App. Div. 564, 233 N. Y. 470; Fogg v. Blair, 133 U. S. 534.) III. The sale at auction without notice to creditors was proper. The disposition of the assets at public auction was proper. (Hayden v. Official Hotel Red-Book & Directory Co., 42 F. 875; Allen v. Newmarket Ind. Assn., 95 N. H. 121; Mason v. Pewabic Mining Co., 133 U. S. 50; Wilson v. Proprietors, 9 R. I. 590; Phillips v. Providence Steam Engine Co., 21 R. I. 302; Price v. Holcomb, 89 Iowa 123.) IV. There was no requirement of notice to creditors of the auction sale. (Wright v. Hart, 182 N. Y. 330; Lowe v. Fairberg, 245 App. Div. 731, 270 N. Y. 590.) V. In disposing of the corporate assets appellants could act only as stockholders and section 60 of the General Corporation Law is inapplicable. (Lilienthal v. Betz, 185 N. Y. 153.) VI. Only stockholders can dispose of all corporate assets. (Gamble v. Queens Co. Water Co., 123 N. Y. 91; Texas Co. v. Z. & M. Independent Oil Co., 156 F. 2d 862; Matter of Manufacturers Trust Co. v. Ralph, 300 N. Y. 411; Elyea v. Lehigh Sale Mining Co., 169 N. Y. 29.) VII. Section 60 of the General Corporation Law is inapplicable. (Giles Dyeing Mach. Co. v. Klauder-Weldon Dyeing Mach. Co., 212 App. Div. 771, 243 N. Y. 547; Darcy v. Brooklyn & N. Y. Ferry Co., 196 N. Y. 99.) VIII. There was no duty to adopt the costlier procedure for formal dissolution, liquidation or adjustment of corporate obligations. (McNeal v. Hayes Mach. Co., 118 App. Div. 130; Kavanaugh v. Kavanaugh Knitting Co., 226 N. Y 185; Kroger v. Jaburg, 231 App. Div. 641; Hayman v. Brown, 176 Misc. 176; Brock v. Poor, 216 N. Y. 387; Matter of Clark, 257 N. Y. 487; Curran v. Oppenheimer, 164 App. Div. 746, 222 N. Y. 615; Levin v. Mayer, 86 Misc. 116; Howe v. Boston Carpet Co., 16 Gray [Mass.] 493; Holmes & Griggs Mfg. Co. v. Holmes & Wessell Metal Co., 127 N. Y. 252.) IX. Assuming the responsibility for the sale rested upon appellants as officers and directors as distinguished from stockholders, there is no basis for liability in view of the lack of fraud, bad faith or personal gain. (Turner v. American Metal Co., 268 App. Div. 239.) X. The business judgment rule is applicable. (McQuade v. Stoneham, 263 N. Y. 323; Pollitz v. Wabash R. R. Co., 207 N. Y. 113; Billings v. Shaw, 209 N. Y. 265; Bliss v. Matteson, 45 N. Y. 22; Flynn v. Brooklyn City R. R. Co., 158 N. Y. 493.) XI. If appellants were mistaken as to their right and power to cause the sale to be conducted, they cannot be held liable. (Sheldon Hat Blocking Co. v. Eickmeyer Hat Blocking Mach. Co., 56 How. Prac. 70, 90 N. Y. 607; City Nat. Bank of Huron, S. D., v. Fuller, 52 F. 2d 870; Matter of Smith, 279 N. Y. 479; Matter of Stupack, 274 N. Y. 198; Simon v. Socony-Vacuum Oil Co., 179 Misc. 202, 267 App. Div. 890; Michelsen v. Penney, 135 F. 2d 409; Seymour v. Spring Forest Cemetery Assn., 4 App. Div. 359,157 N. Y. 697; Cass v. Realty Securities Co., 148 App. Div. 96, 206 N. Y. 649; Levin v. Mayer, 86 Misc. 116.) XII. Appellants did not violate the provisions of section 60 of the General Corporation Law. XIII. No damages were sustained by respondent nor was any proof offered with respect thereto. (Curran v. Oppenheimer, 164 App. Div. 746, 222 N. Y. 615; Buckley v. Stansfield, 155 App. Div. 735, 214 N. Y. 679; Standard Nat. Bank v. National Silk Label Co., 30 Misc. 219, 70 App. Div. 46; Van Schaick v. Carr, 170 Misc. 539; Brown Packing Co. v. Lewis, 185 Misc. 445; Trustees of Masonic Hall v. Fontana, 99 Misc. 497; Newman v. Meisel-Galland Co., 143 Misc. 494; Pennsylvania R. R. Co. v. Peddrick, 234 F. 781; Di Tomasso v. Loverro, 250 App. Div. 206, 276 N. Y. 551; Gallin v. National City Bank of N. Y., 152 Misc. 679; Van Schaick v. Aron, 170 Misc. 520.) XIV. The prices realized at the auction sale establish the value of the assets. (Parmenter v. Fitzpatrick, 135 N. Y. 190; Almy v. Simonson, 52 Hun 535; Halpern v. Grabosky, 296 Pa. 108; Matter of Kansas City Journal-Post Co., 144 F. 2d 791.)

      Benjamin Weintraub and Eugene N. Sosnoff for respondent.
    I. Regardless of their honesty or good faith, the directors of W. F. Irish Co., Inc., are liable under section 60 of the General Corporation Law for any loss caused creditors as a result of the winding up of the corporation without notice to creditors and without following any statutory method for the protection of creditors. (Darcy v. Brooklyn & N. Y. Ferry Co., 196 N. Y. 99; Hurd v. New York S Central Steam Laundry Co., 167 N. Y. 89; Buckley v. Stansfield, 155 App. Div. 735; Shalek v. Jetter, 171 App. Div. 364; Lawrence Leather Co. v. Milgrom, 151 Misc. 609.) II. Appellants’ arguments do not refute respondent’s case. (Elyea v. Lehigh Salt Mining Co., 169 N. Y. 29.) III. Reliance upon advice of counsel does not in this case shield appellants from liability. (Brown v. Fidelity Union Trust Co., 135 N. J. Eq. 404; Matter of Van Alstyne, 27 App. Div. 427.)
   Conway, J.

This is an appeal by the defendants from an order of the Appellate Division, First Department, which reversed, on the law, a judgment of dismissal of the complaint on the merits after trial and ordered a new trial solely for the purpose of assessing plaintiff’s damages. Each of the defendants has stipulated for judgment absolute in the event of affirmance.

The action is by the trustee in bankruptcy of W. F. Irish Co., Inc., under section 60 of the General Corporation Law, against the two defendants, who are the officers, directors and holders of 100% of the stock of the corporation, to compel them to pay the value of property which, it is alleged, they have wasted through neglect of or failure to perform their fiduciary obligations.

Section 60, insofar as relevant, provides:

“ An action may be brought against one or more of the directors or officers of a corporation to procure judgment for the following relief or any part thereof: * * *
“ 2. To compel them to pay to the corporation, or to its creditors, any money and the value of any property, which they have acquired to themselves, or transferred to others, or lost, or wasted, by or through any neglect of or failure to perform or other violation of their duties. ’ ’

The defendants purchased the corporation, which was engaged in business as a wholesaler of electrical supplies, in July of 1947. During the five months beginning with August of 1948 the business of the corporation fell off sharply. By November or December of 1948, defendants realized that they could not continue business under the conditions then prevailing. Operations were being carried on at a loss, although the balance sheet indicated an excess of assets over liabilities and merchandise was never sold below cost. By January of 1949 merchandise creditors were pressing for payment, sales were dropping to a point where the losses were increasing each week, although all expenses had been cut to the limit and the corporation was no longer able to meet its obligations as they matured. Defendants, therefore, concluded that it was best to wind up the affairs of the corporation.

Several possible courses of action were open to defendants. A loan of a sufficient sum of money would have enabled the corporation to carry on further. Defendants sought to borrow money between October, 1948, and February, 1949, without success. They were also unsuccessful in their attempt to sell part of their interest in the corporation to procure additional working capital. A common-law extension or settlement or an arrangement under chapter XI of the Bankruptcy Act would have given them a respite. However, their inability to raise any additional funds, and their then business condition, in the opinion of their attorney, ruled out the common-law extension or settlement and the possibility of obtaining an extension from their creditors under chapter XI. Defendants could have filed a petition in bankruptcy or entered into an assignment for the benefit of creditors pursuant to the provisions of the Debtor and Creditor Law, section 3 et seq. Finally, it might have been possible for them to have dissolved under section 105 of the Stock Corporation Law.

Had they sought the aid of the bankruptcy court or assigned for the benefit of creditors under the Debtor and Creditor Law there would have been supervision and control by a court. Nevertheless, no statute and no decision of our courts required the defendants to adopt either of those methods or any of the other common-law or statutory methods suggested above. The defendants were free to liquidate the assets as they saw fit with a view to the eventual dissolution of the corporation, and despite the fact that the creditors were primarily concerned with defendants’ activities in this respect, defendants were under no obligation to give notice to each creditor of their intention to convert the assets into cash. However, they were obligated to obtain for the corporation the full value of the assets as of that period under the circumstances.

The defendants elected to liquidate by conducting a public auction sale.

If the corporation was insolvent at that time it is clear that defendants, as officers and directors thereof, were to be considered as though trustees of the property for the corporate creditor-beneficiaries (see 3 Fletcher’s Cyclopedia Corporations, § 849). If the corporation was then technically solvent but insolvency was approaching and was then only a few days away, defendants, as officers and directors, were, in effect, trustees by statute for the creditors by virtue of section 60 of the General Corporation Law which obligated them to protect the trust res for the creditors and to account for waste in not obtaining full value for the res, if there was any waste by reason of their conduct.

On Sunday, February 6, 1949, an advertisement of the proposed sale appeared in the New York Journal American and on Monday and Tuesday in the New York Herald-Tribune. The advertisements contained the words ‘1 LIQUIDATION SALE ’ ’, the name of the auctioneer, the subject matter of the auction (the assets), and the address at which the assets to be sold were located, viz., 265 West 40th Street near 8th Avenue, New York City. That happened to be the address where the business of W. F. Irish Co., Inc., was conducted. They did not contain the name of the owner of the assets. In addition to the advertisements 1,000 postcards were mailed to electrical jobbers, wholesalers, retailers and buyers although not to any of the creditors interested here. The postcards contained only the same information as the advertisements. The creditors of the corporation were not given notice, except as they may be charged with notice by reason of the advertisement, of the address at which the assets were to be sold.

The estimated value of the inventory as of December 31, 1948, as shown on the corporation’s balance sheet, was $73,492.21, and by defendants’ admission had a cost value of at least $60,000 on February 4, 1949. It was also admitted by defendants that on the latter date the claims of creditors ággregated at least $52,000. The gross proceeds of the auction sale, held on February 8, 1949, were $23,262.33. The expenses for labor and advertising and the commissions of the auctioneer, selected by defendants, totaled $3,395.35, leaving a net of $19,866.98.

Three days after the sale an involuntary petition in bankruptcy was filed against the corporation and it was adjudicated a bankrupt. Respondent was, thereafter, elected the trustee in bankruptcy, and the sum of $19,866.98 was turned over to it.

The creditors, through the trustee in bankruptcy, have come forward and by their complaint charge that defendants wasted and dissipated the aforementioned assets and trust funds by their neglect of and failure to perform their duties ” to protect the res, among other charges, in that (1) “ On or about February 4, 1949, said defendants entered into an agreement with [the auctioneer] entrusting the aforementioned assets to him and directing him to conduct an auction sale of said assets, without restriction, as to the manner or proper conduct of said sale ”, and (2) That said defendants exercised no supervision or control over said liquidation of the assets, took no active part in said sale, did nothing to insure the success of the sale, but left the entire process in the hands of a stranger to the corporation.” Plaintiff asserts that it made out a prima facie case by showing that the defendants sold assets having a book value of $73,492.21 and a cost value of at least $60,000 for the sum of $23,262.33, realizing only $19,866.98 after the expenses of the sale were deducted. The plaintiff contends that prima facie the assets would have brought an amount at least equal to the claims on a proper sale or orderly liquidation of the business, and that upon that showing the burden was upon the defendant-fiduciaries to go forward with evidence to establish that the full value of the assets was realized.

Defendants, on the other hand, urge that they were under no such onus and that the burden rested upon plaintiff to show that full value was not obtained. In support of their claim that plaintiff failed to sustain the burden of proof imposed upon it defendants point to the fact that the trial court found that the í ‘ evidence at the trial failed to disclose any fraud by either of the two defendants, nor has the evidence shown in any way that the defendants profited from the liquidation of the assets. Plaintiff also failed to show that the goods sold at the auction were sold for less than their fair value at a sale of that character (Emphasis supplied.)

Of course the fact that a beneficiary is unable to disclose any fraud committed against him by his fiduciary or that the fiduciary personnally profited from a liquidation of the assets equitably belonging to the beneficiary does not necessarily absolve the fiduciary from liability.

We have had occasion to point out the nature of the obligation resting upon fiduciaries which is applicable to those, such as defendants, who are, in effect, trustees. (Meinhard v. Salmon, 249 N. Y. 458, 464.) There we said: “ Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ‘ disintegrating erosion ’ of particular exceptions (Wendt v. Fischer, 243 N. Y. 439, 444).” We have also pointed out that questions of bad faith as matters of fact ” may be absent from a case and yet breaches of duty as matters of law ” may be present. (Matter of Ryan, 291 N. Y. 376, 386.) Quasi trustees must be held to accountability for the performance of obligations thrust upon them by circumstances. The safety and protection of the trust res is of primary significance. If the assets — the trust fund for the creditors — were actually improvidently wasted or depleted as a result of defendants’ unilateral action the plaintiff is entitled to recover the amount of the loss thus sustained. If, on the other hand, the assets were not thus wasted or depleted the defendants are not liable. Defendants are not to be cast in judgment solely because they neglected to give creditors notice of the bale.

Prima facie the assets in this case could have been sold for a sum of money sufficient to satisfy the creditors. As a matter of fact there was realized but $19,866.98, considerably less than half the sum owed to creditors. The creditors were not given individual notice of the sale and had no opportunity to protect their interests. While it is true, as earlier stated herein, that notice to the creditors was not required, nevertheless, the failure to so notify the persons primarily interested in the assets requires the imposition, in this statutory action for waste, upon the defendants of the burden of going forward to show that their action in selling the inventory at public auction resulted in obtaining full value under the circumstances in which they found themselves and did not occasion an improper or improvident depletion of the trust res. Defendants are the only ones who can furnish the information. The defendants should not be relieved of that burden of going forward on the present state of the record, even if, indeed, their action was prompted by a good motive, viz., to liquidate in an inexpensive manner. The burden of establishing the cause of action on the whole case, of course, remains upon the plaintiff.

The Appellate Division has ordered a new trial ‘ for the purpose of assessing plaintiff’s damages ”, there being no dispute as to facts. The Appellate Division has, thus, afforded defendants an opportunity to account for their handling of the res in the matter of the sale and to show that full value was realized for the assets upon the sale and that, therefore, the creditors did not sustain a loss by virtue of the defendants’ action. That court has determined that the defendants are obligated to “ account and respond in damages for the amount. if any, by which less than full value was realized upon the sale ” (278 App. Div. 501, 504) and all available evidence on the subject of value is to be received on the trial. In our opinion that was a proper disposition of the matter. That must still be done although the defendants have stipulated for judgment absolute. As yet there has been no finding by any court after proper proof as to whether the creditors suffered any damage and, if they did, in what amount.

The order should be affirmed, and judgment absolute ordered against appellants on the stipulations, with costs in all courts.

Desmond, J.

(dissenting). We dissent, since we know of no theory of law under which directors, on facts like these, can be held liable or accountable to their corporation’s creditors. There is in the ease no showing of fraud or bad faith, no self-dealing or diversion of assets, no violation of any statute, and, therefore, no applicability of any of the decisions cited in the majority opinion of this court, in the opinion of the Appellate Division, or in the briefs filed here by respondent.

Faced with operating losses, poor market conditions, pressure from creditors, and inability to borrow, the corporation, in early 1949, found that it could not continue its merchandising business. Defendants, its sole stockholders and directors, consulted an attorney, who described to them various methods of liquidation, including a sale at auction of the corporation’s merchandise. That method defendants chose. They hired a licensed auctioneer, who advertised the event by newspaper advertisements and by postcards mailed to about a thousand persons or firms in the same or similar lines of business (not including the corporation’s creditors), and who conducted the sale, which produced gross proceeds of about $23,000 and a net return of just under $20,000, for merchandise which had been carried on the corporation’s books at its gross cost price of about $60,000. Three days later, the corporation’s creditors, to whom it owed about $52,000, petitioned it into bankruptcy, and plaintiff-respondent, after its election and qualification as trustee in bankruptcy, and after the net proceeds of the auction had been turned over to it by defendants, brought this suit.

Those are the facts, undisputed and found by both courts below. Defendants committed no actionable wrong of any sort, and were entitled to judgment of dismissal, on the merits. At very worst, they were guilty of an error of judgment, hut for that the law provides no punishment or remedy. “If a director exercises his business judgment in good faith on the information before him, he may not be called to account through the judicial process, even though he may have erred in his judgment ” (Rous v. Carlisle, 261 App. Div. 432, 434, affd. 290 N. Y. 869). “ That is true even though the errors may be so gross that they may demonstrate the unfitness of the directors to manage the corporate affairs ” (Everett v. Phillips, 288 N. Y. 227, 232). “ The law will not permit a course of conduct by directors, which would be applauded if it succeeded, to be condemned with a riot of adjectives simply because it failed. Directors of a commercial corporation may take chances, the same kind of chances that a man would take in his own business. Because they are given this wide latitude, the law will not hold directors liable for honest errors, for mistakes of judgment ” (Shientag, J., in Bayer v. Beran, 49 N. Y. S. 2d 2, 6; see, also, Leslie v. Lorillard, 110 N. Y. 519, 532; Winter v. Anderson, 242 App. Div. 430, 432; Kalmanash v. Smith, 291 N. Y. 142,155; Rosbrook, New York Corporation Manual, § 314).

The theory of the recovery here seems to be: that these directors “ wasted ” the corporate assets, and so became subject to suit under subdivision 2 of section 60 .of the General Corporation Law. But ‘ ‘ waste ’ ’, as that verb is used in this and similar statutes, has a fixed meaning, limited to acts which are illegal, fraudulent or done in such bad faith as to amount to fraud (see Bosworth v. Allen, 168 N. Y. 157, 165, 166; Mason v. Henry, 152 N. Y. 529; Gilbert v. Finch, 173 N. Y. 455; Lonas v. Layman Pressed Rod Co., 242 App. Div. 444, affd. 269 N. Y. 529; Bassellin v. Pate, 30 Misc. 368, 373, Hiscook, J.; Cottrell v. Albany Card & Paper Mfg. Co., 142 App. Div. 148, 151 et seq.; Hazard v. Wight, 201 N. Y. 399, 403; Talcott v. City of Buffalo, 125 N. Y. 280, 288; Ayers v. Lawrence, 59 N. Y. 192,197). We find no case, and none is cited to us, where directors have been held liable to creditors for waste, merely because of their use, in good faith but doubtful wisdom, of their own business judgment. Hindsight may be better than foresight for some purposes, but not as a basis for imposition of liability in a court of law (Purdy v. Lynch, 145 N. Y. 462, 475, 476; Costello v. Costello, 209 N. Y. 252, 262).

Aside from accusations of mere unwisdom, the only specifications of “ illegality ” put forward here are these: that defendants gave the creditors no notice of the sale, that defendants themselves did not conduct the sale, and that they failed to carry out the permissive statutory procedures for corporate dissolution, or bankruptcy, or assignment for benefit of creditors. As to each of these, we can say only that there is no requirement of law for such action by directors.

A word as to the ‘ ‘ trust fund doctrine ’ ’. Whatever be 11 the uncertain limits of that much debated theory as understood and applied in New York ” (Barr & Creelman Mill & Plumbing Supply Co. v. Zoller, 109 F. 2d, 924, 927, 928), it never includes more than this: that the property of a corporation is a trust fund for the payment of all its debts, and its creditors, therefore, have an equitable lien thereon and the right to priority of payment over all stockholders (Wood v. Dunmer, Fed. Cas. No. 17,944; Bartlett v. Drew, 57 N. Y. 587, 589; Ward v. City Trust Co., 192 N. Y. 61, 74; Reif v. Equitable Life Assur. Soc., 268 N. Y. 269, 276). The doctrine or theory has, therefore, nothing whatever to do with this case.

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

Loughran, Oh. J., Lewis, Dye and Froessel, JJ., concur with Conway, J.; Desmond, J., dissents in opinion in which Fuld, J., concurs.

Order affirmed, etc.


source: Caselaw Access Project

author: Dye, J. Froessel, J.

license: Public Domain

text:
    In the Matter of Samuel Silverman et al., Appellants. R. Hoe & Co., Inc., Respondent.
    Argued October 21, 1952;
    decided January 15, 1953.

      Bernard S. Kanton, George C. Baron and Frederick Doppelt for appellant.
    I. By accepting the amount conceded by respondent to be due them, petitioners were not precluded from appealing from the disallowance of their motion to recover more than the conceded amount. II. The Appellate Division erred in its decision. It is clear that there was no waiver of the right to appeal as to the quantum of the award. (Matter of City of New York [Court House], 216 N. Y. 489; Goepel v. Kurtz Action Co., 216 N. Y. 343; Matter of Board of Water Comrs. of Vil. of White Plains [Westchester Co. Water Works Co.], 195 N. Y. 502; Seymour v. Spring Forest Cemetery

      Assn., 4 App. Div. 359, 157 N. Y. 697; Mellen v. Mellen, 137 N. Y. 606; Benkard v. Babcock, 17 Abb. Prac. 421; Matter of City of New York [Court House], 216 N. Y. 491; Matter of New York & H. R. R. Co., 98.N. Y. 12.) III. The surrender by-petitioners of their stock certificates did not constitute a 1 ‘ sale, transfer or assignment ” of their right to receive the full value for such stock. (Matter of City of New York [Court House], 216 N. Y. 491.)

      Neil P. Cullom and Stanford Schewel for respondent.
    I. For a valuable consideration, appellants sold, assigned and transferred their stock to respondent; they, therefore, have no interest, legal or equitable, contingent or otherwise, in the appraisal litigation or the proceeds thereof; and, hence, the unanimous Appellate Division properly dismissed their appeals. (Spencer v. Standard Chemicals & Metals Corp., 237 N. Y. 479; Whiting v. Glass, 217 N. Y. 333; Foster v. Central Nat. Bank of Boston, 183 N. Y. 379; Amella v. Consolidated Edison Co., 273 App. Div. 755, 297 N. Y. 1031.) II. By the acceptance of benefits conferred by the order appealed from, i.e., payment for their stock at $7.50 per share, with interest, petitioners were estopped from prosecuting their appeal to the Appellate Division and, hence, such appeal was properly dismissed. (Clair Marcelle, Inc., v. Agfa Ansco Corp., 250 App. Div. 508; Goepel v. Kurtz Action Co., 216 N. Y. 343; Suffolk Co. Nat. Bank v. Licht, 256 App. Div. 1080; Carll v. Oakley, 97 N. Y. 633; Wormser v. Metropolitan St. Ry. Co., 184 N. Y. 83; Tanenbaum v. Consolidated Edison Co., 273 App. Div. 755, 297 N. Y. 1041; Amella v. Consolidated Edison Co., 273 App. Div. 755, 297 N. Y. 1031; Lazenby v. International Cotton Mills Corp., 174 App. Div. 906, 226 N. Y. 645; Wall v. Anaconda Copper Mining Co., 216 F. 242; Wall v. Parrot Silver & Copper Co., 244 U. S. 408.)
   Dye, J.

Being dissatisfied with the terms and conditions of a plan of merger with a subsidiary and recapitalization offered by the respondent, R Hoe & Co., Inc., hereinafter called the Corporation, the petitioners and other stockholders owning 66,547 shares of the authorized 160,000 shares of the corporation and representing approximately 42% of the total common shares outstanding, dissented therefrom, When the corporate stockholders authorized to vote thereon approved the proposed plan, the petitioners and others then instituted this appraisal proceeding pursuant to section 21 of the Stock Corporation Law to fix the value of the common shares held by them. The appraisers, after hearing controverted testimony, reported that the common stock had a value of $7.50 per share. The Corporation moved to confirm the report at Special Term and the petitioners moved to reject it and to fix the value at $23.30 per share. The Special Term confirmed the appraisers’ report by adopting the valuation of $7.50 per share and provided further that interest at the rate of 6% should be paid upon surrender of the stock certificates duly indorsed for transfer and showing payment of all transfer taxes “ within 30 days after service of a copy of this order with notice of entry ”. The petitioners’ cross motion was denied as was also their request that the order provide that the surrender by any petitioner herein and the acceptance of payment for his shares of stock as provided herein shall be without prejudice to the right of each of such petitioners to appeal from this order or the judgment entered thereon in so far as the same denies his right and rejects his application to recover in excess of $7.50 per share exclusive of interest ”. The Special Term order also required the respondent to pay $10 costs in favor of each petitioner and the amount of the stenographer’s expense for a transcript of the proceedings. Subsequent to the entry and service of the order of confirmation and within the thirty-day period, many of the petitioning stockholders surrendered their stock certificates and received payment at the rate of $7.50 per share plus interest to date of payment. In the meantime counsel for petitioners filed notice of appeal to the Appellate Division, from so much of the Special Term order as restricted the stock valuation to $7.50 per share and which denied petitioners’ motion for an order fixing the value of said stock in the sum of $23.30 per share as well as the provision limiting the payment of interest to thirty days after entry of the order. The Corporation cross-appealed from so much of the order as awarded each defendant $10 costs. During the pendency of the appeal certain of the appellant stockholders turned in their shares and took payment at the authorized rate. Such surrender and payment was without reservation or stipulation by either party respecting prosecution of the pending appeal. Thereafter the Corporation moved in the Appellate Division for an order dismissing the appeal of each of the petitioners who had turned in their stock and received payment on the ground that by such voluntary act those stockholders not only parted with the stock but with all the rights appurtenant thereto, including the right to appeal. The Appellate Division granted the motion and entered its order dismissing the appeal of such petitioners because, we assume, in the absence of any opinion, that their interest in the litigation was deemed thereby terminated for all purposes including the prosecution of the appeal. In other words, we assume that the Appellate Division applied the general rule that in ordinary cases a party "who accepts the benefit of a judgment thereby waives his right to appeal (Alexander v. Alexander, 104 N. Y. 643) because as we said in Matter of City of New York (Court House) (216 N. Y. 489, 492), the waiver results from the inconsistent attitude of a party who at the same time collects the amount of a judgment in his favor and appeals for the purpose of reversing that judgment ” (cf. Matter of New York & H. R. R. Co., 98 N. Y. 12). Such general rule, however, is not of universal application as there is a line of cases to the effect that the right to appeal survives the acceptance of benefits not inconsistent with an appeal from other parts of the judgment or when the right to the benefit is absolute (Cohen and Karger, Powers of the New York Court of Appeals, § 95, p. 407; 4 C. J. S., Appeal and Error, §§ 215, 216; 2 Am. Jur., Appeal and Error, §§ 214-221). This principle has been most usually applied in proceedings for condemnation of land for public use on the theory that the claimants have received nothing to which they would not be entitled in any event (Matter of Board of Water Comrs. of Vil. of White Plains [Westchester Co. Water Works Co.], 195 N. Y. 502; Matter of City of New York [Court House], supra).

This line of cases holds that in condemnation proceedings, the acceptance of payment under a judgment does not bar an appeal where the claimant seeks merely to question the amount of the award (Matter of City of New York [Court House], supra; Matter of New York & H. R. R. Co., 98 N. Y. 12, supra). Under these cases, while claimant may not question the right of the condemning party to acquire the land, and as long as claimant does not seek to get the land back, but only to increase the amount of the award, he does not lose the right to appeal by accepting the award. The rationale of these decisions is that even though the judgment might be reversed on appeal, “ the effect of the confirmation of the original .award is not destroyed # * * it still transfers title of the land to the condemning party, and the property owner still retains title to the award that has been paid him subject, only in case the new award should be less, to a judgment against him for the difference ” (Matter of Board of Water Comrs. of Vil. of White Plains [Westchester Co. Water Works Co.], supra, p. 506).

A variant of this general principle was .applied in that case. There an award had been made to property owners who declined to take it and appealed. The appeal resulted in a new appraisal and an increased award, whereupon the property owners claimed interest on the entire amount from the time of the first award. We held, however, that as the property owners were entitled to take an award and still appeal, they were entitled to interest only upon the excess of the second award over the first.

There is room in the condemnation statutes for applying such a policy and by the same token there is room for application of the principle to appraisal awards in stock valuation proceedings. Subdivision 6 of section 21 provides that a stockholder demanding payment for his stock shall, following a stockholders’ vote in favor of the action to which objection was made, have no rights with respect to such stock “ except the right to receive payment for the value thereof as in this section provided ” (emphasis supplied).

When fairly read it seems clear beyond peradventure that the scheme of the statute contemplates that a dissenting stockholder shall receive the value of his stock and this, if it means anything, must mean the proper value. Nowhere does the statute indicate that his right to establish such value, including the right to appeal from a controverted valuation, is cut off by the surrender and acceptance of payment at the controverted appraised value. Under such a reading of the statute, there is no substance to the respondent’s contention that surrender of the stock certificates and acceptance of payment at the appraised rate amounts to a waiver of his right to appeal to test the propriety of the quantum. The words of the statute relied on by respondent, viz. (subd. 7): Upon receipt of such payment, the objecting stockholder shall cease to have any interest in the corporation or its assets by reason of his ownership of the stock so paid for ” do not bear such a construction for to accord it such a meaning would render the other provision “to receive payment for the value thereof” an empty meaningless phrase. Ceasing to have any interest in the corporation upon surrender of the stock, as provided in the statute, contemplates a right to notice, to attend meetings and to vote, and is not in any sense inconsistent with the right to receive payment for the value thereof ”. Such a view is not inconsistent with or contrary to the rule recently enunciated in Tanenbaum v. Consolidated Edison Co. (273 App. Div. 755, motion for leave to appeal denied 297 1ST. Y. 1041) and Amella v. Consolidated Edison Co. (273 App. Div. 755, motion for leave to appeal denied 297 N. Y. 1031) for there the benefits of the merger plans were accepted without any appeal being taken from the appraisal order. Under such circumstances, nothing survived to sustain the derivative suit, a situation clearly distinguishable from the one at hand.

The circumstance that the petitioners sought on the return of the respondent’s motion for confirmation to have a provision included in the order permitting acceptance of payment at the appraised rate without prejudice to an appeal — which the court rejected — does not establish a waiver in and of itself — in fact, the appeal negates consent. It was, in truth, a bona fide effort to avoid litigating the very dispute now before us.

The order should be reversed, with costs, and the appeal to the Appellate Division reinstated.

Froessel, J.

(dissenting). I dissent. The rule is well settled that ordinarily a party who accepts the benefit of a judgment or order thereby waives his right to appeal therefrom (Alexander v. Alexander, 104 N. Y. 643; Matter of City of New York [Court House], 216 N. Y. 489, 491, 492). That rule is not applicable to appeals in condemnation proceedings (Matter of New York & H. R. R. Co., 98 N. Y. 12, 18; Matter of City of New York [Court House], supra), nor in exceptional situations where in effect we are dealing with different claims in the same judgment (Goepel v. Kurts Action Co., 216 N. Y. 343 [goods sold and loss of profits]; Mellen v. Mellen, 137 N. Y. 606 [separate interests in a partition action]).

Here each claim is one and indivisible, its disposition is directly challenged by the notice of appeal, and the prosecution thereof is governed by a statute, which should be interpreted to mean what it says. Subdivision 6 of section 21 of the Stock Corporation Law provides that in a situation as we have here, the only right of dissenting stockholders is the right to receive payment for the value [of their stock] as in this section provided ” (emphasis supplied). That value was fixed by the Supreme Court. When, pursuant to that court’s order, appellants voluntarily received such payment ” from respondent, and at the same time sold, assigned and transferred the shares represented by their certificates, indorsing and physically surrendering same unconditionally, they ceased, under subdivision 7 of section 21, to have any interest in the corporation or its assets by reason of * * * ownership of the stock so paid for ” (emphasis supplied). Their appeals were properly dismissed.

Loughban, Ch. J., Lewis, Desmond and Fuld, JJ., concur with Dye, J.; Froessel, J., dissents in opinion in which Conway, J., concurs.

Order reversed, etc. [See 305 N. Y. 626.]


author: Froessel, J. Conway, J.

text:
    In the Matter of the Claim of Gertrude Davis, Respondent, against Newsweek Magazine et al., Appellants. Workmen’s Compensation Board, Respondent.
    Argued October 16, 1952;
    decided January 15, 1953.

      Ralph S. Stowell and Joseph D. Edwards for appellants.
    The death of Davis did not result from an accident which arose out of and in the course of his employment. (Matter of Heits v. Ruppert, 218 N. Y. 148; Matter of Scholtzhauer v. C. & L. Lunch Co., 233 N. Y. 12; Isabelle v. Bode & Co., 215 App. Div. 184; Matter of Katz v. Kadans & Co., 232 N. Y. 420; Matter of Marks v. Gray, 251 N. Y. 90; Matter of Lief v. Walzer & Son, 248 App. Div. 651, 272 N. Y. 542; Matter of Lepow v. Lepow Knitting Mills, 263 App. Div. 211, 288 N. Y. 377; Matter of Baron v. Norton & Co., 264 App. Div. 802; Matter of Lowe v. Wright & Co., 245 App. Div. 875; Matter of Lyons v. U. S. O. Camp Shows, 274 App. Div. 861; Matter of Scott v. U. S. O. Camp Shows, 274 App. Div. 862; Matter of Younger v. Motor Cab Transp. Co., 260 N. Y. 396.)

      Nathaniel L. Goldstein, Attorney-General (Daniel Polansky, Wendell P. Brown and Roy Wiedersum of counsel), for Workmen’s Compensation Board, respondent.
    Ample evidence supports the finding that the employee’s death arose out of and in the course of his employment. (Matter of Tushinsky v. National Broadcasting Co., 265 App. Div. 301, 292 N. Y. 595; Matter of Lyons v. U. S. O. Camp Shows, 298 N. Y. 897; Matter of Scott v. U. S. O. Camp Shows, 298 N. Y. 896; Matter of Block v. Camp Shows, 272 App. Div. 980; Matter of De Santis v. U. S. O. Camp Shows, 275 App. Div. 880; Matter of Windishar v. Warmack, 271 App. Div. 855; Matter of Fuller v. Title Guar. & Trust Co., 223 App. Div. 173; Matter of Wickham v. Glenside Woolen Mills, 252 N. Y. 11; Matter of Bollard v. Engel, 254 App. Div. 162, 278 N. Y. 463; Matter of Younger v. Motor Cab Transp. Co., 260 N. Y. 396.)
   Froessel, J.

Claimant is the widow of one Harry Davis, hereinafter called decedent. They were married on October 2, 1948, and had no children. On May 16, 1949, decedent, while at a vacation resort in Biloxi, Mississippi, came to his death as the result of diving in shallow water from the end of a long pier. His claimant widow was awarded compensation below. She remarried on December 31,1949.

The sole issue presented by this appeal is whether or not the accidental death arose out of and in the course of his employment. Decedent was science editor of Newsweek, with offices in New York City. Besides working at his desk, he would visit places of scientific interest and attend meetings, preparatory to writing articles for his employer, which he sometimes did at home. His employment called for thirty-five hours of work per week.

In the spring of 1949, he and claimant contemplated a vacation trip west — they “had never been around the United States ” — during which he planned as part of their vacation to visit places of scientific interest throughout the country by automobile. He then proposed to his employer that his allotted vacation of four weeks be extended in order that he might visit additional scientific developments as background material for use in his work. He was granted an additional four weeks, and thus the entire eight weeks were combined as a vacation and business trip to the west coast. In addition to paying his salary, his employer agreed to pay the nominal amount of $200 toward the expenses of the trip. It was contemplated that decedent might send in articles for publication during the course of the trip, although apparently not required to do so. A tentative itinerary was left with the employer so that decedent might be contacted for either personal or business reasons should occasion arise.

In the course of their trip, claimant and decedent visited the atomic energy project at Oak Bidge, Tennessee, after which they started on their way to San Antonio, Texas, to visit the Southern Besearch Institute. On the second day of that journey, they stopped at Biloxi, Mississippi, a “gulf port vacation spot”, not scheduled on his itinerary and for which they had no reservations. No scientific investigation had been planned there or elsewhere in that State. Upon arriving at the hotel, decedent, being hot and tired, prepared to take a swim. Instead of entering the water from the beach, he chose to engage in a hazardous act — to dive from a pier in unfamiliar water, as aforesaid— as a result of which he suffered injuries from which he died,

The Appellate Division, in sustaining the board’s determination that decedent was in the regular course of his employment when he was drowned, and that the accidental injuries and death arose out of and in course of his employment, stated that said employment, or a phase of it, was that of a tourist, which exposed bim to the risks incident to that status, and that his attempt to get relief from his fatigue following a long journey in hot weather might be regarded as a reasonable act in the course of his employment, since, had it been successful, it would have been of some benefit to his employer, in that decedent might more promptly have sent a better article.

We find ourselves unable to concur in that reasoning. To be compensable, an injury must arise out of the employment as well as in the course thereof (Matter of Wilson v. General Motors Corp., 298 N. Y. 468, 472; Matter of Clark v. Voorhees, 231 N. Y. 14, 17). Since decedent was traveling between places of scientific interest when he was killed, it may in a broad sense be said to have been in the course of his employment. His travels, however, though finally twofold in purpose, were predominantly in furtherance of the personally motivated vacation trip, except for which he would not have gone (Matter of Marks v. Gray, 251 N. Y. 90). His status as a tourist was personal and unrelated to his employment, for he was a science editor, not a travel writer; risks peculiar to tourist activity could not fairly be said to arise out of his employment. Upon the facts here shown, only risks arising out of his inspections of scientific sites and travel thereto could possibly give rise to compensable injuries.

Neither was the death compensable simply because the employer might derive some incidental benefit from decedent’s attempt to refresh himself in this manner. A slight and momentary deviation from the work routine for an accustomed and accepted purpose (Matter of Montgomery v. Bartholomay Milk Co., 260 N. Y. 664; Matter of McLellan v. International Paper Co., 269 App. Div. 800, motion for leave to appeal dismissed 294 N. Y. 967) must be distinguished from purely personal activity, however much such activity may incidentally benefit the employer (Matter of Marks v. Gray, supra; Matter of Chetney v. Manning Co., 273 N. Y. 82; Tallon v. Interborough R. T. Co., 232 N. Y. 410; Matter of Kowalek v, New York Cons, R. R. Co., 229 N. Y. 489; 1 Larson’s Workmen’s Compensation Law [1952], § 15). If the factory worker who is injured, on his way to work may not be compensated therefor, how could we justify the award herein on the tenuous basis that decedent’s swim may have been of “some benefit” to his employer in enabling him to write a better article f If that is to be deemed a sufficient nexus between the employment and the injury, then one may say that in the ordinary effort of living a man continually makes himself ready for his employer’s service and thus should be compensated for whatever injury befalls him.

The risks inherent in travel may, of course, arise out of the employment where such travel is a necessary incident thereof (Matter of Landrum v. Congress Motor Corp., 301 N. Y. 544; Matter of Kleid v. Carr Bros., 300 N. Y. 270; Matter of Lief v. Walzer & Son, 272 N. Y. 542; Matter of Theyken v. Diplomat Products, 268 N. Y. 658; Matter of Crowell v. American Fruit Growers, 253 N. Y. 543; Matter of Gibbs v. Macy & Co., 242 N. Y. 551; Matter of Harby v. Marwell Bros., 235 N. Y. 504; Matter of Katz v. Kadans & Co., 232 N. Y. 420). Moreover, when the travel is essentially part of the employment, the risk remains an incident thereof even though the employee may have turned his steps toward a place of refreshment, for the employment continues until the necessary travel is concluded (Matter of Laubeck v. Toc’s Products Co., 286 N. Y. 577). When such travel is performed in foreign lands, where strange customs or abnormal conditions prevail, the risk involved in traveling from a place of reasonable personal diversion to the appointed place for service may also come within the coverage afforded by the employer’s compensation insurance (Matter of Scott v. U. S. O. Camp Shows, 298 N. Y. 896; Matter of Lyons v. U. S. O. Camp Shows, 298 N. Y. 897; Matter of Tushinsky v. National Broadcasting Co., 265 App. Div. 301, appeal dismissed 292 N. Y. 595).

Such coverage has also been considered to include risks arising out of the inherent nature of the place to which the employment takes the employee, without regard to the particular circumstances in which the injury occurred. Thus awards have been upheld where the employee was bitten by a disease-bearing insect indigenous to a tropical country (Matter of Lepow v. Lepow Knitting Mills, 288 N. Y. 377), or has been struck by a bullet fired during a skirmish in a country at war (Matter of Lewis v. Knappen Tippetts Abbett Eng. Co., 304 N. Y. 461). Similarly, one whose employment takes him to a hotel may recover compensation for injuries sustained in a conflagration (Matter of Blake v. Grand Union Co., 277 App. Div. 914, motion for leave to appeal denied 301 N. Y. 813; Matter of Commissioner of Taxation & Finance [Buck] v. Katherine Gibbs School, 277 App. Div. 126, motion for leave to appeal denied 301 N. Y. 813), or one required to reside in certain premises may recover for injuries resulting from fire or other condition rendering the premises inherently dangerous (Matter of Finnegan v. Biehn, 276 N. Y. 50; Matter of Giliotti v. Hoffman Catering Co., 246 N. Y. 279; Matter of Underhill v. Keener, 258 N. Y. 543). So where one whose work necessarily takes him outdoors in all kinds of weather is exposed to the risk of lightning (Matter of Many v. Bradford, 266 N. Y. 558) or heat prostration (Matter of Hughes v. St. Patrick’s Cathedral, 245 N. Y. 201). It is also true that recreational or other normally personal activity may sometimes become so intimately related to the employment as to create risks incidental thereto (Matter of Dodge v. Wm. J. Keller, Inc., 304 N. Y. 792; Matter of Brown v. United Services for Air, 298 N. Y. 901; Matter of Bollard v. Engel, 278 N. Y. 463).

These authorities must be read, however, in the light of the basic principle that there can be no compensation for injuries arising out of purely personal activities not directly related to the employment. In other words, each case depends upon its facts (Matter of Masse v. Robinson Co., 301 N. Y. 34, 37). As already noted, the risk of travel may be compensable even though it is travel to a place of rest or refreshment, so long as travel is part of the work routine. But an accident happening at such place, resulting solely from the personal pursuits therein undertaken, is not compensable (Matter of Goldman v. John Hancock Mut. Life Ins. Co., 276 N. Y. 582; Matter of Johnson v. Smith, 263 N. Y. 10; Matter of Davidson v. Pansy Waist Co., 240 N. Y. 584). Neither is an injury resulting from recreational activity compensable, where such activity is carried on on the employee’s own time and off the employer’s premises, though the employer has sanctioned and given financial assistance to such activity (Matter of Wilson v. General Motors Corp., supra).

W'e think it is quite clear that decedent, in engaging in the hazardous act of diving off the pier in strange waters for a swim, was indulging in a personal recreational activity in nowise related to his employment, except as all such activity, in refreshing mind and body, better fits the individual for his daily labors. His death was not “work-connected”, it did not occur in such a way as to bring it within any of the categories above mentioned, in which awards have been allowed; it did not, therefore, arise “ out of and in the course of the employment ” and is not compensable.

There is one other group of cases in which compensation was allowed of which note may be taken, not because they are apposite but because they may appear to be so upon a cursory reading. Some of these appear to pertain to travel or street risks, others to recreational activity during travel (Matter of Crippen v. Press Co., 254 N. Y. 535 [employer furnished hotel room during a strike and instructed claimant to stay in vicinity — assaulted, presumably by striker]; Matter of Madura v. City of New York, 238 N. Y. 214 [claimant ordered to wait under tree during storm— struck by lightning]; Matter of Motto v. Cosmopolitan Tourist Co., 278 App. Div. 597, motion for leave to appeal denied 302 N. Y. 950 [bus driver’s duties required that he wait for fishing party — injured on boat while following custom of going out with fishing party]; Matter of De Santis v. U. S. O. Camp Shows, 275 App. Div. 880, motion for leave to appeal denied 299 N. Y. 798 [musician required to wait in San Francisco until called to ship for embarkation — struck by automobile while crossing street]; Matter of Block v. Camp Shows, 272 App. Div. 980, motion for leave to appeal denied 297 N. Y. 1032 [theatrical manager required to wait in Monroe, Louisiana, for transportation back to air base — injured in fall down steps while going into barbershop for haircut]; Matter of Gabunas v. Pan American Airways, 279 App. Div. 697 [air line stewardess required to wait in Lisbon during enforced layover of assigned aircraft — injured while cycling] ). Careful examination of these cases reveals that there is one operative factor common to all. In each and every instance the employee had been directed, as part of his duties, to remain in a particular place or locality until directed otherwise or for a specified length of time. In those circumstances, the rule applied is simply that the employee is not expected to wait immobile, but may indulge in any reasonable activity at that place, and if he does so the risk inherent in such activity is an incident of his employment. In the Be Santis and Gabunas cases (supra), the area in which the employee was required to wait embraced a city, but it was so delineated by the employer, and consequently those cases do not in any way represent an extension of or departure from the rule. The operative factor present in those cases is not present in the case at bar.

For the reasons above set forth, the order of the Appellate Division should be reversed, and the award of the Workmen’s Compensation Board annulled, with costs in this court and in the Appellate Division, and the claim dismissed.

Conway, J.

(dissenting). We feel constrained to state our views which seem to us to follow and to be in accord with those expressed in Matter of Lewis v. Knappen Tippetts Abbett Eng. Co. (304 N. Y. 461), decided two sessions back. We are the more inclined to do this since if there is to be a distinction between employee journeys made solely for work and those combining vacation and work, that should be called to the attention of employees for their protection and to the Legislature as well.

The Workmen’s Compensation Board has made findings of fact which have been affirmed by the Appellate Division of the Supreme Court (3d Dept.). We may not make new findings or add findings of our own. The board expressly found that while the decedent was engaged in the regular course of his employment and while working for his employer he arrived at Biloxi, Mississippi, and was drowned while swimming; that his death was the result of an accident which arose out of and in the course of his employment while “on a combined vacation and business trip to the West Coast ”. Those findings of the Workmen’s Compensation Board are conclusive upon us unless we can say as a matter of law that they are unsupported by evidence (see Workmen’s Compensation Law, § 23; Matter of Daus v. Gunderman & Sons, 283 N. Y. 459). Thus, to set aside the award and dismiss the claim we must say, as a matter of law, that no reasonable man on the present record could draw an inference that the stop at Biloxi had anything to do with the business end of the combined business and vacation trip. It seems to us that it is impossible to say that for several reasons. It is a matter of common knowledge among professional men that when one goes out of town on a matter of his professional calling, there is almost no appreciable period of time when his mind is not concerned with the matter in hand. So it is even though the trip be called a combined vacation and business trip. The man is never completely and entirely on either one to the exclusion of the other. Even though on a business trip a man may have his best ideas: as he retires, as he shaves in the morning, as he listens to music, as he considers the progress of the work or a phrase to be used or a meeting to be arranged.

There is indeed nothing factually which may be added to the findings of the board as restated with more detail in the majority opinion of the Appellate Division. If we were to stress or point up any of the facts it would be by way of restating in a conclusory manner that the decedent was a writer and science editor for a nationally known magazine, Newsweek. Decedent had a good background for his work since he had an engineering degree from Cornell University and had had a year in Harvard University in journalism on a fellowship. He had written two books one entitled “Energy Unlimited” and another for the U. S. Signal Corps while serving in the army. He had also written articles for Scientific American. In the spring, when he was about to arrange for his vacation, he decided to speak to his superiors at Newsweek and ask them to extend the four-week vacation to which he was entitled “and make it a real science hop eventually” by going to “the science hot spots so-to-speak and get to see people he was writing about or was planning to write about, see the apparatus he was writing about and see the laboratories ”. He planned to explain to his superiors the necessity of this “ as far as being a good science editor now and in the future ”. This he did by talking Avith his immediate superior. He later outlined the plan in an interoffice communication under date of April 15th to his immediate superior which was subsequently approved by News week. The memorandum was received in evidence as an exhibit without objection and will be referred to presently. An agreement was also reached between deceased and Newsweek by which decedent was to receive his salary for the eight weeks he was to be gone at the customary rate of $150 a week as well as $200 for expenses, making a total of $1,400. That was what the board referred to in its second finding of facts as “ a combined vacation and business trip ’ ’, and to which the Appellate Division referred when it said that “decedent’s employee status was so inextricably entwined with his tour as to sustain the board’s finding that his employment included his transient stopover at Biloxi on his route to San Antonio.” (279 App. Div. 502, 504.) Indeed it seems to us that it could not have been found otherwise. The itinerary was to cover, in time, eight weeks from May 7th to July 4th. Feature stories for the following weeks were to be provided by wire or mail to the medical editor who was to handle decedent’s department in his absence. The interoffice memorandum exhibit read: “ Mrs. Clark, as usual, is prepared to handle the department during my absence, except that during three of the weeks I propose to send in feature stories from places I visit which will provide the bulk of the department. Because of out-of-town assignments she has scheduled, material for the following weeks would be most convenient to her, and I can provide it by wire or mail:

(1) week of May 23
(from Oak Ridge or San Antonio, Tex.)
(2) week of June 6
(from New Mexico or California)
(3) week of June 13 (from California) ”.

The deceased came to his death on May 16th, six days after he had left New York and after he had spent several days at Oak Ridge, Tennessee, where he had inspected the atomic energy project and was traveling on a line between Oak Ridge and San Antonio, Texas, with his feature story due in seven days, part of which he had planned to write on the night of the day he died. As to that the decedent’s widow testified: “Well, Monday we had to drive so that we could get somewhere where we could put up and we always preferred to drive during daytime in the light so we drove and we were tired, we planned to drive and did drive until we were tired which was I think three or four in the afternoon when we hit the first gulf port which was Biloxi. Q. And did he have any plans for doing any writing on that day? A. Yes, he was going to write up the Bussell story for one thing because he talked about that in the car. Q. He had his notes all prepared for that, is that correct? A. Yes.”

We think it clear that had the decedent met bis death in an automobile accident while driving from Oak Bidge on his way to San Antonio at Biloxi (which is between Oak Bidge and San Antonio) no one would claim that the accident was not compensable. Here, the decedent and his wife arrived at the first gulf city hot and exhausted in the late afternoon and, since they avoided travel after dark, they decided to stop at Biloxi. The decedent decided to go into the water on the beach apparently adjacent to the hotel. Since his wife was pregnant and did not wish to go into the water he sent her onto the beach while he was changing into a bathing suit. She went down directly and he came down in fifteen minutes as they did not unpack. The water was shallow. The decedent went all the way out on the pier, it was like three city blocks,” and made a head-first dive into the water. He did not come up and before help could be obtained he was gone. Since, as his wife testified, the decedent 6‘planned to write the Bussell story that evening” and to make some notes on the Oak Bidge visit, we consider that the Workmen’s Compensation Board was correct in finding that the accident arose out of and in the regular course of his employment. We are of the opinion that under the evidence here, if it could be considered that there was a deviation by decedent from his duties of an active nature, there was no such deviation or departure from the general performance of the duties of his mission as to result in a severance of his employee status at the time of the accident. (See Matter of Block v. Camp Shows, 272 App. Div. 980, motion for leave to appeal denied 297 N. Y. 1032; Matter of Tushinsky v. National Broadcasting Co., 265 App. Div. 301, appeal dismissed 292 N. Y. 595).

The scientific points of interest in the itinerary included the following:

‘ ‘ 1. Oak Ridge, Tenn.: atomic research
2. Norris Tenn.: TVA research
3. Gorgas, Ala.: experiment in underground coal gasification
4. San Antonio, Tex.: Southern Research Institute
5. Meteor Crater, Ariz.: new diggings by University of New Mexico
6. Imperial Valley, Calif.: All-America canal and reclamation
7. Palomar Mountain: the 200 inch telescope
8. Pasadena, Calif.: California Institute of Technology
9. Los Angeles: University of Southern California: Bing Crosby’s institute of inventions; UCLA
10. San Francisco: University of California (biggest cyclotron, etc.)
11. Palo Alto: Stanford Research Institute
12. Muroc Dry Lake: Supersonic flight testing
13. Denver: University of Denver, Mt. Evans cosmic ray station
14. Los Alamos: Atomic research and possibly a look at uranium mining operations in Colorado ”.

We have set forth and quoted the scientific points of interest and the weeks when the feature stories were to be provided as outlined in the interoffice memorandum exhibit to indicate the extent of the work to be done by decedent on the trip. In the same interoffice memorandum the trip was denominated a vacation and business trip. The Workmen’s Compensation Board in its findings referred to it as ‘1 a combined vacation and business trip ”. If we were permitted to make findings, which of course we are not, we would say that this was predominantly a business trip by a man who was endeavoring to advance himself in his business organization and who was willing to toss in most of his annual vacation for 1949. Many years ago when the Legislature and the Workmen’s Compensation Board were not as liberal in viewing compensation claims as they are today, we laid down in a local ease, involving a trip to a village, a common-sense rule which has often been cited since by us in upholding awards, although not in denying them. The test in brief is this: “If the work of the employee creates the necessity for travel, he is in the course of his employment, though he is serving at the same time some purpose of his own (Clawson v. Pierce-Arrow Co., 231 N. Y. 273). If, however, the work has had no part in creating the necessity for travel, if the journey would have gone forward though the business errand had been dropped, and would have been canceled upon failure of the private purpose though the business errand was undone, the travel is then personal, and personal the risk.” In that case a plumber’s helper who was about to visit a nearby village was asked by his employer, who had learned of the proposed journey, to do a trifling job there. While en route he was injured in an automobile wreck and died. We properly held that the accident “did not arise out of and in the course of the employment ”. (Matter of Marks v. Gray, 251 N. Y. 90, 93-94, Cardozo, Ch. J.) The man on the street would have decided that case in the same way and we have recently said in Matter of Masse v. Robinson Co. (301 N. Y. 34, 37, Loughran, Ch. J.): “ Whether a particular event was an industrial accident is to be determined, not by any legal definition, but by the common-sense viewpoint of the average man.” So here, it seems to us, that the decedent being on his way from one project to another in two separate cities, and there being no requirement that he make the long trip between those two cities without stopping for rest during the night, that stopping at Biloxi with the intention of writing part of his feature article due in New York City within a week and taking a dip in the water to relieve his tiredness and exhaustion so that he might prepare his article, with death accidentally resulting therefrom, was an industrial accident within “ the common-sense viewpoint of the average man.” There can be no question in view of our decision in Matter of Lewis v. Knappen Tippetts Abbett Eng. Co. (304 N. Y. 461, supra) that if dece.dent had been sent by his employer to follow the itinerary as laid out and if it were no part of a combination vacation and work trip, that his death would be compensable. That would be because he would have an employee’s status during all of his trip and could do the things which a person might reasonably be expected to do while living as he ordinarily lived and exercising the care of a reasonable man. When a man is sent on a long trip, whether here or abroad, among people with whom he is not accustomed to live, where he will work intermittently, it is not to be anticipated that when he has concluded his work on one of such occasions and the next conference or activity on his part is not to take place for twenty-four or forty-eight hours, that he will immediately repair to his room and remain there until the next period of activity. He may properly go sightseeing (Matter of Lewis v. Knappen Tippetts Abbett Eng. Co., supra); he may go to a barbershop (Matter of Block, supra); he may get a breath of fresh air or a smoke (Matter of Montgomery v. Bartholomay Milk Co., 260 N. Y. 664; Matter of McLellan v. International Paper Co., 269 App. Div. 800, motion for leave to appeal dismissed 294 N. Y. 967); he may go cycling (Matter of Gabunas v. Pan American Airways, 279 App. Div. 697), without ceasing to be covered by workmen’s compensation. That is because he has an employee status during such conduct. It cannot be that because an employee wishes to make himself more valuable to his corporation and at the same time see a portion of the country and scientific projects therein which he has never seen before (merely another way of saying, in this instance, to make himself more valuable to his employer) he loses that which he would have had if he had waited for the employer to pay the entire cost and thus in some mysterious way loses his status as employee whenever he stops working on one piece of business only to regain it days later when he becomes engaged in another piece of business. An employee’s status cannot be such a shifting and shuttling relationship. If the court was right in its decision of the Lewis case, then, it seems to us, the principles there enunciated apply here.

It seems to us, too, that we must now squarely face a new type of employee situation which has arisen in a world which has materially changed and has contracted transportation-wise, and thus geographically, in the last fifteen or twenty years. Before that, workmen’s compensation cases, similar in some aspects to the present one, arose locally, like the trip of the plumber’s helper to a neighboring village. The rules we made, except for more liberality on the part of the Legislature, the Workmen’s Compensation Board and the courts, may still be said to be properly applicable and just. We first began to perceive a difference between those cases and cases involving employees sent to foreign lands or to distant cities on their way to foreign lands by their employers. First there was the case of Matter of Lepow v. Lepow Knitting Mills (288 N. Y. 377), in which the employer sent a salesman to South Africa to promote its business interests. While in Africa the employee died of malaria as the result of the sting of a mosquito. Death benefits were awarded to his widow despite the fact, as we indicated, that it could not be determined whether the man was attending to business, relaxing from business cares or sleeping at the time of the accident. Then we had the 77. S. O. cases where employees had volunteered to entertain men in the armed forces (see Matter of Scott v. U. S. O. Camp Shows, 298 N. Y. 896; Matter of Lyons v. U. S. O. Camp Shows, 298 N. Y. 897; Matter of De Santis v. U. S. O. Camp Shows, 275 App. Div. 880, motion for leave to appeal denied 299 N. Y. 798; Matter of Block v. Camp Shows, 272 App. Div. 980, motion for leave to appeal denied 297 N. Y. 1032, supra). Later there came Federal projects in foreign lands: in Europe, in the Middle East and in the Far East. Employers sent employees, as in the Lewis case (supra), for instance, as railroad experts advising foreign governments. That particular employer, as our opinion showed, had offices in New York City, Philadelphia, San Francisco, Miami, Argentina and Israel. It has been common practice for some years for employers to advertise in metropolitan newspapers for skilled laborers who will contract to go to parts of Europe, Africa or Asia for a period of years to work on extensive building projects and ventures. All these employers could engage men living in the cities, towns and villages in which or near which those operations were to be initiated and brought to a conclusion but it is more profitable to them to have skilled men from this country work in those distant places. So it was with the employer in the Lewis case and workmen’s compensation must follow such an employee, as we held it did in the Lewis case, in order to carry out the very purpose for which workmen’s compensation was originated, viz., to spread over the backs of the many the sudden paralyzing losses of the few. It is a matter of workmen’s compensation rates. If the employer wishes to keep his insurance rates down, or his contributions down, if he be a self-insurer, he need not engage men here at his New York office and send them to distant countries or to places on this continent away from their homes with the understanding that they are to return here.

In the case of the decedent the employer could have sent him on the trip and paid for it in its entirety in which case he would have been covered under the Lewis case (supra) or he could have hired a separate individual in each of the scientific hot spots ” where the employer wished work done or would benefit from work done on the scene.” The employer here was benefited and expected to benefit in the future by what the board has found expressly was a “ combined vacation and business trip to the West Coast ”.

The order should be affirmed, with costs.

Loughban, Ch. J., Lewis and Fuld, JJ., concur with Fboessel, J.; Conway, J., dissents in opinion in which Desmond and Dye, JJ., concur.

Order reversed, etc.


author: Conway, J.

text:
    In the Matter of River Brand Rice Mills, Inc., Respondent, against Latrobe Brewing Company, Appellant.
    Argued November 25, 1952;
    decided January 15, 1953.

      Maurice Smith for appellant.
    I. The Appellate Division erred in holding that the five-day limitation on arbitration was intended to make arbitration the sole remedy. The nonfulfillment of the condition that arbitration must be demanded “ within five days after tender ” does not deprive appellant of the right to sue at law. (Crocker v. Ireland, 235 App. Div. 760; Parker v. Krauss Co., 157 Misc. 667, 249 App. Div. 718; Meacham v. Jamestown, F. & C. R. R. Co., 211 N. Y. 346; Kent v. Universal Film Mfg. Co., 200 App. Div. 539; Matter of Marchant v.
      Mead-Morrison Mfg. Co., 252 N. Y. 284; Matter of Zimmerman v. Cohen, 236 N. Y. 15; De Gorter v. Banque de France, 176 Misc. 1062, 262 App. Div. 997; American Reserve Ins. Co. v. China Ins. Co., 297 N. Y. 322; Matter of Broadway-40th St. Corp. [Manhattan Co.], 271 App. Div. 219, 296 N. Y. 165; Matter of Raphael [Silberberg], 274 App. Div. 625.) II. The stay of arbitration granted at respondent’s request under section 1450 of the Civil Practice Act established that there was no issue referable to arbitration requiring a stay under section 1451 of the Civil Practice Act. (Matter of Kahn [Nat. City Bank], 284 N. Y. 515; Raven Elec. Co. v. Linzer, 302 N. Y. 188; American Reserve Ins. Co. v. China Ins. Co., 297 N. Y. 322.) The order staying arbitration on the ground it was barred by the five-day clause is not res judicata on the issue whether arbitration is the sole remedy under the contract.

      Milton Pollack and Irving K. Rubin for respondent.
    I. The issue raised in the City Court action is referable to arbitration and accordingly the action must be stayed under section 1451 of the Civil Practice Act. (Syracuse Plaster Co. v. Agostini Bros. Bldg. Corp., 169 Misc. 564; Matter of Young v. Crescent Development Co., 240 N. Y. 244.) II. Arbitration is the sole remedy under an arbitration agreement. If such remedy becomes barred by limitations of time, resort may not be had to an action at law. (Matter of Fletcher, 237 N. Y. 440; Matter of Webster v. Van Allen, 217 App. Div. 219; Meacham v. Jamestown, F. & C. R. R. Co., 211 N. Y. 346; Matter of Gantt [Hurtado & Cia], 297 N. Y. 433; Matter of Kramer & Uchitelle [Eddington Fabrics Corp.], 288 N. Y. 467; Matter of Berkovitz v. Arbib & Houlberg, 230 N. Y. 261; Matter of Zimmerman v. Cohen, 236 N. Y. 15; Matter of Feuer Transp. [Local No. 445], 295 N. Y. 87; American Reserve Ins. Co. v. China Ins. Co., 297 N. Y. 322; Matter of Raphael [Silberberg], 274 App. Div. 625; Matter of Broadway-40th St. Corp. [Manhattan Co.], 271 App. Div. 219, 296 N. Y. 165; Matter of Ketchum & Co., 70 N. Y. S. 2d 476.) III. The prior order of the court staying arbitration is res judicata of the issue in the instant proceeding. (Crouse v. McVickar, 207 N. Y. 213; Meyerhoffer v. Baker, 121 App. Div. 797; Gilbert v. Burnstine, 255 M. Y. 348; Clark v. American Morgan Co., 268 App. Div. 209, 293 N. Y. 933.)
   Conway, J.

On August 8,1949, River Brand Rice Mills, Inc., hereinafter referred to as the seller, sold to Latrobe Brewing Company, hereinafter referred to as the purchaser, seven carloads of brewer’s rice. One of the later carloads, consisting of 1,000 bags, was shipped in June of 1950, was received by the purchaser and stored in a refrigerated place. While so stored Federal inspectors found a considerable number of the bags to be contaminated and government proceedings in a United States District Court in Pennsylvania led to a final order, on August 29, 1950, declaring those bags to be adulterated. They were then destroyed by a United States marshal. The purchaser demanded reimbursement from the seller but the demand was refused. Thereafter, in July, 1951, more than a year subsequent to the receipt of the rice and more than ten months after entry of the order directing its destruction by the marshal, the purchaser served a formal demand on the seller for arbitration before the American Arbitration Association of New York.

The agreement of sale was on the seller’s printed form and contained the following clause relating to arbitration: ‘‘ Any controversy or claim arising out of or relating to this contract or the breach thereof, shall be settled by arbitration in New York, in accordance with the Rules, then obtaining, of the American Arbitration Association, and judgment upon the award rendered may be entered in the highest court of the forum, state or federal, having jurisdiction. Any demand for arbitration must be made within five days after tender.”

Subsequent to the service of the demand, the seller made application to the Supreme Court, under section 1450 of the Civil Practice Act, for an order restraining the purchaser from pursuing an arbitration proceeding because of the failure to make demand within the period prescribed by the clause quoted above. Special Term granted the stay stating: “Whatever meaning may reasonably be attributed to the word ‘ tender,' it is clear that the demand for arbitration was not made within five days after such ‘ tender.’ ” An order was entered thereon in September of 1951, permanently enjoining the purchaser. No appeal was taken from that order.

Two months later the purchaser commenced an action in the City Court against the seller to recover the purchase price and damages suffered by reason of the defective quality of the rice. Before answer the seller applied, this time under section 1451 of the Civil Practice Act, to the Supreme Court, for a stay of the City Court action upon the following grounds: (1) that the purchaser’s sole remedy was arbitration; (2) that such sole remedy had become barred by limitations of time, and (3) that the order of Special Term in the initial proceeding was res judicata of the issues involved.

Section 1451 of the Civil Practice Act reads as follows: “ Stay of proceedings brought in violation of an arbitration contract or submission. If any action or proceeding be brought upon any issue otherwise referable to arbitration under a contract or submission described in section fourteen hundred forty-eight, the supreme court, or a judge thereof, upon being satisfied that the issue involved in such action, or proceeding is referable to arbitration under a contract or submission described in section fourteen hundred forty-eight, shall stay all proceedings in the action or proceeding until such arbitration has been had in accordance with the terms of the contract or submission.”

Special Term denied the stay upon the ground that although the action was brought upon a claim which the parties had agreed to arbitrate, when arbitration was stayed pursuant to section 1450, the issue ceased to be one referable to arbitration; that the seller’s application for a stay under section 1450 constituted an election to waive arbitration and, therefore, section 1451 was inapplicable. In effect, Special Term held that when demand for arbitration was made belatedly the seller could either permit arbitration to proceed despite the untimeliness of the demand or, if it elected to take advantage of such untimeliness by staying arbitration then the seller would be compelled to submit to such court action as might follow.

The Appellate Division, by a closely divided court, reversed Special Term and granted the stay.

It was the contention of the purchaser below that the arbitration clause did not make arbitration the sole remedy of the parties. When, however, we read the clause as quoted (supra), and find that it refers to Any controversy or claim ”, it is clear that the language is all inclusive and that the parties intended that all controversies, including the present one, should be settled by arbitration. As we said in Matter of Marchant v. Mead-Morrison Mfg. Co. (252 N. Y. 284, 298): Parties to a contract may agree, if they will, that any and all controversies growing out of it in any way shall be submitted to arbitration. If they do, the courts of New York will give effect to their intention.”

It is true that in this controversy arbitration is no longer available because of the existing permanent injunction. However, that would not affect the binding force of the agreement. It may be that, upon a proper showing, the portion of the agreement containing the time limitation: “ Any demand for arbitration must be made within five days after tender ’ ’, would be held to be so ambiguous or so unreasonably harsh, when applied to facts such as those presented here as to be unenforcible. That, however, was a matter to be determined when the seller sought originally to stay arbitration. The determination by Special Term at that time was evidently accepted by both parties since neither appealed therefrom. Special Term at that time had the matter of ambiguity in mind for it said, as already noted, Whatever meaning may reasonably be attributed to the word * tender, ’ it is clear that the demand for arbitration was not made within five days after such ‘ tender.’ ” The purchaser may not now be heard to say that the word tender ” has a meaning which is not applicable to the facts as they were then presented to Special Term. To permit an action at law after the parties have agreed to submit any dispute arising under a sales contract would be to set at naught the underlying policy which has shaped the growth of arbitration law in this State. We traced the history of that growth in Matter of Feuer Transp. (Local No. 445) (295 N. Y. 87, 91, Medalie, J.) and pointed out that a quarter of a century of the operation of the arbitration law had demonstrated its usefulness and general acceptability. Were one of the parties to an arbitration agreement, containing a time limitation, permitted to allow such limitation to expire and then sue at law on the claim which it had agreed to arbitrate, the result would be a return to the situation obtaining when agreements to arbitrate were revocable at the will of a party thereto.

The case of Matter of Zimmerman v. Cohen (236 N. Y. 15), upon which reliance is placed by the purchaser in seeking to justify the bringing of its law action, is readily distinguishable. There we made clear that an agreement to arbitrate in accordance with the arbitration law is subject to the same general rules applicable to all contracts (pp. 18, 19). It may be waived or abandoned by the agreement or conduct of the parties to it. In the Zimmerman case (supra) the defendant could have applied to the court to enforce arbitration and stay all proceedings in the action. Instead of so doing the defendant answered, pleaded a separate and distinct defense and then, going still further, set up a counterclaim and sought relief from the court by demanding judgment thereon for a very substantial sum. In the City Court action here there was no abandonment or waiver of arbitration. The seller’s original application for a stay pursuant to section 1450 of the Civil Practice Act was based on the express terms of the arbitration agreement. The seller sought enforcement of the agreement. One may not say that insistence' upon fulfillment of an agreement is an abandonment or waiver of it and yet that is the result which a contrary holding would reach.

Finally, the purchaser urges that section 1451 of the Civil Practice Act, quoted (supra), 11 envisages a subsisting agreement or submission under which an arbitration can be had ” and, since that is no longer the case here, section 1451 is inapplicable. True, arbitration under the agreement may not now be had but the very issue presented in the City Court action was once referable to arbitration and now is no longer so referable only because the parties wrote their own time limitation beyond which no step toward such relief could be taken. That was within the contract power of the parties.

In the course of our decisions indicating the purpose and intent of the Legislature in amending the arbitration law from time to time, we have stressed the legislative purpose to strengthen that law by holding the parties to the terms of their agreement providing for arbitration of their disputes and to provide an exclusive remedy to prevent departure by either party from such agreement. We had occasion to do this recently in American Reserve Ins. Co. v. China Ins. Co. (297 N. Y. 322, 326-327) where we pointed out that the stay provided for in section 1451 of the Civil Practice Act was the exclusive remedy for a person against whom an action had been brought in violation of an agreement to arbitrate saying: “ The Legislature has provided a means of enforcing that which was previously unenforcible; the defendant in such an action must use those means or none at all. This court has indicated — and hr ver courts have held — that it is not even proper for the defendar t in such an action to plead the arbitration agreement as a defense or counterclaim [cases cited].” No different result should obtain in a case where an issue once referable is no longer arbitrable because one of the parties to the agreement failed to avail itself of its right to arbitrate by neglecting to make timely demand therefor.

No doubt section 1451 indicates a general legislative intent to provide for a situation where an action is first brought in an attempt to avoid arbitration since it declares that the action shall be stayed until such arbitration has been had in accordance with the terms of the contract or submission.” Nevertheless, it seems to us that section 1451 should not be construed so narrowly as to deny its application in a situation where one of the parties to the arbitration agreement has merely reversed the order of procedure ordinarily anticipated and thus forbidden and first seeks arbitration too late and then brings the action at law. The whole spirit and purpose of article 84 of the Civil Practice Act entitled “ Arbitration” is to hold the parties to their agreement and to provide the exclusive remedy for its attempted breach. The intent of the Legislature in enacting legislation is the primary object to be found. Whenever such intention is apparent it must be followed in construing the statute. As the rule is summarized in section 111 (McKinney’s Cons. Laws of N. Y., Book 1, Statutes [1942 ed.]), from the cases cited therein, “ * * * a thing which is within the letter of the statute is not within the statute unless it be within the intention of the lawmakers, but a case within the intention of a statute is within the statute, though an exact literal construction would exclude it. It is a familiar legal maxim that ‘ he who considers merely the letter of an instrument goes but skin deep into its meaning,’ and all statutes are to be construed according to their meaning, not according to the letter.” The construction we give section 1451 gives effect to the legislative intent.

The order of the Appellate Division should be affirmed, with costs.

Loughran, Ch. J., Lewis, Desmond, Dye, Fuld and Froessel, JJ., concur.

Order affirmed.


author: Froessel, J. Fuld, J.

text:
    The People of the State of New York, Respondent, v. Joseph J. De Santis, Appellant.
    Argued November 25, 1952;
    decided January 21, 1953.

      Harry G. Anderson for appellant.
    I. The evidence adduced by the People was wholly circumstantial and insufficient, as a matter of law, to establish appellant’s guilt. (People v. Taddio, 292 N. Y. 488; People v. Weiss, 290 N. Y. 160; People v. Cooperman, 279 N. Y. 599; People v. Galbo, 218 N. Y. 283; People v. Razezicz, 206 N. Y. 249; People v. Orr, 270 N. Y. 193; People v. Woltering, 275 N. Y. 51.) II. It was reversible error to permit the inclusion in the indictment of an allegation that appellant had been previously convicted of a felony and to permit proof thereof upon the trial. (People v. Gowasky, 244 N. Y. 451; People v. Sickles, 156 N. Y. 541; People v. Rosen, 208 N. Y. 169; People v. Reese, 258 N. Y. 89; People ex rel. Hirschberg v. Orange Co. Ct., 271 N. Y. 151; People v. Brennan, 229 App. Div. 378; People v. Schaller, 224 App. Div. 3; People ex rel. Marlowe v. Martin, 192 Misc. 192; People v. Wicklem, 183 Misc. 639; People v. La Sasso, 182 Misc. 538; People v. O’Donnell, 177 Misc. 562.) III. The jury having acquitted appellant of larceny, as charged in the second count of the indictment, the conviction for burglary cannot be sustained. (Guenther v. People, 24 N. Y. 100; People v. Dowling, 84 N. Y. 478; People v. Kelley, 253 App. Div. 430.)

      Frank A. Gulotta, District Attorney (Henry P. De Vine of counsel), for respondent.
    I. The evidence establishes the guilt of defendant as a matter of law. (People v. Jones, 257 App. Div. 5.) II. An indictment which, on its face, charges a defendant with a prior felony conviction is legal and valid, and under such indictment the People may prove as a part of their case such prior felony conviction. (People v. Gowasky, 244 N. Y. 451; People ex rel. Smith v. Hunt, 257 App. Div. 457; People ex rel. Williams v. Jackson, 272 App. Div. 859; People ex rel. Jablonowski v. Jackson, 272 App. Div. 989; People v. Van Allen, 275 App. Div. 181; People v. Brennan, 229 App. Div. 378; People v. Sickles, 156 N. Y. 541; Matter of Reichel v. Moore, 158 Misc. 301; Matter of Dodd v. Martin, 248 N. Y. 394; People v. Reese, 258 N. Y. 89; People ex rel. Wisniewski v. Hunt, 36 F. Supp. 774.) III. The conviction for burglary in the third degree does not necessarily have to be reversed because defendant was acquitted of grand larceny in the first degree. (Guenther v. People, 24 N. Y. 100; People v. Dowling, 84 N. Y. 478; People v. Kelley, 253 App. Div. 430; People v. Rockower, 266 App. Div. 781, 292 N. Y. 655; People v. Haupt, 247 N. Y. 369.)
   Froessel, J.

We are all satisfied that the evidence was sufficient to establish defendant’s guilt beyond a reasonable doubt, and that the verdict was not inconsistent.

It was not reversible error to include in the indictment allegations charging defendant as a prior offender, and to receive proof therof at the trial. This has long been the settled practice in this State (Johnson v. People, 55 N. Y. 512; People v. Sickles, 156 N. Y. 541; People v. Gowasky, 244 N. Y. 451), and countless convictions were based on such indictments. The Legislature has not prohibited this practice by its enactment in 1926 of section 1943 of the Penal Law (L. 1926, ch. 457). That statute, so far as pertinent herein, provided: “ If at any time, either after sentence or conviction, it shall appear that a person convicted of a felony has previously been convicted of crimes as set forth either in section nineteen hundred and forty-one or nineteen hundred and forty-two, it shall be the duty of the district attorney of the county in which such conviction was had to file an information accusing the said person of such previous convictions.” (Emphasis supplied.)

The Joint Legislative Committee on the Co-ordination of Civil and Criminal Practice Acts, popularly known as the Baumes Committee, recommended this legislation. In its 1926 report (N. Y. Legis. Doc., 1926, No. 84, p. 22), it said: “ Resentencing of Second Offenders. There are times when a defendant is found guilty of the offense for which he has been tried without its being known by the prosecuting officers or the court that it is the second criminal offense of which he is guilty. Perhaps the facts were not known when the indictment was drawn. * Society should be protected and the criminal receive his just dues. We approve the suggestion that provides for the court sending for such a prisoner and resentencing him in accordance with his new found criminal history and recommend appropriate, carefully prepared legislation.” It is clear that the purpose of this legislation was to make it mandatory upon the prosecutor, when a defendant has not been indicted as a prior offender, to file an information “ either after sentence or conviction ” accusing him of the previous conviction. It was aimed at proper punishment of those multiple offenders whose previous convictions were unknown to prosecuting authorities at the time indictments were drawn. There is no indication whatsoever that the Legislature intended to outlaw the previous practice; section 1943 is an addition to, rather than an abolition of, pre-existing procedure. So it has been held by us in People v. Zeiler (243 App. Div. 542, affd. 268 N. Y. 582) following People v. Gowasky (244 N. Y. 451, supra); (see, also, People v. Reese, 258 N. Y. 89,101; Matter of Dodd v. Martin, 248 N. Y. 394, 397). If the long-standing practice complained of is to be abolished, it must be accomplished by legislative enactment and not by judicial decision.

The judgment should be affirmed.

Fuld, J.

(dissenting). Patently unfair, unquestionably prejudicial, the practice of charging a defendant as a prior felony offender in the indictment and permitting proof thereof at the trial, should be condemned and outlawed. Before 1926, that procedure was upheld as proper and necessary, but that, it seems to me, was because, absent pertinent regulatory legislation, it was the only method by which the more severe punishment provided for recidivists could be imposed. (See People v. Sickles, 156 N. Y. 541.) When, however, section 1943 was written into the Penal Law in 1926, expressly authorizing a district attorney to proceed against a person as a second or fourth felony offender by filing an information accusing him of such previous convictions, the legislature thereby provided a new and exclusive method of enforcing the provisions of sections 1941 and 1942. Not alone the 1926 enactment, but protection of the rights of the accused and a regard for essential concepts of fairness, call upon us to hold that the district attorney should employ the procedure prescribed in section 1943, and no other.

While the opinion in People v. Gowasky (244 N. Y. 451, 460) contains the statement that the “ old practice is still permissible ”, and while that statement is quoted in one other opinion (Matter of Dodd v. Martin, 248 N. Y. 394, 397; see, also, People v. Reese, 258 N. Y. 89,101), it may not be regarded as announcing the law of this state, for in no one of those cases was that question presented. As we have frequently declared, “No opinion is an authority beyond the point actually decided, and no judge can write freely if every sentence is to be taken as a rule of law separate from its association.” (Dougherty v. Equitable Life Assur. Soc., 266 N. Y. 71, 88; see, also, People v. Olah, 300 N. Y. 96, 101; Cardozo, The Nature of the Judicial Process, pp. 29-30.)

I would reverse the judgment of conviction.

Loughban, Ch. J., Lewis, Conway, Desmond and Dye, JJ., concur with Fboessel, J.; Fuld, J., dissents in opinion.

Judgment affirmed.