text:
    In the Matter of Sears, Roebuck & Co., Appellant, against Joseph D. McGoldrick, as Comptroller of the City of New. York, Respondent.
    Argued October 25, 1938;
    decided November 29, 1938.

      Robert D. Steefel, Sol M. Stroock, Peter I. B. Lavan and Bernard E. Brandes for appellant.
    The city of New York cannot tax under Local Law No. 20 of 1934, as amended, receipts from a transaction in which the contract of sale requires and contemplates the delivery of goods from outside of the State to the customer within the State. (Matter of National Cash Register Co. v. Taylor, 276 N. Y. 208; Matter of West Publishing Co. v. Taylor, 276 N. Y. 535; Matter of Compagnie Generate Transatlantigue v. McGoldrick, 254 App. Div. 237; Matter of Felt & Tarrant Mfg. Co. v. Taylor, 254 App. Div. 246; Montgomery Ward & Co. v. Frye, 277 Mich. 260; Sonneborn Bros. v. Cureton, 262 U. S. 506; Rearick v. Pennsylvania, 203 U. S. 507; Caldwell v. North Carolina, 187 U. S. 622; Dozier v. Alabama, 218 U. S. 124; Real Silk Hosiery Mills, Inc., v. City of Portland, 268 U. S. 325; Stewart v. Michigan, 232 U. S. 665; Cook v. Pennsylvania, 97 U. S. 566; Henneford v. Mason Co., 300 U. S. 577.) That “ ship direct ” sales contemplate and require interstate commerce is not altered by the fact that the contract of sale is made in New York city. (Sonneborn Bros. v. Cureton, 262 U. S. 506; Rearick v. Pennsylvania, 203 U. S. 507; Caldwell v. North Carolina, 187 U. S. 622; Dozier v. Alabama, 218 U. S. 124; Stewart v. Michigan. 232 U. S. 665; Brennan v. Titusville, 153 U. S. 289; Real Silk Hosiery Mills, Inc., v. City of Portland, 268 U. S. 325.) A local tax on any interstate activity violates the commerce clause of the Federal Constitution because, were it not for the protection of the commerce clause, multiple taxation would always ensue. (Case of the State Freight Tax, 15 Wall. 232; Robbins v. Shelby County Taxing District, 120 U. S. 489; Fargo v. Michigan, 121 U. S. 230; Galveston, H. & S. A. Ry. Co. v. Texas, 210 U. S. 217; New Jersey Bell Tel. Co. v. State Board of Taxes & Assessments, 280 U. S. 338; Cooney v. Mountain States Tel. & Tel. Co., 294 U. S. 384; Fisher’s Blend Station, Inc., v. State Tax Comm., 297 U. S. 650; Puget Sound

      Stevedoring Co. v. State Tax Comm., 302 U. S. 90; American Mfg. Co. v. St. Louis, 250 U. S. 459; Monamotor Oil Co. v. Johnson, 292 U. S. 86; Henneford v. Mason Co., 300 U. S. 577; Sonneborn Bros. v. Cureton, 262 U. S. 506.) The transactions take place not only in New York but also in New Jersey and Pennsylvania, and if these transactions could be lawfully taxed in New York they could likewise be lawfully taxed in New Jersey or Pennsylvania. (Adams Mfg. Co. v. Storen, 304 U. S. 307; James v. Bravo Contracting Co., 302 U. S. 134; Hans Rees’ Sons v. North Carolina, 283 U. S. 123; Shaffer v. Carter, 252 U. S. 37; People ex rel. Stafford v. Travis, 231 N. Y. 339; Kresge Co. v. Bennett, 51 Fed. Rep. [2d] 353; 287 U. S. 565; Fisher’s Blend Station v. State Tax Comm., 297 U. S. 650.)

      William C. Chanler, Corporation Counsel (Sol Charles Levine, Edmund B. Hennefeld, Jerome R. Hellerstein and Milton Sandberg of counsel), for respondent.
    A tax imposed upon every person who purchases goods at retail and obtains possession of them within the State for his own use and consumption, regardless of the source of the goods, cannot constitute such a burden upon interstate commerce as to violate the commerce clause of the Federal Constitution. (Western Live Stock v. Bureau of Revenue, 303 U. S. 250; Coverdale v. Arkansas-Louisiana Pipe Line Co., 303 U. S. 604; Baldwin v. Seelig, 294 U. S. 511; Wiloil Corp. v. Pennsylvania, 294 U. S. 169; Woodruff v. Parham, 8 Wall. 123; Hinson v. Lott, 8 Wall. 148; Superior Oil Co. v. Mississippi, 280 U. S. 390; Matter of Kesbec, Inc., v. McGoldrick, 278 N. Y. 293; Monamotor Oil Co. v. Johnson, 292 U. S. 86; Matter of Leavy, 85 Fed. Rep. [2d] 25; Henneford v. Mason Co., 300 U. S. 577; Edelman v. Boeing Air Transp., 289 U. S. 249; Nashville, C. & St. L. Ry. Co. v. Wallace, 288 U. S. 249; Gregg Dyeing Co. v. Query, 286 U. S. 472; Minnesota v. Blasius, 290 U. S. 1; Bacon v. Illinois, 227 U. S. 504;
      Susquehanna Coal Co. v. South Amboy, 228 U. S. 665; Brown v. Houston, 114 U. S. 622.) The transactions are purely local in all their material aspects, and could not be taxed in any other jurisdiction. (Alpha Portland Cememt Co. v. Massachusetts, 268 U. S. 203; Cheney Bros. Co. v. Massachusetts, 246 U. S. 147; Case of State Freight Tax, 15 Wall. 232; Fargo v. Michigan, 121 U. S. 230; Minnesota v. Blasius, 290 U. S. 1; Western Live Stock v. Bureau of Revenue, 303 U. S. 250.) Interstate commerce was neither required nor contemplated by the transactions here involved. (Matter of Mc Neel Marble Co. v. Graves, 247 App. Div. 242; 275 N. Y. 601; Kansas City Structural Steel Co. v. Arkansas, 269 U. S. 148; Browning v. City of Waycross, 233 U. S. 16; Rearick v. Pennsylvania, 203 U. S. 507; Wiloil Corp. v. Pennsylvania, 294 U. S. 169.) Since the subject of the tax is a purchase which is local to New York city only, there is no possibility of multiple taxation. (Monamotor Oil Co. v. Johnson, 292 U. S. 86; Henneford v. Mason Co., 300 U. S. 577; Coverdale v. Arkansas-Louisiana Pipe Line Co., 303 U. S. 604.) There is no possibility of multiple taxation since the tax is borne by the purchaser, who is subject to tax in no other State. (Helvering v. Mountain Producers Corp., 303 U. S. 376; Helvering v. Gerhardt, 304 U. S. 405; Matter of Leavy, 85 Fed. Rep.. [2d] 25.)
   Crane, Ch. J.

By Local Law No. 24 (published as No. 25) of 1934, enacted pursuant to authorization granted by the State Legislature (Laws of 1934, ch. 873), the city of New York imposes a tax of two per cent upon receipts from every sale of tangible personal property sold within the city. The tax must be paid by the purchaser to the vendor, who is required to keep records and make a return to the Comptroller of his receipts and of the tax payable thereon. A sale is defined as any transfer of title or possession, or both, for a consideration. A sale at retail is a sale for any purpose other than for resale. Although ordinarily the tax is collected by the vendor from the purchaser, the Comptroller may collect the tax directly from the purchaser. Where the vendor fails to collect the tax the purchaser is required to file a return and pay the tax directly to the Comptroller.

Sears, Roebuck & Co. has been required to pay a tax for the years 1934 and 1935 upon sales made at its stores in New York city, the goods or merchandise being sent from its warehouses or plants in other States. Payment has been resisted under the plea that such a tax is unconstitutional, as a burden upon interstate commerce. This tax has been sustained by the Appellate Division.

The petitioner conducts and operates nine retail stores within the city of New York. The principal office of the petitioner, which is a New York corporation, is at Chicago, Illinois. It has no factory or warehouse in the city of New York except a piano factory and except one warehouse in the borough of Brooklyn, which stores ready to wear suits, dresses, coats and other articles of clothing, piece goods, notions and other light merchandise. Sears, Roebuck & Co. maintains a control store at Philadelphia, Pennsylvania, which is a distributing plant for all of the New York stores and other stores in various parts of the east of the United States, and the executives at this control store have charge of and supervision over the New York stores. The company also maintains a factory at Port Newark, New Jersey, where there are manufactured and assembled bulky articles, such as mill work, roofer materials, heating equipment and the like. The articles involved on this review are described as “ ship direct orders.” Certain articles . which are large and bulky, or which must be assembled and put together before they are ready for delivery to the customer, are not kept in stock in the company’s New York stores, but are kept either at the control store in Philadelphia, or are kept or manufactured upon order, at the factory at Port Newark, New Jersey. At Boston, Massachusetts, there is the Boston mail order control store.

The regional auditor gave the following testimony: “Q. When you make a sale or take an order for this type of merchandise do you have samples at your store? A. There are samples on display in the store and that is all that is in the store; because of the type of merchandise, it is entirely too bulky to carry it in the stores.”

The practice, so the petitioner stated in its petition for review, is for a customer to come to one of the retail stores in New York city and order the merchandise in question. He is informed by the salesman that the merchandise is not kept in stock, but must be ordered from either Philadelphia or Port Newark, as the case may be. His order is taken and if it is a cash transaction, he pays his money, or, if it is a credit transaction, his credit is checked. A sales slip is made out, which states that the merchandise is to be shipped either from the Philadelphia control store or Port Newark direct to the customer at his home within the city of New, York. A duplicate of the sales slip is sent to Port Newark or Philadelphia. The order is filled and is shipped by United States mail or by common carrier. The sample of sales slip, taxpayer’s exhibit No. 6, for horsehide coat, size 48, simply has written diagonally across the bottom in lead pencil, “ Ship from Phila control Store.” These sales slips are not signed by the purchaser.

Approximately eighty-five per cent of the sales at New York city stores are filled from a stock of merchandise kept in New York city. As to the remaining fifteen per cent, the goods are standard merchandise regularly carried in stock by the company as a retail dealer, none of which is manufactured to order, with the exception of mill work. At the nine retail stores during the period in question the appellant sold $2,750,857.99 worth of goods. Of these sales, $2,288,113.59 represented orders filled from stock kept in New York city stores or in the warehouse maintained in Brooklyn. The balance of $462,744.40 consisted of sales filled from stock held in warehouses maintained in Philadelphia, Port Newark or Boston.

The two per cent tax on the sales of merchandise in the stores in New York city has been paid. This appeal involves solely the tax on the shipped direct orders.” All parties to the controversy concede that the contracts of sale or the sales were made in New York city. The delivery was made from the company’s warehouse or control stores according to shipping directions directly to the purchaser’s home.

When the purchaser entered one of the defendant’s stores and made a contract to buy certain merchandise, according to the sample displayed, his purpose and object were to procure the article, irrespective of the place from which it was delivered. It made no difference to him whether it came from Philadelphia, Port Newark or Boston, as long as he got it on time and in good condition. The delivery from the warehouses of the appellant outside the State was a matter of convenience or economy in the methods of conducting the appellant’s business. It cannot be said that the shipments out of the State were one of the important features of the contract. It was incidental, to the contract, the obligation of the defendant being to deliver the article purchased. From where it should come was a matter of its choice.

On these facts, has interstate commerce been burdened or interfered with in such a way as to make this city tax upon the proceeds of these “ shipped direct orders ” unconstitutional? In the first place, Sears, Roebuck & Co. paid no more tax on these articles which it had delivered from its stores in Philadelphia or Port Newark or Boston than it paid on the goods sold and delivered from its nine stores in New York city. It paid no more tax than a seller would have paid or, to be more exact, a purchaser would have paid, if the goods had been purchased and delivered in New York city from any other vendor. There was here no. discrimination against the interstate commerce or the shipment of goods from out the State. Neither could there possibly be any double taxation involved. The sale was complete in New York city; the price was to be paid in New York city; in every respect it was a New York State contract, governed by the laws of this State. The delivery of standard stock goods for the convenience of the seller was made from warehouses or storeplaces outside of the State. Under such circumstances, to permit Sears, Roebuck & Co. to evade this tax would really be a discrimination against people doing business within the city of New York with storehouses or mills there. Besides, if such sales were to go untaxed, a door would be open for an evasion, unfair indeed to those who did not care to resort to such methods. Merchandise could be stored or kept outside the State and sold by sample within the State, without paying a tax. Not every merchant can afford such storehouses. No principle of interstate commerce forces us to such a conclusion. Even interstate business must pay its way.” (Postal-Telegraph Cable Co. v. City of Richmond, 249 U. S. 252, 259.)

The counsel have relied upon Matter of National Cash Register Co. v. Taylor (276 N. Y. 208). The sales there were made and consummated in Ohio where the company approved, accepted and executed the orders or sales. To the same effect was Matter of West Publishing Co. v. Taylor (276 N. Y. 535). The reasons and principles here expressed find their source or, rather, their support, in such cases as Adams Manufacturing Co. v. Storen (304 U. S. 307); Coverdale v. Arkansas-Louisiana Pipe Line Co. (303 U. S. 604); Western Live Stock v. Bureau of Revenue (303 U. S. 250); Henneford v. Mason Co. (300 U. S. 577); Wiloil Corp. v. Pennsylvania (294 U. S. 169); Monamotor Oil Co. v. Johnson (292 U. S. 86); Banker Brothers Co. v. Commonwealth of Pennsylvania (222 U. S. 210).

The order should be affirmed, with costs.

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

Order affirmed.


source: Caselaw Access Project

author:
Crane, Ch. J.
      Finch, J.

license: Public Domain

text:
    In the Matter of Compagnie Generale Transatlantique, Respondent, against Joseph D. McGoldrick, as Comptroller of the City of New York, Appellant.
    Argued October 25, 1938;
    decided November 29, 1938.

      William C. Chanler, Corporation Counsel (Sol Charles Levine, Edmund B. Hennefeld and Jerome B. Hellerstein of counsel), for appellant.
    A general tax levied alike upon all persons who purchase and acquire within the State goods sold at retail does not violate the commerce clause of the Federal Constitution when applied alike to purchases of goods stored within and without the State at the time of purchase. (Wiloil Corp. v. Pennsylvania, 294 U. S. 169.) The tax at bar must be upheld. (Wiloil Corp. v. Pennsylvania, 294 U. S. 169; Monamotor Oil Co. v. Johnson, 292 U. S. 86; Hump Hairpin Co. v. Emmerson, 258 U. S. 290; Banker Bros. Co. v. Pennsylvania, 222 U. S. 210; Matter of McNeel Marble Co. v. Graves, 247 App. Div. 242; 275 N. Y. 601; Alpha Portland Cement Co. v. Massachusetts, 268 U. S. 203; Case of State Freight Tax, 15 Wall. 232; Fargo v. Michigan, 121 U. S. 230; Minnesota v. Blasius, 290 U. S. 1; American Mfg. Co. v. St. Louis, 250 U. S. 459; Western Live Stock v. Bureau of Revenue, 303 U. S. 250.) Taxes upon local activities may be measured by receipts from sales of goods shipped across State lines. (American Mfg. Co. v. St. Louis, 250 U. S. 459; Western Live Stock v. Bureau of Revenue, 303 U. S. 250.) Since the subject of the tax is a purchase which is local to New York city alone, there is no possibility of multiple taxation, (Monar

      motor Oil Co. v. Johnson, 292 U. S. 86; Henneford v. Mason Co., 300 U. S. 577; Coverdale v. Arkansas-Louisiana Pipe Line Co., 303 U. S. 604.) There is no possibility of multiple taxation since the tax is borne by the purchaser, who is subject to tax in no other State. (James v. Dravo Contracting Co., 302 U. S. 134; Helvering v. Mountain Producers Corp., 303 U. S. 376; Helvering v. Gerhardt, 304 U. S. 405; Matter of Leavy, 85 Fed. Rep. [2d] 25.

      Herbert K. Stockton for respondent.
    The imposition of the sales tax upon the transactions is in violation of the United States Constitution because it is a direct burden upon interstate commerce. The sales and deliveries are transactions in interstate commerce. (Oklahoma v. Kansas Natural Gas Co,, 221 U. S. 229; Welton v. Missouri, 91 U. S. 275; Rearick v. Pennsylvania, 203 U. S. 507; Dahnke-Walker Milling Co. v. Bondurant, 257 U. S. 282; Kidd v. Pearson, 128 U. S. 1; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211; Lemke v. Farmers Grain Co., 258 U. S. 50; American Express Co. v. Iowa, 196 U. S. 133; Sonneborn Bros. v. Cureton, 262 U. S. 506; Matter of McNeel Marble Co. v. Graves, 247 App. Div. 242; Western Union Tel. Co. v. Foster, 247 U. S. 105; Federal Trade Comm. v. Pacific States Paper Trade Assn., 273 U. S. 52.) The city of New York is without power to burden interstate commerce by imposing a tax on the interstate sales. (Robbins v. Shelby Taxing District, 120 U. S. 489; Lyng v. Michigan, 135 U. S. 161; Kansas City Ry. Co. v. Kansas, 240 U. S. 227; Ozark Pipe Line Corp. v. Monier, 266 U. S. 555; Helson & Randolph v. Kentucky, 279 U. S. 245; Minnesota v. Blasius, 290 U. S. 1; Spalding & Bros. v. Edwards, 262 U. S. 66; American Mfg. Co. v. St. Louis, 250 U. S. 459; Cudahy Packing Co. v. Minnesota, 246 U. S. 450; Crew Levick Co. v. Pennsylvania, 245 U. S. 292; Pollock v. Farmers Loan & Trust Co., 157 U. S. 429; Patton v. Brady, 184 U. S. 608; Matter of National Cash Register Co. v. Taylor, 276 N. Y. 208; 303 U. S. 656.) The sales tax is not a tax upon the purchaser nor upon the seller, but upon the transaction of sale. (Panhandle Oil Co. v. Knox, 277 U. S. 218; Indian Motorcycle Co. v. United States, 283 U. S. 570; Robbins v. Shelby Taxing District, 120 U. S. 489; Dahnke-Walker Milling Co. v. Bondurant, 257 U. S. 282; Matter of McNeel Marble Co. v. Graves, 247 App. Div. 242.)

      H. Maurice Fridlund and James R. Roberts for Kirlin, Campbell, Hickox, Keating & McGrann, amici curise.

    The sales involved were transactions in interstate commerce. (Oklahoma v. Kansas Natural Gas Co., 221 U. S. 229; Western Oil Refining Co. v. Lipscomb, 244 U. S. 346; Welton v. Missouri, 91 U. S. 275; Rearick v. Pennsylvania, 203 U. S. 507; Dahnke-Walker Milling Co. v. Bondurant, 257 U. S. 282; Kidd v. Pearson, 128 U. S. 1; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211; Lemke v. Farmers Grain Co., 258 U. S. 50; American Express Co. v. Iowa, 196 U. S. 133; Sonneborn Bros. v. Cureton, 262 U. S. 506; McCall v. California, 136 U. S. 104; Federal Trade Comm. v. Pacific States Paper Trade Assn., 273 U. S. 52; Cleveland Refining Co. v. Phipps, 277 Fed. Rep. 463; 261 U. S. 449; Matter of McNeel Marble Co. v. Graves, 247 App. Div. 242; 275 N. Y. 601; Western Union Tel. Co. v. Foster, 247 U. S. 105.) The sales tax would lay a direct burden upon interstate commerce. (Lyng v. Michigan, 135 U. S. 161; Kansas City Ry. Co. v. Kansas, 240 U. S. 227; Ozark Pipe Line v. Monier, 266 U. S. 555; Helson & Randolph v. Kentucky, 279 U. S. 245; Anglo-Chilean Nitrate Corp. v. Alabama, 288 U. S. 218; Spalding & Bros. v. Edwards, 262 U. S. 66; American Mfg. Co. v. St. Louis, 250 U. S. 459; Cudahy Packing Co. v. Minnesota, 246 U. S. 450; Crew Levick Co. v. Pennsylvania, 245 U. S. 292; Pollock v. Farmers Loan & Trust Co., 157 U. S. 429; Patton v. Brady, 184 U. S. 608.) The tax assessed against petitioner is invalid. (Matter of National Cash Register Co. v. Taylor, 276 N. Y. 208; 303 U. S. 656; Southern Pacific Co. v. Kentucky, 222 U. S. 63; People ex rel. Astor Trust Co. v. State Tax Comm., 174 App. Div. 320; Matter of West Pub. Co. v. Taylor, 276 N. Y. 535; 303 U. S. 656.)
   Crane, Ch. J.

This appeal involves the same question as that presented in its companion case, Matter of Sears, Roebuck & Co. v. McGoldrick (279 N. Y. 184). Should the principles there stated lead to a different result on the facts in this case?

The Standard Oil Company, having numerous oil tanks in New Jersey, by New York contract sold and delivered oil to the respondent’s steamships at its piers in New York city. A tax upon these sales for the period from December 10, 1934, to December 31, 1935, has been set aside below, as an illegal burden upon interstate commerce. The only distinction upon the facts in this case and those in the Sears, Roebuck & Co. case rests in the nature of the respondent’s business. The [respondent buys two classes of oil for steamships — fuel oil, and Diesel fuel oil. In the briefs these are referred to as “ Standard Bunker Fuel Oil ” and “ Standard Diesel Fuel Oil.” The storage tanks containing large quantities of these oils are at Bayonne, New Jersey.

The contract for the period in question for fuel oil is contained in a letter accepting an offer to extend a previous fuel oil contract until December 31, 1936. It states that the Standard Oil Company of New Jersey is to supply the total fuel oil requirements at New York of all the oil-burning vessels of the Compagnie Generale Transatl antique during the period of the contract up to a maximum of four million barrels per year. The maximum price is fixed at $1.10 per barrel, with provision for increases. The contract for the Diesel fuel was also made at New York for a period up to December 31, 1935, not to exceed fifteen thousand barrels in any one month, and up to, but not exceeding, one hundred thousand barrels during the term of one year. Delivery shall be made by barge provided by the seller to the buyer’s vessel at dock within the harbor limits at New York, or to the buyer’s vessel alongside dock of seller at New York. The price varies according to the place of delivery.

These two companies have been doing business for many years, and it was well understood that the oil of the Standard Oil Company of New Jersey was stored in thousands of tanks in Bayonne, New Jersey. So far as this record shows, it had no storage facilities in New York city. As the Normandie or the Paris or the Champlain or the Lafayette approached the harbor in New York, messages were sent to the Standard Oil Company’s office in New York city indicating the amount of fuel that would be necessary, and with the docking of the steamer at the steamship company’s pier, barges of the oil company would soon be alongside prepared to pump the oil into the steamer’s tanks. The oil was brought from New Jersey by the oil company’s barges. Both the Standard Oil Company of New Jersey and the Compagnie Generale Transatlantique were doing business in the city of New York. The latter had its piers and office at the foot of Fiftieth street, and places of business at 19 State street and 610 Fifth avenue, Manhattan. The offices of the Standard Oil Company of New Jersey were at 26 Broadway, New York city.

Unless there be some material difference between the sales in this case and those in the Sears, Roebuck case, we shall be obliged to sustain the tax. What difference do we find? In the first place, the Standard Oil Company of New Jersey maintains a large number of oil tanks in Bayonne, New Jersey, and the vicinity. The steamship company knew that the nature of the business required oil to be stored in large quantities, and that the oil company had such a plant, and delivered its oil by drawing it off from, these tanks into ships at Bayonne, or else into barges, to be carried to vessels at the port of New York and elsewhere. While the purchase or the contract of sale was made in New York, it was with a view of getting this specific oil, the product of the Standard Oil Company of New Jersey, from its plant and tanks in New Jersey. The product in New Jersey, kept there in tanks, was the thing bargained for. So £or as the record in this case goes, the contract centers'"around the purchase of the New Jersey oil of the kind and quantity specified. The delivery at the Port of New York was made necessary because of the draft of the steamers. The cost of transportation from Bayonne to the port of New York increased the price.

In the Sears, Roebuck case the purchaser bought an article in New York according to sample. As long as he got what he ordered, it was indifferent to him where it came from. The merchandise was very largely stock goods and kept for the convenience of the seller at various depots throughout the State. The ease with which the tax could be evaded by such class of merchandise being stored without the State and sold in New York city by sample, was a matter worthy of consideration, as bearing upon competition with New York goods.

Here, on the other hand, there is a special product of the Standard Oil Company of New Jersey which has to be kept in great receptacles built for the purpose which we can treat by analogy as a manufacturing plant. It is the articles of this plant in New Jersey which the purchaser seeks. At the office of the seller in New York it bargains for this oil to be put in its ships. We_think, under the principles stated in the Sears, Roebuck case and the authorities there cited, that this is a contract for interstate shipments, and that the tax upon such a sale is a direct tax upon interstate commerce.

The order should be affirmed, with costs.

Finch, J.

(dissenting). The contract involved in the case at bar admittedly was made in New York for delivery in New York of a standard kind of oil procurable in the open market in New York or elsewhere, at an open market price. While customarily coming from New Jersey, it is admitted that in some instances the seller has resold oil which, pursuant to its rights under the contract, it had purchased in New York. When sold and delivered in this State, the fact that it may be used thereafter in foreign commerce does not prevent it from being taxable as a sale here. (Edelman v. Boeing Air Transport, Inc., 289 U. S. 249.) In addition, since no burden is laid on interstate commerce as such, and no other or different burden than if deliveries had been made by intrastate transportation in New York, the tax is a non-discriminatory one and cannot in any view constitute an undue burden on interstate commerce. (Wiloil Corp. v. Pennsylvania, 294 U. S. 169.)

The order appealed from should be reversed and the determination of the Comptroller reinstated.

Lehman, O’Brien, Hubbs, Loughran and Rippey, JJ., concur with Crane, Ch. J.; Finch, J., dissents in opinion.

Order affirmed.


author: O’Brien, J.

text:
    In the Matter of Leopold V. Rossi, Individually and as Chairman of the Executive Committee of the Greater New York City Lifeguards Association, Appellant and Respondent, against Robert Moses, as Commissioner of Parks of the City of New York, et al., Defendants, and Paul J. Kern et al., Constituting the Municipal Civil Service Commission of the City of New York, Respondents and Appellants.
    Argued October 4, 1938;
    decided November 29, 1938.

      Leopold F. Rossi, in person, and John J. Gussak for petitioner, appellant and respondent.
    The new medical and physical examination order is illegal. (Matter of Sandford v. Finegan, 276 N. Y. 70; Matter of Fornara v. Schroeder, 261 N. Y. 363; Opinion of Attorney-General, 24 St. Dept. Rep. 383.) Petitioner and all others similarly situated must be certified and reinstated in accordance with section 31 of the Civil Service Law (Cons. Laws, ch. 7). (Matter of Woods v. Finegan, 246 App. Div. 271; Henry Hudson Parkway Authority v. Kerns, N. Y. L. J. May 5, 1938.)

      William C. Chanler, Corporation Counsel (Samuel J. Silverman and Paxton Blair of counsel), for defendants, respondents and appellants.
    Petitioner was properly subject to both the medical test and the swimming test. (Conner v. City of New York, 5 N. Y. 285; Koso v. Greene, 260 N. Y. 491.) The affirmance having been unanimous upon the petitioner’s appeal, his appeal should be dismissed. (De Santis v. Luger, 257 N. Y. 476.)
   O’Brien, J.

In the year 1927 petitioner passed an open competitive examination for the position of municipal lifeguard and was appointed to that position which embraces only temporary employment for seasonal work.” Each year, when the bathing season at the beaches had expired, petitioner was notified that bis services were terminated and that his name would be placed upon the preferred fist of suspended employees and made eligible for re-employment. Since the termination of his services for the 1937 season, his name has been upon the eligible list. He has received notice from the Municipal Civil Service Commission to submit to an examination for a medical and physical test and to report for a practical test to swim fifty yards in thirty-five seconds. Petitioner refuséd to submit to the new examination and the relief which he demands is that the examination be canceled and that the Municipal Civil Service Commission certify the names of persons on the preferred list for lifeguards in accordance with their standing on the list. The courts below have decided that petitioner is obliged to submit to a physical examination in accordance with section 14 of the Civil Service Law (Cons. Laws, ch. 7) but is not required to undergo the practical swimming test. He has once passed an open competitive examination for the position of lifeguard but that examination occurred ten years ago. A physical examination for the peculiar position to which petitioner seeks to be restored must necessarily include not only an examination in respect to a generally sound condition of his body but also such a physical condition as is directly related to the duties to be performed by him as a lifeguard. He might, in a general sense, be free from illness or disease but after the passage of ten years time be unable, physically, to perform the duties of lifeguard. The physical test of his ability to act as lifeguard includes not only general physical health but also such a condition of bodily strength as would enable him to rescue drowning persons on the municipal beaches. We think, therefore, that the provisions of section 14 of the Civil Service Law, empowering the Civil Service Commission to refuse * * * to certify an eligible * * * who is physically so disabled as to be rendered unfit for his performance of the duties of the position to which he seeks appointment,” applies to a prospective appointee to the position of lifeguard. The physical qualification of petitioner to perform the duties of lifeguard can be determined only by the physical test which the Civil Service Commission has prescribed. Physical ability to perform the duties of this position can be ascertained in no other way.

The orders should be modified by reversing so much of the order as directs defendants not to require petitioner to take and pass the practical test as a condition of certifying him for appointment to the position of lifeguard and as so modified affirmed, with costs to the defendants, respondents and appellants.

The motion by the defendants, respondents and appellants, to dismiss the appeal taken by the petitioner should be denied.

Crane, Ch. J., Hubbs, Lotjghran, Finch and Rippey, JJ., concur; Lehman, J., taking on part.

Ordered accordingly.


text:
    The People of the State of New York, Respondent, v. Vincent Forte, Appellant.
    Argued October 28, 1938;
    decided November 29, 1938.

      Paul O’Dwyer, Leon Fishbein and Irving Wharton for appellant.
    It was error for the trial court to have denied defendant the right of being examined under a pathometer or “ lie detector ” and of submitting the result of such test to the jury. (People v. Kenny, 167 Misc. Rep. 51.)

      William F. X. Oeoghan, District Attorney {Edward H. Levine of counsel), for respondent.
    The trial court properly denied the appellant’s request to be examined under a pathometer or “ lie detector,” thereby excluding the result of such test from the jury. (Frye v. United States, 54 App. D. C. 46; 293 Fed. Rep. 1013; State v. Bohner, 210 Wis. 651.)
   O’Brien, J.

On the night of March 16, 1937, Berl Wolkowitz, in his store on Sutter avenue near Jerome street in Brooklyn, received two bullet wounds in the abdomen from a .38 calibre revolver which resulted next day in his death.

No witness testified that he was present at the time of the shooting, but defendant, aged twenty years, has been convicted, by a chain of circumstances, as the perpetrator of the crime. The witness Siegel testified that a few minutes prior to the homicide he was in Wolkowitz’s store and that a young man, whom he positively identified as defendant, entered. The witness Schumer testified that, after he heard the sound of the shots, he observed a young man, whom he also positively identified as defendant, run from the doorway of Wolkowitz’s store and then walk within three feet of him. His right hand was hidden inside his coat. This witness declared that he looked directly at this young man and had a full view of him. The witness Stewart, who swore that he looked at him face to face, is equally certain that defendant is the man whom he saw coming from Wolkowitz’s store, walking rapidly, later running, and carrying a gun in his hand which later he put under his coat. Although the homicide was committed March 16, 1937, no arrest was made until June 26th of that year when defendant was taken into custody charged with another offense. On his person was found a .38 calibre revolver in respect to which a ballistic expert expressed his opinion that it is the same weapon from which were discharged the two bullets which killed Wolkowitz. When interrogated by the police concerning his possession of the gun, defendant first stated that he had found it on the street a few minutes prior to his arrest. After he became convinced that the police proved this statement false, he admitted that he had the weapon since the previous Christmas holidays. Defendant took the stand and denied that he shot Wolkowitz or that he was in the store on March 16th. Witnesses testified that his reputation for peacefulness was good, although they knew that he had once been convicted of possessing burglar tools. The verdict is not against the weight of evidence. The jury, accepting the credibility of the People’s witnesses, could and did conclude from the evidence that, beyond a reasonable doubt, defendant is the man who shot Wolkowitz.

An issue of law is raised by defendant which requires serious consideration. After all the evidence had been produced for the jury’s consideration, defendant’s counsel moved to reopen the case and be permitted to take defendant from Kings county to a laboratory in Bronx county to be examined under the pathometer, commonly known as the lie detector.” His motion was denied. We cannot take judicial notice that this instrument is or is not effective for the purpose of determining the truth. Can it be depended upon to operate with complete success on persons of varying emotional stability? The record is devoid of evidence tending to show a general scientific recognition that the pathometer possesses efficacy. Evidence relating to handwriting, finger printing and ballistics is recognized by experts as possessing such value that reasonable certainty can follow from tests. Until such a fact, if it be a fact, is demonstrated by qualified experts in respect to the lie detector,” we cannot hold as matter of law that error was committed in refusing to allow defendant to experiment with it.

Other objections, raised by exceptions, to certain rulings of the trial court are technical in their essence and, if error was committed, it was of such a nature that, in view of the strong evidence against defendant, it could not reasonably be said to have affected the result.

The judgment of conviction should be affirmed. (See 279 N. Y. 788.)

Crane, Ch. J., Htjbbs, Loughran, Finch and Rippey, JJ., concur; Lehman, J., concurs in result.

Judgment of conviction affirmed.


author:
Crane, Ch. J.
      Lehman, J.

text:
    Transbel Investment Co., Inc., Appellant, v. Jean G. Venetos, Respondent.

      Argued October 4, 1938;
    decided November 29, 1938.

      Manfred Nathan and Harold N. Schwinger for appellant.
    The note is a sealed instrument as a matter of law. (O’Keefe v. French, 239 App. Div. 498; American Law Institute, Restatement of Law of Contracts, § 98 [1] and comment [a]; Federal Reserve Bank v. Kalin, 81 Fed. Rep. [2d] 1003; Langley v. Owens, 52 Fla. 302; Warren v. Lynch, 5 Johns. 239; Merritt v. Cornell, 1 E. D. Smith, 336; Caputo v. Di Loreto, 148 Atl. Rep. 367; Taylor v. Glaser, 2 S. & R. [Pa.] 502; Austin v. Whitlock, 1 Munf. [Va.] 487; Lagumis v. Gerard, 116 Misc. Rep. 471; National Bank of Rochester v. Erion-Haines Realty Co., 224 App. Div. 642; Barnard v. Gantz, 140 N. Y. 249; Harris v. Shorall, 230 N. Y. 343.) The court below was in error in its finding that there was no evidence that defendant ever intended to make the note a sealed instrument; but, on the contrary, if the Court of Appeals holds the evidence insufficient to constitute the note a specialty as a matter of law, it should, nevertheless, reverse on the ground that there is a question of fact as to whether the instrument was sealed. (O’Keefe v. French, 239 App. Div. 498; Drexler-Rochester Properties, Inc., v. Paris, 236 App. Div. 409; Nix v. Low, 165 Misc. Rep. 484.)

      Joesph Rosenzweig and Saul Bergman for respondent.
    The promissory note is not a sealed instrument as a, matter of law. (Jacksonville Co. v. Hooper, 160 U. S. 514; Matter of Pirie, 198 N. Y. 209; Caputo v. DiLoreto, 148 Atl. Rep. 367; Empire Trust Co. v. Heinze, 242 N. Y. 475; Weeks v. Esler, 143 N. Y. 374; Drexler-Rochester Properties, Inc., v. Paris, 236 App. Div. 409; Nix v. Low, 165 Misc. Rep. 484; Cochran v. Taylor, 273 N. Y. 172.)
   Crane, Ch. J.

The complaint in this action was dismissed on motion made under rule 107 of the Rules of Civil Practice, subdivision 6, on the ground that the cause of action did not accrue within the time limited by law for the commencement thereof. The complaint is brought upon a promissory note which, if it be under seal, comes within the twenty-year Statute of Limitations. The question presented on the motion was whether the note was a sealed instrument merely because it had opposite the maker’s name the word Seal,” and, if not, whether a question of fact was presented calling for a trial, whereon the plaintiff would have the burden of proving that the note was intentionally sealed.

On the 10th day of March, 1925, A: J. Richey and his wife, Dorothy D. Richey, of Dade county, Florida, entered into a contract to sell real property in Florida to the present defendant, Jean G. Vénetos. The contract called for installment payments secured by promissory note. The contract was concededly under seal. The complaint alleges the contract, and that the amount of the purchase price was past due and owing; that the Richeys tendered to the defendant a good and sufficient deed conveying good and marketable title, and demanded payment of the note sued upon; and that the defendant refused to pay or accept the deed. The note in question was signed and executed in Brooklyn, New York, March 10, 1925, for $12,183.50, payable at the Corn Exchange Bank, Flatbush Avenue Branch, in Brooklyn. It is Signed “ J. G. Vénetos ('Seal).” The word “ seal ” is printed on the paper, so that we may assume that it was there at the time Venetos signed the note. A. J. Richey, the payee of the note, transferred his interest therein to the plaintiff. According to the authorities in this State, this promissory note is not a sealed instrument, in the absence of any explanation as to how or under what circumstances it was made, or any statements or facts showing an intention on the part of the maker to adopt the seal or to create a sealed instrument.

Matter of Pirie (198 N. Y. 209) related to an ordinary form of promissory note bearing the name of the maker and, after the signature, a seal. There was nothing in the body of the note or the signing of it which indicated that it was intended to be a sealed instrument. This court said: “ Ordinarily a seal affixed to a paper in the form of a promissory note changes it into a sealed instrument, which, under the Statute of Limitations, may run for twenty years; but the mere attaching of a seal after the signature does not raise a presumption that the note is a sealed instrument, unless there be a recognition of the seal in the body of the instrument, by some such phrase as 1 witness my hand and seal ’ or signed and sealed.’ The reason for this is that the mere attaching of a seal after a signature without any recognition of it in the body of the note or in connection with the signing, in the absence of evidence showing the time when, and the person by whom, the seal was affixed, would open the door to frauds and forgeries and enable evil-disposed persons to prevent the running of the six-years’ Statute of Limitations, by merely attaching at the end of the note a seal. Under such circumstances a seal is regarded merely as surplusage and the character of the note is not changed” (p. 215).

This rule of the Pirie case has been followed by the courts of this State and in other States, and recognized as the rule of New York in the text books. We again referred to it in Empire Trust Co. v. Heinze (242 N. Y. 475, 479), which related to an instrument described as having been signed and sealed, but which in fact lacked a seal. We said, referring to section 44 of the General Construction Law (Cons. Laws, ch, 22), which defined the nature of a seal: Intention, therefore, cannot make a seal where this provision has not been complied with. * * * The reverse of this proposition does not hold true. The seal annexed to an ordinary obligation like a promissory note does not necessarily make it a sealed instrument, in the absence of any indication that such was the intention.” (Citing Matter of Pirie.)

Again, in Cochran v. Taylor (273 N. Y. 172, 178), we noted that in the body of the instruments the parties had recited that they attached their seals “ thereby establishing their intention concerning the sealing of the instrument,” citing the Pirie case. The authority of the Pirie case has been recognized in Brooklyn Public Library v. City of New York (222 App. Div. 422; affd., 250 N. Y. 495); Drexler-Rochester Properties, Inc., v. Paris (236 App. Div. 409), where, at page 410, the court said: “ The use of the letters ‘ L. S.’ appearing after the signature of a party to an instrument not required by law to be under seal is not alone sufficient to constitute the instrument subscribed a sealed instrument.”

In Caputo v. DiLoretto (110 Conn. 413) a promissory note was signed by the defendant on a line at the end of which in brackets was the word “ seal.” It was held that the instrument was not a contract under seal, and that the six-year Statute of Limitations applied. The court said: “ To constitute such an instrument a contract under seal there must therefore be some recognition of the fact on the face of the instrument, other than the mere addition of such word or letters, * * * The fact that the maker of the instrument himself wrote the word seal ’ or the letters ‘ L. S.’ after his signature at the time that he executed it, or that the instrument was one whose validity was dependent upon its being under seal, might indicate his intention ” (p. 416). The Pirie case (198 N. Y. 209) was cited as an authority. (See, also, Williams v. Turner, 208 N. C. 202; and to the same effect, Matter of Stamford Road Construction Co., 5 Fed. Supp. 651, which cites not only Matter of Pirie, 198 N. Y. 209, but Weeks v. Esler, 143 N. Y. 374, which preceded the Pirie case as an, authority upon the same point; 1 Williston on Law of Contracts, § 209, p. 419; 25 Am. & Eng. Encyclopaedia of Law [2d ed.], p. 76; Breitling v. Marx, 123 Ala. 222; Buckingham v. Orr, 6 Col. 587; Chambers v. Kingsbeery, 68 Ga. 828; Bradley Salt Co. v. Norfolk Importing & Exporting Co., 95 Va. 461; 19 Am. & Eng. Annotated Cases, p. 678.)

The statement in the Pirie case, that there must be recognition in the instrument of the seal, was nothing new to the law, as it is found in Newbold v. Lamb as early as 1819 (5 N. J. L. 449). (See, also, Brannan’s Negotiable Instruments Law [6th ed.], p. 191; 34 Yale Law Journal, p. 786; 4 N. Y. Law Review, p. 432; American Law Institute, Restatement of the Law of Contracts, N. Y. Annotations, vol. 1, § 100.)

The statement in the headnote of Barnard v. Gantz (140 N. Y. 249, 250) is misleading because under the letters “ L. S.” was the phrase, Sealed and delivered in the presence of John Weber,” and beneath this an acknowledgment.

The law, therefore, of this State is well established and has been followed and recognized, as before stated, in other courts. A promissory note bearing a signature, after which come the printed letters “ L. S.” is not in and of itself sufficient to constitute a specialty, a sealed instrument. There must be in the instrument some acknowledgment or recognition of the seal or else there must be proof that it was the intention of the parties to make it a sealed instrument. This proof may refer to words spoken or to circumstances of execution leading to the inference that the parties intended to use the seal.

The Pirie case recognized that such proof might be forthcoming by citing Smith v. Henning (10 W. Va. 596, 631), which stated: “ To constitute a sealed instrument, there must be a seal or scroll affixed, and some recognition of it in the instrument, or some evidence of it aliunde; but it can never be maintained that such evidence, whether by the proof of witnesses or acknowledgment of the party, will not supply the place of such recognition.”

The affidavit of the defendant on the motion to dismiss the complaint stated that when the note was signed there was nothing said nor was there anything discussed, nor was there any intention that the note be considered a sealed instrument within the purview of the statute. The plaintiff met this by the affidavit of A. J. Richey, the payee. He denies that it was never the intention to seal the note but, on the contrary, asserts that the defendant did intend to affix his seal, and that the note was given in connection with the real estate transaction; that the note was given as part of a consideration for an instrument under seal, and that it was understood between the parties to the contract and to the note that both were to be sealed instruments.”

We think these allegations are sufficient to create a question of fact regarding the nature of this instrument. Standing alone and by itself, unexplained, it is not a sealed instrument, but in view of these denials and allegations, the plaintiff may prove that it was the intention of the parties to make it a sealed instrument, and that the maker understood that he was adopting the seal. The burden is on the plaintiff, but the issue of fact is here and must be tried out. The plaintiff must have an opportunity to present all the facts.

For these reasons the judgment of the Appellate Division should be reversed and the order of the Special Term affirmed, with costs in this court and in the Appellate Division.

Lehman, J.

(concurring for reversal). The promissory note was signed by the defendant in Brooklyn on March 10, 1925, and mailed by the defendant to the payee, A. J. Richey, in Florida pursuant to a contract under seal for the purchase of lands in Florida. A printed form was used with script or typewriting inserted in the blank spaces on the printed form. At the end of the space intended for a signature, in which the defendant wrote his name, appears the printed word “ (seal).”

This action was not begun within six years after the note was due. In Merritt v. Cornell (1 B. D. Smith, 335), decided by the Court of Common Pleas in 1852, it was said: “ At the present day, the distinction between sealed and unsealed instruments has almost ceased to exist, except in respect to the period of limitation of actions upon them ” (p. 338). That period is fixed by statute and the Legislature there has continued the old distinction and has provided that: an action upon a sealed instrument must be commenced within twenty years after the cause of action has accrued.” (Civ, Prac. Act, § 47.) The question presented upon this appeal is whether the promissory note which the plaintiff in this action seeks to enforce is a sealed instrument.”

“ The private seal of a person, other than a corporation, to any instrument or writing shall consist of a wafer, wax or other similar adhesive substance affixed thereto, or of paper or other similar substance affixed thereto, by mucilege or other adhesive substance, or of the word seal/ or the letters c L. S.’ opposite the signature.” (General Construction Law [Cons. Laws, ch. 22], § 44.) A contract under seal is a contract expressed in a writing which is sealed and delivered by the promisor.” (American Lawjfnstitute, Restatement of the Law of Contracts, § 8.) Dispute may at times arise whether the substance affixed to the instrument was affixed by_the obligor or adopted by him as his seal; whether the obligor -wrote the words or letters opposite his signature or adopted as bis seal such words or letters previously written or printed upon the paper. Such dispute has arisen in this case and, without waiting for a trial, the courts below have granted summary judgment determining that the note is not a sealed instrument.

In Matter of Pirie (198 N. Y. 209) the court laid down the rule to be applied by the court when such a dispute arises: “ Ordinarily a seal affixed to a paper in the form of a promissory note changes it into a sealed instrument, which, under the Statute of Limitations, may run for twenty years; but the mere attaching of a seal after the signature does not raise a presumption that the note is a sealed instrument, unless there be a recognition of the seal in the body of the instrument, by some such phrase as ‘ witness my hand and seal ’ or ‘ signed and sealed.’ The reason for this is that the mere attaching of a seal after a signature without any recognition of it in the body of the note or in connection with the signing, in the absence of evidence showing the time when, and the person by whom, the seal was affixed, would open the door to frauds and forgeries and enable evil-disposed persons to prevent the running of the six-years’ Statute of Limitations, by merely attaching at the end of the note a seal. Under such circumstances a seal is regarded merely as surplusage and the character of the note is not changed” (p. 215). That statement of the applicable rule has been followed in all subsequent cases in this State, and is in accord with decisions in many other jurisdictions. (See 1 Williston on Law^of Contracts [Revised ed.], § 209.) We are agreed that there should be no departure from that rule.

In this case there is no “ recognition of the seal in the body of the instrument ” but it does appear from an inspection of the instrument and from the affidavits of the parties that the word “ seal ” was printed opposite the signature of the defendant at the time when he signed the instrument and put it in circulation. Thus we have here indisputable evidence “ showing the time when, and the person by whom, the seal was affixed,” which was wanting in the Pirie case.

Though this evidence destroys what we said in Matter of Pirie was the “ reason ” for the rule that, in the absence of recognition of the seal in the body of the instrument, no presumption arises that the note is a sealed instrument, yet it is now said that even this evidence must be supplemented by other proof that it was “ the intention of the parties to make it a sealed instrument.” Undoubtedly it must appear that such intention did exist; the problem, however, is whether in this case the evidence is sufficient to permit or even dictate a finding that the intention did exist.

Certainly the position of the printed word t£ seal ” immediately after the defendant’s signature leads fairly to the inference that the defendant saw that word and put the note in circulation knowing that it was there. Perhaps he did not, in fact, intend to indicate thereby that the note was to be considered a sealed instrument, but he manifested such intention by his acts. The word seal ” in that position constitutes the seal of the person signing the instrument, as ££ seal ” is defined by the statute, and gives the note the appearance of a sealed instrument. It could not have any other purpose. Not the undisclosed intention of a party to a contract but the intention manifested by his acts or words, is the measure of his obligation. So here, evidence that the defendant put in circulation an instrument bearing what is, in law, his seal establishes that the note is a ££ sealed instrument.” It is not disputed that the instrument was executed and delivered by the defendant and had a valid inception. The defendant should not be heard to say that he intended that the instrument should have a legal effect different from that which a person receiving it would be justified in ascribing to it.

That is the general rule as formulated in the Restatement of the Law of Contracts:

Section 96.

“A seal is a piece of wax, a wafer or other substance, affixed to the paper or other material on which a promise, release or conveyance is written, or a scroll or sign, however made, on such paper or other material, or an impression made thereon; provided that by a recital or by the appearance of the document an intention of the promisor, releasor or grantor is manifested that the substance, scroll, sign or impression shall be a seal.

“ Comment.

* * * Hs * * *

“ Under the Section the question whether a seal is upon a document is to be determined from the document itself. Evidence of extrinsic circumstances is not admissible to prove or disprove this. Such circumstances may, however, be shown to aid the determination of the questions whether a promisor affixed or adopted a seal (see | 98) and whether the document has been delivered * * * >>

Section 98.

“ (1) A promisor who delivers a written promise to which a seal has been previously affixed or impressed with apparent reference to his signature, thereby adopts the seal.

“ (2) A promisor who delivers a written promise to which a seal has been previously affixed or impressed with apparent reference to the signature of another party to the document, is presumed to have adopted the seal unless extrinsic circumstances show a contrary intention.

Comment.

“ a. Under the rule stated in subsection (1) extrinsic evidence is not admissible; under the rule stated in subsection (2) such evidence is admissible.”

Nothing to the contrary was said or decided in Matter of Pirie (supra) or in Weeks v. Esler (143 N. Y. 374), or any other cases in this court; nor have our decisions been generally construed as stating a different rule. (Cf. authorities cited in the opinion of Crane, Ch. J.) True, the unexplained presence of a seal upon a note is not ' itself sufficient proof that the maker “ intended to, or did, affix it ” (Weeks v. Esler), but proof that the maker did affix the “ seal ” or put the note in circulation bearing what is apparently his seal ” is sufficient. The weight of authority including the cases cited in Matter of Pirie support that conclusion.

The judgment should be reversed, etc.

O’Brien, Hubbs and Finch, JJ., concur with Crane, Ch. J.; Lehman, J., concurs in opinion in which Lough-ran and Rippey, JJ., concur.

Judgment accordingly.


author: Lehman, J.

text:
    Lillian Holland, Respondent, v. John Hancock Mutual Life Insurance Company, Appellant.

      Argued October 13, 1938;
    decided November 29, 1938.

      George W. Riley and John J. Kuhn for appellant.
    Values that are “ decreased by any indebtedness hereon or secured hereby,” as provided in the policy, manifestly are cash values and not the unmatured coverage which would be proportional to the actual cash value. (Jefferson v. N. Y. Life Ins. Co., 151 Ky. 609; Williams v. Union Central Life Ins. Co., 291 U. S. 170; Sheiner, Inc., v. Massachusetts Mut. Life Ins. Co., 165 Misc. Rep. 569; McCormack v. Security Mut. Life Ins. Co., 220 N. Y. 447;
      Bach v. Western States Life Ins. Co., 51 Fed. Rep. [2d] 191; New York Life Ins. Co. v. Board of Assessors, 158 Fed. Rep. 462 ; 216 U. S. 517.) There is no ambiguity in the non-forfeiture options of the policy. These provisions confer rights and do not cut off rights that would otherwise exist in the insured. The intention is clear that on default he shall get only its value in paid-up insurance. (Imperial Fire Ins. Co. v. Coos County, 151 U. S. 452; Gould v. Equitable Life Assur. Soc., 231 N. Y. 208; Taylor v. New York Life Ins. Co., 197 N. Y. 324; McCormack v. Security Mut. Life Ins Co., 220 N. Y. 447; Lumber Underwriters Ins. Co. v. Rife, 237 U. S. 605; Houlihan v. Preferred Acc. Ins. Co., 196 N. Y. 337; Halsted v. Globe Indemnity Co., 258 N. Y. 176; Becker v. London Assur. Corp., [1918] App. Cas. 101; Heller v. Pope, 250 N. Y. 132; New York Trust Co. v. Island Oil T. Co., 34 Fed. Rep. [2d] 655; Kratzenstein v. Western Assur. Co., 116 N. Y. 54; First Nat. Bank v. National Surety Co., 228 N. Y. 469; Hartigan v. Casualty Co., 227 N. Y. 175; Atwater v. Panama R. R. Co., 246 N. Y. 519; Towne v. Eisner, 245 U. S. 418; Witherstine v. Employers’ Liability Assur. Corp., 235 N. Y. 168.) The question of ambiguity in insurance provisions has no relevancy as to those provisions enjoined upon the company by statute, particularly those which are in the category of “ standard” provisions. {Greenfield y. Massachusetts Mut. Life Ins. Co., 47 N. Y. 430; Goodwin v. Massachusetts Mut. Life Ins. Co., 73 N. Y. 480; Sliosberg v. New York Life Ins. Co., 244 N. Y. 482; Broderick v. Rosner, 294 U. S. 629; Stewart v. Union Mut. Life Ins. Co., 155 N. Y. 257; Taylor v. New York Life Ins. Co., 197 N. Y. 324; Nelson v. Traders’ Ins. Co., 181 N. Y. 472; Hamilton v. Royal Ins. Co., 156 N. Y. 327; Archer v. Equitable Life Assur. Soc., 218 N. Y. 18; McCormack v. Security Mut. Life Ins. Co., 220 N. Y. 447.) The written loan assignment affords a practical construction by the parties themselves ante litem motam. (Langley v.
      Prudential Ins. Co., 271 Fed. Rep. 776; Cooper v. N. Y. Life Ins. Co., 211 S. W. Rep. 548; Beatty v. Guggenheim Exploration Co., 225 N. Y. 380; East Side Garage, Inc., v. New Brunswick Fire Ins. Co., 198 App. Div. 408; Iowa Life Ins. Co. v. Lewis, 187 U. S. 335; Matter of Hayes, 252 N. Y. 148; Board of Assessors v. New York Life Ins. Co., 216 U. S. 517; Stevens v. Mutual Life Ins. Co., 227 N. Y. 524.) The indebtedness is extinguished and repaid to the company out of the reserve immediately on premium default. Being paid and canceled, the loan transaction is closed. It cannot then be paid twice nor can it be brought back to life without a new agreement between the parties. (Kimball v. N. Y. Life Ins. Co., 98 Vt. 192; Hawthorne v. Bankers Life Ins. Co., 63 Fed. Rep. [2d] 971; McCall v. International Life Ins. Co., 196 Mo. App. 318; Ruane v. Manhattan Life Ins. Co., 194 Mo. App. 214.)

      Julius L. (iSchapira and Albert P. Singman for respondent.
    Plaintiff is entitled to the amount of paid-up insurance specified in the “ Table of Non-Forfeiture Values ” in the policy, less the indebtedness secured thereby. (Monsbacher v. Prudential Life Ins. Co., 273 N. Y. 140; Hart v. Travelers Ins. Co., 236 App. Div. 309; 261 N. Y. 563; Aldrich v. New York Life Ins. Co., 235 N. Y. 214.)
   Lehman, J.

On June 26,1916, the defendant insurance company issued a policy insuring the life of Philip Holland in the sum of $2,000, in consideration of the payment of a stipulated annual premium of $55.10 in quarterly installments. By its terms the policy was to become fully paid up after twenty years. .The insured paid the premiums for over eighteen years but failed to pay the installment of premium due on September 26,1934. The policy by its terms remained in force during a “ grace period ” of thirty-one days. The assured died five days after the expiration of the “ grace period.”

The plaintiff, his widow, was named as beneficiary of the policy. She filed proofs of death. The policy provided that “ if the insured shall die during the continuance of this policy the Company will pay the sum insured, less any indebtedness to the Company hereon or secured hereby and less any unpaid balance of premium for the uncompleted policy year.” Though prior to the death of the deceased there had been failure to pay the premium which, by stipulation of the parties, was required to keep the policy in force, yet the policy had acquired a surrender value ” during the lifetime of the assured through regular payment of the premium for a long term of years. Under the provisions of the policy its holder could not be deprived of that surrender value or the insurance which might be purchased with that surrender value.

The policy provides that “ after three full annual premiums shall have been paid hereon, then in case of default in the payment of any subsequent premium or instalment, continued after the days of grace,” the holder was granted three options as follows:

Option A — Without action on the part of the holder, the policy will be continued for its value in participating paid-up life insurance (without disability benefits) which will have a yearly increasing surrender value; or

Option B — If the holder so elect, the policy will be terminated and the surrender value paid in cash; or

Option C — Upon written request by the holder filed at the Home Office of the Company within ninety days from the due date of the premium in default, the policy will be continued at its face amount including any outstanding additions and less any indebtedness to the Company hereon or secured hereby, for its value in participating extended term insurance (without loan privilege or disability benefits) dating from said due date. Such insurance will have a decreasing surrender value expiring with the extension term.”

Concededly the holder did not elect to terminate the policy under Option B or file a written request for the continuance of the policy at its face amount under Option C. Therefore, under Option A the policy was continued for its value in participating paid-up life insurance.” We must determine how such “ value ” is to be fixed..

“ Value ” is a term of vague or shifting meaning. In this case the contract itself furnishes the definition of value which both parties accepted and.which must be applied by the courts:

Said surrender value at date of default in payment of premium will be the full reserve on the policy and any outstanding additions, less a sum having a maximum at the end of the third year not in excess of six-tenths of one per centum of the face amount of the policy, and thereafter decreasing, and less any indebtedness to the Company hereon or secured hereby.

The legal reserve under this policy is computed upon die American Experience Table of Mortality, with interest at three and one-half per centum per annum.

“ The paid-up and extended insurances under Options A and C are such as will be purchased by the surrender value as herein defined, applied as a net single premium at the attained age of the Insured upon the mortality and interest basis adopted for the reserve computation hereunder.”

Actuarial computations often require expert skill, and in a description of the method to be applied and the factors to be considered in such actuarial computations, technical terms are sometimes used which are difficult for those without actuarial training or experience to understand. That may be true of the provisions of this policy. Nevertheless, those provisions are not ambiguous and they must be enforced in accordance with their letter, if after study they would carry the same meaning to an informed business man and to the expert technician. Under the terms of this policy, the “ surrender value ” to be applied as a net single premium for the purchase of paid-up insurance, can be fixed only by a complicated calculation of the full reserve on the policy and any outstanding additions,” etc. However difficult and complicated that calculation may be, there is no difference of opinion as to the method to be used in calculating the “ full reserve ” or the correctness of the amount arrived at. The difference of opinion concerns the meaning of the provision that the surrender value shall be the full reserve * * * less any indebtedness to the Company hereon or secured hereby.”

Prior to his death, the assured had obtained a loan from the insurance company secured by his policy. At the time of his death the indebtedness with interest amounted to $681.87. If there had been no such indebtedness, the cash surrender value, i. e., the full reserve ” undiminished by any deduction, would have been sufficient to purchase paid-up insurance in the sum of $1,796. If, however, the surrender value which is to be applied as a single premium to the purchase of paid-up insurance is, as the policy provides, only the amount of the full reserve on the policy,” etc., less the indebtedness, then the amount of paid-up insurance it would purchase is only $203.97.

Undoubtedly the defendant company is entitled to repayment of the loan which it made upon the security of the policy, but it is said that the loan should be repaid out of the proceeds of the paid-up insurance policy purchased by the full reserve ” upon the policy rather than repaid out of the reserve or surrender value before the surrender value is used to purchase the paid-up insurance. The method of repayment urged by the respondent might be the more equitable. On that point opinion may differ; but it is not the method provided in the policy or in the written loan agreement and it is not the method required by law. The policy expressly provides that indebtedness due to the company shall be deducted from the full reserve.” The loan agreement expressly provides that in case of default in the payment of any premium or instalment thereof, on said policy, the Company may terminate said insurance, subject to any provisions of law or of the policy prescribing the conditions under which this right may be exercised, and may deduct the indebtedness hereby secured from the amount which would otherwise be the surrender value of the policy, and apply the residue thereof, if any, to the purchase of paid-up or extended insurance, when such insurance is provided for by the terms of the policy, or pay it in cash if those entitled to receive it so elect.” We do not say that a provision of the loan agreement inconsistent with the provisions of the policy would be enforceable. That question is not before us. Here the provisions of the policy, though more complicated and more difficult for the uninstructed reader to understand, are entirely consistent with the provisions of the loan agreement; and the loan agreement is evidence that the assured understood and acquiesced in the construction placed upon the policy by the company. Indeed, an insurance company which did not provide in each policy an option by which the cash surrender value, less any indebtednessJ30 the company, should be applied as a single premium for the purchase of paid-up insurance, would be violating the law. The Insurance Law of this State (Cons. Laws, ch. 28), section 88, so requires, and so does chapter 175, section 144, of the General Laws of Massachusetts, the State where the defendant company was incorporated. The provision for the deduction of the indebtedness from the cash value of the policy before such cash value is used to purchase the paid-up insurance assures the payment of the stipulated amount to the beneficiary of the policy regardless of the length of life of the assured after default in the payment of a premium. Such deduction benefits the holder of a policy where the assured lives beyond the date when the indebtedness, augmented by continuing interest, would exceed or even approach the amount payable under the policy. We find nothing in the policy which might be construed as a promise by the insurance company for paid-up insurance calculated in any other way.

It is true that the policy contains a table of non-forfeiture values ” which shows that under Option A the holder of a policy on which premiums were paid for eighteen years would be entitled to $1,796. It must be clear, however, even to a casual reader that this table is based solely upon the cash value of the reserve, and it does not purport to show the value of the amount of participating paid-up life insurance under Option A where there is an indebtedness due to the company which under the terms of the policy must be deducted from the full reserve before purchase of the paid-up insurance.

The judgments should be modified by reducing the same to the amount of $203.97, and as so modified affirmed, without costs.

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

Judgment accordingly.


text:
    B. C. Schram, as Receiver of First National Bank-Detroit, Respondent, v. May E. C. Keane, Appellant.
    Submitted October 7, 1938;
    decided November 29, 1938.

      The following question was certified:

      “ Is the second separate defense contained in defendant’s answer sufficient in law? ”

      Harold D. Beatty for appellant.
    The action was not commenced until service of the summons was complete on July 9, 1936. (Paget v. Pease, 17 Civ. Pro. Rep. 234; Winter v. Winter, 256 N. Y. 113; Fell v. McCready, 236 App. Div. 390.) The three-year Statute of Limitations is applicable. (Pufahl v. Estate of Parks, 299 U. S. 217.) The Statute of Limitations began to run on or before June 23, 1933, and not on July 31, 1933; consequently it is a bar to the action. The attempted extensions did not toll the statute. (Pufahl v. Estate of Parks, 299 U. S. 217; Blake v. Clausen, 16 Misc. Rep. 400; 10 App. Div. 223; 158 N. Y. 727; Matter of Furey v. Graves, 148 Misc. Rep. 785; 241 App. Div. 897; 266 N. Y. 415; Bauserman v. Blunt, 147 U. S. 647; Braun v. Sauerwein, 10 Wall. 218; Kirby v. L. S. & M. S. R. R. Co., 120 U. S. 130.) The three-year Statute of Limitations was not tolled. Defendant’s non-residence is not established, but, even if it were, the test as to whether a statute of limitation is tolled is not the residence of the defendant, but is whether she can be served with process, which will vest the court with jurisdiction and enable the entry of judgment. (Eno v. Diefendorf, 102 N. Y. 720; Camp v. Smith, 136 N. Y. 187; Belmont v. City of New York, 191 App. Div. 717; Holland v. Grote, 193 N. Y. 262; Helmer v. Minot, 75 Hun, 309; Nixon v. Palmer, 10 Barb. 175; Mack v. Mendels, 249 N. Y. 356.)

      Robert L. Loeb and Oscar M. Bate for respondent.
    The cause of action did not accrue until July 31, 1933, and consequently the action was commenced within three years from the date when the cause of action accrued whether the date of commencement of the action be deemed to be the date when the summons was issued, the date of first publication, or the date upon which service by publication was complete. (Cary v. Koerner, 200 N. Y. 253; Barbour v. Thomas, 86 Fed. Rep. [2d] 510; Beckham v. Hague, 38 Misc. Rep. 606; Rankin v. Miller, 207 Fed. Rep. 602; Deweese v. Smith, 106 Fed. Rep. 438; McDonald v. Thompson, 101 Fed. Rep. 183; Thompson v. German Ins. Co., 76 Fed. Rep. 892; King v. Pomeroy, 121 Fed. Rep. 287; Quackenbush v. Mapes, 123 App. Div. 242; Baker v. Leland, 9 App. Div. 365.) The defense of the Statute of Limitations is not available to the defendant as a bar to the action. (Curran v. Arp, 141 App. Div. 38; Meyers v. Credit Lyonnais, 259 N. Y. 399.) The action was commenced when the summons was issued to .accompany the writ of attachment on May 13, 1936, and hence the action was commenced within three years after May 16, 1933, the date when the assessment was levied. (Import Chemical Co. v. Foster & Gregory, Ltd., 172 App. Div. 406.) This is an action upon an express contract obligation or liability and, therefore, the six-year Statute of Limitations of section 48 of the Civil Practice Act is applicable. (Barbour v. Thomas, 7 Fed. Supp. 271; 86 Fed. Rep. [2d] 510; 300 U. S. 670; Schram v. Smith, 97 Fed. Rep. [2d] 662; Backus v. Connelly, 268 Mich. 495.)
   Lehman, J.

The plaintiff, as receiver of First National Bank-Detroit, has brought an action to compel the defendant to pay an assessment levied upon stockholders pursuant to the provisions of the Federal statutes creating and regulating liability of stockholders of an insolvent bank. The complaint alleges that on or about the 16th day of May, 1933, J. F. T. O’Connor, the Comptroller of the Currency of the United States, found and declared that it appeared to his satisfaction, in order to pay the contracts, debts and engagements of First National Bank-Detroit, that it was necessary to enforce the individual liability of the stockholders of said bank to the extent hereinafter mentioned, as prescribed in Sections 5151 and 5234 of the Revised Statutes of the United States, Section 1-C. 156, Act of June 30, 1876, and Section 23, Act approved December 23,1913, known as the Federal Reserve Act. Said Comptroller of the Currency * * * did levy and make an assessment and requisition upon the shareholders of First National Bank-Detroit for Twenty-five Million Dollars ($25,000,000) to be paid by them on or before the 23d day of June, 1933, which assessment and requisition was amended, on June 20th, 1933, to extend the time of payment to July 14th, 1933, and on July 13th, 1933, was amended to extend the time of payment from July 14th, 1933, to July 31st, 1933.” In her answer the defendant pleaded, as part of a second separate defense, that the alleged cause of action set forth in the complaint did not accrue within the period of three years next preceding the commencement of this action, and is barred by Section 49 of the Civil Practice Act.” Upon motion of the plaintiff, that defense was stricken out on the ground that the said defense, consisting of new matter, is insufficient in law. The order striking out the defense was affirmed by the Appellate Division, which granted leave to appeal to this court, certifying the question, Is the second separate defense contained in defendant’s answer sufficient in law? ”

The statutes enacted by Congress, which create and regulate the individual liability of the stockholder of a national bank for the debts of the bank and which empower the Comptroller of the Currency to levy an assessment upon stockholders of an insolvent bank, prescribe no period of limitation for the commencement of an action to enforce such liability. In an action brought for that purpose in the courts of this State, the statutory period of limitation of this State is applicable. (Pufahl v. Estate of Parks, 299 U. S. 217.) The defendant invokes the provisions of section 49 of the Civil Practice Act that “ an action against * * * a stockholder of a moneyed corporation, or banking association * * * to enforce a liability created by the common law or by statute ” must be commenced within three years after the cause of action accrued. The plaintiff urges, however, that the cause of action alleged in the complaint is upon a contract obligation * * * express or implied ” to which the six-year period of limitation, provided by section 48 of the act, applies.

In a carefully drawn complaint, the plaintiff has alleged facts which show that the defendant is one of the stockholders of a Michigan corporation formed to control and to conduct the business of First National Bank-Detroit and other banking institutions in Michigan. The corporate structure is complicated, and it is difficult to place in any recognized classification the relation of the dominant corporation and its stockholders toward the banks which it controls. Perhaps the stockholders of the dominant corporation may be treated as stockholders of each subsidiary bank, and, as such, subject to liability created by the statute for their pro rata share of the debts of each bank; but there are additional allegations in the complaint that each stockholder of the dominant corporation has, by contract, expressly assumed such liability. We do not pause now to consider whether the action is one to enforce a liability created by statute or to enforce a contract obligation, or perhaps both. (Cf. Barbour v. Thomas, 86 Fed. Rep. [2d] 510; Simons v. Groesbeck, 268 Mich. 495; Strasburger v. Schram, 93 Fed. Rep. [2d] 246.) We assume for the purposes of this appeal that the action is brought to enforce a liability created by statute and is subject to the three-year period of limitation. Even so, we conclude that the cause of action is not barred.

The complaint alleges, and the answer fails to deny, that the defendant is not a resident of the State of New York.” It appears from the new matter in the defense, here challenged, that a warrant of attachment was issued herein on May 13,1936, and the sheriff attached property of the defendant. On May 22d an order was entered directing service by publication once a week for six sucessive weeks. Publication was begun on May 28, 1936, and was completed on July 2, 1936. “ For the purpose of reckoning the time within which the defendant must appear or answer, service by publication is complete on the forty-second day after the day of first publication.” (Rules Civ. Prac., rule 51.)’ The forty-second day after the day of first publication was on July 9, 1936. The defendant argues that no action was commenced ” within the meaning of the Statute of Limitations until service of the summons by publication was 11 complete ” on July 9,1936, and that on that date the plaintiff’s cause of action was barred. The plaintiff argues that after May 13th, when the warrant of attachment was granted, the statutory period of limitation ceased to run.

At least until May 16, 1933, when the Comptroller of the Currency levied an assessment, the plaintiff had no cause of action against any stockholder. (Pufahl v. Estate of Parks, supra.) Cogent arguments have been advanced that no cause of action accrued thereafter until the date when the .assessment became payable. (Cf. Strasburger v. Schram, supra.) Certainly, an action to compel payment of the assessment commenced on May 13, 1936, would not be barred. The primary question upon this appeal is whether the action was commenced on May 13, 1936, when the warrant of attachment was granted, or on July 9th, the date when service of the summons became complete. If the action was commenced on May 13th no other question need be considered.

There is no authoritative decision upon the question in this State, and since its answer depends primarily upon the proper construction of the statute, decisions in other jurisdictions, construing other statutes, are not very helpful; but see Flournoy & Epping v. Lyon & Co. (70 Ala. 308, at p. 313; Slater v. Roche (148 Iowa, 413). The word ‘ action,’ when applied to judicial proceedings, signifies an ordinary prosecution in a court of justice by a party against another party for the enforcement or protection of a right, the redress or prevention of a wrong or the punishment of a public offense.” (Civ. Prac. Act, § 4.) There can be no u prosecution * * * by a party against another party ” until the defendant has been summoned to answer the complaint. An adjudication which is the purpose of an action can be made only where through service of a summons the defendant has received notice and opportunity to be heard. Under our practice, then a civil action is commenced by the service of a summons ” (§ 218).

The law recognizes, however, that at times it may be difficult to serve a summons and that before there can be an adjudication of the controversy, and even before a summons is served, the court must take jurisdiction of an action for the purpose of granting an order of arrest, injunction or attachment as a temporary or provisional remedy for an alleged wrong. “ From the time of the granting of a provisional remedy, the court acquires jurisdiction and has control of all the subsequent proceedings. Nevertheless, jurisdiction thus acquired is conditional, and liable to be divested in a case where the jurisdiction of the court is made dependent by a special provision of law upon some act to be done after the granting of the provisional remedy.” (Civ. Prac. Act, § 825.) A warrant of attachment may be granted in an action before the summons is served, but in such case “ personal service of the summons must be made upon the defendant against whose property the warrant is granted, within thirty days after the granting thereof; or else before the expiration of the same time, service of the summons by publication must be commenced, ^or service thereof must be made without the state, as prescribed by law; and if publication has been, or is thereafter commenced, the service must be made complete by the continuance thereof.” (Civ. Prac. Act, § 905.)

The practical effect of these sections is that from the time that the warrant of attachment is issued, the court has jurisdiction of the action and all proceedings taken therein, though its jurisdiction remains conditional and its orders provisional, until service of a summons is completed or other required act performed in accordance with the provisions of the statute. We only play with words and draw distinctions which have no support in logic or in practical considerations when we say that until service of a summons, an action is not “ commenced,” but that before the action is commenced ” the court has jurisdiction of the action conditioned upon its subsequent commencement. An action must have inception, although conditional, before the court can have any jurisdiction in it.

Sections 218 and 825 must be read together. Indeed, before the Civil Practice Act was enacted, they were combined in one section of the Code of Civil Procedure. “A civil action is commenced by the service of a summons. But from the time of the granting of a provisional remedy, the court acquires jurisdiction, and has control of all the subsequent proceedings. Nevertheless, jurisdiction thus acquired is conditional, and hable to be divested, in a case where the jurisdiction of the court is made dependent, by a special provision of law, upon some act, to be done after the granting of the provisional remedy.” (Code Civ. Proc. § 416.) By division of the section into two parts, the Legislature did not change its meaning.

Possible doubt as to the meaning or effect of the section disappears when the section is read in the light of its history. (Cf. Import Chemical Co. v. Forster & Gregory, Ltd., 172 App. Div. 406.) The general rule that an action is commenced by the service of a summons is qualified to the extent that the court may grant a provisional remedy in an action even before the service of the summons, and the action must provisionally be deemed commenced from the time of the granting of the provisional remedy, subject, however, to the condition subsequent that within the time allowed by statute the summons is served. Where there is failure to comply with this condition, the action falls, and with it the provisional remedy; where there is compliance with the condition, the grant of the provisional remedy marks the commencement of the action. So in Import Chemical Co. v. Forster & Gregory, Ltd. (supra) the Appellate Division (first department) held that the plaintiff could not by amendment to the complaint include in an action for breach of contract new allegations of additional breaches of the same contract occurring between the date of the grant of a warrant of attachment and the completion of service of the summons by publication, for the action was commenced when the attachment was granted, and could not be enlarged by allegations of wrongs occurring thereafter.

Though, as we have said, there has been no authoritative decision in this court upon the question of whether an action is provisionally commenced within the meaning of the Statute of Limitations, at the time when a warrant of attachment is issued, analogous questions have been presented in other cases. So in Logan v. Greenwich Trust Co. (144 App. Div. 372; affd., 203 N. Y. 611) it was held that an action against a non-resident must be deemed to have been commenced provisionally at the time a warrant of attachment is granted, so that upon the death of the defendant before service of the summons by publication, the action may be revived, the personal representative substituted as a party defendant and an order granted for service of the summons and complaint. The decision there reached is supported by More v. Thayer (10 Barb. 258); Thacker v. Bancroft (15 Abb. Pr. 243, 249); but cf. Barron v. South Brooklyn Saw Mill Co. (18 Abb. New Cases, 352). In other cases, too, the conclusion is based logically upon the premise that from the time a provisional remedy is granted, the action is commenced. (Cf. Daly v. Amberg, 126 N. Y. 490; Acker v. Hautemann, 27 Hun, 48.) Practical consideratians and juristic concepts alike dictate the conclusion that the Statute of Limitations ceases to run from the time when the court assumes jurisdiction to grant a provisional remedy for an asserted wrong, if thereafter jurisdiction provisionally assumed becomes complete by service of the summons.

On that ground, and perhaps on other grounds too which we do not now consider, the order should be affirmed, with costs, and the question certified answered in the negative.

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

Order affirmed, etc.


text:
    In the Matter of Louis H. Pink, Superintendent of Insurance of the State of New York, as Liquidator of New York Title and Mortgage Company, Respondent, against Cord Meyer Company, Appellant, Impleaded with Another.

      Argued October 3, 1938;
    decided November 29, 1938.

      John Adikes and Charles H. Street for appellant.
    The order of the Special Term denying the application as to appellant was right. The case is not within the spirit of section 1077-c of the Civil Practice Act so far as appellant is concerned. (Weisel v. Hagdahl Realty Co., 241 App. Div. 314; Gould v. Equitable Life Assur. Soc., 231 N. Y. 208.)

      William A. Shea, Frank J. Melioris and Ivey W. Cashatt for respondent.
    The decision of the Appellate Division is in all respects correct. (1 Wiltsie on Mortgage Foreclosure [4th ed.], § 1; Murray v. Walker, 31 N. Y. 399; Thompson v. Lewis, 182 App. Div. 556.) The holder of a past-due mortgage is entitled to maintain an application under section 1077-c of the Civil Practice Act against the owner of the premises, as well as the lessee thereof. (Matter of Pink [Kayares Theatricals, Inc.], 252 App. Div. 759.) The payment by the lessee of the ground rent to appellant is in fact a concession that to the extent of such payment the premises involved produced a surplus and such ground rent, together with any additional surplus found, was properly ordered paid to respondent on account of the past-due principal of his mortgage. (Matter of Old Men & Aged Couples, N. Y. L. J. July 16, 1937.)
   Lehman, J.

The appellant Cord Meyer Company is the owner in fee of real property in Queens county. In July, 1931, it leased the land, then vacant and unimproved, for a long term of years. The lease provided for the erection of an apartment house on the leased property by the lessee. The lessee agreed to pay the cost of the improvement, but to enable the lessee to borrow the money required for that purpose the lessor agreed to join with the lessee in the execution of two mortgages for stipulated amounts upon the premises, without, however, joining in the bond secured by the mortgages. Accordingly, in October, 1931, the lessor and lessee executed and delivered to New York Title and Mortgage Company a mortgage upon the leased premises to secure a bond of the lessee for the payment of the sum of $160,000. Under the terms of the bond semi-annual installments of $2,000 were to be paid on the first day of January and the first day of July in each year. No such installment payments have been made since January 1, 1933.

Though the owner of the fee, as part of a business transaction entered into for profit, pledged its property to secure the prompt repayment, in accordance with the terms of the lessee’s bond, of moneys borrowed for the improvement of the property, yet the mortgagee cannot avail itself of the right to foreclose the mortgage for the borrower’s default in the payment of installments of principal, because the State has suspended the remedy of foreclosure of a mortgage “ solely for or on account of a default in the payment * * * _ of any installment or amortization of principal secured by such mortgage.” (Civ. Prac. Act, § 1077-a.) Conditions which, in the opinion of the Legislature, constitute an emergency, hamper ready sales of real property for an adequate price, and, in many cases, have reduced the rents and profits derived from mortgaged property below the amount required to pay taxes, interest and other carrying charges. To avoid injury to the general welfare which might result from widespread foreclosure of mortgages while these conditions remain acute, the Legislature has, in the statute, provided a shield for owners of mortgaged property against attack by mortgagees through insistence upon the letter of the bond and against possible abuse of the remedy of foreclosure during a period when a ready sale for an adequate price cannot be had.

In providing a shield for the owner of the property against attacks of the mortgagee which might result in a sale of the property at much less than its real value, the Legislature took care to provide also that an owner who avails himself of the statutory protection against loss of his property might still be required to apply, in reduction of any past-due principal, any surplus income produced by the mortgaged property. “ Any person who would otherwise have the right to foreclose a mortgage, shall have the right to make an application to any court in which such foreclosure action might be brought * * * and if upon such application it shall appear to the satisfaction of the court that the mortgaged property during the six months prior to the application shall have produced a surplus over and above the taxes, interest and all other carrying charges, then the court may make an order directing .the payment of such surplus or such part thereof as the court may determine to the mortgagee to apply toward the reduction of any past due principal * * (Civ. Prac. Act, § 1077-c.) Accordingly, in this proceeding the Superintendent of Insurance has made such application.

It then appeared that during the six months’ period the rents of the apartment building were sufficient to leave a surplus of 1856.28 after payment of the operating and maintenance expenses of the building, taxes, water rents and interest on the first mortgage. During the same period the lessee paid to the lessor as ground rent under the lease the sum of $1,248.75. The rents and profits received by the lessee were insufficient by almost $400 to pay the ground rent and to that extent the lessee suffered a loss rather than a profit. Nevertheless, the lessee was directed by the court to pay to the mortgagee the sum of $856.28 in reduction of the mortgage debt. No appeal was taken by the lessee from the order directing such payment, and we may not now pass on the question whether the ground rent is a “ carrying charge ” within the meaning of the statute which must be deducted in fixing the “ surplus ” produced by the mortgaged premises which the court may direct the lessee to pay to the mortgagee.

The sole question to be determined upon this appeal is whether the court may direct the lessor to pay to the mortgagee the ground rent received by it under the terms of the lease. The court at Special Term refused to make such direction. The Appellate Division reversed the order of the Supreme Court on the law and the facts and granted the application of the mortgagee.

When the mortgage was executed, the lessor owned only the fee of the mortgaged premises, subject to a long term lease, and the lessee owned the term granted by the lease. Each could mortgage what it owned; neither could mortgage what the other owned. When both joined in the mortgage the mortgagee obtained a lien on the property of each. So long as the lease continued, ownership of the fee carried with it the right to receive the rent reserved. When the rent was received by the owner of the fee, it was income derived from the fee which the lessor had mortgaged; and since the lessee had, in accordance with the terms of the lease, paid all the expenses and carrying charges, the court could properly direct the lessee to pay to the mortgagee the entire amount received as surplus ” produced by the mortgaged fee. The lessee’s ownership of the lease and the term granted by the lease carried with it the right to build and maintain an apartment house. The rents received by the lessee of the apartment house from tenants of apartments therein is income of the lessee derived from and produced by the interest in the property which the lessor had granted to him and which the lessee mortgaged. The owner of the mortgaged fee is not interested in the rentals paid by the tenants of the apartment house. He would be entitled to the ground rent reserved in the lease, though the completed apartment house did not produce sufficient income to pay it, as well as the other carrying charges. Where both the owner of the fee who has reserved a ground rent and the lessee join in a mortgage as security for a loan made to the lessee and payable by the lessee, the owner should not be heard to complain^that it is inequitable, after default in payment of the principal of the mortgage debt, to compel the owner to pay any surplus rental received by him from the property in reduction of the past due principal. The owner of the fee may properly be directed to pay to the mortgagee the ground rents produced by the mortgaged fee; in addition the lessee may properly be directed to pay to the mortgagee the surplus of rents received from tenants to which the lessee is entitled as owner of the mortgaged term. The court may not, however, direct the owner of the fee to pay in addition the rentals received by the lessee from the tenants in the apartment house which the owner of the fee did not receive and which, indeed, were insufficient to meet the ground rent charge. Such additional direction is included in the order of the Appellate Division, perhaps by inadvertence. The respondent concedes that the “ surplus ” payable by the appellant is limited to the ground rent received.

The order of the Appellate Division should be modified in accordance with this opinion, and as so modified affirmed, with costs to the respondent.

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

Ordered accordingly.


author: Per Curiam.

text:
    Turner Construction Company, Appellant and Respondent, v. State of New York, Respondent and Appellant.
    (Claim No. 22419.)
    Argued October 18, 1938;
    decided November 29, 1938.

      John J. Bennett, Jr., Attorney-General {Leon M. Layden of counsel), for defendant, respondent and appellant.
    The claimant is precluded by the terms of its contract from any recovery on item 7. (Norcross v. Wills, 198 N. Y. 336.)

      Charles B. Sullivan and J. C. Fink for claimant, appellant and respondent.
   Per Curiam.

The claimant has been awarded the sum of $1,647.89 under item 7 for damages caused to the contractor by the directions of the inspectors for the State of New York to remove materials, buildings and equipment and to rebuild temporary roadways in order to give other contractors reasonable opportunity to construct sewers and tunnels required by the State in the construction of the hospital and its appurtenances. We find authority for these directions in article 21, section 84, of the specifications, which provides that the contractor shall afford other contractors reasonable opportunity for the execution of their work performed under contracts let in connection with this work.”

The judgment should be modified by deducting therefrom the sum of $1,647.89, with interest, and as so modified affirmed, without costs.

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

Judgment accordingly.