author:
Lehman, J. Pound, J.
      Crane, J. Andrews, J.

text:
    The People of the State of New York, Respondent, v. Albert Vandewater, Appellant.

      (Argued October 8, 1928;
    decided December 31, 1928.)

      Thomas R. Fay, George A. Gibson and George E. Mulry for appellant.
    The conviction is based solely upon the alleged maintenance of premises for the sale of intoxicating liquor in violation of the National Prohibition Act and should, therefore, be reversed and the indictment dismissed. (People v. Cook, 220 App. Div. 110; 248 N. Y. 597.) The defendant is not guilty of keeping a disorderly house and maintaining a public nuisance as defined in sections 1146 and 1530 of the Penal Law, since the alleged sale of liquor to persons within doors, unobserved by the public and unaccompanied by noise, violence and unseemly conduct, does not offend public decency. (People v. Haber, 221 App. Div. 150; Boliver v. Monnat, 130 Misc. Rep. 660; People v. Conti, 127 Misc. Rep. 244; People v. Wade, 126 Misc. Rep. 574; 127 Misc. Rep. 593; People v. Barberi, 127 Misc. Rep. 864; People v. Eckerson, 133 App. Div. 220.)

      Elvin N. Edwards, District Attorney (Philip Huntington of counsel), for respondent.
    The sale of intoxicating liquor is an unlawful act within the meaning of section 1530 of the Penal Law. (People v. Otis, 235 N. Y. 421; People v. Heff, 110 Misc. Rep. 76; People v. Borden Condensed Milk Co., 165 App. Div. 711; People v. High

      Ground Dairy Co., 166 App. Div; 81.) The maintenance of premises for the unlawful sale of intoxicating liquors offends public decency. (Bohan v. Port Jervis Gas-Light Co., 122 N. Y. 32.) A “ speak-easy " is in fact and in every sense Of the word a public nuisance. (People v. Jones, 129 App. Div. 772; 195 N. Y. 547; People v. Doris, 14 App. Div. 117; Hamlin v. Bender, 92 Misc. Rep. 16; People v. Borden Condensed Milk Co., 165 App. Div. 711; 216 N. Y. 658; People v. High Ground Dairy Co., 166 App. Div. 81; United States v. Sumner, 125 Misc. Rep. 658; 216 App. Div. 782; People v. Curtis, 152 App. Div. 372; 206 N. Y. 707.) A house or like place for the habitual commission of illegal acts is a disorderly house and a public nuisance under the common law. (People v. Hoffman, 118 App. Div. 862; 189 N. Y. 561.)
   Lehman, J.

The defendant maintained, in the village of Hempstead in Nassau county, a room where he sold intoxicating liquor. The room was in the rear of a store and there was nothing in the appearance of the store which gave notice of the nature of the traffic conducted in the rear or which might be regarded as an invitation to the general public to enter the premises and regale themselves. In other days it has been said that " good wine needs no bush,” and it appears from the evidence that even without any signs or public invitation, customers found their way to the place where they could obtain from the defendant the prohibited but enticing beverage. The beverage was served to them in surroundings which, we are advised, would not be unfamiliar to those who habitually visited saloons when the traffic in liquor might be sanctioned and regulated by governmental authority. There was a counter described as a “ bar.” Bottles were displayed, some purporting to contain innocent “ ginger ale; ” others purporting to contain more potent fluids. There were small tables and chairs in front of the counter or “ bar ” and a witness testified that he saw men at these tables in an intoxicated condition, and men in similar condition at times emerged from the premises. The defendant’s premises were near a school and immediately adjacent to a confectionery and ice-cream shop to which school children came during the lunch hour.

The defendant has been convicted of maintaining an ill-governed and disorderly house and a public nuisance. Section 1530 of the Penal Law provides that “ a public nuisance ” is a crime against the order and economy of the State and consists in unlawfully doing an act or omitting to perform a duty, which act or omission: “1. Annoys, injures or endangers the comfort, repose, health or safety of any considerable, number of persons; or, 2. Offends public decency; or, 3. * * * or, 4. In any way renders a considerable number of persons insecure in life, or the use of property.” It is, of course, not disputed that each sale of intoxicating liquor by the defendant constitutes a criminal offense under the National Prohibition Act, and that within the definition contained in that act the defendant maintained a public nuisance. An act prohibited by the National Prohibition Act constitutes an offense against the United States, it constitutes no offense against the peace and dignity of the State. (United States v. Lanza, 260 U. S. 377.) The defendant has been charged with a crime against the “ order and economy of the State.” The charge may be sustained only by proof which brings defendant’s offense within the definition of a “ public nuisance ” contained in section 1530 of the Penal Law. Proof which shows only that an accused has on a certain day committed an offense under the National Prohibition Act by trafficking in intoxicating liquor is insufficient. That was decided in People v. Cook (220 App. Div. 110; affd., 248 N. Y. 597.)

In its opinion in-that case the Appellate Division, pointed out: “At most, the defendant sold intoxicating. liquor to some of his friends and acquaintances in his own home, in the presence of other people. It was stipulated on the argument in this court that no disturbance was created, and that the outside public was not annoyed, or even aware of what was going on in appellant’s home.” The stipulation left open only the question whether sales made privately on a single day by a man in his own home to his own friends and acquaintances, without disorder, and resulting in no disturbance or annoyance to others, constituted an offense against public decency and a public nuisance. In the case which we are now called upon to decide, the question is whether the maintenance of premises for the purpose of trafficking in intoxicating liquor, a saloon or tippling house, conducted without sanction of or regulation by the State and in violation of the law of the land, may constitute a public nuisance under the Penal Law of this State. No such question was before the court in People v. Cook (supra).

It is a public nuisance at common law to keep a house, room, or other place of such a kind, or in such a manner, as to cause disorder or scandal.” (Russell on Crimes & Misdemeanors [7th ed.], p. 1887.) Brothels and common gaming houses have been classed as disorderly houses and public nuisances, because they were maintained for purposes which in themselves tended to cause disorder or scandal. Other kinds of houses became public nuisances only if they were conducted in such a manner, as to cause disorder or scandal.” “ It is clearly agreed that keeping a bawdy house is a common nuisance, as it endangers the publick Peace by drawing together dissolute and debauched Persons; and also has an apparent Tendency to corrupt the Manners of both Sexes by such an open Profession of Lewdness. * * * It is clearly agreed that all common Gambling Houses are Nusances in the Bye of the Law, being detrimental to the Publick, as they promote Cheating and other corrupt Practices, and incite, to Idleness and. avaricious Ways of gaining Property, great Numbers whose time might otherwise be employed for the general Good of the Community.” (Bacon, “Abridgement of the Law,” sub-tit. “ Nusances.”) “ The keeping of a common bawdy or gambling house constitutes the house so kept a disorderly house and an indictable nuisance at common law * * *. It is a public offense, for the reason that its direct tendency is to debauch and corrupt the public morals, to encourage idle and dissolute habits and to disturb the public peace. It is not an essential element that it should be so kept that the neighborhood is disturbed by the noise, or that the immoral practices should be open to public observation. The law, it is true, gives a remedy by indictment against those who unduly disturb the quiet of the community by noises which tend to impair the enjoyment of life, but it does not refuse cognizance of those far greater public injuries, which arise from practices which destroy the peace of families and disturb and undermine the foundations of social order and virtue.” (King v. People of the State of New York, 83 N. Y. 587, per Andrews, J.)

There are those who urge that all inns, ale-houses and other places where more or less intoxicating drinks are offered to the public for consumption, tend by reason of the kind of traffic conducted, therein, like common gaming houses, to debauch the public morals and disturb the public peace, and should properly be classed with gaming houses as public nuisances. (State ex rel. Vance v. Crawford, 28 Kan. 726 at p. 733.) Danger to the public in an unregulated traffic in drink was early recognized in England. The State might meet the threatened danger by" regulating or suppressing the traffic. It chose the less drastic course, and-sanctioned the maintenance of drinking-houses only so long as they were conducted in an orderly manner and in accordance with the regulations of the Crown. Traffic in drink was lawful before the State recognized the need for regulation; it continued lawful thereafter when conducted with the express sanction of the State. A business which is lawful cannot be a nuisance when properly conducted. Ale-houses and other prototypes of the saloon were not nuisances at common law unless they became so because of the manner in. which they were conducted. (Rex v. Ivyes, 2 Show. 468; Stephens v. Watson, 1 Salkeld, 45; Faulkner’s Case, 1 Saunders, 248.)

Nevertheless it has long been, the rule that public nuisances included not only bawdy-houses, common gaming houses and unlicensed shows, but also disorderly drinking places. “All disorderly inns or ale-houses, bawdy-houses, gaming-houses, stage-plays, unlicensed booths and stages for rope-dancers, mountebanks, and the like, are public nuisances, and may upon indictment be suppressed and fined.” (4 Blackstone’s Commentaries, p. 167.) So it was said in Commonwealth v. McDonough (95 Mass. 581): “ Brothels and gaming-houses were held to be nuisances under, all circumstances; but alehouses were not, unless they became disorderly.” (See, also, State v. Bertheol, 6 Blackford [Ind.],474; Sopher v. State, 169 Ind, 177.).

The question we must decide is whether the saloon or drinking place maintained by the defendant was “ disorderly,” as that term was understood by the judges and legal scholars who may be said to have directed the course of the common law. The Eighteenth Amendment to the Constitution created an entirely novel situation. It destroyed the choice of the State to sanction, regulate or prohibit traffic in intoxicating liquors. “ The first section of the Amendment — the one embodying the prohibitions — is operative throughout the entire territorial limits of the United States, binds all legislative bodies, courts, public officers and individuals within those limits, and of its own force invalidates every legislative act — whether by Congress, by a state legislature, or by a territorial assembly — which authorizes or sanctions what the section prohibits.” (National Prohibition Cases, 253 U. S. 350.) Each State might thereafter, for purposes of enforcement, declare that the prohibited acts constitute offenses against fits own peace and dignity. None might make an act prohibited by the Constitution lawful. By its repeal of the State Enforcement Act, the Legislature of New York has determined that the public policy, of the State does not require the State to embrace within its statutory definitions of crime the acts prohibited by the constitutional amendment. Certainly the courts, may not create new categories of offenses against the State, or enlarge statutory definitions. None the less the courts must apply the accepted definitions of crime even in novel conditions, and determine whether in such conditions an offense against the State has been committed.

It may hardly .be doubted that the Legislature did not intend that its definition of a public nuisance as "unlawfully doing an act * * * which act or omission * * * offends public decency * * * " (Penal Law, section 1530), should be confined to acts which are more or less analogous to the acts prohibited by article 106 of the Penal Law entitled “Indecency.” The definition of a public nuisance contained in section 1530 is derived from section 385 of the Penal Code. That definition was originally formulated in the draft of a Penal Code prepared by Commissioners appointed in accordance with chapter 266 of the Laws of 1857. To the draft submitted to the Legislature the Commissioners appended a list of cases which in their opinion supported each statutory definition. As authority for their definition that a public nuisance included unlawfully doing an act * * * which * * * offends public decency ” the Commissioners cited only three cases, and the first case cited is State v. Bertheol (supra) which decided that at common law a disorderly alehouse of saloon constituted a public nuisance. In other jurisdictions which have adopted the same or similar statutory definitions, the courts have regarded the statute as merely declaratory of the common law. (Faucett v. Dewey Lumber Co., 82 Mont. 250; Jones v. State, 38 Oklahoma, 218.) Such construction seems implicit in the opinion of People v. Hoffman (118 App. Div. 862; affd., on opinion of the Appellate Division, 189 N. Y. 561. See, also, Melker v. City of New York, 190 N. Y. 481; People v. Borden’s Condensed Milk Co., 165 App. Div. 711, at p. 713; affd., 216 N. Y. 658). We conclude that while for time out of mind the term ‘ nuisance ’ has been regarded as incapable of definition so as to fit all cases, because the controlling facts are seldom alike ” (Melker v. City of New York, supra), yet the public decency may be offended and a nuisance created by “ practises which destroy the peace of families and disturb and undermine the foundations of social order and virtue.” (King v. People, supra.)

We need not now attempt to decide whether in all cases such practices constitute a public nuisance. Doubtless an unrestricted judicial power to punish as a public nuisance all practices which in the opinion of the courts corrupt the public morals or disturb the public peace might create a danger of judicial invasion of the legislative field, through the creation of new crimes by the courts. Perhaps the power must be restricted to practices which are in true sense analogous to those which have been held to constitute common-law nuisances. At least for the purposes of this case, we shall assume that our power is so restricted. To determine whether the defendant’s clandestine maintenance of an unlawful drinking place was “ disorderly ” and “ offends public decency,” we apply to new conditions the tests which have been approved and applied in the past.

The maintenance of a brothel was, as we have pointed out, a nuisance at common law, and it was punished as such by the courts of common law though the acts committed therein were offenses cognizable only by the spiritual courts. (Galizard v. Rigault, 2 Salkeld, 551.) The maintenance of a common gaming house was a nuisance and punishable as such though the common law did not prohibit the playing at dice and cards. (Jenks v. Turpin, 13 Q. B. D. 505.) They were nuisances, not because they were maintained for purposes which violated the law, nor because they caused noise or disorder or resulted naturally in bringing together criminals and disorderly characters. They were nuisances and their maintenance constituted a public offense for the reason that its direct tendency is to debauch and corrupt the public morals, to encourage idle and dissolute habits and to disturb the public peace.” That is the test which has been applied for centuries and has been approved by this court. {King v. People, supra.) Measured by that test brothels and gaming houses are declared to be nuisances because disorder and evil are inherent in their nature, and drinking houses may be declared to be nuisances, even though authorized by law, when they are maintained in such manner as to produce similar evils and disorder.

It has been held that a “ practise of so keeping a house as therein to violate the law makes it disorderly.” {State v. Williams, 30 N. J. Law, 102; Smith v. Commonwealth, 45 Kentucky, 21; Wilson v. Commonwealth, 51 Kentucky, 2; Meyer v. State, 42 N. J. Law, 145; Walt v. People, 46 Colorado, 136; People v. Hoffman, 189 N. Y. 561; People v. Curtis, 152 App. Div. 372; affd., 206 N. Y. 747; People v. Kingston, 177 App. Div. 376. See, also, 1 Bishop, Criminal Law, 824; Rex v. MacDonald, 3 Burrows, 1645.)

It is not easy to define the exact limits of the doctrine of these cases.. Perhaps that doctrine should be applied only where the defendant carries on a vocation which at common law has been regarded as a nuisance when carried on in a disorderly or ill-governed way. Perhaps other limitation may hereafter be formulated. At least it has been applied to saloons or drinking places where traffic in intoxicating liquor is carried on in a manner prohibited by law. (State v. Williams, supra; Meyer v. State, supra; Walt v. People, supra.)

In those cases, it is true, the acts which gave color of disorder to the maintenance of the house were violations of the law of the State which declared the house a nuisance. Here, as we have pointed out, traffic in intoxicating liquor constitutes no offense to the peace and dignity of the State. The distinction is only superficial. The basis of the decision in these cases is that the maintenance of a house, where unlawful or vicious acts are habitual, tends to debauch public morals. and to offend public decency, and constitutes a crime against the State independent of any crime which may . be committed by each separate act done in the house. The State punishes the offense of inducing vice, rather than the vice itself; the indecency of such inducement — the. injury to the public morals — constitutes the gist of the offense.

We recognize that the repeal of the State Enforcement Act has bean sometimes regarded as a legislative declaration that the policy of the National Enforcement Act is not in accord with the public policy of the State. Doubtless there are many citizens who regard the Eighteenth Amendment as wrong in principle and pernicious in practice. Men may differ as to whether it has brought more evil than good. At least all must agree that the effect of the amendment as interpreted by the Supreme Court is.to curtail the sovereignty of the State so that the State can no longer sanction, render lawful or regulate the traffic in intoxicating liquors. The injury to the State resulting from an unlawful and unregulated traffic, in intoxicating liquor is unfortunately manifest. Difference of opinion exists only upon the question of whether the remedy lies in an attempt to enforce prohibition by the State or whether a State enforcement act would bring in its train greater evils. The Legislature has spoken upon that question. It has established the policy that the ' State should, not "exércise .its concurrent power to enforce prohibitiofr' created by the Constitution. It hits certainly not attempted to declarethatthe State is not ihjuféd^^ the?evils inherent' in the illicit". mnintenhhce- of sálbóns':: br "so-calléd‘‘ -Speák-easiésP iñ' defiance or disregard Ofthe law imposed upon the" People of "the -State By ñdnstítütionáí amendment of. Ect" of -Congress.

WddMght assüMd thátoóppdsltidntó" the prohibition amendment ándthe National adt adopted for its enforce-6$6^S>4n''fxill"mé£6^r!éi. even" "then we cóuld ndt-Sfind 'oi$rr"%8si‘-te^e' fháfÉftií "purpose and moused MMcós :"of the cfhainténMce of -á mElodm finder the" conditions ' created' by." National pr6hibitióñ,:: which ,áre:.so níMMféáí that • ittrouftb BFSIl fdíé-task to? point théffi. -Gut; GppOnhñts áhd?'súpport'érs-Of-prohibitiÓn?áf:e.alike,yoeif6f5 Ms íh-thhiPEláríh bvfef thO- débEiicheFy-of 1 mofáis;?-th© Mjufy: to? Health,- the ."distúrbáncé". of thé peace "o£" the. State which flow from-^eAltiWtiáMce. ni ‘illitit-driñkh^. plan^P'-'STohO" -han doubt that -' ffdm"theif? .'natüfé osuch dfíñMhg plachs cOnstitUte-an iníufy tothn.StEté. "y C '-

¡?: Wh-arebfiot-now cohcérriéd. with distinctions cohcérning thñ^9ereignty'Of "Státe-andfNatiónfi'-The-Statndoe's" not: aufh@riie>%Kátv tiín,.Nátionr forbids,' nóF?do©S'it~Seek'to. püníSb?En? offehSe-^against the.peace- "and "dignity, of . the Nntiéfi-hs#hi'xyWeE¿ .offénSé against its ówn-peacév' .'It; demands puSihinent for - and suppression of the' maintnÉaMn-of-préíñi¿bS-‘ fof/purposes '"-Whiéh'.'feSul’t incirijury tO-.tho#eSth'Ehd2i¿órslEoi the- community and-'threaten1 fO-ifSfdefMM-ftófOühdationsóf'SOniaLofdermhdvirtüé.'’./ Evemdf ?thÍ?ináinTenancéiOf añ .?bMéfIy ? dfinking :plach '^eW^anhtihiiM-.^byi-tb'o -' State,-' "a dfinMng:place ?so -com ducted as-to'dfeáte .meh'e'vils'fvbüld.uñder well-established ái.#bflty?Qiónhtiftité m-pUblic nuisance?? andan? offense á^ffiltvMníStatn?,20-::o ct ír^W?. rr ft r:h y v-r-r v-C

P-*'3he -fNsfiorM'-Prohibition enacted " by.? Congress coüíd?not "áhd"díd not enlarge the "definition" of thé crime óf rnaintEiñing'-a public nuisance as defihéd-' by thehLegisv lature of this State; • We give the National Prohibition Act no such effect. . The National Prohibition Act has, however, changed the conditions under, which drinking places may be and, in fact, are conducted. Before that act became part of tfie law of the land," saloons might be conducted in this State under the sanction .of:, our, law in an orderly manner, furnishing to their patrons Equor which might be bought in, the open market and which was subject to reasonable regulation and inspection by pubfic officers, calculated to safeguard the pubfic health. Since that act has become the law. of the land, drinking places must be conducted in fear of the law, withdrawn from inspection of pubfic officers, .furnishing fiqiior obtained, and perhaps manufactured, surreptitiously. We cannot close our eyes to facts which are manifest to. all. Pubfic approval or disapproval of the policy of pro-, hibition, even the fiat of fhe Legislature, cannot change those facts. We know that liquor not subject to,inspection, manufactured and sold surreptitiously,: is a danger to health. We know that a drinking place, conducted surreptitiously, in fear of the officers of the law, not only tends to breed disrespect of all law, .but attracts men of criminal character who might not dare to enter.a place of. entertainment conducted openly and subject to visitation, by the police. We know that such places ruin the health: of those they entice} induce idleness and dissolute habits, foster crime and thus cause injury to the pubfic health and debauchery of the pubfic morals.

We are not now concerned with the source of the law which has changed former conditions. We do not seek to enforce that law. We recognize the, conditions now existing, regardless of the source , from which they. flow. We apply to the conditions now existing , the definition of a public' nuisance applied of old by the common law. The maintenance of a drinking place which produces such evils has never been an.innocent act. c"It can. hardly be doubted that such a drinking place has always..been “ disorderly 'and a “ public nuisance" ”" at common law and tinder the statutory definition of "the Penal Law of this State, read in the light of the common law. Application of the statutory definition of a public nuisancé tó a drinking place1' conducted under conditions created by the National Prohibition Act, in' ho manner involves a holding that in effect Congress can amend the law of the State of New York. Indeed, it might more accurately be said that the act of Congress’has amended the law of our" State if we refuse to'apply thé statutory definition to- conditions, which fairly" come within its scope, merely because the act Of Cófigress prohibits all drinking places, orderly or otherwise. : '

. We determine 'Only that an illicit common' drinking- house creates stich evils; The harm" to ""the"'community which arises from the defendant’s" act is hardly affected by distinctions draWn by "constitutional lawyers as to- the nature or source of the" law which is habitually violated in the defendant’s" premise’s. "Otir conclusion that an illicit drinking place," from its nature, is a public nuisance which entices'and "induces "men to break the law bf " the land and which "téhds tó "injure thé health and morals of the community, is "founded upon manifest conditions. It is the disorderly character of the illicit-drinking place.which Constitutes the offénsé tó thé public decency. That offense arises from the natufe of the-acts-habitually done upon the premises ’ and "the injury to the morals and health Of the community "which must naturally flow therefrom,' apart from thé' annoyance or - disturbance of those" person's who might be in the neighborhood. " We do fibt* now consider whether the same conclusion would follow merely from proof that a person maintains' premises in which" other laws, either of State or of Nation, are habitually violated.

• It has been urged thafthere can "be no óffefisé to public decency, and public nuisance unless the gerieral public is invited to the premises, or" at" least awáré of the purpose for which they are used. The argument is Specious. The defendant regularly used his premises for the purpose of selling strong drink to such part of the public as he chose to invite or admit, though the evidence shows that the business was conducted in a clandestine manner and that none were admitted to its allurements unless known to the defendant. Perhaps even without such evidence we might almost assume that the place was conducted clandestinely, and that not all the public knew of the place or were invited to it. Disrespect of the law has not yet generally assumed the aspect of Open defiance. Habitual violations of the law are ordinarily conducted with some degree of secrecy. Otherwise they might not remain unsuppressed long enough to become habitual.

Open defiance of the law might perhaps accentuate the disorderly character of the premises, yet" inducement to violate the law clandestinely results in scarcely less injury to the community. Brothels and common gaming houses seldom if ever invited the general public, yet as we have pointed out, they have always been punished as public nuisances. “ To no gaming-house is the public at large invited to go without restriction of some sort or other. The keeper of such a house has always the right to admit or refuse admission to any one he pleases, or to make such rules as he may think fit for the regulation of such admission. * * * The law does not require that it shall be a public gaming-house: a common gaming-house is that which is forbidden, that is; a house in which a large number of persons are invited habitually" to congregate for the purpose of gaming.” (Jenks v. Turpin, supra.)

So here, the defendant’s offense consists neither in annoyance nor disturbance of the public, but in maintaining a common drinking place in a disorderly manner. The disorder might be concealed from part of the public. The defendant might exclude such part of the public as he saw fit, but the premises were maintained for the defendant’s profitderived from inducing and enticing such part of; thejpublic as def endant did admit,'to violate the National Prohibition: Law clandestinely and to drink the prohibited beverage, ..The injury to the health and morals of the. connnmitity constitues an offense against the peace and order of-the .State" and.'a common nuisance-as understood af eommon .Iaw. and: as defined by:, section 1530: of the Penal-Law. of this State. " ; . , ■ v

. The; judgment .of -convitition should be affirmed.

Pound, J.

(concurring). I concur.

" This Constitution * * * shall be the supreme Law of the Land." (U. S. Const. art. VI, § 2.) The Constitution is a part of the law of the State of New York. (Hauenstein v. Lynham, 100 U. S. 483, 490.)

' The ^Eighteenth; Amendment prohibits .the sale, of intoxicating .liqudrs fpr beverage purposes. . The.purpose of the .amendment is: the protection of the public health, orderj decency and morals. . Every place where intoxicating-liquor is openly'and .habitually sold is maintained in defiance of the United . States : Constitution — the supreme Law of the. Land.” '- . .

Whatever may be said about the liquor traffic prior to the-, adoption [ of the Eighteenth Amendment, a place where intoxicating liquor is .thus sold is now placed by the Constitution in the same .class with bawdy houses and gaining houses, as being per se unlawful, subversive, of public order, decency and morals to the annoyance of the People of the State of New York (Penal Law, § 1530) as well as Of the United States of America. , (U. S. Code, title 27, § 33.)

. The State of New York does not aid in- the enforcement of the. Eighteenth Amendment by general legislation directed to that end but it should not refrain from' upholding the .Constitution by enforcing .its existing ' laws when applicable to the situation. . ‘

The judgment should be affirmed.

Crane, J.

(concurring). I concur. Section 1530 of the Penal Law defines a public nuisance as an unlawful act which endangers, the health of any considerable number of persons. The maintenance of a u speak-easy” or saloon for the sale of intoxicating liquors is the doing of:an act which endangers the health of persons taking or buying, the liquor.

The only justification for the Eighteenth Amendment and the National Prohibition Act is that intoxicating liquors are injurious to health. For this reason their sale has been prohibited. This was the point In Lambert v. Yellowley (272 U. S. 581), where the reports of the various medical societies upon this subject were considered of sufficient importance to be quoted. The deaths and the blindness from wood alcohol or poisoned liquor sold in these "speak-easies" have been too frequent to escape public attention and notice. As paradoxical as it may seem, the illegality and secrecy of such sales afford some protection to the violator of the law. It does not do to say that the place in which he violates the law is not a nuisance because the secrecy creates no noise. The danger to the frequenters of such a place, though health be sapped in silence, nevertheless makes the place a nuisance. The law does not inquire whether the liquor be good or bad it takes no chances.

The maintenance of this “ speak-easy,”' therefore, in my. judgment; comes directly within this "definition .of our Penal.Law of a public nuisance.

Andrews, J.

(concurring); : With the resxfit reached in this case I agree; i' “’ A ‘ public nuisance:’ is a crime against the order and economy of the State, and consists in unlawfully doing an act, or omitting to perform" a. duty, .which act"or omission: 1. Annoys, injures.or endangers the comfort, repose; health or safety" of any considerable number of persons; or, 2. Offends, public decency;!! * or, 4. In any .w.ay renders- a- “e.onsiderable;number of persons insecure in life, or the use of property,” It is not necessary that the public be invited to the building upon which the nuisance is said to be maintained. It is enough if any considerable number are accustomed to enter and disorder customarily follows.

Here there is proof that persons became intoxicated upon the premises and left them, still intoxicated, school children and others being in the neighborhood, Under such circumstances the defendant maintained a disorderly house within every reasonable definition and so comes within the first and second subdivisions of the statute..

I am unwilling to go further. Doubtless if the defendant dispensed poisonous or adulterated liquor, he endangered the health of many. (People v. Kingston, 177 App. Div. 376.) Of that there is no proof. We certainly may not hold, as a matter of judicial knowledge, that the moderate consumption of pure beer, wine or spirits is dangerous. Too many eminent physicians take the other view. Nor do epithets supply the want of evidence.

Neither do I think that the maintenance .of premises for practices' not in themselves immoral or disorderly although prohibited by statute, is an offense, against public decency. The so-called Volstead Act is no more sacred than other statutes authorized by the Constitution... Its habitual violation is no more an offense against the decency, dr the order of this State, than would be the habitual grant of rebates by railroad corporations. To. so : hold where there is no actual disorder would be to subject the defendant to that same double jeopardy which, was one of the reasons for the repeal of the Mullan-Gage Act. . .....

If mere disobedience to gome statute is not sufficient, then there must be something peculiar in the possession and sale of liqiior to bring, it within the thought of the Legislature. It, must be immoral per so. Such sales have long been regulated. One object was revenue for the

State, easily collected, as was the case with tobacco. Another was to check public disorder. We ah- know the indignation caused by the persistent and notorious breach of these regulations. We know the evil influence of saloons in politics — the poverty and violence that resulted. Conducted as they were and given the frailty of human nature they were as a whole an undoubted evil. IU repute fell on innocent and guilty alike. Also, even if no drunkenness or disorder were permitted, they were a temptation to extravagance, to neglect of thrift — as are today a cigar store or an automobile salesroom.

Yet under the guise of enforcing a penal statute courts should beware of attempting to give effect to their own notions of right or wrong, of wisdom and policy. They are to declare that criminal only when the Legislature has made it a crime. New . conditions may point to new needs. It is for the Legislature to act. The courts are to interpret its words —not to extend its meaning to situations as to, which it,had no thought. And in so doing they may not consider this particular section of the Penal Law as if it were a venture into a new and untried field. They are to view it in the light, of its historie background. The Legislature spoke of “ public decency,” having before it many decisions and a long tradition.

Neither the Legislature nor the Commissioners who drafted this section of the statute in 1857 thought the mere possession and consequently the sale of liquor a thing immoral in itself — a sin. If for other reasons a saloon became disorderly, yes. Then there, was an independent crime. Not otherwise.. If a saloon were unlicensed, the sale was forbidden.. But never was it held that such disobedience was also an offense against decency. In that day the thought that the moderate use of liquor was a wrong occurred to. few. Such an idea seems never to have been in the mind of Moses if.we have received the substance of his words (Deuteronomy, XIV: 23). Nor did it occur to St. Paul (1 Corinthians, XI: 25; 1 Timothy, V: 23), to St. Augustine (St. Augustine, book. 10, chap. 31), to Luther (Bayne, Luther, vol. 2, p, 243), nor to Jonathan Edwards (Works, vol. 1, p. 70). It is not yet the belief of England, France, Italy or Quebec. Nor of our own citizens on a British steamer with New York a hundred miles behind. To impute to our Legislature any such belief is an anachronism. It itself authorized possession and sale. It drew a large revenue from the traffic. The people of the State approved. We pay slight respect to our predecessors if we ascribe to them a thought that the orderly sale in itself offended public decency or the order and economy of the State.

The Legislature: gave some indication of the kind of thing it understood by the word " indecent in definitions contained in another article. Clearly in using words subject to wide interpretation, it had in mind the meaning given them in the past. Brothels, houses of abortion were evil in themselves. So, to a lesser extent, were public gaming houses. As to them courts might well say that their direct tendency was to debauch public morals and to disturb the public peace. Such general statements should not, however, be disassociated from their context. Never before, in England or New York, have they been applied to the orderly sale of liquor, permitted of unpermitted. And when the Legislature spoke of public decency it did not, any more than would one who reads the statute, suppose it had reference to such sales. Nor did it suppose that the habitual possession of wine in a private house, where freely offered to guests, was an indecent act.

- : "What .-has happened since the" section was adopted Tomake a .crime of that which, was: not a. crime before?" Concfededly Any sale of liquors" is:how unlawful. Concedédly theVolstead Act.isthe rule " of New York as well as-the rule of "Kansas; 'Yet its".violation does not offend the;order andbconomy of the State, unless the. violation qfTany-'StAtutu does, so- because'ssüch :violátioh!?míght corrupt the public morals. Such wide latitude to the term is inadmissible.

We disapprove of the possession and sale of liquor, as we do of disobedience of any statute, State or National. But because we disapprove, we should not declare criminal what was never so intended by the Legislature. We should remember what was in its mind when the section was adopted. We should limit our declarations as to what constitutes public decency to acts strictly analogous to those with which the courts had hitherto dealt.

This discussion is not necessary for the decision of the case before us, as the discussion in the prevailing opinion is not. Always a disorderly drinking place has been declared a public nuisance; here disorder was shown. For that, I repeat, the present defendant may be punished under our statute.

Cardozo, Ch. J., Pound, Crane and O’Brien, JJ., concur; Pound and Crane, JJ., in separate opinions; Andrews, J., concurs in result in opinion in which Kellogg, J., concurs.

Judgment affirmed.


source: Caselaw Access Project

author: Pound, J.

license: Public Domain

text:
    In the Matter of Mount Sinai Hospital. Julius Goldman et al., Appellants; Jacob Emsheimer et al., Respondents.

      (Argued November 28, 1928;
    decided December 31, 1928.)

      Walter H. Pollak and Carl S. Stern for appellants.
    The statute of 1925 destroys the voting rights of members, for which consideration had on the faith of law existing at the time and of the hospital’s own constitution been given by the members; the statute, therefore, impairs the obligation of contracts. (Commonwealth v. Essex Co., 13 Gray, 239; People v. O’Brien, 111 N. Y. 1; Superior Water Co. v. Superior, 263 U. S. 125; Manheim Borough v. Manheim Water Co., 229 Penn. St. 177; Holyoke Co. v. Lyman, 15 Wall. 500; Printing House v. Trustees, 104 U. S. 711; Bryan v. Board of Education, 151 U. S. 639; George v. Holstein-Friesian Association, 238 N. Y. 513; Allen v. McKean, 1 Sumn. 277; Sage v. Dillard, 15 B. Mon. 340.) The statute by completely making over the structure of the corporation and taking from the members their right to control its property and policies through electing the trustees, deprives them of property without due process of law. (Lord v. Equitable Life Assurance Society, 194 N. Y. 212; Page v. American, etc., Mfg. Co., 129 App. Div. 346; Bond v. Atlantic Terra Cotta Co., 137 App. Div. 671; 151 App. Div. 938; 210 N. Y. 587; Matter of Jamaica Consumers Ice Co., 190 App. Div. 739; 229 N. Y. 516; Dartmouth College v. Woodward, 4 Wheat. 699; White v. Brownell, 2 Daly, 329; People v. Medical Society, 24 Barb. 570; Commonwealth v. Guardians of the Poor, 6 S. & R. 469; Fuller v. Trustees Plainfield School, 6 Conn. 532; Associate Alumni v. Theological Seminary, 163 N. Y. 417; Trustees of Presbytry v. Westminster Church, 222 N. Y. 305.) The special act which deprives the members of Mount Sinai Hospital, and of that corporation alone, of rights which the general laws of the State established and which the members of all other membership corporations incorporated under those laws retain, is a denial of the equal protection of the laws and a deprivation of the members’ rights otherwise than by the law of the land. (Yick Wo v. Hopkins, 118 U. S. 369; Nixon v. Herndon, 273 U. S. 536; Cotting v. Kansas City Stock Yards Co., 183 U. S. 79; Gulf Railway Co. v. Ellis, 165 U. S. 150; Detroit Ry. Co. v. Fuller, 205 Fed. Rep. 86; Southern Bell Telephone Co. v. Calhoun, 287 Fed. Rep. 381; McFarland v. American Sugar Refining Co., 241 U. S. 86; Stearns v. Minnesota, 179 U. S. 223.)

      Charles E. Hughes, Garrard Glenn, Benjamin Tuska and Henry F. Wolff for respondents.
    The charter amendment was the means chosen by the Legislature acting within its constitutional sphere, for the. solution of a, serious problem which new conditions had created in the operations of a public charity. The method adopted was in accord with both precedent and modem practice, and constituted no radical alteration in the charter scheme. (People ex rel. Bryant v. Zimmerman, 241 N. Y. 405; Matter of Morse, 247 N. Y. 290; Middleton v. Texas Power & Light Co., 249 U. S. 152; Calder v. Michigan, 218 U. S. 591; Polk v. Mutual Reserve, 207 U. S. 310; Ark. Valley Co. v. Lyon Canal Co., 173 Fed. Rep. 601; Brewster v. Hartley, 37 Cal. 15; Cabana v. Holstein-Friesian Assn., 196 App. Div. 842; 233 N. Y. 644; George v. Holstein-Friesian Assn., 238 N. Y. 513; Ayers v. Order of United Workmen, 188 N. Y. 280; Wright v. Knights of Maccabees, 196 N. Y. 391.) The State’s reserved power to amend or repeal the corporate charter peculiarly applies to changes in the manner of electing the directors of a corporation like Mount Sinai. (Pratt Institute v. City of N. Y., 183 N. Y. 151; Polk v. Mutual Reserve Fund, 207 U. S. 310; Lord v. Equitable Trust Co., 194 N. Y. 212; Dartmouth College v. Woodward, 4 Wheat. 518; Miller v. State, 15 Wall. 478; Looker v. Maynard, 179 U. S. 46; 21 Sup. Ct. 21; McKee v. Chautauqua Assembly, 124 Fed. Rep. 808; 130 Fed. Rep. 536; Jackson v. Walsh, 75 Md. 304; Grobe v. Erie Mutual Ins. Co., 39 App. Div. 183; 169 N. Y. 613.) There has been no invasion of rights in which, either the corporation, or the public as represented by the State, are interested. (Dartmouth College v. Woodward, 4 Wheat. 518; Sage v. Dillard, 15 B. Mon. 340; Cotting v. Kansas City Stock Yards Co., 183 U. S. 79; Southern Tel. Co. v. Calhoun, 287 Fed. Rep. 381; McFarland v. Am. Sugar Co., 241 U. S. 79; People v. Beakes Dairy Co., 222 N. Y. 432; Matter of Morse, 247 N. Y. 290.) The members’ privilege of voting for the election of trustees of a charitable corporation does not constitute a “ contract right ” within the meaning of any constitutional restriction on the exercise by the Legislature of its reserved right to alter, amend or repeal the charter. (Sherman v. Richmond Hose Co., 230 N. Y. 462; Matter of MacDowell, 217 N. Y. 454; Polk v. Mutual Reserve Assn., 207 U. S. 310; Bryan v. Board of Education,
      151 U. S. 639.) The appellants had.no property interest of any description in or with respect to the Mount Sinai Hospital. (Matter of Morse, 247 N. Y. 290; Grobe v. Ins. Co., 39 App. Div. 183; 169 N. Y. 613; Sherman v. Richmond Hose Co., 230 N. Y. 462; Avila v. City of New York, 106 App. Div. 120; Mormon Church v. U. S., 136 U. S. 1; Stanley v. Colt, 5 Wall. 119.)
   Pound, J.

Mount Sinai Hospital is a charitable corporation,. It was incorporated in the year 1852 under the name of The Jews Hospital in New York,” under a general act (L. 1848, ch. 319) entitled: "An Act for the incorporation of. benevolent, .charitable, scientific and missionary societies.”. The affairs of such a corporation are, under such act, controlled and managed by a board or trustees or directors. The purpose of the incorporation, as stated, in the certificate, was: " medical and surgical aid to persons, of the Jewish persuasion and for all other purposes appertaining to Hospitals and Dispensaries.” Its name was . changed by a special act of the Legislature (L. 1866, ch. 627) to “ The Mount Sinai Hospital.” The act of 1848 provided: “ the society so incorporated may annually elect from its members its trustees, directors or managers, at such time and place, and in such manner as may be specified in its by-laws.”

By Laws of 1857, ch. 651, entitled: “ An Act to amend the constitution of the Jews’ Hospital, in New York,” a special act, it was provided: “ the business of the Jews’ hospital, in New York, shall be managed by twelve directors, and the said directors, shall be so classified that one-fourth part of the whole number thereof, shall be annually elected by the members of the society.” In 1922 the number of the board was increased to forty-two, divided into seven classes of six each, six' being elected each year for the term of seven years. Many other special acts amending the charter of the Mount Sinai Hospital have been enacted. Two only will be referred to. Laws of 1918, chapter 80, changed the style of directors ” to “ trustees.” Laws of 1904, chapter 365, provides:

“ Section 1; The purposes and objects of the Mount Sinai hospital of the city of New York are hereby declared to- be the support and maintenance of. an institution to be knówn as the Mount Sinai hospital, for the purpose of affording dispensary service and medical and surgical aid and nursing sick and disabled poor of the city of New York and - others- of -- any. race, creed or nationality,’ and its certificate of incorporation is hereby amended accordingly.” .. .....

Thereby the non-sectarian character, of the charitable activities of the hospital was established.

By Laws of 1917, chapter 269, the Federation for the support of Jewish Philanthrophie Societies of New York City,” was incorporated, and by Laws of 1917, chapter 498, charitable corporations Were authorized to affiliate with Federation. Mount Sinai became affiliated with Federation.

Federation is a central collecting agency for Jewish societies-. By -its by-laws no affiliated institution may solicit funds except permanent endowments and legacies. Mount Sinai submits to Federation its annual budget. Members of beneficiary societies may designate in contributing to Federation the particular societies to which their contributions may be applied. The purpose is to enable all members of .Jewish charitable societies to pay Federation rather than to keep up individual -memberships.

The corporation is one of the greater charities of the city bf New York. It has a membership numbering about four thousand and from small beginnings has accumulated property of the estimated value of from $12,000,000 to $15,000,000.

Laws of 1925, chapter 17, provides:.

( " The various classes of the board of trustees of the Mount Sinai Hospital, as now constituted, shall continue in office until the-expiration of their respective terms, and the successors of said" respective classes shall be elected by a majority vote of the remaining members of the board of trustees annually Upon the expiration Of the terms of said respective classes»”

The election of the members of the board in the year 1925 Was held "Under the provisions bf this act. ’ The constitutionality of the statute is challenged in this proceeding, not by the corporation, but by two members of the society, paying annual dues, one as a $10 member and the other as a donor or $25 member. Membership consists of those persons who have' enrolled their names ” in one of several classes of members, the classification being dependent" on the amount received. It is also provided that a member in arrears for one year may be dropped. The only question is whether the act violates any Of the appellants’ constitutional rights to have their Contracts unimpaired and their property and liberty uníntérfefed With, except by due process of law, and to the protection of equal laws.

The change is not arbitrary or unreasonable. A board of trustees Once elected by the members of the corporation becomes sélf-perpetuating. The purpose of the enactment máy be regarded as two-fold: First, to meet the situation of a possible falling membership, and secondly, to make certain the self-perpetuating control of the society by the board as against the' possible dangers of popular elections. Such a change must be upheld unless, under the Circumstances, it violates fundamental principles of justice, inconsistently with constitutional limitations on the legislative power."

The certificate of incorporation is subject to alteration by the Legislature. Not only did the Constitution of New York of 1846, in force when the hospital was incorporated, provide, as does the present Constitution (Art. VIII, § 1): “All general laws and special acts passed pursuant to this section may be altered from time to time or repealed,” but the act of 1848 (§ 10) also contained a provision: “ The legislature may at any time amend, annul or repeal any incorporation formed or created under this act.” This reservation is a part of the charter (Pratt, Inc., v. City of New York, 183 N. Y. 151, 162.) Furthermore, the Legislature may, when in its judgment the objects of the corporation cannot be attained under general laws, create corporations by special act. (Art. VIII, § 1.) Thus we have the Mount Sinai Hospital with a charter consisting of its certificate of incorporation as amended by special acts. We have such special acts accepted by the corporation. We have the act of 1925, challenged as unconstitutional by two members who assert that the board of trustees may not accept the amendment without their consent. They rest on the proposition that, so long as they choose to remain members of the corporation, the Legislature may not under the reserved power to amend the corporate charter, without their consent, deprive them of their right to vote for trustees.

The reserved power to amend corporate charters prevents the charter from becoming a contract, between State and corporation protected from impairment, by the Constitution. (Dartmouth College Case, 4 Wheat. [U. S.] 518.) Under it anything may be done by the Legislature that could be done if the Federal Constitution did not prohibit a State from passing a law impairing the obligation of contracts. (U. S. Const. art. 1, § 10.) Any alteration may be made “ which will not. defeat or substantially impair the object of the grant, or any rights vested under it, and which the. legislature may deem necessary to secure either that object or-any public right ” or “ to promote due administration of the affairs of the corporation.” (Tomlinson v. Jessup, 15 Wall. [U. S.] 454; Holyoke Co. v. Lyman, 15 Wall. [U. S.] 500, 519; Miller v. State, 15 Wall. [U. S.] 478, 498; Close v. Glenwood Cemetery, 107 U. S. 466, 476.) A State may not, by using the form of charter amendment, deprive a corporation of any of its substantial property or property rights, except in the legitimate exercise of the legislative or police power, under the due process and equal protection clauses of the State and Federal Constitutions. (Zabriskie v. Hackensack, etc., R. R. Co., 18 N. J. Eq. 178, 192; People v. Beakes Dairy Co., 222 N. Y. 416.) In other words, a corporate charter is no longer, a contract between the corporation and the State which the State, may not alter without the consent of the corporation; but the corporation and its members are not subject to any kind of confiscatory legislation or discriminatory burden which takes the guise of an amendment to the charter. " The alterations [under the reserved power] must be reasonable; * * * and be consistent with the scope and object of the act of incorporation.” (Shields v. Ohio, 95 U. S. 319, 324; Commonwealth v. Essex Co., 13 Gray [Mass.], 239, 253; People v. O’Brien, 111 N. Y. 1, 52; Chicago Mil. & St. P. R. R. Co. v. Wisconsin, 238 U. S. 491, 501.) Tested by this rule, the amendment is unobjectionable on constitutional grounds and is a proper exercise of the reserved power to alter charters, wholly independent of the exercise of the police power of the State. (Cf. Erie R. R. Co. v. Williams, 233 U. S. 685, 700.)

The grant of a special charter to a corporation does not deny to it or to other corporations “ the equal protection of the laws.” (U. S. Const. 14th Amendment, § 1.) A corporate, charter creates a legal entity, distinct from its members and from other corporations. The trustees of one charitable or educational corporation may be elected by the members; of another by the board itself; of a third by cooptation: (Education Law [Cons. Laws, ch. 16], § 1031.) One corporation may have many and great powers; another few and small powers. They differ as individuals differ. The effort to require incorporation under general laws has proved both half-hearted and ineffective. The monition contained in the New York Constitution that " corporations may be formed under general laws ” has been heeded by the Legislature only so far as it has been deemed expedient by the Legislature itself to do so and the determination of the Legislature is controlling on the courts. (People v. Bowen, 21 N. Y. 517; Economic P. & C. Co. v. City of Buffalo, 195 N. Y. 286, 299.) The act of 1925, even though the corporation sought to reject it, as it does not, is not discriminatory legislation placing an unequal burden on the Mount Sinai Hospital or on its members. It is not a penal statute, such as was unsuccessfully challenged by a member of the Ku Klux Klan in People ex rel. Bryant v. Zimmerman (241 N. Y. 405 ; 278 U. S. 63), nor is it a statute which intentionally and arbitrarily discriminates. against the corporation or its members. It is a governmental regulation of the method of electing trustees as to which no rule of uniformity exists and which is a common regulation of charitable corporate charters. If the Legislature, in its wisdom, deems it necessary or appropriate, on grounds of public policy, to enact such a statute to carry into execution its power over the conduct. of the business of its creature, the equal protection of the laws is not thereby withheld.

The corporation itself has been deprived of no property without due process of law ” (U. S. Const. 14th Amendment, § 1), for the provision that the trustees should be elected by its members, although a contractual right between State and corporation, subject to amendment under the reserved power, is not a property right of . the corporation of which it could not be deprived without its consent. It has, moreover, sought the change in the-law for its benefits and accepted and acted on it; so that the test is not what'are its rights in this regard but what are the rights of the appellants as members of the corporation? If their privilege to vote for. trustees presents any evidence of ownership or vested right to share in the control of the corporation such as we associate with the idea of property, it may be beyond the power of the Legislature to take it from them. (Lord v. Equitable Life Assur. Soc., 194 N. Y. 212.) They had the bare right to vote for trustees because they were mere members of the corporation paying an annual membership fee. When they became members of the corporation they consented in advance to everything that could be done by legislative amendment to the charter which did not deprive them of their constitutional rights. (McKee v. Chautauqua Assembly, 124 Fed. Rep. 808; 130 Fed. Rep. 536.) They took the risk of a true amendment.

A member’s right to a voice in the management of a corporation may under conditions not presented here be a vested interest entitled to protection under the Constitution. What vested interest does a mere voting member of a charitable corporation devoted in part, at least, to public uses, have to protect of which he is deprived when he is deprived of his right to vote? Not, as in the case of the stockholders of a business corporation, property interests of his own (Lord v. Equitable Life Assur. Soc., supra; Davis v. Louisville G. & E. Co., 142 Atl. Rep. 654; 14 Cornell Law Quarterly, 85), because he has no interest in the property of the corporation. If the corporation were dissolved, the funds would not be awarded to the individual members. (Sherman v. Richmond Hose Co., 230 N. Y. 462.) The members do not invest their money. They give it to charity. Not the right of a founder, or one who contributes money under express conditions, to have the statutes of his foundation as to the powers of trustees, or the terms of his conditions, strictly adhered to, except so far as he consents to their alteration. (Allen v. McKeen, 1 Sumner, 276; Printing House v. Trustees, 104 U. S. 711.) Appellants are not founders nor did they attach any express conditions to the payment of their membership dues. Appellants are not asserting the right of the corporation to prevent the transfer of the corporate property from one board of trustees to another by the creation of a new corporation under a new charter (Ohio v. Neff, 52 Ohio St. 375; Sage v. Dillard, 15 B. Mon. [Ky.] 340, 360; Regents, etc., v. Williams, 9 G. & J. [Md.] 365) for no such transfer is attempted. The corporation continues to elect its own trustees. Nor are they asserting the right of the corporation to prevent diversion of the funds raised for the corporation (Bryan v. Board of Education, 151 U. S. 639, 653); the corporation and its purposes remain intact. The voting power was exercised by the members for the benefit of the corporation. Appellants have no beneficial interest of their own to protect (Matter of Morse, 247 N. Y. 290, 303, 304); no “ definite right secured to him [them] by a contract with the corporation.” (Grobe v. Erie Co. Mut. Ins. Co., 39 App. Div. 183, 186; affd., 169 N. Y. 613; Polk v. Mutual Reserve Fund, 207 U. S. 310, 325, 328.)

Under the reserved power of amendment, when in the judgment of the Legislature the interests of a charitable corporation will be promoted by a change in the method of electing trustees, once intrusted to the members, whereby the members are disfranchised and the board is made self perpetuating, no one’s property is taken; no one is deprived of his liberty, except by the rightful exercise of the reserved power. (People ex rel. Bryant v. Zimmerman, supra, at p. 72.) Methods of administration are regulated (Lord v. Equitable Life Assurance Soc., supra; Sinking-Fund Cases, 99 U. S. 700, 719, 720), and properly regulated.

As was pointedly said in Looker v. Maynard (179 U. S. 46, 54): Remembering that the Dartmouth College case, (which was the cause of the general introduction into the legislation of the several States of a provision reserving the power to alter, amend or repeal acts of incorporation,) concerned the right of a Legislature to make a change in the number and mode of appointment of the trustees or managers of a corporation, we cannot assent to the theory that an express reservation of the general power does not secure to the Legislature the right to exercise it in this respect.”

The appellants’ case has been presented to the court from many different angles, none of which has been overlooked. The court has carefully considered all their points. It has reached the conclusion that the right of a member of a charitable corporation to participate in the control of the corporation by voting for trustees, must, under the reserved power, yield to the greater right of the State and the corporation to provide for the more efficient administration of the affairs of the corporation, as their judgment dictates.

It would be .contrary to all correct ideas of the reserved power to say that one who once becomes, by the payment of annual dues, a voting member of a charitable corporation of four thousand members, becomes also a party to a perpetual contract that he shall not be divested of his voting rights without his consent so that he may insist on retaining his membership to bar the adoption of a detail of administration, such as the method of electing trustees, which is deemed salutary by the Legislature and the corporation. Such is the substance of appellants’ claim. We find no authority which compels such a conclusion.

If appellants are not satisfied with the amendment, they have an ample remedy in the right to refrain from paying membership dues in the future.

The order should be affirmed, with costs.

Crane, Andrews, Kellogg and O’Brien, JJ., concur; Cardozo, Ch. J., and Lehman, J., not sitting.

Order affirmed.


author: Crane, J.

text:
    The Greenwich Bank, Respondent, v. Hartford Fire Insurance Company of Hartford, Connecticut, Appellant, and The Hempstead Plains Company et al., Respondents.

      (Argued December 3, 1928;
    decided December 31, 1928.)

      Frederick T. Case and Francis X. Hanley for appellant.
    The policy required the giving of immediate notice of loss. The trial court found as a fact that the insurance companies did not receive immediate notice of loss. The breach of this condition precedent defeats a recovery. (Brown v. London Assurance, 40 Hun, 101; Quinlan v. Providence Washington Ins. Co., 133 N. Y. 356; Inman v. Western Fire Ins. Co., 12 Wend. 452; Carpenter v. German American Ins. Co., 52 Hun, 249; Railway Passenger Assurance Co. v. Burwell, 44 Ind. 460; Trask v. State F. & M. Ins. Co., 29 Penn. St. 198; Cook v. No. British & M. Ins. Co., 181 Mass. 101; Burnham v. Royal Ins. Co., 75 Mo. App. 394; Roumage v. Ins. Co., 13 N. J. L. 110; Edwards v. Ins. Co., 75 Penn. St. 378; Weed v. Hamburg Bremen Ins. Co., 133 N. Y. 394; Brown v. London Assn., 40 Hun, 101; Ermentrout v. Girard Ins. Co., 63 Minn. 305.) The policy provided that any change in the interest, title or possession of the assured rendered void the insurance. There was such a change and the policy was rendered void, (Bronson v. N. Y. Fire Ins. Co., 64 W. Va. 494; Bowling v. Continental Ins. Co., 86 W. Va. 164; Matter

      of Hamilton, 102 Fed. Rep. 683; Rand v. Iowa Central Ry. Co., 186 N. Y. 58; Nicoll v. Sands, 131 N. Y. 19; Woolsey v. Funke, 121 N. Y. 87; Phetteplace v. British & Foreign Ins. Co., 23 R. I. 26.) The evidence shows that the defendant Hempstead Plains Company had no interest in the insurance or in the mortgaged property. The trial court could not possibly have directed a verdict in its favor. (Lett v. Guardian Ins. Co., 52 Hun, 570; 125 N. Y. 82; Attleborough Savings Bank v. Security Ins. Co., 168 Mass. 147; Missouri Pac. Ry. v. International Marine Ins. Co., 84 Tex. 149; Packham v. German Fire Ins. Co., 91 Md. 515; Sims v. Mut. Fire Ins. Co., 101 Wis. 586.)

      Frank C. Laughlin, Thomas G. Frost and Joseph W. Kirkpatrick for plaintiff, respondent.
    The provisions of the policies, that the insured shall give immediate notice in writing of any loss or damage, require only that the notice must be given within a reasonable time and the facts being undisputed that presented only a question of law which the Appellate Division properly decided in favor of the plaintiff. (Carpenter v. German-American Ins. Co., 52 Hun, 249; Coventry Mutual Stock Ins. Co. v. Evans, 102 Penn. St. 281; Southern Idaho Assn. v. Hartford Fire Ins. Co., 31 Idaho, 130; Watson v. Ocean A. & G. Corp., 238 Pac. Rep. 338; Home Life & Accident Co. v. Beckner, 168 Ark. 283; Shaneberg v. Nat. Accident Society, 263 S. W. Rep. 512; Taber v. Royal Ins. Co., 124 Ala. 681; Insurance Co. v. Owens, 69 Kan. 602; Insurance Co. v. Whitaker, 112 Tenn. 151; Southern Fire Ins. Co. v. Knight, 111 Ga. 622; Connecticut Fire Ins. Co. v. Colorado L. & M. Co., 50 Colo. 424.) The appointment of a receiver in bankruptcy of the estate of the insured prior to the fire loss, did not effect such a change in the interest, title or possession of the property as to render the policy void. (Keeney v. Home Ins. Co., 71 N. Y. 396; Fuller v. Jameson, 98 App. Div. 53; 184 N. Y. 605; Bowling v. Cont. Ins. Co., 86 W. Va. 164; Walradt v. Phœnix Ins. Co., 136 N. Y. 375; Gordon v. Mechanics &

      Traders’ Ins. Co., 120 La. Ann. 441; Fuller v. New York Fire Ins. Co., 184 Mass. 12; Georgia Ins. Co. v. Bartlett, 91 Va. 305; Budelman v. American Ins. Co., 297 Ill. 222; Marcello v. Concordia Ins. Co., 234 Penn. St. 31; Thompson v. Phœnix Ins. Co., 136 U. S. 287; Southern Pants Co. v. Rochester German Ins. Co., 159 N. C. 78; Smith v. Security M. F. Ins. Co., 29 S. Dak. 328; Rumsey v. Phœnix Ins. Co., 1 Fed. Rep. 396.) The trial court erred in directing a verdict in appellant’s favor, in view of the fact that insured’s policies were “ for account of whom it may concern and/or as interest may appear,” and made payable to " The Hempstead Plains Company, The Greenwich Bank and The New Netherland Bank of New York as their respective interests may appear,” and in view of the fact that with respect to five of the policies, there were mortgagee clauses attached in favor of the Hemp-stead Plains Company. (McDowell v. St. Paul F. & M. Ins. Co., 207 N. Y. 482; Heilbrunn v. German Alliance Ins. Co., 140 App. Div. 557; 202 N. Y. 610; Bertolami v. United Engineering & C. Co., 198 N. Y. 71; Cary v. White, 59 N. Y. 336; People ex rel. Warchauer v. Dalton, 159 N. Y. 235; Bulkley v. Kaolin Products Co., Inc., 187 App. Div. 103; Union Inst. for Savings v. Phœnix Ins. Co., 196 Mass. 230; Canton Co-op. Bank v. Amer. Central Ins. Co., 219 Mass. 132.)

      George E. Netter and Henry C. Burnstine for respondent.
    Notice of loss was immediate in the circumstances and the Appellate Division correctly held that the trial court erred in holding as matter of law that the respondents could not recover for failure to give immediate notice. (Solomon v. Continental Fire Ins. Co., 160 N. Y. 595; Weed v. H. B. F. Ins. Co., 133 N. Y. 394; O’Brien v. Phœnix Ins. Co., 76 N. Y. 459; Carpenter v. G. A. Ins. Co., 135 N. Y. 298; Matthews v. Amer. Central Ins. Co., 154 N. Y. 449; Solomon v. Continental Fire Ins. Co., 160 N. Y. 595; Will & Baumer v. Rochester German Ins.

      Co., 140 App. Div. 691; Glazer v. Home Ins. Co., 190 N. Y. 6; Paltrovitch v. P. Ins. Co., 143 N. Y. 73; Edwards v. Lycoming County M. Ins. Co., 75 Penn. St. 378.) Respondents other than the trustee in bankruptcy are not affected by any neglect or delay in giving notice of loss and may recover notwithstanding any such delay. (Bonfoey v. U. S., 252 Fed. Rep. 802; McClelland v. Remsen, 3 Keyes, 454; 14 Abb. Pr. 331; Leitch v. Hollister, 4 N. Y. 211; Scandinavian Am. Bank v. Sabin, 227 Fed. Rep. 579; McDowell v. St. Paul F. & M. Ins. Co., 207 N. Y. 482; Heilbrun v. German Alliance Ins. Co., 140 App. Div. 557; 202 N. Y. 610; Lewis v. Guardian Ins. Co., 93 App. Div. 157; Moore v. Hanover Fire Ins. Co., 141 N. Y. 219; Rosenstein v. Traders’ Ins. Co., 79 App. Div. 481; East-Side Garage v. New Brunswick Fire Ins. Co., 198 App. Div. 408; Williams v. Pioneer Co-operative Fire Ins. Co., 183 App. Div. 826.) There was no such change of interest, title or possession as would void the policy. (Bowling v. Continental Fire Ins. Co., 86 W. Va. 164; Walradt v. Phœnix Ins. Co., 136 N. Y. 377; Keeney v. Home Ins. Co., 71 N. Y. 396; Marcello v. Concordia F. Ins. Co., 234 Penn. St. 31; Thompson v. Phenix Ins. Co., 136 U. S. 287; Georgia Home Ins. Co. v. Bartlett, 91 Va. 305; Southern Pants Co. v. Rochester German Ins. Co., 159 N. C. 78; Ætna Ins. Co. v. Aston, 123 Va. 327; Lancashire Ins. Co. v. Boardman, 58 Kans. 339; Gordon v. Insurance Co., 120 La. Ann. 442.)
   Crane, J.

The Alexandre Works, Inc., a domestic corporation, was engaged in business on Stewart ave., Garden City, Long Island, New York, as dealer in and manufacturer of fur novelties. Its plant consisted of a number of brick buildings containing machinery and personal property of considerable value. The insurance amounted to $369,000. On January 9, 1922, it went into bankruptcy, and Percival Wilds on that day was appointed receiver, going into possession on January 14, 1922. The insurance was reduced to $293,500, covered by thirty-nine policies in various companies. On January 29,1922, a fire occurred, causing slight damage, and on February 17, 1922, another fire occurred, resulting in total loss. Thirty of the policies, amounting to $240,500 insurance, had been transferred to the name of the receiver. The proportionate part of the loss due under these policies has been paid. The remaining nine policies are in litigation in this action; they were not transferred into the name of the receiver. Payment has been resisted under two main contentions: one, that immediate notice of loss was not given to the companies; the other, that possession had been transferred out of the insured into the receiver, contrary to the terms of the policy.

The nine policies insured the Alexandre Works, Inc.:

Loss, if any, payable to The Hempstead Plains Company, The Greenwich Bank, and the New Netherland Bank of New York as their respective interests may appear.”

The Hempstead Plains Company was a mortgagee under two mortgages covering the property of the Alexandre Works, Inc., and five of the policies contained a mortgagee clause. The Greenwich Bank and the New Netherland Bank of New York did not have a mortgage. They owned some of the merchandise it was given on trust receipts.” The claims of the banks and of the mortgagee, the Hempstead Plains Company, are the ones which are involved in this lawsuit, although the trustee in bankruptcy is a party representing the Alexandre Works, Inc.

In reviewing the defenses made by the insurance company, I shall deal with the questions in the following order: first, the rights of the mortgagee; second, the transfer of possession to the receiver; and third, the notice of loss given to the companies.

The Hempstead Plains Company, as to five of these policies, was a mortgagee, protected by a mortgage clause in the policies. This clause does not appear in the record. Only one policy is given in full (plaintiff’s Exhibit 10), which does not contain this clause. The other exhibits are abbreviated, five of the statements reading: Same assured, payable to same companies as appears in Plaintiff’s Exhibit No. 10 (mortgagee clause with respect to Hempstead Plains Co. attached).” The brief for the insurance companies refers to this clause as the extended standard mortgagee clause,” and says that it gave the Hempstead Plains Company a separate contractual right, not affected by any act or neglect of the mortgagor or owner. If this mortgagee clause has become standardized, the provisions of subdivision 3, section 121 of the Insurance Law (Cons. Laws, ch. 28), must have been complied with. We may fairly assume, therefore, that the copy of the clause contained in one of the other briefs is accurate. The following are its provisions:

“ Loss or damage, if any, under this policy, shall be payable to Hempstead Plains Co. as first mortgagee (or trustee), as interest may appear, and this insurance, as to the interest of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, nor by qny foreclosure or other proceedings or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy; Provided, that in case the mortgagor or owner shall neglect to pay any premium due under this policy, the mortgagee (or trustee) shall, on demand, pay the same.”

This is all that need be quoted for the purposes of this opinion.

Under this clause, therefore, as to these five policies, the appointment of the receiver and the transfer of possession to him or the failure of the insured to give immediate notice of loss would furnish no defense to the companies as against the Hempstead Plains Company. (Heilbrunn v. German Alliance Ins. Co., 140 App. Div. 557; affd., 202 N. Y. 610.)

In this connection, however, another question has arisen. All the policies contained the subrogation clause. It reads:

“ On payment to such mortgagee of any sum for loss or damage hereunder, if this Company shall claim that as to the mortgagor or owner, no liability existed, it shall, to the extent of such payment be subrogated to the mortgagee’s right of recovery and claim upon the collateral to the mortgage debt, but without impairing the mortgagee’s right to sue or it may pay the mortgage debt and require an assignment thereof and of the mortgage.”

The only benefit of this clause to the companies is in case they are liable to the mortgagee, but not liable to the insured; that they have a defense against the insured which for some reason, possibly the mortgagee clause, is not good as against the mortgagee. In this case, as I shall show later, the companies have no defense, as against the insured, for the reason that there was no transfer of possession within the meaning of the policy, and that the notice of loss was given in time.

As to these five policies, therefore, the insurance companies were hable to the Hempstead Plains Company under the mortgagee clause. Judgment should have been directed in its favor.

The Greenwich Bank and the New Netherland Bank of New York were not mortgagees, and did not come within the benefit of this mortgagee clause, as to these five policies. They held trust receipts, the nature of which is not stated in the record. They had some right of property in the merchandise. Apparently the Alexandre Works, Inc., held the merchandise, the title remaining in the banks. As between the banks and the company, this may have been in the nature of a conditional sale or a chattel mortgage. (Matter of A. E. Fountain, Inc., 282 Fed. Rep. 816.) Under the terms of the policies of insurance, however, the banks were not mortgagees; the policies refer to those who are mortgagees in fact, and not by mere construction of law. McDowell v. St. Paul F. & M. Ins. Co. (207 N. Y. 482) dealt with a mortgagor and the mortgagee, and a clause which made the loss payable to John McDowell, as mortgagee; the policy so stated; this was the contract. In the nine policies in this case, the banks are not referred to as mortgagees, and in the evidence it appears that they are not mortgagees. The Greenwich Bank and the New Netherland Bank of New York, therefore, under these policies, stood in no better position than the insured. (Moore v. Hanover Fire Ins. Co., 141 N. Y. 219.) Whatever rights they have, they must derive by and through it. The Hempstead Plains Company, as to the four policies which did not have annexed the “ standard form extended mortgagee clause” is probably in a better position than the banks, because it does appear from the evidence to be a mortgagee in fact, and, therefore, comes within that provision of the policy headed, “ Mortgage Interests.” This is not a standard mortgagee clause, but is a part of the policy itself. A similar provision was construed by us in the McDowell case, and no doubt that case is applicable to the Hempstead Plains Company, in so far as the facts here support the application. I will not, however, pause to deal with this distinction, but treat the rights of the banks under the nine policies, and the rights of the Hempstead Plains Company under the four policies as though they were the same.

Was there a transfer of possession by the appointment of the receiver within the meaning of the policies? The policies provided: “This entire policy shall be void, * * * (d) if any change, other than by the death of an insured, take place in the interest, title or possession of the subject of insurance (except change of occupants without increase of hazard).” The insurance companies, insist that the appointment of the receiver in bankruptcy a month and a half before the fire, made void this policy. We are not dealing with title, but with this clause regarding possession. Title to the property passed to the trustee in bankruptcy after the fire, March 24, 1922. The question now is solely one of possession. The word “ possession ” has various meanings. We speak of one having title to property as possessing such property; it may also have a very broad meaning when applicable to tax litigation. (U. S. v. Whitridge, 231 U. S. 144.) Here it is used in a contract, and the question is what meaning have the parties given to it; what is the possession, the transfer of which voids the contract? Occupancy is possession, and occupancy may take under its control an entire plant and all the buildings. Possession in this policy means something different than occupancy. Change in occupants does not invalidate the policy without an increase of hazard. Is the receiver an occupant within the meaning of this exception? By order of the court in bankruptcy proceedings, he is put into the possession of the property as a custodian to hold it for the benefit of all parties interested until a trustee is appointed or until otherwise disposed of. He is a custodian acting in behalf of the court, but takes no title, In this sense he is an occupant, and there is nothing here to show in this case that by reason of this occupancy or this possession, the risk was increased. This word possession,” therefore, must mean something more than entering the property and holding it as custodian, or entering it and retaining it as an occupant. What other possession can there be than the possession of one who. occupies the premises physically by being on them, and being the only person on or in them? There is that possession which legally follows the title. Therefore, some of the cases which have passed upon this clause in the insurance policies have held that possession means title. Whichever of these reasons is assigned, the cases are numerous which hold that the appointment of a receiver is not such possession as is transferred within the meaning of this clause in the policies. (Keeney v. Home Ins. Co., 71 N. Y. 396; Walradt v. Phœnix Ins. Co., 136 N. Y. 375; Bowling v. Continental Ins. Co., 86 W. Va. 164; Budelman v. American Ins. Co., 297 Ill. 222; Marcello v. Concordia Fire Ins. Co., 234 Penn. St. 31; Rumsey v. Phœnix Ins. Co., 1 Fed. Rep. 396; Gordon v. Mechanics’ & Traders’ Ins. Co., 120 La. 441; Fuller v. New York Fire Ins. Co., 184 Mass. 12; Georgia Ins. Co. v. Bartlett, 91 Vir. 305; Thompson v. Phenix Ins. Co., 136 U. S. 287; Southern Pants Co. v. Rochester German Ins. Co., 159 N. C. 78; Lancashire Ins. Co. v. Boardman, 58 Kan. 339.)

Some of these cases have held that the possession was not that of the receiver but the possession of the court, and that this was not a change of possession within the meaning of the policy.

That a receiver going into possession in bankruptcy proceedings may very materially increase the risk is not difficult to foresee. All work generally stops; the insured is apt to lose interest in his property and its upkeep; the vigilance which watches over a prosperous going concern is keener than that which is to preserve it merely for creditors. Many things may be suggested in favor of a ruling that the possession of a receiver is such a transfer of rights over property as to void a policy of insurance and in and of itself does increase the risk. If this were a new question presented for the first time, we might be more patient in listening to this plea of the insurance companies. The rule, to the contrary, however, has been deeply written into the law, and the companies continue to use the same phrase in their policies with this interpretation which has been given to it by the courts. It is too late now to construe these words differently from the meaning given to them by the above authorities.

The trial court held that notice of loss was not given in time. As all the facts were conceded, and there, were no different inferences to be drawn from them, his ruling was clearly one of law, as his opinion indicates. The Appellate Division reversed and sent the case back for a new trial, holding that the twelve days which elapsed between the fire and the notice of loss were not fatal as matter of law. The case comes here upon a stipulation for judgment absolute given by the insurance companies, so that if notice was given within reasonable time, as matter of law, the appellants must lose.

The fire causing the total loss occurred February 17, 1922. Notice of loss was given on March 1st to the insurance companies which had issued these nine policies. But this is not the whole story. The policies in standard form contained this clause:

Requirements in case of loss.— The insured shall give immediate notice in writing, to this Company, of any loss or damage, protect the property from further damage, forthwith separate the damaged and undamaged personal property, put it in the best possible order, furnish a complete inventory,” etc.

These -requirements are not included within the provisions which are said to make the policy void unless complied with. We may assume that whatever penalty follows from failure to meet these requirements is applicable alike to each and every one of them. Unless immediate notice is given, it is said that the policy is void. Does this also follow.if the property is not protected from further damage, or separated from the undamaged property, or not put in the best possible order? And if not, why not? The penalty which follows from the failure to comply with any of these requirements is stated at the end of the policy: “ No suit or action on this policy, for the recovery of any claim, shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with.” Some courts have held, under policies different in form, that the requirement to give immediate notice does not void the policy, but delays action or payment until such notice is given. (Dixon v. State Mutual Ins. Co., 34 Okla. 624; Mason v. St. Paul Fire & Marine Ins. Co., 82 Minn. 336; Kahnweiler v. Phœnix Ins. Co., 57 Fed. Rep. 562; Hirsch-Fauth Furniture Co. v. Continental Ins. Co., 24 Fed. Rep. [2d] 216; Joyce on Insurance, vol. 5, p. 5483.) In this State, however, we have held that notice of loss must be given within a reasonable time, and that if there be no question on the facts, reasonable time is a question of law for the court. (Solomon v. Continental Fire Ins. Co., 160 N. Y. 595; Bennett v. Lycoming Mutual Ins. Co., 67 N. Y. 274; Matthews v. American Cent. Ins. Co., 154 N. Y. 449; Carpenter v. German American Ins. Co., 135 N. Y. 298.) The notice of loss in this case under all the circumstances, as I shall explain them, was given within a reasonable time.

The Alexandre Works, Inc., as above stated, had reduced its insurance to $293,500 represented by 39 separate and distinct policies of insurance. The insurance had been covered and the policies obtained by Joseph Bookstaver, an insurance broker doing a general insurance business. The actual work in connection with this insurance was handled by Elias Klein, an employee of Bookstaver’s. Before the fires, Klein-had been instructed by Mr. Geist, one of the officers of the Alexandre Works, Inc., to effect some change in the interest of a mortgagee on one of the policies, and later undertook to transfer all the policies into the name of the receiver. He collected all the policies, going to Garden City for some and to “ different sources ” for the others. Before the fire, he had all the thirty-nine policies. Thirty of them had been transferred into the name of the receiver. The nine here in question were still in force, had never been canceled, but had not been changed into the name of the receiver. The receiver did not know what insurance there was upon the property. Klein had all the policies. When the fire occurred, adjusters were appointed, as is customary, to settle the loss and to collect under the policies. The adjuster selected by Percival Wilds, the receiver, was Lyons, Stadholz & Co., to whom Klein was asked to turn over all the policies. This he attempted to do, after the first fire of January 29. The loss at this fire was very slight. Notice of loss was sent by this adjuster or its representative, Albert M. Isaacs, to all the companies represented by the policies turned over by Klein. When the fire of February 17 occurred, there was a total loss. The adjuster for the receiver had the policies, and he gave notice to the companies of the loss. When it came to making up the inventories of this loss, it was necessary to consult the general manager of the Alexandre Works, Inc. For the first time it was then discovered that nine policies were missing. The manager discovered the fact and told the adjuster. Klein had failed to turn over the nine policies here in question. He had been instructed by the receiver, after the first fire, to turn over all policies which he had collected, and which he had in his possession, to the adjuster for the receiver. He failed to turn over these nine policies. As soon as the adjuster learned this, he gave immediate notice of loss to the companies issuing these policies, and this within twelve days after the fire. The notice was given to these nine companies on March 1, 1922. After the first fire, as well as after the second fire, the companies under the thirty policies appointed representatives of the General Adjustment Bureau as adjusters. These same adjusters represented the companies under these nine policies, on which notice of loss was not given until March 1. Klein had failed to turn over these nine policies, as he was told to do by the receiver, because thirty of them had been transferred to the name of the receiver, and these nine had not been so transferred. He “ assumed that those particular companies would not be liable for the particular loss.” He concluded that the total amount of insurance was only $240,500 instead of $293,500. Here was a clear mistake of fact, and an assumption of authority which he did not possess. (Commercial Travelers Ins. Co. v. McAdam, 125 Fed. Rep. 358; Melcher v. Ocean Accident Guarantee Corp., 226 N. Y. 51.) Klein had been instructed to turn over all policies — a clerical act; he kept out these nine under the mistaken belief that they did not cover the loss. It is conceded that as soon as knowledge of this additional insurance was discovered by the receiver and his adjuster, immediate notice of loss was given to the companies. Here we have a delay of twelve days in giving notice of loss, due to the mistake of a clerk. Thirty-nine policies were to be turned over to an adjuster; the clerk had them all in his possession and turned over thirty under some notion of his that nine did not apply. Neither the adjuster nor the receiver knew anything about these nine policies. As soon as their existence was discovered, immediate notice was given to the companies, as required by the policies. All this happened within a period of twelve days after the fire. The position of no one was changed in the meantime. The adjusters of the thirty companies, who were also the adjusters of these nine companies, knew of the fire of the seventeenth, and of the total loss.

What reason is there for placing a narrow and strict construction upon the words, “ immediate notice of loss? ” When we consider that this is not made one of the conditions which voids the policy, but is linked up to those provisions relating to requirements after the loss, we should give this policy a reasonable interpretation, and a fairly liberal construction. Such is the law. A liberal construction always obtains with reference to the procedure after loss. (McNally v. P. Ins. Co., 137 N. Y. 389, p. 398; Paltrovitch v. P. Ins. Co., 143 N. Y. 73, 77; Sergent v. Liverpool & L. Globe Ins. Co., 155 N. Y. 349; Glazer v. Home Ins. Co., 190 N. Y. 6, 11; Matthews v. American Central Ins. Co., 154 N. Y. 449, 457.)

The fire occurred; there is no fraud; the loss has been sustained; the policies covered the loss, and this point relates to those things which must be done by the insured in connection with the remedy. He must give immediate notice of the loss, which we have held repeatedly means notice within a reasonable time. Notice given as soon as the receiver or his representative knew of the existence of the policies, which a clerk had concealed, and within twelve days after the fire, is given within a reasonable time.

The rule has been repeatedly stated that a reasonable time, when the facts are undisputed and different inferences cannot reasonably be drawn from the facts, is a question of law. (Wright v. Bank of Metropolis, 110 N. Y. 237, 249; Travelers Ins. Co. v. Pomerantz, 246 N. Y. 63; Bennett v. Lycoming Mut. Ins. Co., supra.) This is one of those general rules, however, which is some times difficult of application, and results in the question being left to a jury when it is near the border line. (Carpenter v. German American Ins. Co., 135 N. Y. 298, 303.)

There are one or two other points raised by the insurance companies, but we need not discuss them, as in our judgment they have been rightly disposed of.

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

Cardozo, Ch. J., Pound, Andrews, Lehman, Kellogg and O’Brien, JJ., concur.

Order affirmed, etc.


text:
    Alexander Heller, Appellant, v. Charles E. Pope et al., Individually and as Copartners under the Name of C. W. Pope & Company, Respondents.
    (Argued December 6, 1928;
    decided December 31, 1928.)

      Samuel J. Rosensohn and J. Robert Rubin for appellant.
    The words of the contract in question are capable of the construction contended for by the plaintiff. The term “ option ” has been used in the sense of exclusive right. (Levy v. Rothe, 39 N. Y. Supp. 1057.) The agreement is inconsistent with the interpretation that the defendants are merely taking an option without any obligation on their part. (Benedict v. Pincus, 191 N. Y. 377; Ellis v. Miller, 164 N. Y. 434; Atwater v. Panama R. R. Co., 246 N. Y. 519.)

      Avery F. Cushman and Franklin Leonard, Jr., for respondents.
    Where essential terms of an agreement are not arrived at and are left for future negotiations the minds of the parties have not met and no valid contract is consummated. (St. Regis Paper Co. v. Hubbs & Hastings Paper Co., 235 N. Y. 30; Wigmore on Evidence, § 2425; Lamb v. Norcross Bros. Co., 208 N. Y. 437; Thomas v. Scutt, 127 N. Y. 133; Mandel v. Holding Co., Inc., 200 App. Div. 767; Varney v. Ditmars, 217 N. Y. 223; United Press v. New York Press, 164 N. Y. 406; Clark Paper Co. v. Stenacker, 236 N. Y. 312; Sun P. & P. Association v. Remington P. & P. Co., 235 N. Y. 338; Ansorge v. Kane, 244 N. Y. 395; Winn v. Bull, L. R. [7 Ch. Div.] 29.) It is evident from the complaint what the parties were seeking to accomplish. The plaintiff was giving to the defendants an option which they were at liberty to exercise or not, to buy certain stocks, and if they accepted the option, then to sell such stock for a certain price, and in certain amounts. To give the letter the construction that the plaintiff desires in his complaint, would not be to construe the contract, but to remake it. (Susquehanna S. S. Co. v. Anderson, 239 N. Y. 285.)
   Pound, J.

In a former action between the parties the complaint undertook to set forth a cause of action for breach of contract. The contract alleged was as follows:

“ Messrs. C. W. Pope & Co., " July &h’ 1917'

“ 25 Broad Street,

“ New York:

Gentlemen.— Referring to an arrangement I am making with you this day, I agree to let you sell for me 200,000 shares of treasury stock of the Tuscon Arizona Copper Co., of Tuscon, Arizona, at $1.00 per share and agree to sell same to you under an option for 70c per share.

I also agree to option to you 70,000 shares of treasury stock additional at $1.00 per share. You are to use your discretion in the selling price of this stock, but it cannot be sold for less than $1.25 per share.

“ When this treasury stock is disposed of by you, I then give you an option on 150,000 shares of Vendors stock at 95c per share, which you cannot sell for less than $1.25 minimum. I leave it to your discretion to get as much as you can for this stock, but under no conditions would I care to have this stock sold for less than $1.25.

For this option you agree to do the following:

“ You agree to sell this stock at the best of your ability; advertise it, and use all the methods necessary for the disposal of same, and you guarantee to sell a minimum of 10,000 shares per month, each calendar month, beginning the 25th day of July.

“ Very truly yours,

(Signed) A. HELLER.

Agreed to:

“ (Signed) C. W. Pope & Co.

The complaint was dismissed because the court held that, from a mere inspection of the writing it was an option and not a contract for the purchase and sale of stock. (Heller v. Pope, 183 App. Div. 863.)

The complaint herein contains further allegations. It sets forth that the word “ option ” means “ exclusive right; ” that the word guaranteed ” meant that defendants would sell for the plaintiff a minimum of 10,000 shares per month until all the shares of stock mentioned in said agreement had been sold by defendants; that by the words agreed to ” it was intended to mean that defendants “ accepted the exclusive right to sell the stock.”

It appears on the face of the complaint that defendants, after signing under the words “ agreed to ” on the face of the writing, refused to “approve the memorandum.” Plaintiff alleges that this was the repudiation of a contract. Defendants argue that it was a refusal to accept an option.

Does the complaint state facts sufficient to constitute a cause of action?

The question is as to the fair and reasonable meaning that may be given to the writing sued on. Written words may have more than one meaning. The letter killeth but the spirit giveth life.” (2 Cor. 3:6.) “Form should not prevail over substance and a sensible meaning of words should be sought.” (Atwater & Co. v. Panama R. R. Co., 246 N. Y. 519, 524.) But plain meanings may not be changed by parol and the courts will not make a new contract for the parties under the guise of interpreting the writing. “ The fact that the parties intended their words to bear a certain meaning, would be immaterial were it not for the fact that the words either normally or locally might properly bear such meaning.” (Williston on Contracts, § 613.)

The substance of the succinct provisions of the memorandum declared on is as follows: Plaintiff offers to defendants to sell stock at the prices specified. For this option, defendants “ agree to sell this stock at the best of your [their]ability; advertise it, and use all the methods necessary for the disposal of same, and you [they] guarantee to sell a minimum of 10,000 shares per month, each calendar month, beginning the 25th day of July.” This agreement is plainly conditioned upon the acceptance of the offer by defendants. It is a conditional promise which may be consideration for the defendants’ offer. A binding option is a contract but it is also an offer which when accepted will create another contract. Defendants agree that, if they accept the offer, they will do certain things. But they have not accepted the offer and the entire option falls with such refusal. The memorandum is an unilateral contract binding on the plaintiff but leaving the defendants free to accept or not within a reasonable time. Acceptance alone would convert the unilateral contract into a bilateral contract.

The judgment should be affirmed, with costs.

Cardozo, Ch. J., Crane, Andrews, Lehman, Kellogg and O’Brien, JJ., concur.

Judgment affirmed.