author: Chief Judge Desmond.

text:
    In the Matter of the Arbitration Between Publishers’ Association of New York City, Respondent, and New York Stereotypers’ Union Number One, Appellant. (Two Proceedings.)
    ■ Argued October 18, 1960;
    decided December 1, 1960.

      Thomas J. Craig, Jr., for appellant in both proceedings.
    I. The association seeks the relief requested for the purpose of avoiding the unequivocal and unambiguous terms of the contract. (Matter of International Assn. of Machinists [Cutler-Hammer], 271 App. Div. 917, 297 N. Y. 519; Matter of Sarle [Sperry Gyroscope Co.], 4 A D 2d 638, 4 N Y 2d 917). II. The protection given to a labor union and its members under the law as to claims for damages should be maintained unless expressly waived. (Martin v. Curran, 303 N. Y. 276.) III. The union members have not authorized the arbitration of claims for damages against it. (Matter of Publishers’ Assn. [Newspaper Union], 280 App. Div. 500; Matter of Deering Milliken & Co. [Boepple Mills], 4 A D 2d 652; Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N. Y. 284; De Lillo Constr. Co. v. Lizza & Sons, 7 N Y 2d 102; Matter of Riverdale Fabrics Corp. [Tillinghast-Stiles Co.], 306 N. Y. 288; Matter of New York Mirror v. Potoker, 5 A D 2d 423; Matter of General Warehousemen’s Union, 10 Misc 2d 700.)

      Andrew L. Hughes for respondent in the first proceeding.
    I. The motion to compel arbitration was properly granted. (Matter of Potoker [Brooklyn Eagle], 286 App. Div. 733, 2 N Y 2d 553; Matter of Otis Elevator Co. [Carney], 6 N Y 2d 358; Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76; Matter of Carey [Westinghouse Elec. Corp.], 6 A D 2d 582, 6 N Y 2d 934; Matter of Spectrum Fabrics Corp. [Main St. Fashions], 285 App. Div. 710, 309 N. Y. 709; Matter of Crossett [Mount Vernon Housing Auth.], 275 App. Div. 1051; Matter of Lane [Endicott Johnson Corp.], 274 App. Div. 833, 299 N. Y. 725.) II. The union’s contention that there is no arbitrable dispute is not tenable.

      Andrew L. Hughes and Charles T. Bates for respondent in the second proceeding.
    I. The role of the court on a motion to compel arbitration is limited to three considerations. (Matter of Potoker [Brooklyn Eagle], 286 App. Div. 733, 2 N Y 2d 553;
      Matter of Otis Elevator Co. [Carney], 6 N Y 2d 358; Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76; Matter of Staklinski [Pyramid Elec. Co.], 6 A D 2d 565, 6 N Y 2d 159; Matter of Carey [Westinghouse Elec. Corp.], 6 A D 2d 582, 6 N Y 2d 934; Matter of Spectrum Fabrics Corp. [Main St. Fashions], 285 App. Div. 710, 309 N. Y. 709; Matter of Crosett [Mount Vernon Housing Auth.], 275 App. Div. 1051.) II. The issue of damages is arbitrable under the agreement. (Matter of Utility Laundry Serv. [Sklar], 300 N. Y. 255; Matter of General Footwear Corp. v. Lawrence Leather Co., 252 N. Y. 577; Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N. Y. 284; Matter of Mencher [Abeles & Kahn], 274 App. Div. 585; Matter of Pierce v. Brown Buick Co., 256 App. Div. 1076; De Lillo Constr. Co. v. Lizza & Sons, 7 N Y 2d 102; Matter of Ruppert [Egelhofer], 3 N Y 2d 576; Matter of Publishers’ Assn. of New York [New York Stereotypers’ Union], 15 Misc 2d 931; Matter of Publishers’ Assn. of New York [New York Stereotypers’ Union], 1 A D 2d 941, 1 N Y 2d 860:) III. Questions of the union’s liability at law or of the specific authorization of the union president are irrelevant. (Matter of Ruppert [Egelhofer], 2 Misc 2d 744, 2 A D 2d 670, 3 N Y 2d 576.)
   Chief Judge Desmond.

These are two separate arbitrations under two successive collective bargaining agreements between these parties. The first proceeding arose under the agreement which covered the period from December, 1956 to December, 1958. We agree with the Appellate Division that sections 57 and 62 of that contract were properly applied to the situation presented and that it was correct to order the union to participate in the selection of a fifth member of the Joint Conference Committee.

The second above-entitled appeal brings up the interpretation of the 1958-1960 contract between these parties and calls for more extended discussion.

The arbitration provision in the second contract says that there shall be a Joint Conference Committee of four members, two selected by each party, and “ To this Committee shall be referred for settlement any matter arising from the application of this agreement if such matter cannot be settled by conciliation between the Union and the Publisher involved.” In the early morning hours of February 18, 1959 (or so it is claimed by the association), about 60 stereotypers employed at the New York Times engaged in a work stoppage at the direction, it is said, of the “ Chapel Chairman ” who is a sort of a shop steward of the stereotypers. The Publishers’ Association later sent a telegram to the President of the Stereotypers’ Union announcing that the association was filing a grievance because of this work stoppage, the telegram asserting that the stoppage was a violation of certain provisions of the contract and giving notice that at the hearing of the grievance before the Joint Conference Committee the association would demand damages. The union by answering letter wrote that it would participate in the selection of a fifth or independent arbitrator and would arbitrate the question of whether this work stoppage was a violation. It insisted, however, that there was no basis for arbitration “ as to the matter contained in the balance of the telegram.” In other words, the union said that it was not required to and would not arbitrate the question of damages. The association then brought this proceeding for an order to direct the union to proceed to an arbitration of the whole matter.

At Special Term the motion was granted by an order which stated: “The arbitration clause in the current agreement of the parties is sufficiently broad to include therein as an arbitrable issue the matter of damages arising from the alleged breach of the agreement.” The Appellate Division, First Department, unanimously affirmed without opinion and we granted leave to appeal.

The arbitration clause of this collective bargaining contract does not include the word ‘ ‘ damages ’ ’ but it is a broad covenant providing that there shall be referred to the Joint Conference Committee ‘ ‘ any matter arising from the application of this agreement ”. We know that innumerable arbitrations of damage questions are held pursuant to arbitration agreements which do not directly mention “ damages ”. No reason appears for a different result here. Our own records show that under a similar agreement between these same two parties the question of damages was arbitrated and litigated although, because of insufficient proof (but not because of contract limitations), no damages were in fact awarded by the arbitrators in that instance (Matter of Publishers’ Assn. of New York City [New York Stereotypers’ Union], 1 A D 2d 941, motion for stay denied 1 N Y 2d 860).

The landmark arbitration ease of Matter of Marchant v. Mead-Morrison Mfg. Co. (252 N. Y. 284, 298-299) says that an agreement in a contract that all controversies growing out of it should l;e arbitrated — or any equivalent agreement — authorizes the arbitrators to assess damages. The Marchant case held, as did other cases (Matter of Utility Laundry Serv. [Sklar], 300 N. Y. 255; De Lillo Constr. Co. v. Lizza & Sons, 7 N Y 2d 102), that a general arbitration clause regardless of precise language ordinarily authorizes arbitration of damages. Of course, we are not discussing consequential damages since no such question is before us. Appellant cites Matter of New York Mirror (Potoker) (5 A D 2d 423; see, also, Matter of Potoker [Brooklyn Eagle], 2 N Y 2d 553) but the Potoker decisions have no particular bearing on our problem. The union is really arguing here that, while the arbitrators can decide whether or not there is a violation and a breach, any claim for damages as a result of a violation or a breach so found would have to be the subject of a separate suit at law. There is no reason to think that the parties contemplated successive litigations arising out of one violation.

The other argument made by appellant union basis itself on section 876-a of the Civil Practice Act and Martin v. Curran (303 N. Y. 276). That is, the union points out that under section 876-a and other New York statutes an unincorporated association cannot be held liable except on proof which would make all the members liable individually. The union says that, with this statutory immunity in existence, the intent of this agreement could not have been to authorize an award of damages for a violation which actually involved only about 60 of the union’s 1,100 members. There are at least two answers to this. First, Matter of Ruppert (Egelhofer) (3 N Y 2d 576) held that arbitrators under appropriate language in an agreement could order an injunction even though section 876-a would prevent a court from issuing an injunction on the same facts. The second and more general answer is that the question of arbitration clause coverage is one of intent, damages are a most common feature of arbitration awards and nothing before us suggests that these parties intended their arbitrations to result in futile declarations only. If the parties intended to prohibit the arbitrators from exercising the customary function of fixing damages, they probably would have said so, especially since, under an earlier but apparently identical form of arbitration agreement between these same parties, the association had sought damages and the question of damages had been tried out before arbitrators with no complaint from the union (see Matter of Publishers’ Assn. of New York City [New York Stereotypers’ Union], motion for stay denied 1 N Y 2d 860 [1956], supra). Both orders appealed from should be affirmed, with costs.

Judges Dye, Fuld, Froessel, Van Voorhis, Burke and Foster concur.

Orders affirmed.


source: Caselaw Access Project

author:
Van Voorhis, J.
      Burke, J. (dissenting).

license: Public Domain

text:
    In the Matter of the Accounting of United States Trust Company of New York et al., as Trustees under the Will of George S. Scott, Deceased. St. Thomas Church in the City and County of New York, Appellant; Louis J. Lefkowitz, Attorney-General of the State of New York, for Ultimate Charitable Beneficiaries, et al., Respondents.
    Argued October 10, 1960;
    decided December 1, 1960.

      Charles H. Tuttle, George A. Wilson and Douglas F. Williamson, Jr., for appellant.
    I. Under the codicil’s terms and under pertinent judicial decisions, Scott’s primary intention was to make a gift to St. Thomas Church in perpetuity for a memorial to the Scott family. Since the secondary and precatory expression as to the erection and maintenance of a tuberculosis “ Home ” on a site to be secured failed of practicality before the fund vested in the church, and since there is neither a trust, a condition precedent, a gift over, nor a defeasance clause, the legacy (for the purpose of a memorial) vests absolutely in the church as the primary named and vested donee. The Surrogate had in law no authority to impose a disposition framed and decreed by himself to be observed by the church under penalty of forfeiture. (Johnston v. Hughes, 187 N. Y. 446; Farmers’ Loan & Trust Co. v. Shaw, 56 Misc. 201, 127 App. Div. 656; Matter of Griffin, 167 N. Y. 71; Matter of Durand, 194 N. Y. 477; Bird v. Merklee, 144 N. Y. 544; Matter of Baldwin, 74 Misc. 325;
      Matter of Schrieb, 190 Misc. 547; Matter of Donald, 149 Misc. 142; Matter of Gerity, 248 App. Div. 903; Corporation of Chamber of Commerce of State of N. Y. v. Bennett, 143 Misc. 513; Matter of Fairchild, 15 Misc 2d 272; Edgar v. Waldo, 227 N. Y. 656; Matter of Hoyt, 142 Misc. 344.) II. The contention heretofore made in the Attorney-General’s briefs that St. Joseph’s Hosp. v. Bennett (281 N. Y. 115) “overruled” Johnston v. Hughes (187 1ST. Y. 446), and four other decisions cited by us supra, is unsound, but serves to emphasize the importance to this case of these five decisions thus erroneously claimed to have been overruled. The St. Joseph’s case is on an altogether different factual basis. It does not profess to overrule any decision and has never been interpreted as so doing. (Cadman Mem. Cong. Soc. of Brooklyn v. Kenyon, 306 N. Y. 151; Attinson v. Consumer-Farmer Milk Co-op., 197 Misc. 336; Matter of Corlies, 150 Misc. 596, 242 App. Div. 703.) III. The courts have always recognized the right and power of a testator to vest a testamentary fund in a named legatee in reliance on the legatee’s sense of judgment and of moral obligation. (Matter of Hayes, 263 N. Y. 219; Webster v. Gleizes, 251 N. Y. 554; Matter of Isbell, 1 App. Div. 158; Matter of Abbe, 138 Misc. 210.) IV. The courts below further erred in holding that the codicil manifested “a general charitable intent” which, notwithstanding the impracticabilities of the “Home” as described, would exclude St. Thomas Church itself as donee in its own right for the purpose of a memorial to the Scott family, and which would reduce the church to the position of a mere conduit for such charitable objectives as the court might devise, under penalty of forfeiting all connection whatever with the fund. (Matter of Prall, 78 App. Div. 301; Matter of Durbrow, 245 N. Y. 469; Matter of Morris, 227 N. Y. 141.) Y. There is nothing whatever in the codicil to indicate that Scott intended, in case the described “Home” for tuberculosis patients proved impractical, that the gift should be devoted to the care of persons “ suffering from respiratory and thoracic diseases ” and that the testator’s wish for an outward and publicly visible and permanent family memorial should be dropped. (Matter of Syracuse Univ. [Heffron], 3 N Y 2d 665.)

      Louis J. Lefkowitz, Attorney-General (P. Hodges Combier, Paxton Blair and Percy E. Schuberth, Jr., of counsel), for Attorney-General of the State of New York, respondent.
    I. The determinations of the court below effectuate the testamentary directions and the dominant charitable intent and purpose of the testator for the benefit of the intended beneficiaries, represented herein by the Attorney-General, as distinguished from any purely religious purpose, however laudable, favored by the present management of the church. The church, as a religious corporation, is competent to take and administer the legacy directed to be applied exclusively to charitable purposes and must apply it to the stipulated purposes and no intestacy can occur. (Inglis v. Trustees of Sailor’s Snug Harbour, 3 Pet. [28 U. S.] 99; Matter of Sturgis, 164 N. Y. 485; Matter of Howe, 1 Paige Ch. 214; Bird v. Merklee, 144 N. Y. 544; Matter of St. John’s Church of Mt. Morris, 237 App. Div. 454, 263 N. Y. 638 ; Matter of Rupprecht, 271 App. Div. 376, 297 N. Y. 462; Williams v. Williams, 8 N. Y. 525; Rector of Church of Redeemer v. Crawford, 43 N. Y. 476; Wetmore v. Parker, 52 N. Y. 450; St. Joseph’s Hosp. v. Bennett, 281 N. Y. 115; Matter of Prall, 78 App. Div. 301; Matter of White, 118 App. Div. 869; Matter of Mount Sinai Hosp., 250 N. Y. 103; Field v. Field, 9 Wend. 394; Cadman Mem. Cong. Soc. of Brooklyn v. Kenyon, 279 App. Div. 1015, 306 N. Y. 151; Dartmouth Coll. v. Woodward, 4 Wheat. [17 U. S.] 518; Mormon Church v. United States, 136 U. S. 1; Sherman v. Richmond Hose Co., 230 N. Y. 462; Matter of Lawless, 194 Misc. 844, 277 App. Div. 1045, 302 N. Y. 949.) II. A true construction of the testator’s testamentary dispositions discloses his dominant intent and mandatory direction that his residuary remainder legacy should be used, exclusively, for the specified charitable purposes. (Matter of Campbell, 170 N. Y. 84; Livingston v. Ward, 247 N. Y. 97 ; Matter of Satterwhite, 262 N. Y. 339; Matter of Browning, 165 Misc. 819, 254 App. Div. 843, 281 N. Y. 577.) III. The powers of the court and the duties of the Attorney-General, in the light of the Tilden Act, have been properly applied below. (Cadman Mem. Cong. Soc. of Brooklyn v. Kenyon, 279 App. Div. 1015, 306 N. Y. 151; Madison Ave. Baptist Church v. Oliver St. Baptist Church, 46 N. Y. 131, 73 N. Y. 82; Moritz v. United Brethrens Church on Staten Is., 269 N. Y. 125; People v. Volunteer Rescue Army, 262 App. Div. 237; Matter of Syracuse Univ. [Heffron], 3 N Y 2d 665; Matter of Syracuse Univ. [Hendricks], 1 Misc 2d 904, 3 A Dz 2d 890, 4 N Y 2d 744.) IV. If the court should find that there is any ambiguity as to what the testator intended, then the court may consider how the legatee church construed the legacy for a score of years after the testator died, as depicted by the 1931 assignment. (Nicoll v. Mumford, 4 Johns. Ch. 522; Moir v. Brown, 14 Barb. 39; Lady Superior of Cong. Nunnery of Montreal v. McNamara, 3 Barb. Ch. 375; Livingston v. Ten Broeck, 16 Johns. 14; Reid v. Sprague, 72 N. Y. 457; Woolsey v. Funke, 121 N. Y. 87; Seymour v. Warren, 179 N. Y. 1; City of New York v. New York City Ry. Co., 193 N. Y. 543; Bacon v. Sayre, 84 Misc. 462, 164 App. Div. 909, 218 N. Y. 725; Dobbins v. Pratt Chuck Co., 242 N. Y. 106; Matter of Kolb v. Holling, 285 N. Y. 104; Matter of 440 East 102 St. Corp. v. Murdock, 285 N. Y. 298; Town of Pelham v. City of Mt. Vernon, 304 N. Y. 15.)

      Andrew Shiland and Arthur J. Marangelo for United States Trust Company of New York and Alton S. Keeler, respondents.
    Petitioners took a neutral position before the Surrogate, before the Appellate Division, and in connection with the application of St. Thomas Church for leave to appeal to this court, and continue such position on the appeal itself.
   Van Voorhis, J.

This appeal by St. Thomas Church in New York City is from an affirmance of a decree of the Surrogate’s Court construing the will and codicil of the late George S. Scott and applying the cy pres doctrine thereto. It raises questions whether a bequest to this religious corporation was absolute, and, if not, whether the purposes of the testator as expressed in his testament have been followed or ignored in the variance which has been made by cy pres in the disposition of the gift which the decedent directed. Inasmuch as the subject assets have been transferred to New York where St. Thomas Church was incorporated, both sides have treated the law of New York State as controlling. Upon the death of the last life income beneficiary, in default of lineal descendants, the testator gave the remainder to the Rector, Church Wardens and Vestrymen of St. Thomas’ Church in the City of New York, for the purpose of erecting and maintaining, in such place as they may select, a building or buildings for the care of persons suffering from tuberculosis, to be called the Scott Memorial Home.”

The petition by the corporate testamentary trustee alleges that the last income beneficiary died December 18, 1957 and that a question is presented concerning the construction and effect of the will and codicil relative to whether the said property vests in St. Thomas Church absolutely and without restriction. A letter from St. Thomas Church is incorporated in the petition stating that its position is that the fund vested absolutely in the church and that the language of the bequest is precatory only that a building or buildings be erected and maintained for the care of persons suffering from tuberculosis. In addition St. Thomas Church stated in this letter that the need for home's for the care of persons suffering from tuberculosis has precipitously declined during the course of the years since the death of George S. Scott in 1912, and that the principal of the said residuary would not in any event be sufficient at this time to cover the cost of erecting and maintaining such a building. The letter concludes by stating that it is accordingly the belief of the vestry that, consistent with the intent of George S. Scott, the church should use the fund by expending not to exceed $600,000 for the purpose of adorning and completing the Fifth Avenue facade of the church’s gothic building, the carillon tower and the 53rd Street side, placing a Scott memorial plaque at the Fifth Avenue entrance; and by holding the balance of the principal as part of the church endowments in a separate fund to be known as the Scott Memorial Fund, expending so much of the income therefrom as might be needed from time to time for the proper maintenance and repair of the said improvements to the church building and the balance to be devoted to general charitable uses in the discretion of the vestry. The present value of the fund is approximately $1,600,000. The answer of St. Thomas Church stated its position as thus expressed in its letter to the testamentary trustee incorporated in the petition, and further alleged absolute and unconditional assignments to St. Thomas Church by the lineal descendants of George S. Scott, their distributees, devisees and legatees. This answer further alleged that, if it were to be held that the church is not at liberty to use this fund for its general corporate purposes, the cv pres powers of the court should be exercised as stated in the letter inasmuch as it has become impractical and impossible to use the principal of the residuary trust for the purpose stated.

The assignment to St. Thomas- Church of all right, title and interest by the beneficiaries of George S. Scott and their successors may have indicated what they thought to have been his intent, but could not supersede the responsibility of the Attorney-General to act under sections 12 of the Personal Property Law and 113 of the Real Property Law. Although the legacy vests in St. Thomas Church under the will and codicil, it must be devoted to the uses stated in the testament unless modified by cy pres (St. Joseph’s Hosp. v. Bennett, 281 N. Y. 115; Matter of Lawless, 194 Misc. 844, affd. 277 App. Div. 1045, motion for leave to appeal denied 302 N. Y. 949). Situations where a charitable gift fails on account of lack of qualified beneficiaries (Holmes v. Mead, 52 N. Y. 332, overruling Williams v. Williams, 8 N. Y. 525, insofar as it upheld the law of charitable uses as it existed in England at the time of the Revolution), are not to be confused with decisions such as Wetmore v. Parker (52 N. Y. 450), where the gift is to a religious or charitable corporation. The difference is between charitable gifts that fail for lack of beneficiaries and those which are upheld by reason of the identifiable nature and capacity to take of a corporation. Where a charitable gift was to a corporation but restricted to designated uses, the restriction has always been enforced (Bird v. Merklee, 144 N. Y. 544; Matter of Griffin, 167 N. Y. 71, see opinion by Cullen, J., pp. 82-84, concurred in by the majority; Matter of Durand, 194 N. Y. 477). The cy pres rule, to be sure, went out of existence with the charitable trust doctrine, but was reinstated with it by the Tilden Act in 1893 (L. 1893, ch. 701; Allen v. Stevens, 161 N. Y. 122), and applies to gifts to charitable corporations as well as to what are charitable trusts in the technical sense (Sherman v. Richmond Hose Co., 230 N. Y. 462; Matter of Gary, 248 App. Div. 373, affd. 272 N. Y. 635).

In sustaining the contention of the Attorney-General, however, that the intention of the testator was ‘ not to benefit either St. Thomas Church or to devote such remainder to the advancement of the religious functions or objectives of St. Thomas Church,” we think that the Surrogate exceeded the powers conferred upon him by sections 12 of the Personal Property. Law and 113 of the Real Property Law. The testator would not have named St. Thomas Church in this capacity unless part of his intention was to advance its objectives. The circumstances called for the cy pres rule, but these statutes require that the direction made shall be such as “ will most effectually accomplish the general purpose ” of the testament, where due to change in circumstances a literal compliance has become ‘ ‘ impracticable or impossible ’ In the construction of wills ‘ ‘ ‘ where the intent of the testator is to be ascertained from his language alone, or from his language and surrounding circumstances about which there is no dispute ’ ”, the intention of the testator is “ a question of law and not one of fact ” (Matter of Potter, 307 N. Y. 504, 515, italics from original, quoting from Underhill v. Vandervoort, 56 N. Y. 242, 247; Matter of Burk, 298 N. Y. 450, 455; Williams v. Jones, 166 N. Y. 522; Ruiz v. Renauld, 100 N. Y. 256; Matter of Hier, 205 App. Div. 215, 217). In a cy pres proceeding the way may be open to more than one practical substitute for a direction by a testator which can no longer be executed, but the circumstance that there may be more than one alternative in deciding what disposition most nearly resembles that which was made by the testator does not preclude a question of law from arising concerning whether the Surrogate has exceeded his powers by overriding or failing to give effect to basic purposes of the testator as expressed in the instrument. We think that this has happened here. Every testamentary or other trust instrument stands largely on its own feet when it comes to the application of the rule of cy pres. The language and circumstances are seldom twice alike. Here the language and undisputed circumstances show that the testator was actuated by three dominant considerations: (1) that his name and the name of his family should be connected with a building erected and maintained for the benefit of mankind, which would be a tangible memorial to their public spirit; (2) that this building should be erected and maintained by St. Thomas Church in the City of New York, with which he had long been connected, as a visible symbol of its good works; and (3) that people afflicted with tuberculosis, upon whom he had compassion, should be aided in their struggles for life and health. When he executed this will in 1904 and codicil in 1911 it was customary to treat tubercular patients in sanatoriums, and it was reasonable to expect that the remainder given to St. Thomas’ would accomplish that result. Now that the number of tubercular patients has declined and the method of treatment changed so that even Trudeau Sanatorium at Saranac Lake, Loomis Institute at Liberty and various other similar institutions have been discontinued, it would be impracticable in any event to give effect to the third purpose enumerated above in the manner prescribed by the testator. If that had been the i only purpose which the testator had in mind, he would have j been likely to have given the remainder directly to that type of Í institution. The Surrogate changed the testator’s direction by , substituting the care of persons suffering from ‘ respiratory and thoracic diseases ” in place of tuberculosis. The difficulty with the decision is that he concluded that the third numbered objective was the only purpose which the testator had in mind. Determining that it was not Mr. Scott’s purpose to benefit St. Thomas Church or to advance its objectives, • the Surrogate directed that the fund be administered by some other organization whose objectives presumably would be served if St. Thomas Church declined to execute what was regarded as equivalent to an ultra vires assignment. The decree erroneously directs the use of the money in a manner designed not to benefit St. Thomas Church and without memorializing the Scott family except by describing these assets as the ‘ ‘ Scott Memorial Fund” on the records of whatever organization were to administer them.

This disposition failed as matter of law, we think, to give effect insofar as practicable to the full design of the testator as manifested by his will and codicil. His purpose was not exclusively to aid tuberculars. Even that aim was found to be impractical except by broadening it to encompass all respiratory and thoracic diseases. There was an accompanying intent to promote the objectives of St. Thomas Church by assisting it to engage in good works without which faith alone is dead. Nor was it a selfish ” purpose, inconsistent with cy pres, to desire to perpetuate conspicuously the name and memory of the donor as a benefactor of the church and humankind. Naming a charitable fund after the Scott family on the records of whatever institution might administer this fund is of a different order of magnitude from causing a building to bear his name, as the will directs. It is not always possible to carry into effect all of the motivating factors of a program such as this testator put forward, but in the circumstances here presented we think that it was an unlawful dilution of his purpose to eliminate any benefit to St. Thomas Church and any tangible memorial to himself. A. building erected and maintained by St. Thomas Church was plainly important in his calculations, in order that its light (like his own) would, in Biblical words, so shine before men so that they might see their good works. These desires are deeply ingrained in human nature and are effective motivating forces in donations of this character. Cy pres is not designed to nullify them, where, as here, it is practicable to encompass them in the decree.

We agree with the Attorney-General and with the courts below that the original contention of St. Thomas Church is invalid that it has absolute power to use this remainder for any corporate purpose, and likewise that its proposal was unjustified to devote almost all of these funds by cy pres to the church building. Nevertheless it does not follow that none should be expended on this edifice, since we are persuaded that the testator was concerned among other matters with attaching his family name* if possible, to a building or buildings maintained by St. Thomas Church. Appellant’s brief states that the church vestry has | modified its original position by adopting a resolution “that ] $350,000 be used to provide an appropriate outward and visible ; memorial on the Fifth Avenue facade of the Church, and that the income from the balance be devoted to the establishment and maintenance of a clinical program in conjunction with St. Luke’s Hospital or some other Episcopal hospital willing to provide and designate such a program as a memorial to George S. Scott and his family.”

It is not for us on this appeal to approve or to disapprove a different, specific plan from the one described in the decree, but in our judgment the program advanced by the Attorney-General and directed by the order appealed from is erroneous as matter of law in determining that it was no part of the purpose of the testator to advance objectives of St. Thomas Church and in failing to discern or deciding that it is impracticable to execute more completely the objectives manifested by the will and codicil.

The order appealed from should be reversed, with costs to appellant in all courts payable out of the fund, and the matter remitted to the Surrogates’ Court for further proceedings not inconsistent with the opinion herein.

Burke, J. (dissenting).

There is nothing in the record to indicate an abuse of the discretion possessed by the Surrogate and the Appellate Division.

We have said that The exercise of the cy pres doctrine always involves a large measure of discretion ” (Sherman v. Richmond Hose Co., 230 N. Y. 462, 473; City Bank Farmers Trust Co. v. Arnold, 283 N. Y. 184, 195). It was, therefore, the duty of the Surrogate to provide that the funds should be administered in such manner as in his opinion would best serve the purposes for which the testator intended his property to be used.

When the courts below have had to exercise a judgment in regard to the ways and means of carrying out a testamentary purpose of a decedent which cannot be precisely accomplished, we are not empowered to substitute our opinions in place of theirs unless the uses commanded by the Surrogate constitute as a matter of law an improper exercise of discretion.

In this case the decree, which directs that the assets of the trust should be applied under the aegis of the church and in the name of the Scott Memorial Fund to the care of persons suffering from respiratory and thoracic diseases, is in accord not only with the purposes of the trust as expressed in the will, but also with that part of the resolution of the vestrymen of the church which proposes to set aside approximately 70% of the trust funds on hand for the care of.persons suffering from tuberculosis through a program to be instituted by the church at St. Luke’s Hospital or other Episcopal hospitals.

Where an appellant thus agrees with the finding of the Surrogate as to the dominant charitable purpose of the testator, we can hardly decide as a matter of law that the Surrogate and the Appellate Division must be held to have improperly exercised the discretion entrusted to them in failing to authorize the use of the balance of the fund for a purpose which, albeit worthy, is quite different.

The order appealed from should be affirmed, with costs in this court to all parties.

Judges Dye, Froessel and Foster concur with Judge Van Voorhis; Judge Burke dissents in an opinion in which Chief Judge Desmond and Judge Fuld concur.

Order reversed, etc.


author: Van Voorhis, J. Foster, J. (dissenting). Dye, J. (dissenting).

text:
    Charles B. Ripley et al., Individually and as Stockholders of International Railways of Central America, Suing in Behalf of Themselves and All Other Stockholders Similarly Situated, Appellants-Respondents, v. International Railways of Central America, Appellant-Respondent, and United Fruit Company, Respondent-Appellant.
    Argued March 24, 1960;
    decided December 1, 1960.

      T. Roland Berner, Aaron Lewittes, Julian S. Bush, M. Victor Leventritt, Shirley D. Brinsfield and Sidney Bender for Charles B. Ripley and others, appellants-respondents.
    I. United, as a faithless fiduciary, must restore to Irca, its cestui, the full difference between the public tariffs and the unconscionable, private rates that it paid, without amelioration, under the principles established by this court in Chelrob, Inc., v. Barrett (293 N. Y. 442) and Meinhard v. Salmon (249 N. Y. 458). (Espach v. Nassau & Suffolk Light. Co., 293 N. Y. 463; Equity Corp. v. Groves, 294 N. Y. 8; Sage v. Culver, 147 N. Y. 241; Globe Woolen Co. v. Utica Gas & Elec. Co., 224 N. Y. 483; Koral v. Savory, 276 N. Y. 215; Matter of Durston, 297 N. Y. 64; Geddes v. Anaconda Min. Co., 254 U. S. 590; Pepper v. Litton, 308 U. S. 295; Marian v. Mariani, 276 App. Div. 205.) II. United is estopped, as a matter of law, from asserting the alleged intangible benefits, because they are the fruits of fiduciary control or tainted with breaches of fiduciary obligation. (Sautter v. Fulmer, 258 N. Y. 107; Woods v. City Bank Co., 312 U. S. 262; Ex Parte Lacey, 6 Ves. Jr. 625; Davoue v. Fanning, 2 Johns. Ch. 252; Michoud v. Girod, 4 How. [45 U. S.] 503; Strates v. Dimotsis, 110 F. 2d 374, 311 U. S. 666.) III. The alleged ‘ ‘ intangible benefits ’ ’ are, as a matter of law, not susceptible of ‘ ‘ adequate ’ ’ determination. (Dayton Power & Light Co. v. Public Utilities Comm., 292 U. S. 290;
      United Gas Co. v. Railroad Comm., 278 U. S. 300.) IV. By the “ amelioration ”, United has been improperly compensated for values that it was duty bound as a fiduciary to give Irca gratis. (Lebold v. Inland Steel Co., 125 F. 2d 369; Farmers’ Loan & Trust Co. v. New York d Northern Ry. Co., 150 N. Y. 410.) V. Since United was disloyal to Irca, it forfeited all right to compensation by way of offset or otherwise. (Lamdin v. Broadway Surface Adv. Corp., 272 N. Y. 133; Crites v. Prudential Co., 322 U. S. 408; Young v. Potts, 161 F. 2d 597; Matter of Rees, 277 App. Div. 839; Matter of Caffrey, 254 App. Div. 684.) VI. “ Amelioration ” violates Guatemalan law and New York’s public policy against unfair discrimination. (United States v. Tozer, 39 F. 369; Hewitt v. New York, N. H. & H. R. R. Co., 284 N. Y. 117.) VII. United, as a faithless fiduciary, must also disgorge its profits on money that is rightfully Irca’s (United must at least pay 6% interest). (Beatty v. Guggenheim Exploration Co., 225 N. Y. 380; Equity Corp. v. Groves, 294 N. Y. 8; Falk v. Hoffman, 233 N. Y. 199; Fur & Wool Trading Co. v. Fox, 245 N. Y. 215; Harrison v. Egan, 270 N. Y. 387; Marcus v. Otis, 168 F. 2d 649; Smolowe v. Delendo Corp., 136 F. 2d 231, 320 U. S. 751; Vorlander v. Keyes, 1 F. 2d 67; Perlman v. Feldmann, 154 F. Supp. 436.)

      Harry Bijur and Alexander Kahan for John A. Bonaudi and others, appellants-respondents.
    I. Both the trial court and the Appellate Division erred by misapplying their own prescribed formula for the increase of West Coast (Agricola) banana rates. II. The finding of unconscionable rates by both courts is irreconcilable and inconsistent with their degree of application of the doctrine of amelioration. (Hume v. United States, 132 U. S. 406; Elder v. Frazier, 174 Iowa 46; Hall v. Wingate, 159 Ga. 630; Domus Realty Corp. v. 3440 Realty Co., 179 Misc. 749; Vulcan Detinning Co. v. American Can Co., 72 N. J. Eq. 387.) III. The misapplication of the doctrine of amelioration by the courts below has penalized the cestui que (Irca) instead of compelling a fair, full and just accounting from the defaulting fiduciary (United Fruit Company).

      Herman A. Bayless, of the Ohio Bar, admitted on motion pro hac vice, for Peter G. Thomson, Jr., and others, appellants-respondents.
    I. The United Fruit Company was found guilty of domination and control and is, therefore, a fiduciary responsible for fairness of rates in its transactions with Irca. II. Fair value is the public rate. III. Contributions claimed by United Fruit Company to Irca justifying the low rates paid by United Fruit Company were properly reviewed by the Appellate Division and rejected. IV. Amelioration is completely unwarranted because no contributions were claimed by United Fruit Company to Irca which were not rejected by the court. V. Award of damages in the judgment is entirely inadequate.

      Inzer B. Wyatt for International Railways of Central America, appellant-respondent.
    I. The position of Irca in this court is the same as it was in the Appellate Division, namely, that the judgment in favor of Irca, now unanimously affirmed by the Appellate Division, should be supported and increased. II. If United should urge on this appeal that under Irca concessions from the Republic of Guatemala there is a 20-cent maximum per stem which may be charged by Irca for the haulage of bananas, regardless of the distance involved, then we vigorously argue in this court against such contention.

      Ralph M. Carson, Theodore Kiendl, Porter R. Chandler, Edwin J. Jacob and Edward E. Ellis for respondent-appellant.
    I. The judgment must be reversed and the complaint dismissed on the ground of the Statute of Limitations. (Globe Woolen Co. v. Utica Gas & Elec. Co., 224 N. Y. 483; Equity Corp. v. Groves, 294 N. Y. 8; Hodge v. United States Steel Corp., 64 N. J. Eq. 807; Everett v. Phillips, 288 N. Y. 227; Barr v. New York, L. E. & W. R. R. Co., 125 N. Y. 263; Lewitt & Co. v. Jewelers’ Safety Fund Soc., 249 N. Y. 217; Metzger v. Ætna Ins. Co., 227 N. Y. 411; Curtis v. Albee, 167 N. Y. 360; Amend v. Hurley, 293 N. Y. 587; Porter v. Commercial Cas. Ins. Co., 292 N. Y. 176; Ross v. Food Specialties, 6 N Y 2d 336.) II. The entirety of plaintiffs ’ right to relief by action, whatever it was, accrued in September, 1936. (Potter v. Walker, 276 N. Y. 15; Brinckerhoff v. Bostwick, 99 N. Y. 185; Brick v. Cohn-Hall-Marx Co., 276 N. Y. 259; Sicolo v. Prudential Sav. Bank of Brooklyn, 5 N Y 2d 254; Schmidt v. Merchants Desp. Transp. Co., 270 N. Y. 287; Gregoire v. Putnam’s Sons, 298 N. Y. 119; Toomey v. Farley, 2 N Y 2d 71; Henis v. Compania Agricola de Guatemala, 116 F. Supp. 223, 210 F. 2d 950.) III. The judgment must be reversed and the complaint dismissed on the independent ground that damages for unjust enrichment cannot he awarded contrary to the terms of an existing contract which has not been set aside (even if assumed to be voidable). (Barr v. New York, L. E. & W. R. R. Co., 125 N. Y. 263; New York Trust Co. v. American Reatty Co., 244 N. Y. 209; Hauben v. Morris, 255 App. Div. 35, 281 N. Y. 652; Curtis v. Albee, 167 N. Y. 360; Amend v. Hurley, 293 N. Y. 587; City of New York v. Pennsylvania R. R. Co., 281 App. Div. 27, 305 N. Y. 788.) IV. The arbitration (commodity price level) clause of the 1936 contracts was no basis for decision below. (Matter of Wrap-Vertiser Corp. [Plotnick], 3 N Y 2d 17; Matter of Amerotron Corp. [Shapiro Woolen Co.], 3 A D 2d 899, 4 N Y 2d 722.) V. Plaintiffs-appellants are prohibited from recovery by section 61 of the General Corporation Law or by their ratification of the 1936 contracts. (Capitol Wine & Spirit Corp. v. Pokrass, 277 App. Div. 184, 302 N. Y. 734; Diamond v. Diamond, 307 N. Y. 263; Kent v. Quicksilver Min. Co., 78 N. Y. 159; Sheldon Hat Blocking Co. v. Eickemeyer Hat Blocking Mach. Co., 90 N. Y. 607; Burden v. Burden, 159 N. Y. 287; Markson v. Markson’s Furniture Stores, 267 N. Y. 137; Ripley v. Colwell, 206 Misc. 46.) VI. The findings, although in conflict, require reversal of the judgment and dismissal of the complaint under the business judgment rule. (Everett v. Phillips, 288 N. Y. 227; Blaustein v. Pan Amer. Petroleum & Transp. Co., 293 N. Y. 281; Pollitz v. Wabash R. R. Co., 207 N. Y. 113; Gamble v. Queens County Water Co., 123 N. Y. 91; Lonsdale v. Speyer, 174 Misc. 532, 259 App. Div. 802, 284 N. Y. 756; Holmes v. Saint Joseph Lead, Co., 84 Misc. 278, 163 App. Div. 885; Kavanaugh v. Kavanaugh Knitting Co., 226 N. Y. 185.) VII. On the assumption that a measure of fiduciary obligation was owing to railways by United as stockholder or otherwise, the evidence and findings establish no breach.
   Van Voorhis, J.

This is a minority stockholders’ suit on behalf of International Railways of Central America (hereafter described as Irca) against United Fruit Company (hereafter described as United) to recover damages arising from what are claimed to have been insufficient freight rates charged by Irca for the transportation in Guatemala of bananas for export and of imported materials and supplies for United or its subsidiary. Exerting practical control over Irca, United is charged with having obtained inadequate rates for its advantage to the detriment of Irca’s minority stockholders. Without restating the evidence on which the findings depend, we are satisfied that the findings are sustained that United was in practical control of Irca at least after the creation of the voting trust in 1928, and stood in a fiduciary relationship to Irca as respects the latter’s minority shareholders insofar as concerned business transactions between Irca and United or its subsidiary (Farmers’ Loan & Trust Co. v. New York & Northern Ry. Co., 150 N. Y. 410; Godley v. Crandall Godley Co., 212 N. Y. 121; Kavanaugh v. Kavanaugh Knitting Co., 226 N. Y. 185; Blaustein v. Pan Amer. Petroleum & Transp. Co., 293 N. Y. 281; Chelrob, Inc., v. Barrett, 293 N. Y. 442; Ripley v. International Rys., 276 App. Div. 1006). The Referee determined the deficiency between the freight rates which were paid and what he deemed to have been the fair and reasonable value of the transportation services rendered, and gave judgment to Irca for the deficiency. The Referee’s findings have been affirmed by the Appellate Division.

Appellant United relies for reversal and dismissal of the complaint primarily upon the Statute of Limitations and the controlling character of certain unrescinded contracts made in 1936. Under subdivision 8 of section 48 of the Civil Practice Act, the recovery has been limited to the period beginning February 14, 1943, six years before the commencement of this suit. United’s contention is that the rates charged were fixed by agreement in 1936, and that it is too late to attack those contracts. The judgment appealed from determines those contracts to be valid and binding except with respect to the freight rates. United contends that this is inconsistent, and that unless those agreements are rescinded the rates stipulated in them are binding as part of the consideration to United and its subsidiary for benefits which these contracts conferred upon Irca (Barr v. New York, L. E. & W. R. R. Co., 125 N. Y. 263; New York Trust Co. v. American Realty Co., 244 N. Y. 209). Under those decisions, and on principles of fair dealing, it is clear that where a fiduciary contracts with its cestui regarding the individual property rights of the fiduciary, the transaction may be rescinded where there has been overreaching, but the cestui cannot knowingly retain the benefits which it receives under such agreements and simultaneously repudiate its obligations thereunder. An agreement with a fiduciary may be set aside, but the courts cannot compel a fiduciary to enter into an agreement which it has not made. The consideration running to Irca under the 1936 contracts did not consist of property which United held in a fiduciary capacity, but it was bargaining with respect to property rights which it owned. If the freight rates which were paid by Irca under the 1936 contracts were part of the consideration for benefits which Irca received, the position of United on this appeal might well be correct. It is now too late to rescind the 1936 contracts; an unsuccessful attempt was made to rescind them in the Federal courts (Henis v. Companía Agrícola de Guatemala, 116 F. Supp. 223, affd. 210 F. 2d 950), and the agreements would not be reformed in court so as to make them provide for different rates from those which they specify. An analysis of these agreements leads us to conclude, however, that the rates which they fix were not an integral part of the consideration for the benefits under them running to Irca. The courts below have apparently held and we believe the evidence to be clear that the rate agreements were separate from the other contracts or portions of contracts on which United relies upon this appeal, and that they are divisible from the rest of the consideration. The rule has been stated in Black on Rescission and Cancellation (2d ed., Vol. 3, § 585) that “ When a contract is separable or divisible into a number of elements or transactions, each of which is so far independent of the others that it might stand or fall by itself, and good cause for rescission exists as to one of such portions, it may be rescinded and the remainder of the contract affirmed. And it has been held that where a contract consists of parts so distinct and independent that each could be performed without reference to the others, a failure of one of the parties to perform one of the parts or terms of the contract does not authorize the other to rescind the whole contract, and refuse to accept a tender of performance of the remainder of the contract by the party in default.” The same principle of divisibility has been applied to restitution as essential to rescission (Corbin, Contracts, § 1111; 5 Williston, Contracts [Rev. ed.], § 1530; Schwasnick v. Blandin, 65 F. 2d 354, 358, per L. Hand, J.; Restatement, Contracts, §§ 351 [a], 487; Thompson v. Fesler, 74 Ind., App. 80). In Bamberger Bros. v. Burrows (145 Iowa 441, 451) it was said: ' ‘ If the contract consists of several distinct and independent parts, each of which can be performed without reference to the other, a failure of one of the parties to perform one of the terms does not authorize the other to rescind the whole and refuse to accept performance of the other terms by the party so in default. ’ ’

It follows from these principles that, if the freight rate provisions of these 1936 contracts were divisible from the other portions of the agreements, the charging of inadequate freight rates by Irca would not have furnished a basis on which the rest of the agreements, supported by independent consideration, could have been rescinded. Under that state of facts, it was not incumbent upon Irca represented by its minority stockholders to attempt to rescind the other portions of the agreements made in 1936, nor did the existence of the other portions of these agreements operate as a bar to this suit for damages based on unjust enrichment of United and Agricola by the carriage of freight at inadequate rates. A cause of action would lie for the difference between the stipulated rates and the fair and reasonable cost of the transportation furnished (Chelrob, Inc., v. Barrett, 293 N. Y. 442, supra), without rescinding the rate agreements by themselves.

Whether this action can be maintained on this theory depends upon whether the parties in 1936 ‘ ‘ assented to all the promises as a single whole, so that there would have been no bargain whatever, if any promise or set of promises were struck out. * * * Did the parties give a single assent to the whole transaction or did they assent separately to several things? ” (3 Williston, Contracts [Bev. ed.], § 863.)

The Appellate Division refers to the rate agreements as separate agreements. The Beferee poses the query whether the 1936 rate agreements are divisible or entire, and appears to have inferred the former to be the fact. We think that the evidence admits of no other conclusion. The 1936 contractual arrangements consist of ten purportedly separate contracts between Irca and United, or between Irca and United’s subsidiary known as Agricola. The circumstance that they are different documents does not necessarily mean that they do not form a single contract (Crabtree v. Elizabeth Arden Sales Corp., 305 N. Y. 48), but it does indicate that they are separate unless the history and subject matter shows them to be unified. Thq first of these 1936 contracts, entitled " Main Agreement ’ ’, is between Irca and Agricola. It does not mention freight rates, but provides that Agricola will purchase 10 new locomotives and 300 banana cars for use by Irca ‘ ‘ under separate trackage and operating agreements, the terms of which have been agreed to and are satisfactory to the Railway Company. ’ ’ For 20 years Agricola agrees to refrain from building a port without Irca’s consent on the Pacific seaboard of Guatemala, which might compete with Irca, and it agrees to use the main lines of Irca to transport its bananas and to carry its imported materials and supplies ' ‘ under such arrangements as the parties hereto may agree upon from time to time.” (Italics supplied.) Agricola agrees to obtain permission for Irca to use jointly for 20 years with the owner the main line of railway running for a distance of about 30 miles from Quiligua to Bananera, paralleling Irca’s own main line, and to provide Irca with certain agreements useful for obtaining gravel ballast and controlling the construe--, tion of a port on the Atlantic seaboard. Irca agrees to deliver. to Agricola $1,750,000 principal amount of a new issue of 3%% 20-year collateral notes together with 185,000 shares of its authorized but unissued common stock (giving United control over 42.67% of Irca’s voting shares) for which Agricola covenanted to pay $2,165,000 in cash, the disposition of which by Irca is directed in detail. Another paragraph provides that this main agreement shall take effect upon the approval of the stockholders of Irca at a meeting duly called for the purpose. This is the only one of the ten agreements of 1936 which was submitted to the stockholders, nor did its submission or the notice of the stockholders ’ meeting disclose that long-term agreements were being proposed or entered into specifying rates for the carriage of Agricola’s freight across Guatemala. Other agreements were signed at the same time, but not submitted to the stockholders, among which were contracts entitled Track-age ’ ’ and ‘' Operation of Trains ’ ’ agreements, which contemplated that Agricola would own and provide the necessary locomotives and banana cars to handle its traffic from the western coast of Guatemala to Puerto Barrios on the east coast for which Irca agreed to provide the trackage rights at $30 per loaded car. The operation of trains agreement covered the operation of these trains for Agricola by Irca, which was to be reimbursed “ for the total amount of expense incurred by [Irca] in performing the aforesaid activities for [Agricola].” Both of these agreements were for terms of 25 years from 1936. A supplemental agreement, signed upon the same day, fixed the amount of expense for which Irca was to be reimbursed under the operating agreement at $30 per car of bananas transported to Puerto Barrios, in addition to the $30 per car under the trackage agreement. From this reimbursement to Irca for the operational expense was to be deducted interest on and amortization of the cost of Agricola’s equipment operated by Irca, consisting of ‘' ten locomotives and three hundred cars for the time being and such additional equipment as hereafter we may agree upon.” As will be mentioned later, these agreements provided that the trackage fees and the operating fees were subject to change at any time by arbitration in event of any change in the costs of bananas in Guatemala or in transportation costs, and this combined figure of $60 per car simply restated the $60 per car rate established for 25 years for the same transportation in 1933 by agreement between Irca and United (subject likewise to change from time to time by arbitration). The rates fixed by the 1933 agreement were not altered, and correspondence between officers of the companies at the time shows that they were intended to remain the same but that the $60 per car figure was broken down into $30 for trackage and $30 for operation of trains in order to conceal the discrepancy between the $60 per car charged to Agrícola and the $130 per car charged to independents for a similar haul after 1939. So large a discrimination in United’s interest was beginning to excite criticism in Guatemala. The chairman of the board of United became exercised about this as a question of public relations, and he insisted that the preferential treatment of United should not be altered but be made less obvious. The track-age ” and “ operating” agreements were the method adopted for doing this. The name ‘ ‘ Agricola ’ ’ was even painted on banana cars owned by Irca to make the $60 preferential rate seem more justifiable. We are concerned with this as an aid to determining whether the rate agreements were severable from the rest of the 1936 contractual provisions so as to determine whether rescission of all of the 1936 contracts was necessary to enable Irca to recover from United for unjust enrichment resulting from inadequate freight rates. These rate agreements could not have been dependent on consideration running to Irca in 1936, as United contends, if the same rates had been fixed 3 years earlier for 25 years without regard to any covenant to refrain from constructing a Pacific seacoast port or any of the other consideration furnished by United or Agricola to Irca in 1936. A covenant to do what one is already under a legal obligation to do is not sufficient consideration for another contract (Carpenter v. Taylor, 164 N. Y. 171). Assuming, therefore, that Irca was already bound to these freight rates by contract in 1933, a reaffirmation of the same obligation in 1936 would not be an integral part of the consideration for the 1936 agreements. Even though it were said that the latter contracts extended the rates until 1961 from the expiration date of the 1933 contracts in 1958, this so clearly was not the animating purpose of these transactions that, although it might be sufficient to defeat a claim of invalidity due to total absence of consideration, it only emphasizes the divisible nature of the rate agreements from the rest of the 1936 contracts. It is plain that if Irca in 1933 was already bound for 25 years to the $60 rate, it was not induced to give its assent to the $60 rate by consideration for Irca’s advantage provided for the first time in 1936.

No rescission of the rate agreements, standing by themselves, is necessary to recovery by plaintiffs; it was United-Agricola, standing in fiduciary relation to Irca, which obtained and retained these transportation services at too low a price, and no theory of rescission of the rate agreements alone is necessary to enable Irca to recover from its fiduciary for unjust enrichment, provided that the continuance of these low rates was not an indivisible part of the consideration for the rest of the 1936 agreements. Considered as divisible, the effect of the rate agreements is similar to any situation where the fiduciary has received and retained property or services at less than value. It has to pay the difference, and the result is not different merely because the rate transaction has taken the form of a contract. The obligations of the fiduciary cannot be escaped merely by making a contract with the cestui, nor is rescission necessary (if the rate contracts are divisible) since the cestui has received nothing under them belonging to the fiduciary which it is bound to give up.

. It has been assumed for the purposes of discussion, thus far, that the ‘ ‘ trackage ”, “ operating ’ ’ and ‘ ‘ supplemental operating ’ ’ agreements of 1936 did fix the freight rates to be paid by United or its subsidiary for 25 years. Actually they did no such thing. Being legally subject to change, the continuance of these rates could not have been relied upon by United or Agricola in entering into any of the 1936 contracts. This further demonstrates that the rate provisions were divisible. As has been said, the “Main Agreement” — the one which was submitted to Irca’s stockholders—made reference to trackage and operating agreements, reciting that Agricola would use the lines of the railroad during the term of the agreement ' ‘ under such arrangements as the parties hereto may agree upon from time to time.” The supplemental operating agreement (which fixed the $30 per car operating fee) provides that the rates for both the trackage and operating agreements (aggregating $60 per car) are subject to change on written request from either party ‘ ‘ at any time or from time to time during the term of this contract ”, the changes to be agreed upon, if possible, but otherwise to be fixed by arbitration. The circumstance that these changes were to be made in event of changes in the costs of the banana or transportation businesses does not alter the fact that the door was thus left wide open to modifications in these freight rates during the 25-year term of these agreements. Pursuant to these clauses the freight rates actually were changed by supplemental agreements in 1946, 1948, 1951 and 1952. These changes were not acts of grace on the part of United. It evidently anticipated changes that might be made unless consent were given. It is immaterial whether arbitration was demanded, in determining whether the freight rate provisions were severable from the sum total of the 1936 contractual arrangements. If the rates were subject to change, their continuance without change could not have been relied upon by United as part of the consideration in making the other 1936 contracts.

For these reasons, we hold that there was no inconsistency in granting recovery to Irca at the instance of plaintiffs on the theory of unjust enrichment without rescinding the 1936 agreements. Neither could it be held, although respondent-appellant United does not make the point, that recovery in this action is barred by failure to rescind the 1933 agreement. When that agreement is examined, it is found to provide that for all bananas transported to Puerto Barrios from the Pacific side “ the rates shall be those from time to time agreed upon between the parties and set forth in contract supplementary hereto.” The supplemental contract sets the rate for these shipments at $60 per car, subject to change by arbitration at intervals in event of changes in the costs of bananas or of transportation. These rate clauses are divisible from the main agreement of 1933. The reason for not making them an integral part of the consideration may well have been that United relied upon its practical control of Irca to insure that whatever other or different rates might be fixed would be satisfactory, but that does not aid the defense in this litigation.

The rate for hauling eastern Guatemalan bananas, less in volume than those from the Pacific coast area, was not covered by the 1936 agreements, presumably for the reason that there was no independent shippers’ banana rate for shipments by others in that area to create a public relations problem. There was no occasion, as in the case of shipments from western Guatemala, to put a better face upon what had already been agreed upon in 1933. The banana shipments originating near the east coast, likewise destined for Puerto Barrios, were set at 11% cents per stem in 1913. The main contract of 1933 continues the same rate for five years, except that it is increased by % cent per stem in case of reduced volume of shipments. It could hardly be contended after 1933 that this rate of 11% cents survived from the 1913 contract, but, in any event, the parties rendered it subject to revision upward or downward by mutual agreement or arbitration so that it could not be regarded as an integral part of any consideration moving to Irca, which would have had to be restored before suit could be maintained to recover fair and reasonable charges for the transportation.

The third item of recovery allowed by the Referee, in addition to the transportation of bananas for export originating on the western or eastern coastal areas of Guatemala, concerns underpayment for transporting imports of materials and supplies for Agrícola from Barrios to the west coast. This subject was covered by a separate one of the ten 1936 contracts, in the form of a letter agreement, which says “ Supplementing our Agreements of even date, this is to confirm that for the duration of said Agreements we will charge you Sixty Dollars ($60.00) TI. S. currency per carload for the transportation of the materials, equipment and supplies which you may require for the construction of new railroad lines and irrigation works on the Pacific slope of Guatemala, and for the development of new banana plantations and their appurtenances. * * * This rate shall be subject to the provisions of the above agreements which permit adjustments in certain contingencies as therein provided.”

These rates were reduced by agreement in 1946 to $48 where the materials and supplies were carried in banana cars, and increased to $100 per freight carload of 40,000 pounds and $125 per freight carload of 50,000 pounds. The Beferee increased these amounts for the years in suit. It may be said with respect to United’s argument that this charge along with the others cannot be altered by reason of the 1936 agreements, that this rate was, to be sure, established by contract for the first time in 1936, and that in that regard it differs from the other two. Nevertheless, this rate was established by separate supplementary agreement, which purports to cover only the subject of freight rates on imports. It is divisible from the subject matter of the rest of the contracts, and, as in case of the others, this rate was subject to change if conditions warranted.

United argues that there is no evidence and no finding of any increases of price or cost levels so as to call the arbitration clauses in these contracts into operation, and that the arbitration clauses were never invoked. It is hard to believe that there have been no changes in costs of bananas or transportation since 1913 when the 11%-cent-per-stem east coast rate was established, or since 1933 when the $60 banana car rate originated for export shipments from the west coast area. This point of United might be of greater consequence if these transportation agreements had been made at arm’s length, and were not subject to the infirmity of having been made between a fiduciary and its cestui. As it is, the question is whether Irca through plaintiffs can recover the difference between what it was paid by its fiduciary and the value of the transportation services which its fiduciary obtained. Irca can recover these amounts on the theory of unjust enrichment unless it is barred by neglect to rescind the 1936 agreements within the period of the Statute of Limitations by making restitution of benefits (other than the stipulated freight rates) which Irca has received. Restitution and rescission are unnecessary, however, under the authorities which have been cited, unless the rate agreements are a dependent part of the consideration for the entire nexus of contractual rights and liabilities established by the 1936 contracts. The test is whether the parties in 1936 assented to all the promises as a single whole or assented separately to several things (Williston, Contracts, supra). That they did the latter, and that the rate provisions are divisible as the courts below have indicated, is clearly apparent—among other matters — from these rate arbitration clauses. These clauses, whether or not they were or could have been invoked, demonstrate that United did not rely on the continuance of any stipulated freight rates over a 25-year -period as consideration for the purchase of its interest-bearing notes and unissued stock, for refraining from constructing a western coastal seaport, for financing the purchase of rolling stock at Irca’s expense or furnishing other benefits to Irca for United’s own primary advantage. Knowing the broad powers of arbitrators on the facts and the law, and the fluctuating nature of costs of bananas and transportation in Guatemala (which the rate agreements never tire of reciting), it is inconceivable that United relied on the unchanging nature of these freight rates in assenting to the other contracts. It is apparent that United did not rely on its contracts but on its working control over Irca to keep these' freight rates at their low level, as the contemporary correspondence indicates. The arbitration clauses supplied a flexibility in the legal rate structure which improved the appearance and could be indulged so long as United controlled both sides of the bargaining table. The fact that arbitration was not demanded, under these circumstances, does not disclose reliance on contractual durability of the rate structure.

Other contentions may be mentioned briefly. The judgment in Henis v. Companía Agricola de Guatemala (supra) dismisses an action in the United States District Court in Delaware to rescind the 1936 agreements. It was for a different cause of action. Rescission of those agreements was not necessary, it is held, in order to enable plaintiffs to maintain the present action. Neither is the defense valid that the stockholders of Irca ratified the freight rates which were charged. Since for the reasons above stated the 1936 contracts are not controlling on this cause of action, which is for unjust enrichment arising from separate shipments made after February 14,1943, plaintiffs need not have been stockholders of Irca in 1936 under section 61 of the General Corporation Law. Concerning the defense of ratification by stockholders, only one of the 1936 agreements was submitted to the stockholders, as has been stated, nor did that contract (the so-called “Main Agreement ”) or the notice of stockholders’ meeting mention that it was proposed to fix freight rates for any period. The stockholders’ notice may not have been defective in this respect in view of the fact that only a flexible rate structure was erected, and by separate agreements, but that does not spell ratification of any long-term rates. Even though the “ trackage ”, “ operation of trains ” and the “ supplementary ’ ’ agreement to the contract for operation of trains were attached to the minutes and physically present at the stockholders ’ meeting, that did not bring them to the attention of stockholders who voted by proxy in reliance on the notice of stockholders ’ meeting.

Plaintiffs have appealed from the judgment on the basis that the report of the Referee indicates that he omitted to award the full difference between the freight rates charged to United and the so-called independent ” or “ public ’ ’ rates promulgated by the railroad for shipment of bananas by others from the west coast for export and of imported materials and supplies destined to the west coast area. Considerable attention has been given during the trial to whether special arrangements were permitted with particular shippers under Guatemalan law. Apparently they were not prohibited during the period covered by this lawsuit. The point in the case insofar as the New York courts are concerned is not so much whether Irca has fostered a monopoly in United in the Guatemalan banana business, as whether it has been adequately paid for what it has done for United. When the report of the Referee is analyzed to ascertain what he did, he appears to have directed judgment at the instance of plaintiffs in amounts reached by computing the difference between what Irca was paid by United-Agricola and what he deemed to have been the fair and reasonable valuation of the services rendered. It was within his province, and that of the Appellate Division, under the evidence, to find the amounts of damages on that basis as facts.

While ordinarily a court is not empowered to fix rates, it may determine appropriate rates for the purposes above stated in an action of this character down to the time of entry of its judgment. The judgment here was entered December 19, 1957 and amended January 2, 1958. As of January 2, 1958, for the purposes stated, it determines final constant rates, subject to any substantial future change in economic or other conditions affecting the fairness of rates, in which event application may be made at the foot of the judgment for appropriate relief. This we believe the court did by the judgment appealed from and had the power to do.

As so construed, the judgment appealed from should be affirmed, without costs.

Foster, J. (dissenting).

For the purposes of this brief dissent I assume that the findings as to domination and control of Irca by United have substantial evidence to support them. Since there was a unanimous affirmance by the Appellate Division, a review as to the weight of such evidence is not permissible here. However the acceptance of such findings leads to the conclusion only that the 1936 contracts between United and Irca were voidable and not void per se. (Burden v. Burden, 159 N. Y. 287; Continental Ins. Co. v. New York & H. R. R. Co., 187 N. Y. 225; Everett v. Phillips, 288 N. Y. 227.) As such they were subject to disaffirmance but plaintiffs abandoned any claims for cancellation, rescission or reformation.

The judgment appealed from determines these contracts to be valid and binding except with respect to freight rates. Such a judgment can only be justified upon the tenuous theory that they are severable, because it is a familiar principle that a party cannot retain the benefits it receives under a voidable agreement and at the same time repudiate its obligations thereunder, and this principle applies equally to a situation where a fiduciary contracts with its cestui (Barr v. New York, L. E. & W. R. R. Co., 125 N. Y. 263; New York Trust Co. v. American Realty Co., 244 N. Y. 209).

The majority opinion holds that the 1936 agreements are divisible. With the conclusion I disagree. They formed in my opinion a package deal and the rates fixed were an integral part of the whole deal. In the absence of rescission they cannot now be changed upon the theory of unjust enrichment without unwarranted judicial interference that has the effect of a new contract which the parties never made (Restatement, Restitution, § 107).

I would reverse and dismiss the complaint.

Dye, J. (dissenting).

I am obliged to dissent from the decision about to be made for the reasons so ably stated by Foster, J., in his dissenting opinion with which I fully agree, and for the additional reasons that regardless of whether the 1936 contract is divisible — and I think it is not — the alleged action is nonetheless barred by limitations of time (Civ. Prac. Act, § 48, subd. 8; § 49, subd. 7). Ripley v. International Rys. of Cent. America (276 App. Div. 1006) is not to the contrary, since that decision simply made available the three-year statute in the event the proof so warranted. The salutary protection afforded by statute should not be denied by resort to an artificial concept of continuing wrong. If the basic contract has become incontestable by virtue of the Statute of Limitations, I can see no wrong committed solely by adhering to the contract according to its terms. The action, if any, accrued at the time of the making of the 1936 contract and, whether it be grounded in the contract as a whole or limited to the allegedly divisible portion, more than six years elapsed before commencement of the suit. The case of Chelrob, Inc., v. Barrett (293 N. Y. 442, 456) is clearly not authority for the view that the courts are empowered to alter existing contracts. It simply stands for the proposition that the courts have jurisdiction ‘ ‘ to determine that it [the contract] should be set aside on equitable grounds” (p. 462; emphasis supplied) which is not to say that a contract may be altered on other than by an application of long-recognized and oft-used remedies. Here, as Foster, J., points out, the plaintiffs have abandoned any action that they may have had for cancellation or rescission. The fact that they might choose to proceed on a theory that they are damaged by United’s wrong in foisting the contract upon International affords no better ground for relief, and that too must be deemed barred by limitations of time. To rule otherwise is to accomplish an innovation in the law which does violence to well-established principles governing restitution, mitigation of damages and ancient legislative, policy embodied in the Statute of Limitations.

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

Chief Judge Desmond and Judges Froessel and Burke concur with Judge Van Voorhis; Judge Fuld concurs in result; Judges Dye and Foster dissent and vote to reverse and to dismiss the complaint in separate opinions.

Judgment affirmed.