author: Chief Judge Conway. Burke, J. Van Voorhis, J.

text:
    Arthur A. Johnson Corporation et al., Respondents, v. Indemnity Insurance Company of North America, Appellant.
    Argued October 14,1959;
    decided December 30, 1959.

      George J. Conway and George A. Garvey for appellant.
    I. The flooding of the continuous trench constituted one accident even though the result was the collapse of the walls fronting on each of the two buildings. (Hyer v. Inter-Insurance Exch., 77 Cal. App. 343; Truck Ins. Exch. v. Rohde, 49 Wn. [2d] 465; Rew v. Beneficial Std. Life Ins. Co., 41 Wn. [2d] 577.) II. There was no uncertainty or ambiguity in the term “ each accident ”. (Lewis v. Ocean Acc. & Guar. Corp., 224 N. Y. 18; Matter of Croshier v. Levitt, 5 N Y 2d 259; Jackson v. Employers’ Liab. Assur. Corp., 139 Misc. 686, 234 App. Div. 893, 259 N. Y. 559; Abrams v. Great Amer. Ins. Co., 269 N. Y. 90; Matter of Woodruff v. Howes Constr. Co., 228 N. Y. 276; Paul v. Travelers’ Ins. Co., 112 N. Y. 472.) III. The decisions of other jurisdictions generally uphold the claim of defendant that there was but one accident. (South Staffordshire Tramways v. Sickness & Acc. Assur. Assn., [1891] 1 Q. B. 402; Denham v. La Salle-Madison Hotel Co., 168 F. 2d 576, 335 U. S. 871; Anchor Cas. Co. v. McCaleb, 178 F. 2d 322; St. Paul-Mercury Ind. Co. v. Rutland, 225 F. 2d 689; Tri-State Roofing Co. v. New Amsterdam Cas. Co., 139 F. Supp. 193.) IY. The difference between the obligation assumed under the contractual coverage and that under the common-law liability in no way changes the concept of accident. (Floralbell Amusement Corp. v. Standard Sur. & Cas. Co., 256 App. Div. 221; Grand Union Co. v. General Acc., Fire & Life. Assur. Corp., 254 App. Div. 274.)

      Franklin Nevius and Thomas B. Treacy for respondents.
    I. The two separate collapses of the two separate temporary walls, constructed as required by respondents’ contract with the city to protect and enclose the basements of the two separate buildings at 300 and 304 Fourth Avenue after removal, as required by that contract, of the vaults of each of those buildings, involved two separate accidents, i.e., two separate events, within the intent of the policy protecting respondents against their contractual liability imposed under that contract. (Tonkin v. California Ins. Co., 294 N. Y. 326; Abrams v. Great Amer. Ins. Co., 269 N. Y. 90; Queens Ins. Co. v. Globe Ins. Co., 263 U. S. 487; Bird v. St. Paul Fire & Mar. Ins. Co., 224 N. Y. 47; McAllister & Co. v. Western Assur. Co., 218 App. Div. 564; Hartol Prods. Corp. v. Prudential Ins. Co., 290 N. Y. 44.) II. Although the court below held that the two separate events, i.e., the separate collapses of the two separate walls enclosing the two separate buildings at sub-basement level, were separate accidents because they resulted from separate risks in connection with the construction work under respondents’ contract with the city, irrespective of the separation by time and spaice of such collapses, nevertheless, such separation by time and space is further indication of the separate character of the accidents. (Gralton v. Oliver, 277 App. Div. 449, 302 N. Y. 864: Anchor Cas. Co. v. McCaleb, 178 F. 2d 322; Kuhn’s of Brownsville v. Bituminous Cas. Co., 197 Tenn. 60.)
   Chief Judge Conway.

This case comes to us upon an agreed statement of facts which are essentially that in January, 1947 plaintiffs, who are general construction contractors, contracted with the New York City Board of Transportation to construct platform extensions to stations on the Lexington Avenue Subway. In the construction contract the plaintiffs agreed to indemnify the city against claims by persons, including abutting owners and their tenants, for damage which “ * * * may be occasioned by the work of construction, even in cases where such owners, have no legal claim against the City for such injuries or damages ”. They further agreed that their liability would be absolute and ‘ ‘ not dependent upon any question of negligence on * * * [their] part or on the part of * * * [their] agents, servants or employees * * Then, defendant insurance carrier issued to the plaintiffs a policy which provided as follows:

tl J # # #
Coverage B — Property Damage Liability.
To pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law, or assumed by him under contract as defined herein, for damages because of injury to or destruction of property, including the loss of use thereof, caused by accident.”
Item 4 of the declarations of the policy provided as follows:
ÍÍ # * * Coverages A * # * Limits of Liability * * *
B. Property Damage Liability $50,000. each accident 100,000. aggregate operations.
* * * n

For an additional premium, the policy further provided:

‘ ‘ Contractual Liability and Property Damage Endt. #1
It is agreed that in consideration of premium hereinafter provided for, such insurance as is afforded by the policy shall also apply to the liability assumed by the insured under Contract for the Extension of Station Platforms at 23rd, 28th and 33rd Streets, Manhattan, Group 12, Lexington-Fourth Avenue Line, I. R. T. Division, New York City Rapid Transit System said contract being executed by and between the named Insured and the City of New York, Board of Transportation, and copies of the Indemnification Clauses set forth therein being on file with the Company.”

Later in the year, as part of the job, plaintiffs excavated a trench on Fourth Avenue which extended between 22nd and 23rd Streets in front of premises 300 and 304 Fourth Avenue. Those two buildings, although they are adjoining, are separate so that water in the sub-basement of one would not flow into the sub-basement of the other. They then removed the underground vault walls in front of each building and constructed in their place two entirely separate, temporary cinder block walls, six inches thick, enclosing the front of the sub-basement of each building. On August 26, 1947 a rainfall of unprecedented intensity took place (3.52 inches) and flooded the excavation beyond the capacity of the pumps. At 5:10 p.m., one of the sections of the cinder block wall in front of 300 Fourth Avenue gave way and that sub-basement was flooded, causing property damage to the owner and occupants therein. Subsequently, at 6:00 p.m., the wall protecting 304 Fourth Avenue was breached and similar flood damage occurred. However, the flood in 304 Fourth Avenue was 3.5 feet lower than that in 300 Fourth Avenue. The plaintiffs and the defendant insurer agree that the collapse of the walls was not the result of any negligence on the part of the plaintiffs.

There were several claims and lawsuits brought which were settled for a total well over $50,000. However, the insurer, in reliance on the policy limitation of $50,000 coverage for each accident, paid $50,000 and no more, claiming that there had been only one accident within the meaning of the policy. It is agreed that the defendant insurer’s further liability under the policy, if two accidents are involved, is $19,939. The controversy is: << * * * whether upon the foregoing facts there were on August 26, 1947 two accidents involved as claimed by plaintiffs, or one accident involved as claimed by defendant.”

The Appellate Division held that more than one accident was involved, and it awarded judgment to the plaintiffs accordingly.

The defendant insurance company contends that there was only one proximate cause (causa causans) of the damage to the several claimants, i.e., the heavy and unprecedented rainfall, and that, thus, there was only one “ accident ” within the commonly accepted meaning of the word. In advancing this position, the carrier relies upon several cases which take the view in a situation where there are losses to more than one person, that, whether there is more than one “ accident ” within the meaning of a limitation clause of the type here involved, depends on whether there is one act of negligence constituting the proximate, continuing cause for all of the injuries and damage. (See, e.g., Hyer v. Inter-Insurance Exch., 77 Cal. App. 343 [1926]; Truck Ins. Exch. v. Rohde, 49 Wn. [2d] 465 [1956].) Plaintiffs, in addition to resisting the carrier’s assertions concerning coverage of ordinary common-law liability, point to the clause insuring them against the liability which they have assumed in their contract with the city and maintain that since they were being sued on that contract by the many claimants, the concept of proximate causation is not relevant to determine the proper construction of the coverage of the policy. The carrier’s reply to this is that the additional obligation incurred by it as insurer in no way affects or changes the concept of “ accident ” contained in the $50,000 limitation clause.

This is apparently a case of first impression in this State. Neither our research nor that of counsel nor that of the court below has uncovered any New York" cases directly in point. This problem is to be distinguished from the multitude of cases in this jurisdiction which have sought to determine whether there has been damage by ‘ ‘ accident ’ ’, as covered by a personal insurance policy. (See, e.g., Lewis v. Ocean Acc. & Guar. Corp., 224 N. Y. 18, 21 [1918]; Smith v. Continental Cas. Co., 259 App. Div. 357 [1st Dept., 1940]), or under the AVorkmen’s Compensation Law (see, e.g., Matter of Woodruff v. Howes Constr. Co., 228 N. Y. 276, 278 [1920]), or under a policy of liability insurance (see, e.g., Floralbell Amusement Corp. v. Standard Sur. & Cas. Co., 256 App. Div. 221 [1st Dept., 1939].) Here, there is no question but that there was damage by ‘ ‘ accident ’ ’. The question is, how many accidents within the meaning of the policy? Of course, in addressing ourselves to this question, our guide is, as both sides agree, especially since there appear no special circumstances, the “ * * * reasonable expectation and purpose of the ordinary business man when making an ordinary business contract.” (Bird v. St. Paul Fire & Mar. Ins. Co., 224 N. Y. 47, 51 [1918].) Phrased differently, we are not construing a statute, but the words of an insurance policy, and in so doing we must construe the word “ accident ” as would the ordinary man on the street or ordinary person when he purchases and pays for insurance. (See Abrams v. Great Amer. Ins. Co., 269 N. Y. 90 [1935]; Johnson v. Travelers Ins. Co., 269 N. Y. 401 [1936].)

The authorities in this area of whether, in a given set of circumstances when the damage is to several persons, there is one or more accidents within the meaning of the clause limiting coverage to a certain amount per accident, may be divided into three classes. In one class of cases upon which the carrier heavily relies, the courts utilize the approach that “ where * * * one negligent act or omission is the sole proximate cause, or causa causans, there is, as a general rule, but one accident, even though there be several resultant injuries or losses.” (Hyer v. Inter-Insurance Exch., 77 Cal. App. 343, 350, supra [2d App. Dist., 1926].) In that case, where the policy was limited to $1,000 for claims arising from one accident, the insured negligently collided with one car forcing that car into a collision with another car and causing an aggregate of $2,000 damage to both. The court held that there was only one accident. (See, also, Truck Ins. Exch. v. Rohde, 49 Wn. [2d] 465, supra [1956], where the insured, driving on the wrong side of the road, hit three oncoming motorcycles in quick succession and the court ruled that there was only one accident within the limitation clause of the policy.)

Another approach is to hold that each person who has suffered a loss has suffered an accident. Thus, the number of accidents is determined by the number of persons damaged. The leading exposition of this doctrine is in South Staffordshire Tramways v. Sickness & Acc. Assur. Assn. ([1891] 1, Q. B. 402 [Court of Appeal]) where several tram passengers were injured in a mishap and made claims upon the insured. The rationale appears to be that, inasmuch as the purpose of the policy is to afford protection against claims for injuries, it is more appropriate to equate “accident” with an “accident to any one claimant ”. ([1891] 1 Q. B. 405-406.) (See, also, Anchor Cas. Co. v. McCaleh, 178 F. 2d 322 [C. A. 5th, 1949].)

Finally, there is the approach, which we consider the soundest, that the term is to be used in its common sense of ‘ ‘ an event of an unfortunate character that takes place without one’s foresight or expectation * * (Definition taken from Matter of Croshier v. Levitt, 5 N Y 2d 259, 269 [1959]; emphasis added.) That is, an unexpected, unfortunate occurrence. One case illustrative of this view is Anchor Cas. Co. v. McCaleb (supra) where an oil well blew up, remained out of control, and continued intermittently for 50 hours to erupt, hurling waste materials upon the property of various neighbors, the victims depending on the direction of the wind. The question was whether there was only one accident within the meaning of the liability insurance policy’s limit of $5,000 for each accident. The court deemed the blowing out of the well to be “ * * * a series of events, a catastrophe ”, and observed that: ‘ ‘ Numerous accidents were the product of the motivating force and the wind as a supervening force. The eruptions continued intermittently for over two days * * *.” Hence, they concluded that there was more than one accident (178 F. 2d 324). An example of similar reasoning which reached the opposite result is Saint Paul-Mercury Ind. Co. v. Rutland (225 F. 2d 689 [0. A. 5th, 1955]) where the insured truck carrying coverage limited to $5,000 per accident collided with a freight train and damaged the roadbed, 16 cars and their contents, giving rise to claims by the railroad as well as by several shippers, amounting to $30,000. The court noted that people “ * * * use the word * accident ’ to describe the event, no matter how many persons or things are involved ” (225 F. 2d, p. 691) and held that there was but one accident. Moreover, they considered the fact that premiums are based upon the risk insured and the potential amounts of liability covered, and decided that: “ Such a system of computing rates is simply incompatible with the idea of virtually limitless liability depending solely upon the number of claimants.” (225 F. 2d, p. 692.) There are other cases where the courts have selected a similar path such as, for example, to hold a hotel fire which destroyed the property of many guests as one event, and thus one accident under the policy. (See Denham v. La Salle-Madison Hotel Co., 168 F. 2d 576 [C. C. A. 7th, 1948].) Or, with the same reasoning but the converse result, the highest court of Tennessee has ruled, in what we consider the case most similar to the instant case, that, where the insured had excavated its two adjoining buildings in order to combine them into one, with the result that they collapsed bringing down their adjoining neighbor on the Bast, and, where the adjoining building of their neighbor on the West likewise crumbled two days later, the two collapses were separate accidents within the meaning of the limitation clause of the policy (Kuhn’s of Brownsville v. Bituminous Cas. Co., 197 Tenn. 60 [1954]). This approach of determining simply whether there was one unfortunate event or occurrence seems to us to be the most practical of the three methods of construction which have been advanced because it corresponds most with what the average person anticipates when he buys insurance and reads the “ accident” limitation in the policy. In applying this approach to the agreed statement of facts, we need only point out that it is agreed that, during a heavy rainfall, a protecting wall collapsed under the water pressure and destruction poured into a building. Almost an hour later, another wall gave way and water flooded another building. There is no suggestion that the collapse of the first wall caused the failure of the second. As a matter of fact, the water in the basement of 300 Fourth Avenue could not have flowed into 304 Fourth Avenue. If anything, the breach of the first wall should have somewhat relieved the pressure on the second. In addition, the catastrophe was not the rain — -that, in itself, did no harm. It was the breach of the wall letting the rain water in. Furthermore, if the walls were located blocks away from each other on different job sites but subject to the same rainfall, no one could contest that there were two accidents. For these reasons, we conclude that the collapses of separate walls, of separate buildings at separate times, were in fact separate disastrous events and, thus, two different accidents within the meaning of the policy.

We think it worthy of mention that the carrier is not aided by the rationale of those cases which it cites to the effect that, where there is one act of negligence as the proximate continuing cause of all the injuries, there is but one accident. In the instant case, it cannot be said that one would allege but one act of negligence as the proximate cause of the injuries to the two separate properties. Here the proximate cause cannot be said to be the heavy rainfall but separate negligent acts of preparing and constructing separate walls which, for all we know, may have been built at separate times by separate groups of workmen. Again, defeat to the insurer would be manifest under the English theory which counts accidents by counting claimants.

Finally, it should be noted there is no need to pass upon the merits of the plaintiffs’ additional argument that the increased coverage which they have purchased for the liability which they had assumed in their contract with the city precludes any consideration of proximate causation in determining the number of accidents. This is so because we find that there was more than one accident within the purview of the policy, as it stood without that extra clause, and that clause which was bought for a premium could not have decreased the insurer’s responsibility.

The judgment of the Appellate Division should be affirmed, without costs.

Burke, J.

(concurring). I do not agree with the interpretation of the liability policy adopted by the majority. If the policy is construed as insuring only against negligence, I believe that in that aspect there was but one “ accident ”.

I concur for affirmance, however, on the ground that the clause incorporated into the policy by an indorsement which insured plaintiff against the liability which it assumed in its contract with the city obliged the insurer to respond and pay all claims sued on under that contract regardless of the number of “ accidents ”.

The insurance company agreed to hold the contractor harmless under this clause against all damages to person or property irrespective of any negligence on his part. Accordingly, it is immaterial to consider what was the proximate cause of the breaking of the walls which would be relevant only in a suit involving common-law liability.

The two collapses of the two separate walls flowed from the acts of construction engaged in by respondent and were hazards insured against under the contractual liability and property damage indorsement of the policy.

As each collapse was a separate event flowing from the hazard of construction for which the contractor was liable, the insurer’s liability became complete not only upon the happening of an accident” but upon the insured’s incurring liability to the abutting’ owners and tenants upon claims arising out of the construction operation.

The judgment should be affirmed.

Van Voorhis, J.

(dissenting). The question is whether, under the language of an insurance policy, the destruction by water of property in two separate basements due to a single flood in which 3.52 inches of rainfall occurred in two hours constituted separate accidents. This insurance policy covered $50,000 for “ each accident ’ ’ and $100,000 for ‘1 aggregate operations. ’ ’ In my view, this deluge was a single event, like an explosion or fire, and the collapse of these two walls did not constitute separate accidents, within the meaning of the policy, but simply the result of this overwhelming flood. If the two walls had collapsed as the result of one explosion, it was conceded on the argument by counsel for the respondent that it would have been a single event and that the limitation of the $50,000 coverage would have applied. It is not disputed that the power of the water was too great to be withstood, like the air pressures engendered by an explosion. The choice is between our rule and the English rule, which provides that there is a separate event wherever loss is sustained by more than one person (South Staffordshire Tramways Co. v. Sickness & Acc. Assur. Assn., [1891] 1 Q. B. 402). If the judgment appealed from is correct, there will always be more than one event wherever the person or property of more than one is affected. Something analogous to the collapse of these two walls can always be found, and would necessarily occur wherever damage is effected to more than one person. The very infliction of damage in several instances involves multiple events on this theory. There is no essential distinction between the decision by the Appellate Division and the English rule. The judgment appealed from should, in my view, be reversed.

Judges Desmond, Dye, Fuld and Froessel concur with Chief Judge Conway ; Judge Burke concurs for affirmance in a separate opinion; Judge Van Voorhis dissents in an opinion.

Judgment affirmed.


source: Caselaw Access Project

author: Dye, J.

license: Public Domain

text:
    Eugene F. Dunn et al., Respondents, v. City of New York et al., Appellants.
    Argued October 6, 1959;
    decided December 30, 1959.

      Charles H. Tenney, Corporation Counsel (Beatrice Shainswit and Seymour B. Quel of counsel), for appellants.
    Plaintiffs have properly been required to make up the deficit in their own contributions to their own Pension Fund. (Birnbaum v. New York State Teachers Retirement System, 5 N Y 2d 1; Hoar v. City of Yonkers, 295 N. Y. 274; Gorman v. City of New York, 280 App. Div. 39, 304 N. Y. 865, 345 U. S. 962; People ex rel. Devery v. Coler, 173 N. Y. 103; Matter of Chiurazzo v. Valentine, 181 Misc. 830; Matter of Carroll v. Grumet, 281 App. Div. 35, 305 N. Y. 692; Mulligan v. City of New York, 194 Misc. 579, 275 App. Div. 795, 300 N. Y. 541.)

      Vincent L. Rosato and John G. Esposito for respondents.
    I. The rate of contribution to be charged to plaintiff shall be the rate fixed by the actuary at the time plaintiff became a member of the Pension Fund. (Birnbaum v. New York State Teachers Retirement System, 5 N Y 2d 1; Matter of Carroll v. Grumet, 281 App. Div. 35; Hoar v. City of Yonkers, 295 N. Y. 274; Gorman v. City of New York, 280 App. Div. 39, 304 N. Y. 865, 345 U. S. 962; People ex rel. Devery v. Coler, 173 N. Y. 103; Matter of Chiurazzo v. Valentine, 181 Misc. 830.) II. The sole obligation of the members of New York Fire Department Pension Fund (art. l-B) to the said fund is the contribution of a proportion of the compensation they actually received. (Mulligan v. City of New York, 194 Misc. 579, 275 App. Div. 795, 300 N. Y. 541; Matter of Graef v. Department of Health of City of N. Y., 131 Misc. 258.) III. Plaintiff was not a member of the New York Fire Department Pension Fund (art. 1-B) during the period of his probation and, therefore, is not liable for contributions to the Pension Fund for such period. (Phalen v. United States Trust Co., 186 N. Y. 178.)
   Dye, J.

This is an action for a judgment declaring a directive of the New York City Fire Department relating to Pension Fund contributions to be null and void as to these plaintiffs.

The challenged directive, which took the form of a letter addressed to plaintiff Dunn and others similarly situated, advised them that they were indebted to the Pension Fund account for contribution ‘ ‘ for .your period of retroactive military service during World War II ”, which assessment was to be paid on or before June 30, 1957, either in a lump sum single payment or in 24 equal payments and that failure to pay as directed would ‘ result in the deduction of your military service time from your Fire Department record and service.”

The directive also stated that it was issued for the following reason: You are obligated to pay this sum because either (1) retroactive seniority credited to your record has changed your age on entry to the Department and consequently your rate of contribution to the Fund and, because this retroactive seniority has changed the rate of salary on which the new rate of contribution is to be applied or (2) you earned more in the military service than you would have earned in the Fire Department. ’ ’

The essential facts are not in dispute and may be briefly stated:

Dunn passed a Fire Department examination before December, 1941, and thereupon his name appeared on the list of eligibles ” awaiting appointment. In January, 1942 he entered military service and on September 16, 1942 an eligible lower on the list than Dunn was appointed. Dunn returned to civilian life in April, 1946 and, pursuant to what is subdivision 7 of section 243 of the Military Law, he was given a preference in appointment, with the result that on July 1, 1946 he began his assignment as a probationary fireman. At the time, that special priority consideration was the only “ veteran’s preference ” Dunn enjoyed with respect to Fire Department employment.

After the usual six-month period of probation, Dunn was privileged to join the Pension Fund as it then existed. That pension plan was, as it still is, basically different from the New York City and the New York State Employees’ Retirement Systems (both of which provide for retirement benefits to accrue upon reaching a fixed age) in that length of service was the determinative factor. Under the Firemen’s Pension Fund system, a member could retire on a lifetime annuity after 20 years of service. The contribution rates of the various members were actuarially computed on the basis of their respective retirement ages, in order to maintain the stability of the reserves. Thus Dunn’s contribution rate was figured on the basis of his life expectancy measured from 1966. A feature of the pension plan which is typical of government retirement systems was that the city paid a percentage of each fireman’s contribution, then fixed at 55%.

At this point it should be noted that certain benefits were accorded to those veterans who had actually served as Fire Department employees prior to the outbreak of World War II. They were given the election of remaining in the retirement system by keeping up their contributions in the customary percentage. And they were also entitled to receive salaries which would include longevity increments accrued during the war (Dunn et al. were not so entitled; see Mulligan v. City of New York, 300 N. Y. 541 [1949]).

The solution of the within controversy turns on the interpretation of the 1947 amendments to section 2431 of the Military Law, which authorized a credit to individual members of the pension system for the years of duty in the military service, the effect being to accelerate the date of retirement by a corresponding period.

Insofar as pertinent, the Military Law of 1947 provides that Dunn, as well as others so situated, would be deemed to have been appointed when his name came up originally, viz., September 16, 1942, “ and shall be entitled to the same benefits in respect to his membership in any system as he would have had if he had been present and continuously engaged in the performance of the duties * * * (4) * * * 0f the position to which he is deemed to have been appointed on the date specified therein, and as if he had actually been appointed and had entered upon the performance of the duties of such position upon such date.” Another change was that for the war years the city was to pay 100% of the contributions required of members of the system.

With the enactment of that legislation, Dunn became eligible for retirement in 1962, approximately four years in advance of the time he would have been eligible without such military credit. This statutory windfall carried with it a serious financial responsibility, namely, maintenance of the retirement fund reserves on an actuarially sound basis with the concomitant problem of who was to pay the deficiency. The Legislature, however, did not expressly indicate the manner or the means by which the fund was to be restored to an actuarially sound basis. The plaintiff Dunn and those he represents have no quarrel with the actuarial necessity for such additional contributions, owing to the crediting of military service, but assert — and so far successfully — that the needed contributions covering the postwar period should be made in whole by the city and not in part by the individual fireman member. The city says that, if the member is entitled to accelerated retirement benefits based on the period of his military service, such member should not complain when required to pay the necessary actuarial cost thereof; in other words, that pension benefits, depending as they do on actuarial computations, should be apportioned between the city and the individual fireman member on the basis of 55% and 45% respectively. In calculating the actuarial deficiency, the city took the date that resulted from the military credit, that is, September 16,1942, as the date of Dunn’s appointment, and it treated others on a like basis. This was theoretical in that Dunn was at that time actually in military service, but for purposes of retirement and pension he was deemed to have been appointed. It thus calculated the amount of his contribution based on his initial salary, to which were added the increments he would have been entitled to for the period of the military credit, so as to make a salary figure equivalent to what he would have received had he actually been in city service at and during the time in question. When the rate formula was applied to this theoretical salary base, a rate was arrived at sufficient to satisfy actuarial requirements permitting retirement on the accelerated date. The computation took time to do. The task was completed in 1950. However, the amount of the deficiency was not figured until 1956 when it was found that Dunn owed $373.32 which — when taken with the others — aggregates $310,000, while the total cost to the city is estimated at $1,218,000. A letter of notification was mailed to each of the firemen involved, directing payment of the calculated deficiency within 24 months. In accordance with the Military Law as amended in 1947, the city paid 100% of the needed contribution for the period of the military credit and apportioned the additional cost for the postwar period. The result was that the actuaries charged Dunn with the deficiencies arising out of the application of the new rate (9.57% as compared with the old rate of 9.31%) to the fictional salary arrived at by including the three annual increments. As noted earlier, Dunn began his employment in July, 1946 at the initial salary, and it was not until 1949 that he actually received the salary based on all the increments. From 1950 on, Dunn paid the new rate into the retirement system. So, the only period involved here is that from 1946 to 1949.

Dunn claims that the change of rate constitutes a violation of • section 7 of article V of the Constitution of the State of New York, which provides that membership in any pension or retirement system of the State or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired. He claims further that his sole obligation to the Pension Fund was to contribute a proportion of only that compensation actually received.

The validity of these claims naturally depends on what the Legislature intended when it enacted the 1947 legislation. It seems reasonable to suppose that the Legislature envisioned no greater benefit than that expressed, viz., an acceleration of the member’s retirement date to the extent of the time he spent in military service. In so doing, the Legislature must be deemed to have had in mind the actuarial consequences and, in particular, the fundamental necessity of maintaining a sound reserve which is an incident to all retirement systems. To be certain that the member would not be financially disadvantaged by the legislative largess, it was also provided that the city should pay 100% of the contribution needed for the period of the war credit and that thereafter the city and the member should resume their initial relation to the fund, that is, that the city should pay 55% and the member 45% of the required annual contribution. To attribute any other intention to the Legislature is to say that it intended to discriminate against those who were members of the system prior to the war and who, by force of circumstances, never qualified for a military service credit under the 1947 enactment. It must be assumed that the Legislature was aware of its duty to treat everyone in the same category alike. In carrying out this obvious legislative intent, the city was under a necessity of implementing it by a recalculation of the rate necessary to maintain an actuarially sound reserve and, to do so, it apportioned the additional cost between the member and itself.

So construed, the statute would not conflict with the Constitution. There is no impairment of contract, but rather a conditioned grant, quite different from the situation in Birnbaum v. New York State Teachers Retirement System (5 N Y 2d 1 [1958]), in which the system attempted to apply a revised mortality rate to existing members.

Dunn also contends, by way of enlargement on the fictional character of the actuaries’ recomputation, that he should be exempt from any contributions for the probationary period (July 1, 1946 through January 1, 1947). The new rate has been applied to the period for the simple reason that such period is necessarily included because the credit for military service was made effective as of September 16, 1942. A recognition of the need for adopting some mathematical method for computing the correct rate-of-contribution figures is the sanction for all the small inconsistencies which ensue from the workings of that method. What is important is that the end product conforms with realities and obvious legislative intent.

Notwithstanding the circumstance that membership in the system is in the nature of a contract, the benefit of which shall not be diminished or impaired ” (N. Y. Const., art. V, § 7), such membership does not operate to give Dunn a vested interest in the maintenance of a rate based on factors not considered in light of the subsequently conferred benefit. When the Legislature gave members a credit for their military service and thereby accelerated the retirement date, it gave a benefit which was necessarily conditioned on a revision of the obligations and responsibilities of the respective parties.

The judgment of the Appellate Division should be reversed, with costs in all courts, and the matter remitted to Special Term for the entry of a declaratory judgment in favor of the defendants.

Chief Judge Conway and Judges Desmond, Fuld, Froessel, Van Voorhis and Burke concur.

Judgment of Appellate Division reversed, with costs in all courts, and matter remitted to Special Term for further proceedings in accordance with the opinion herein.

      . (Subd. 7-b, as amd. by L. 1947, eh. 471, eff. March 27, 1947 and subd. 20, par. B, added by L. 1947, ch. 793, eff. April 11, 1947.)

      . Subdivision 20 went on to provide: “E. Upon the death or retirement of a New York City member, but not otherwise, the city of New York shall pay into the appropriate fund of the system in which such member held membership at the time of his death or retirement, the amount of all contributions which such member would have been required to make if, during the period of his military duty, he had been present and had continuously performed the duties of the position or positions with respect to which his rights and benefits during the corresponding period or portion thereof are determined ° • *. Each such member shall be credited with such contributions paid in his behalf by such city * * * for all pension or retirement purposes”.


author: Fuld, J.

text:
    Frederick A. Nicholson et al., Appellants, v. 300 Broadway Realty Corporation, Respondent.
    Argued October 23, 1959;
    decided December 30, 1959.

      John R. Davison for appellants.
    I. The Appellate Division erred as a matter of law in determining that the consideration for the covenant to furnish heat was inadequate. II. This is an action to force defendant to do what it agreed to do and for damages for its not having done so and, on the face of the complaint, plaintiffs are entitled to such relief. III. The agreement to supply heat was binding on defendant as an equitable obligation even though it may not have been a covenant running with the land. (Hodge v. Sloan, 107 N. Y. 244; Lewis v. Gollner, 129 N. Y. 227; Zemel v. 1616 Corp., 277 App. Div. 1098; Atlas Land Corp. v. Ettinger, 283 App. Div. 379.) IV. The agreement to supply heat was binding on defendant as a covenant running with the land. (Kidder v. Port Henry Iron Ore Co., 201 N. Y. 445; Neponsit Property Owners’ Assn. v. Emigrant Ind. Sav. Bank, 278 N. Y. 248.)

      Arthur J. Harvey for respondent.
    I. The contract of October 7, 1929 does not set np a covenant which runs with the land. (Miller v. Clary, 210 N. Y. 127; Atlas Land Corp. v. Ettinger, 283 App. Div. 379; Zemel v. 1616 Corp., 277 App. Div. 1098; Guaranty Trust Co. of N. Y. v. New York & Queens County Ry. Co., 253 N. Y. 190; Neponsit Property Owners’ Assn. v. Emigrant Ind. Sav. Bank, 278 N. Y. 248; Mygatt v. Coe, 147 N. Y. 456; Hodge v. Sloan, 107 N. Y. 244; Lewis v. Gollner, 129 N. Y. 227.) II. The agreement between the Embossing Company and Aaron Nicholson, if considered as a simple contract, does not affect or bind '300 Broadway Realty Corporation. III. The conveyance made to Betty Thompson vested title in her. (Hegstad v. Wysiecki, 178 App. Div. 733; Marrin v. Monroe, 222 App. Div. 251, 251 N. Y. 530.) IV. The subject of this action has become academic and, therefore, is not properly before the court. (Delavan v. New York, N. H. & H. R. R. Co., 216 N. Y. 359; Beck v. Fybern Holding Corp., 238 App. Div. 25.)
   Fuld, J.

On this appeal, here by our permission, the plaintiffs seek a reversal of an order dismissing their complaint. The action was brought for specific performance of an agreement, made some 30 years ago by The Embossing Company, the defendant’s predecessor in title, to furnish heat to the building on the land belonging to the plaintiffs, and for damages resulting from the defendant’s failure to perform that agreement. The plaintiffs recently sold their property to the defendant and, while this renders impossible a decree of specific performance, it does not render the appeal moot or academic, since there still remains the possibility of damages stemming from breach of the agreement.

The facts to be gleaned from the complaint, which, of course, we read in a light most favorable to the plaintiffs, date from 1929. In that year, The Embossing Company, desiring to build a switch branch track from its factory, located on Church Street in Albany, to the main track of the railroad owned and operated by the Delaware & Hudson Company,- applied to that company and to the City of Albany for permission to do so. To accomplish this, it was also necessary for Embossing to obtain the consent of Aaron Nicholson who owned the adjoining premises. As a condition to giving his consent, Nicholson insisted upon a contract whereby Embossing agreed “ to furnish steam heat ” to the building on his property and ‘ ‘ to furnish and maintain all necessary steam pipes and return pipes for that purpose ” and, in consideration, Nicholson agreed to pay $50 a year. The agreement, dated October 7, 1929, expressly provided that it ‘ ‘ applies to and is binding upon the heirs, executors, administrators and assignees of the parties ”. Embossing’s application was granted and the branch track was constructed. In fulfillment of its covenant, Embossing set up the necessary steam pipes and return pipes, undertook to furnish steam heat to the adjoining building and for some 27 years, from 1929 until 1956, continued to carry out its agreement and to furnish heat to the plaintiffs’ premises in return for the stipulated fee of $50.

The defendant purchased Embossing’s property in 1956, and it was this sale which precipitated the present lawsuit.

More particularly, and we continue to cull from the complaint, in March of 1956, Embossing entered into a contract with one Jack Spitzer to sell the property to him. In making this contract, Spitzer “intended that title to said premises would be conveyed to the defendant, 300 Broadway Realty Corporation, and was acting for and on behalf of [said] defendant * ° *, then or about to be organized and incorporated by the said Spitzer ”. And Spitzer, on behalf of himself and his assignees, “ agreed upon the conveyance of said premises * * * to perform ” Embossing’s obligation under the 1929 agreement. Then, on April 25, 1956, Spitzer, still ‘ ‘ acting for and on behalf of the defendant ”, assigned the contract to Betty Thompson who was also “ acting solely as the [defendant’s] agent * * * and on its behalf ” and, on the same day, Embossing, at Spitzer’s request, executed a deed of the property to her. This deed, signed and acknowledged by Thompson as grantee, recited that the premises “ are conveyed subject to the terms of [Embossing’s 1929] agreement * * # pertaining to the heating ” of the premises and that the grantee, by her execution of the instrument, “agrees to perform ” those terms. And, more or less contemporaneously, Thompson executed another deed, conveying the premises to the defendant, but this one made no reference to the 1929 agreement.

The complaint goes on to charge that tlie defendant, haying ‘ ‘ actual, as well as constructive, notice and knowledge ’ ’ of the 1929 agreement, adopted the procedure outlined solely ‘‘ for the purposes of attempting to avoid performance of the obligation of supplying steam heat ’ \ And, finally, after characterizing the obligation as “ a covenant running with the land ’ ’, the complaint recites that the plaintiffs made demands upon the defendant to furnish the heat, that the latter refused to do so and that the plaintiffs were damaged thereby.

As noted above, the complaint was dismissed on the ground that it fails to state a cause of action. Reasoning that a covenant to furnish heat, being affirmative in nature, is not one which may run with the land, the courts below concluded that Embossing’s obligation was not enforcible against the defendant as a subsequent grantee, and that frames one of the questions for decision: does the affirmative character of the covenant exclude it from the classification of covenants which “touch” or “ concern ” the land!

It has long been the rule in this State, and it finds expression in the leading case of Miller v. Clary (210 N. Y. 127), that “ a covenant to do an affirmative act, as distinguished from [one] merely negative in effect, does not run with the land so as to charge the burden of performance on a subsequent grantee.” (Guaranty Trust Co. of New York v. New York & Queens County Ry. Co., 253 N. Y. 190, 204; see Booth v. Knipe, 225 N. Y. 390, 395; Morehouse v. Woodruff, 218 N. Y. 494, 501.) In this, New York has followed the English view, not adopted elsewhere in this country, which undoubtedly owes its development to a desire to prevent burdensome incumbrances upon title. However, before our decision in the Miller case (210 N. Y. 127, supra), as well as thereafter, we recognized a number of exceptions to the rule. In addition, some 20 years ago, in Neponsit Prop erty Owners’ Assn. v. Emigrant Ind. Sav. Bank (278 N. Y. 248), this court, in treating an affirmative covenant to pay a sum of money each year to maintain and improve a residential area as one which touched and concerned the land, indicated a strong disposition to look to “ substance ” rather than “ technical form ” and adopt a more realistic and pragmatic approach to the problem. (See, also, 165 Broadway Bldg. v. City Investing Co., 120 F. 2d 813, cert, denied 314 TJ. S. 682; 5 Powell, Real Property [1956], p. 184; Clark, Beal Covenants [2d ed., 1947], p. 133.) ¡Recognizing that it might be ‘ ‘ inexpedient and perhaps impossible to formulate a rigid test or definition ” to cover all cases, the court declared that a covenant should be held to touch or concern the land, to run with the land, if it affects “ the legal relations — the advantages and the burdens — of the parties to the covenant, as owners of particular parcels of land and not merely as members of the community in general, such as taxpayers or owners of other land ”. This “ method of approach,” added the court, ‘ ‘ has the merit of realism. The test is based on the effect of the covenant rather than on technical distinctions. Does the covenant impose, on the one hand, a burden upon an interest in land, which on the other hand increases the value of a different interest in the same or related land? ” (278 N. Y., at pp. 257-258.) And, significantly, the court continued, “unless we exalt technical form over substance, the distinction between covenants which run with land and covenants which are personal, must depend upon the effect of the covenant on the legal rights which otherwise would flow from ownership of land and which are connected with the land. The problem then is: Does the covenant in purpose and effect substantially alter these rights? ” (p. 258).

Having in mind the question now presented for decision, the law may be briefly summarized. The burden of affirmative covenants may be enforced against subsequent holders of the originally burdened land whenever it appears that (1) the original covenantor and covenantee intended such a result; (2) there has been a continuous succession of conveyances between the original covenantor and the party now sought to be burdened; and (3) the covenant touches or concerns the land to a substantial degree. In the case before us, it is clear that all three of these essentials are present; indeed, it is only with the third that we need concern ourselves.

If, as our decision in Neponsit makes clear, the test as to whether a covenant touches or concerns the land is “ based upon substance rather than upon form ”, on “ the [covenant’s] effect # * * rather than on technical distinctions ” (278 N. Y., at p. 258), it would seem that the covenant here under consideration does touch and concern the land of the defendant. As is evident, it affected the legal relations of the parties to the covenant as owners of particular parcels of land. More particularly, the covenant gave to the covenantee Nicholson a right, not possessed by other landowners, of having heat supplied to his building, as long as it stood, and it imposed upon the covenantor Embossing, so long as the heat-producing facilities remained on its land, the burden, not cast upon other landowners, of furnishing heat to premises adjoining its own. The fear expressed that the covenant imposes an undue restriction on alienation or an onerous burden in perpetuity is dispelled by the fact that by its terms it may run with the land only as long as both buildings are standing and in use.

The complaint before us may thus be sustained upon the theory that Embossing’s covenant runs with the land and is, therefore, enforcible against the defendant as a subsequent grantee. However, the complaint may also be upheld upon the simpler and equally compelling ground that it spells out a cause of action for breach of contract. Accordingly, we briefly recapitulate its allegations insofar as they reflect such cause of action. By the 1929 agreement, Embossing promised to furnish steam heat, as specified, so long as the promisee should continue to make payments of $50 a year. Under the ‘ ‘ heirs and assigns ’ ’ clause of that agreement, the plaintiffs are the successors in right of the original promisee, Aaron Nicholson, and entitled to enforce their rights under the agreement not only against Embossing, but also against any other party who expressly assumed Embossing’s contract duty to the plaintiffs. What, then, is the legal effect of the purchase transaction which resulted in the April 25, 1956 conveyances by Embossing to Thompson and by Thompson to the defendant?

If the defendant had merely taken conveyance of the property, without expressly assuming performance of the contract duty owed by Embossing to the plaintiffs under the 1929 contract, the plaintiffs would have had no contractual claim against the defendant. (See, e.g., Langel v. Betz, 250 N. Y. 159, 164; Sillman v. Twentieth Century-Fox Film Corf., 3 N Y 2d 395, 402.) But the complaint here alleges that the defendant, initially through its agent Spitzer and then through its agent Thompson, expressly assumed the performance of Embossing’s contract duty to furnish steam heat to the plaintiffs ’ building.

Although Embossing could not relieve itself of its obligation on the covenant in the absence of a complete novation, ’it may be inferred from the complaint that Embossing would not have sold its property on the terms fixed had it not been assured that the grantee, the real grantee, of its property would assume its obligation to furnish heat. The complaint alleges that the conveyance procedure employed by the defendant was designed solely to enable it ££ to avoid performance of [its] obligation ”. If such was the defendant’s purpose, it must be condemned; to approve what was here attempted would be to sanction an evasion which offends against concepts of fair dealing and falls far below permissible standards of business morality. Be this as it may, though, any purpose or intent that the defendant may have had to avoid performance of the obligation will bo wholly ineffectual if the plaintiffs are able to prove their allegations of agency and express assumption of duty.

Accepting, as on this appeal we must, the truth of the allegations that the express provisions of assumption were actually made by Spitzer and Thompson, as agents, £ ‘ acting for and on behalf of the defendant ’ ’, there can be no doubt that the plaintiffs have a direct right of action against the latter to enforce the contract duty explicitly assumed by it through agents. The assumption agreement between Embossing and the defendant is supported by manifest consideration and constitutes a creditor beneficiary contract in which Embossing is promisee, the defendant is promisor and the plaintiffs are third-party beneficiaries. (See, e.g., Lawrence v. Fox, 20 N. Y. 268; Restatement, Contracts, §§ 133, 136.)

On the trial of the action for damages, it may well be that the plaintiffs will not be able to prove, as they must to sustain their claim as to the breach of contract cause of action, that Spitzer and Thompson, or either of them, acted as agents for the defendant in assuming the duty of performing Embossing’s contractual obligation to furnish the heat. It may also be, in view of their own subsequent sale of the premises to the defendant, that the plaintiffs will not be able to establish that they suffered any damages. However, whatever the facts may prove to be, the complaint on its face states a valid cause of action in contract, entitling the plaintiffs to their day in court.

The judgment of the Appellate Division should be reversed, with costs in all courts, and the motion to dismiss the complaint denied, . The motion to dismiss the appeal should also be denied.

Chief Judge Conway and Judges Desmond, Froessel and Burke concur with Judge Fuld; Judge Van Voorhis concurs in the following memorandum in which Judge Dye concurs: In Guaranty Trust Co. v. New York & Queens County Ry. Co. (253 N. Y. 190, 204), it was said in the opinion by Cardozo, Ch. J.: “ Subject to a few exceptions not important at this time, ’there is now in this State a settled rule of law that a covenant to do an affirmative act, as distinguished from a covenant merely negative in effect, does not run with the land so as to charge the burden of performance on a subsequent grantee ”. In Neponsit Property Owners’ Assn. v. Emigrant Ind. Sav. Bank (278 N. Y. 248, 256), this statement was quoted in the opinion by Judge Lehman, coupled with the statement in relation thereto: “ We have not abandoned the historic distinction drawn by the English courts.” Insofar as the instant case deals with this question, I concur in holding that this covenant to supply heat runs with the land for so long as both buildings remain standing and in use. In thus voting, however, I do so on the assumption that the rule above stated is not being overruled but remains in force subject to this and a few other exceptions.

Judgment reversed, with costs in all courts, and case remitted to Special Term for further proceedings in accordance with the opinion herein. Motion to dismiss appeal denied.

      . The plaintiffs succeeded to the ownership of Aaron Nicholson’s property in 1931.

      . We note several of these exceptions: covenants to build fences along boundary lines (Moxley v. New Jersey & N. Y. R. R. Co., 143 N. Y. 649; Dey V. Prentice, 90 Hun 27), to maintain party walls (Mott v. Oppenheimer, 135 N. Y. 312), to provide railway crossings (Post v. West Shore R. R. Co., 123 N. Y. 580; Day v. New York Cent. R. R. Co., 31 Barb. 548), to maintain and repair buildings and dams (Nye v. Hoyle, 120 N. Y. 195; Denman v. Prince, 40 Barb. 213), to repair canal wall (Morehouse v. Woodruff, 218 N. Y. 494, supra), to repair and maintain right of way and sewers laid therein (Greenfarb v. R. S. K. Realty Corp., 256 N. Y. 130) and to pay for damages caused by sparks and cinders falling on ice of lake (Morgan Lake Co. v. New York, N. H. & H. R. R. Co., 262 N. Y. 234).


author: Froessel, J. Desmond, J.

text:
    In the Matter of Realty Agency, Inc., Appellant, against Robert C. Weaver, as State Rent Administrator, Respondent, and Tenants of Premises 419 East 57th Street, New York, N. Y., Intervenors-Respondents.
    Argued October 14, 1959;
    decided December 30, 1959.

      Robert S. Fougner for appellant.
    I. The determination below should be reversed because the statute does not permit avoidance of the sale price mandate through the adoption of a special circumstance category as an irrebuttable presumption resulting solely from an inference which precludes further inquiry. (Matter of Abrams v. McGoldrich, 282 App. Div. 192; Matter of Barry v. O’Connell, 303 N. Y. 46; Matter of Wile v. McGoldrich, 284 App. Div. 388; Matter of Mara v. McGoldrich, 307 N. Y. 856; Matter of Kaufmann v. Abrams, 286 App. Div. 998, 309 N. Y. 1034; Matter of Wile v. McGoldrich, 286 App. Div. 826, 309 N. Y. 1033; Matter of 340 E. 57 St. Corp. v. Weaver, 2 N Y 2d 799; Matter of Florell Equities v. Weaver, 2 N Y 2d 982; Matter of Bajart Management v. Weaver, 8 A D 2d 56; Matter of Management Holding Corp. v. Weaver, 10 Misc 2d 1000.) II. The determination below should be reversed because on this record the sale price constitutes a better reflection of value.

      Jacob B. Ward and Harold Zucker for respondent.
    The commission was neither arbitrary nor capricious in rnling that a sale, wherein the buyer has returned to it 35% of seller’s net profit on the very price buyer pays, did not constitute a bona fide, arm’s length, normally circumstanced sale, as required by the rent act and regulations. (Matter of Kaufmann v. Abrams, 286 App. Div. 998, 309 N. Y. 1034; Matter of Wile v. McGoldrick, 284 App. Div. 388; Matter of Palmer Realty Co. v. Weaver, 5 A D 2d 984; Matter of Nelson Properties v. Abrams, 3 A D 2d 903; Matter of Blackport Estates v. McGoldrick, 280 App. Div. 329.)

      Irving Perl for intervenors-respondents.
    I. The policy as defined by the Legislature of the State of New York demands that the decision reached by the lower courts herein be upheld. II. The only question which is before the court is: Was the State Bent Administrator acting in an arbitrary or capricious manner, or is there a sufficient record to justify his decision herein? (Matter of Humphrey v. State Ins. Fund, 298 N. Y. 327.) III. The commission is bound by the standards of value as set forth by the Legislature. (Matter of Kaufmann v. Abrams, 286 App. Div. 998, 309 N. Y. 1034; Matter of Nelson Properties v. Abrams, 3 A D 2d 903.) IV. The Administrator’s decision in the matter herein must be upheld, as he did not act arbitrarily or capriciously, but based his findings on ample facts as set forth in the record herein.
   Froessel, J.

The issue presented on this appeal is whether the State Bent Administrator properly rejected sales price as a valuation base in a rent adjustment proceeding instituted by petitioner, as authorized by section 4 (subd. 4, par. [a]) of the State Besidential Bent Law (L. 1946, ch. 274, as amd. by L. 1957, ch. 755).

The discretionary power heretofore accorded the Bent Administrator to reject or accept a bona fide sales price as a valuation base in rent adjustment proceedings is now restricted by statute. The pre-1957 subdivision 4 (par. [a], cl. [1]) of section 4 of the Bent Control Law established assessed valuation as the primary valuation base (see § 4, subd. 4, par. [a], cl. [1], as amd. by L. 1955, ch. 685). However, the Administrator was permitted to (“may”) determine that the valuation of the property was other than the assessed valuation or equalized valuation in three prescribed situations — one of them being where a “ bona fide sale of the property ” had taken place (Ibid., see Matter of Abrams v. McGoldrick, 282 App. Div. 192; Matter of 340 E. 57th St. Corp. v. Weaver, 3 Misc 2d 356, 359 [collecting cases], affd. 2 A D 2d 678, affd. 2 N Y 2d 799).

Subdivision 4 (par. [a], cl. [1]) in its present form expressly mandates the use of sale price if the sale took place after March 15,1953, as opposed to assessed valuation, for, as the Legislative Commission pointed out, bona fide sales prices are “ a more accurate reflection of value in fair return applications ” (N. Y. Legis. Annual, 1957, p. 264; Matter of Ackerman v. Weaver, 6 N Y 2d 283, 287). As a consequence, the Administrator may no longer freely utilize one or the other at his discretion, but must use the price of a recent sale, when available, unless specifically excepted by the statute. These exceptions are set forth in the statute by way of four qualifications which preclude the use of sales price. The sale must be bona fide as a result of an arm’s length transaction; on normal financing terms; at a readily ascertainable price and unaffected by special circumstances.

In the instant case, the Bent Administrator concluded that the 1957 sale of the subject property to petitioner’s principal, Edgerly Realty Corporation, failed to meet two of the statutory qualifications: it was “not an arm’s length transaction and [was] affected by special circumstances ”. The sole basis for that conclusion, as the Administrator’s published opinion indicates, was the fact that Messrs. Scheuer and Hurd, the stockholders of Edgerly, had a 35% interest in the operating profits and sales proceeds of the subject property.

Petitioner explained this 35% interest as follows: In 1936 the subject property was owned by Sutton Place Apartments, Inc., which had floated first mortgage bonds secured by the property. J. Scheuer & Company held $156,000 in face amount of these bonds and sold them in February, 1936 to Welz & Zerweck, Inc., — the corporation which sold the instant property to Edgerly. The bonds were sold for $80,019.60, and on condition that “ upon the sale, exchange or other final disposition of said bonds [J. Scheuer & Co. shall] receive 35% of the net realized profit ”. Welz & Zerweck subsequently acquired control of the property, and at the closing of its sale to Edgerly satisfied its obligation under the mortgage-bond sale contract by paying said 35% to Scheuer and Hurd, who apparently succeeded to J. Scheuer & Company’s interest. The purchase price paid by Edgerly for the property was $1,151,920. At the closing, Scheuer and Hurd received from Welz & Zerweck $319,634.34 “ as the share of profits on the sale of the premises ” and $6,838.10 as the “ share in the profits in the operation of the premises for the year ended December 31, 1956 ”.

In addition to the foregoing explanation of the 35% interest, petitioner proffered evidence which indicated a 6 to 1 sales-price-to-rent ratio for the subject property; that an $815,000 first mortgage was negotiated for the property at about the time of the instant sale — a significant factor since lending institutions are limited in their mortgage loans to two thirds of a property’s value; and that an offer was made by an outside group to purchase the subject property at $1,235,000, slightly more than the purchaser paid here.

On the face of this record, there is no substantial evidence to support the Administrator’s finding that the consummated bargain was other than an arm’s length transaction. The evidence does not disclose that petitioner’s principal and Welz & Zerweck negotiated the transaction other than as adversary parties, each standing upon their respective rights and neither under the other’s control. There is nothing to indicate that the seller sold for less than the fair value of the property or that the buyer paid more. Even as to the profits on the sale, the buyer and seller were adversaries — the one a debtor, the other a creditor.

The same must be said as to the Administrator’s finding of ‘ ‘ special circumstances ’ ’. That term is not defined by statute except as it is illustrated, namely, “ such as a forced sale, exchange of property, package deal, wash sale or sale to cooperative ”. Manifestly, the instant transaction comes within none of these illustrations, nor within the ambit of the term “ special circumstances ”, the scope of which may be measured under the doctrine of ejusdem generis. The illustrations set forth in the statute are of situations "where the price yielded a distorted reflection of value. There is not the slightest evidence of such distortion here. In Matter of Ackerman y. Weaver (supra) we held that the presence of an “ internal arrangement ’ ’ between the lessor and lessee — the existence of a cancelable lease — did not “ specially circumstance ” the sale (6 N Y 2d 287). By the same token, in the instant case, the 1936 agreement between the vendor and the vendee, which was not proven to have affected the sale or the sale price as a reflector of value, does not in and of itself ‘ specially circumstance ’ ’ the sale.

Certain aspects of the instant sale and its prior history, upon which no findings appear in the record, remain unexplained. These matters should have been developed by the Bent Administrator in his “ de novo ” consideration and review. It may well be that, after a hearing and proper inquiry is had with respect to these matters and the landlord’s proffered evidence, the latter’s claims may be successfully challenged. A rejection of sales price may then be proper. On the face of the instant record, however, as we have indicated, the rejection of sales price was arbitrary.

Bespondent Bent Administrator contends, in substance, that the rent adjustment provisions of the statute were designed to obviate involved valuation hearings. It is true that the Legislature may facilitate and expedite rent adjustment proceedings by the standards provided in subdivision 4 (par. [a], cl. [1]), but this does not mean that the Administrator may disregard all relevant and nonrefuted objective criteria, and decline to hold a hearing and make inquiry when warranted by the facts. We do not suggest that the subject property need be appraised in the manner followed in condemnation or tax proceedings. We simply state that, in this case, failure of the Administrator to receive and challenge appellant’s proffered evidence and to make appropriate inquiry as to the instant sale at a hearing before him, leaves his findings unsupported by substantial evidence (State Residential Rent Law, § 8, subd. 1; State Rent and Eviction Regulations, § 98, subds. [2], [6]). To hold otherwise, we would be sanctioning an arbitrary restriction on the use of the Legislature’s mandate of sales price (see Matter of Florell Equities v. Weaver, 2 N Y 2d 982; Matter of 340 E. 57th St. Corp. v. Weaver, 2 N Y 2d 799, supra).

Accordingly, the order should be reversed, without costs, the determination of the State Rent Administrator annulled, and the matter remanded to the Rent Administrator for further proceedings not inconsistent with this opinion.

Desmond, J.

(dissenting). I dissent and vote to affirm. I see no illegality in the Rent Commission’s refusal to use the sale price as a valuation base, nor do I see any necessity for a further hearing. Section 4 (subd. 4, par. [a], cl. [1]) of the State Residential Rent Law requires that in computing a 6% return the valuation used shall be the adjusted assessed valuation unless there has been a bona fide sale “ as the result of a transaction at arms ’ length * * * unaffected by special circumstances”. Thus the use of the sales price is itself an exception to the requirement of the use of the adjusted assessed value and the exception applies only when the sale is an arm’s length transaction unaccompanied by special circumstances. There certainly were special circumstances here. It could not be said either that this was an arm’s length transaction or that it was unaffected by special circumstances. The owners of the purchasing corporation had a 35% interest in the profit on the sale in which they themselves were the purchasers. This was a sufficient basis for holding that this was not the kind of arm’s length market place sale that the Legislature had in mind. The commission was, therefore, justified in refusing to use the sale price as a base.

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

Order reversed, etc.

      . The relevant portion of the Rent Law reads: “Provision shall be made pursuant to regulations prescribed by the commission, for individual adjustment of maximum rents where (1) the rental income from a property yields a net annual return of less than six per centum of the valuation of the property. Such valuation shall be the current assessed valuation * 9 * properly adjusted * * 9 except where there has been a bona fide sale of the property within the period between March fifteenth, nineteen hundred fifty-three, and the time of filing of the application, as the result of a transaction at arms’ length, on normal financing terms at a readily ascertainable price and unaffected by special circumstances such as a forced sale, exchange of property, package deal, wash sale or sale to cooperative” (§ 4, subd. 4, par. [a]; emphasis supplied). (The State Rent and Eviction Regulations, § 33, subd. 5> so far as pertinent, restate the above-quoted provision of the statute.)

      . The Administrator also found that the instant sale was a “package deal” since an adjoining light protector was sold together with the subject property. This additional ground was abandoned on appeal.

      . This is the allocated purchase price, obtained after deducting the value of the adjoining light protector from the $1,220,000 actually paid.


author: Froessel, J.

text:
    In the Matter of Clifford Forrest et al., Appellants, against William Evershed et al., Constituting the Zoning Board of Appeals of the Town of Irondequoit, Respondents, and John J. O’Connell et al., Intervenors-Respondents.
    Argued October 9, 1959;
    decided December 30, 1959.

      Vito J. Cassan for appellants.
    I. There was no evidence which would warrant the finding that the owners of the property could not obtain a reasonable return if used for a purpose allowed in the zone. (Matter of Otto v. Steinhilber, 282 N. Y. 71; Matter of Graham v. Newton, 7 Misc 2d 34; Matter of Crossroads Recreation v. Broz, 4 N Y 2d 39; Matter of Gerling v. Board of Zoning Appeals, 6 A D 2d 247; Matter of Stillman v. Board of Standards & Appeals, 222 App. Div. 19, 247 N. Y. 599; Matter of 4672 Broadway Corp. v. Board of Standards & Appeals, 225 App. Div. 97, 250 N. Y. 571; Matter of Falvo v. Kerner, 222 App. Div. 289; Matter of Young Women’s Hebrew Assn. v. Board of Standards & Appeals, 266 N. Y. 270, 296 U. S. 537; Matter of Levy v. Board of Standards & Appeals, 267 N. Y. 347; Matter of Tenlan Realty Corp. v. Board of Standards & Appeals, 251 App. Div. 311, 276 N. Y. 594.) II. The situation of the owner of the lots is not unique. (Matter of Otto v. Steinhilber, 282 N. Y. 71; Matter of Hichox v. Griffin, 298 N. Y. 365; Matter of Levy v. Board of Standards & Appeals, 267 N. Y. 347; Matter of Ward v. Murdock, 247 App. Div. 808; Matter of Clark v. Board of Zoning Appeals, 301 N. Y. 86; People ex rel. Fordham Manor Ref. Church v. Walsh, 244 N. Y. 280.) III. The erection of a medical center upon these lots will change the character of the neighborhood. (Matter of Levy v. Board of Standards Appeals, 267 N. Y. 347; Matter of Gilbert v. Stevens, 284 App. Div. 1016; Matter of Bach v. Board of Zoning Appeals, 282 App. Div. 879; Matter of Bobrowski v. Feriola, 2 A D 2d 708.) IY. The board ignored the public welfare and safety in granting this variance. Y. The court below erred in not allowing appellants to give testimony pursuant to the Town Law. (Matter of Caponi v. Walsh, 228 App. Div. 86; People ex rel. St. Albans-Springfield Corp. v. Connell, 257 N. Y. 73; Matter of Joynt v. King, 6 A D 2d 234; Matter of Arcuri v. Macduff, 286 App. Div. 17; Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304; Ellis v. Central Hanover Bank & Trust Co., 198 Misc. 912; Kellogg v. Commodore Hotel, 187 Misc. 319; Savage v. Mathieson Alkali Works, 174 Misc. 1022.)

      Emmett J. Schnepp for respondents.
    I. The variance was granted pursuant to the board’s authority. (Matter of Otto v. Steinhilber, 282 N. Y. 71; Matter of Crossroads Recreation v. Broz, 4 N Y 2d 39; Matter of Gerling v. Board of Zoning Appeals, 6 A D 2d 247; People ex rel. Fordham Manor Ref. Church v. Walsh, 244 N. Y. 280; Matter of Reed v. Board of Standards & Appeals, 255 N. Y. 126.) II. The adjoining brick structure is a nonconforming use. III. The refusal to take proof did not constitute an abuse of discretion. (People ex rel. Hudson-Harlem Val. Tit. & Mtge. Co. v. Walker, 282 N. Y. 400; Matter of Newbrand v. City of Yonkers, 285 N. Y. 164; People ex rel. St. Albams-Springfield Corp. v. Connell, 257 N. Y. 73; Matter of Levy v. Board of Standards Appeals, 267 N. Y. 347.)

      Eugene R. Cusker for intervenors-respondents.
    I. The determination of the Zoning Board was in conformity with the evidence and the law and Special Term properly dismissed the petition. (Matter of Joyce v. Dobson, 255 App. Div. 348; Matter of Falvo v. Kerner, 222 App. Div. 289; Matter of Rubel Corp. v. Murdock, 255 App. Div. 224, 280 N. Y. 839; People ex rel. Fordham Manor Ref. Church v. Walsh, 244 N. Y. 280.) II. The motion for reargument was addressed to the discretion of the court and was properly denied. III. The Zoning Board could reasonably infer from the testimony presented at the hearing that a reasonable return was unobtainable. (Matter

      of Graham v. Newton, 7 Misc 2d 34; People ex rel. Fordham Manor Ref. Church v. Walsh, 244 N. Y. 280.) IV. The Zoning Board reasonably held that the situation of the owners was unique. V. The Zoning Board was amply justified in determining that a medical center would not affect the character of the neighborhood. VI. The record clearly establishes that the Zoning Board carefully considered the public welfare and safety. VII. The court did not err in declining to take testimony. (Van Slyke v. Hyatt, 46 N. Y. 259; People ex rel. Hudson-Harlem Val. Tit. & Mtge. Co. v. Walker, 282 N. Y. 400.)
   Froessel, J.

The Zoning Board of Appeals of the Town of Irondequoit (hereinafter called the Board), by variance of the zoning ordinance, granted John J. O’Connell and Walter J. Bodenhouse, intervenors in this proceeding, permission to erect a two-story medical office building on their vacant property located at the intersection of St. Paul Boulevard and Wicklow Drive in Irondequoit. It appears that the neighborhood, zoned “ E ” Besidential, is exclusively improved with conforming uses, consisting mainly of one-family homes, except for two gasoline stations erected prior to enactment of the zoning ordinance and situated about one mile from the subject property. Immediately adjacent to intervenors’ vacant property on the south is a two and one-half story brick building, formerly a Masonic temple and presently a synagogue — a permissive use under the zoning ordinance.

At the hearing before the Board, intervener O’Connell appeared and asserted in a very brief statement that the ‘ ‘ negligence ” of the town in permitting construction of the building now used as a synagogue had thwarted the development of his property for residential purposes, adding: nobody wants to build a house next to a public building ’ ’. In support of interveüor’s position, a real estate broker contributed his conclusion to the effect that his efforts to sell the property over a period of five years were met by objections to the building next door. There was also submitted a map bearing the signatures of several property owners under a statement that they had no objection to the proposed variance. (One of these signatories later became a petitioner in this proceeding.) This represents the totality of “ evidence ” submitted in support of the application.

Opposing intervenors’ application were about 14 neighboring property owners, all located within 500 feet of the subject premises, and most of whom appeared by counsel. They objected generally to the proposed variance in the interest of preserving the “beautiful” residential character of the neighborhood; because it would “ put a foot in the door ” toward, breaking down the ordinance; in order to preclude traffic hazards and unsafe conditions in consequence; and since property values would probably depreciate. On the question of salability, their counsel expressed the thought that the intervenors “ could [sell] for a fair price ”.

At the conclusion of the hearing a committee of three Board members was appointed to inspect the site and the surrounding neighborhood. Upon reporting to the Board the committee submitted that, “ although this is a very nice neighborhood ”, it “ would be difficult to use ” the subject lots “ for the purpose for which they are presently zoned ”. A resolution was accordingly adopted granting the variance application, and petitioners commenced the instant article 78 proceeding.

Annexed to the petition were a number of affidavits which, among other things, tended to negate intervenors’ contention that they could not profitably dispose of the property. They point out that O’Connell owned the land surrounding the synagogue, known as “ O’Connell’s (amended) Seneca Park Tract ” on a filed map; that the lots in said tract had 1 ‘ protective covenants regulating the design, size, use and set-back”; that each of intervenors ’ two lots is assessed for $700; that the value of each lot is $3,000; that the Babbi of the synagogue offered to purchase these lots for $6,500 for the purpose of building his home thereon, but that O’Connell would sell only on condition that the sale price be $10,000 and that his fellow-intervenor, Bodenhouse, be permitted to build the home; that one of the petitioners sought to purchase these lots to build his own home, but O’Connell indicated he would not sell unless Bodenhouse be allowed to build the home; that recently Bodenhouse told one of the petitioners that if he could not build the medical center he would sell the property to the synagogue for a parking lot; that in addition to the subject lots three homes adjoined the synagogue property; and that the construction of the medical center “would be out of the character, use and design of the predominating neighborhood quality and standards Special Term refused to consider these affidavits, and in thus limiting its scope of review found the variance grant justifiable. The Appellate Division affirmed, with one dissenting vote.

The Legislature has confided in the zoning boards of appeal the discretionary power to “ vary or modify ” the application of zoning restrictions to individual property owners upon a showing of ‘1 practical difficulties or unnecessary hardships ’ ’ (Town Law, § 267, subd. 5; Irondequoit Zoning Ordinance, § 32, subd. b). In pursuance of this policy, this court has defined the essential elements of hardship upon which the grant of a variance must be conditioned (Matter of Otto v. Steinhilber, 282 N. Y. 71, 76).

The Board, in the instant proceeding, “ found ” these elements to be present. The return of the Board includes its resolution which states, among other things, that (1) the subject property could not “ yield a reasonable return if used only for a purpose allowed in an ‘ E ’' District Residential ”; (2) the interveners’ “ plight is due to the unique circumstances relating to its proximity to the said adjoining [synagogue] building * * * and not to the general conditions in the neighborhood ”, and (3) permitting the use authorized by the variance “ would not decrease residential values in the area and such use would not alter the essential character of the locality ”.

These conclusions of the Board, with little more, however, do not justify a modification of the zoning ordinance. Upon review, a variance may not be sustained unless “ the hardship and its occasion [are] exhibited fully and at large” in the return of the proceedings (People ex rel. Fordham Manor Ref. Church v. Walsh, 244 N. Y. 280, 290; see Matter of Crossroads Recreation v. Broz, 4 N Y 2d 39). The return in the instant proceeding is clearly deficient in this regard. It indeed reflects the meagerness of the evidence before the Board. The only evidence in the record which bears on the question of reasonable return ” — the first element of hardship under the Otto case (supra) — was that adduced by intervenor O’Connell and his real estate broker at the hearing before the Board. It was merely asserted that they tried to sell the property which he owned for 40 years but could not. This will not do.

In the first place, it was not shown that any diligent and bona fide effort was made to sell the property. We are left to guess the means, if any, that were employed to effect a sale thereof. Interveners do not tell us whether the property was advertised, and, if so, how; that it was listed with other brokers, or even that a- sign was placed on the property to indicate that it was for sale (contrast Matter of Crone v. Town of Brighton, 19 Misc 2d 1023). Moreover, the terms and conditions upon which the property was offered for sale are not furnished. For all that appears, the price demanded may have been prohibitive and the terms and conditions of sale unreasonable. Interveners have not demonstrated that their efforts to sell were in good faith.

Secondly, the proof on the issue of “reasonable return” is deficient in another vital respect. This court has consistently held that a mere showing of a present loss is not enough. In order to establish a lack of “ reasonable return ”, the applicant must demonstrate that the return from the property would not be reasonable for each and every permitted use under the ordinance (Matter of Young Women’s Hebrew Assn. v. Board of Standards & Appeals, 266 N. Y. 270, 275; Matter of Clark v. Board of Zoning Appeals, 301 N. Y. 86, 90; Matter of Crossroads Recreation v. Broz, supra, p. 45; see, also, Matter of Graham v. Newton, 7 Misc 2d 34, 38). The present loss and any projected losses attributable to an alternative use must be demonstrated by some “ dollars and cents ” proof (see Matter of Crossroads Recreation v. Broz, supra, pp. 44-45). Upon the record in the instant proceeding, the intervenors did not even suggest that they had explored the possibility of utilizing the property for a parking lot, a parish house or residence in connection with the adjoining synagogue, for a professional office as part of a dwelling, for a greenhouse, plant nursery, playground or library —all permissible “E” Residential' uses under the ordinance — or establish that the alternative uses were economically impracticable.

Under the rule in Otto (supra), an owner must also show that his plight is ‘ ‘ due to unique circumstances and not to the general conditions in the neighborhood ” (282 N. Y., p. 76; accord Matter of Hickox v. Griffin, 298 N. Y. 365; Matter of Clark v. Board of Zoning Appeals, supra, p. 91; Matter of Young Women’s Hebrew Assn. v. Board of Standards & Appeals, supra, p. 276; Matter of Levy v. Board of Standards & Appeals, 267 N. Y. 347, 353). Here too there was insufficient evidence to support the Board’s finding in this respect.

It is true that a committee composed of Board members did inspect the subject property and concluded that the conditions which they observed warranted a variance. The only circumstances reported to us, however, indicate that the subject property is located in a “ very nice neighborhood ” and that “ it would be difficult to use [the] lots for the purposes for which they are presently zoned ”. No facts or considerations bearing upon the elements of lack of reasonable return or uniqueness were submitted by the Board other than that appearing in the record of the hearing. The Board may act upon its own knowledge of conditions, but in the return it must disclose those facts upon which a reviewing court can determine that, under the statute, the Board had power to grant a variance (Matter of Levy v. Board of Standards Appeals, supra, p. 351; Matter of Community Synagogue v. Bates, 1 N Y 2d 445, 454). It did not even report on the nature of the properties adjoining the synagogue other than interveners’.

In view of the fact that the evidence before the Board was inadequate to sustain its determination (1) that the subject property could not yield a reasonable return if used only for a purpose allowed in an “ E ” District Residential, and (2) that the intervenors ’ plight is due to the unique circumstances relating to its proximity to the synagogue and not to the general conditions in the neighborhood, we do not deem it necessary to discuss the third prerequisite under the Otto rule, namely, that the use authorized by the variance will not alter the essential character of the locality. This latter ground was strenuously urged by petitioners at the hearing before the Board, based largely on the fact that, except for two gas stations a mile away, the area is highly residential without a single nonconforming use.

Nor need we reach the question as to whether Special Term acted properly when it refused to consider the affidavits which were annexed to the. petition in this proceeding (see Town Law, § 267, subd. 7, pars, [b], [c]; People ex rel. St. Albans-Springfield Corp. v. Connell, 257 N. Y. 73, 80-81) after having observed that these affidavits “ tend to refute owners’ position Upon this record, which consists of nothing but two or three conclusory statements which as a matter of law are insufficient to sustain the Board’s determination in the first instance, we have no alternative but to annul.

Accordingly, the orders of the Appellate Division and Special Term should be reversed, and the determination of the Zoning Board of Appeals annulled, without costs, and without prejudice to the renewal of the application to the Board if the intervenors be so advised.

Chief Judge Conway and Judges Desmond, Dye, Fuld, Van Voorhis and Burke concur.

Orders reversed, etc.


text:
    The People of the State of New York, Appellant, v. Kurt Klein, Respondent.
    Argued October 8, 1959;
    decided December 30, 1959.

      Abraham Isseks, District Attorney (Angelo J. Ingrassia and Jerome S. Cohen of counsel), for appellant.
    I. The City Court of Middletown was required to make a return only as to the matters set forth in the affidavit of errors and said return constituted the record on appeal. II. The County Court should have considered only those matters set forth in the affidavit of errors and is bound by the record on appeal. (Powers v. Schlict Heat, Light & Power Co., 23 App. Div. 380; Smith v. Slimak, 215 App. Div. 637; People v. Giles, 152 N. Y. 136; People v. Robarge, 142 Misc. 457, 235 App. Div. 896, 259 N. Y. 563; People v. Wallens, 297 N. Y. 57; People v. Levine, 297 N. Y. 144.)

      Roy L. Featherstone for respondent.
    I. The People’s failure to make an opening statement involves a violation of a fundamental right which cannot be waived. (People v. Levine, 297 N. Y. 144; People v. McLaughlin, 291 N. Y. 480; People v. Bradner, 107 N. Y. 1; People v. Miles, 289 N. Y. 360; People v. Wallens, 297 N. Y. 57; People v. Leavitt, 301 N. Y. 113; People v. Pullman, 3 Misc 2d 188.) II. The amended returns were inadequate to show the sufficiency of the District Attorney’s opening statement as required by law. (People v. Romano, 279 N. Y. 392; People v. Ginn, 2 Misc 2d 987.)
   Froessel, J.

Defendant was convicted by a jury of driving while intoxicated (Vehicle and Traffic Law, § 70, subd. 5) in the City Court of Middletown (hereinafter called the trial court). Pursuant to section 751 of the Code of Criminal Procedure, he appealed to the County Court from the judgment of conviction by filing an affidavit of errors with the trial court. In accordance with the statute, which requires that 1 ‘ the alleged errors in the proceedings, conviction or commitment ” be set forth in the . affidavit, he alleged five errors in his affidavit which challenged the sufficiency of the evidence to sustain his conviction and certain evidentiary rulings of the trial court.

In accordance with section 756 of the Code of Criminal-Procedure, which requires the Magistrate or court rendering the judgment to “make a return to all the matters stated in the affidavit ” (emphasis supplied), the trial court filed a return, annexed to which were copies of the affidavit of errors, the .information, the- certificate of conviction, a transcript of the testimony together with all motions made at the trial, the court’s charge, and the Judge’s own minutes. On the “ argument of ' the appeal ” before the County Court, defendant’s counsel raised the additional ground, not specified in the affidavit of errors, that the prosecutor failed to make an opening statement to the jury, as required by section 388 of the Code of Criminal Procedure (see Code Crim. Pro., § 62; People v. Wallens, 297 N. Y. 57). Without discussing the errors assigned in defendant’s affidavit, the County Court held that, since the return of the trial court failed to show that an opening statement had been ■ made, the conviction should be reversed and a new trial ordered, “ even though there was no objection to the fundamental error on the trial and no reference was made thereto in the affidavit of errors filed in connection with the defendant’s appeal ”.

It has been uniformly held that, on appeals from convictions in Courts of Special-Sessions and by Magistrates and Police . Justices, the statute restricts the review, of the appellate court . to those questions which are raised by the affidavit of errors filed at the time of the appeal (People v. Prior., 4 N Y 2d 70; People v. Giles, 152 N. Y. 136, 141-142; People v. Scherno, 140 App. Div. 95, 97, and cases cited therein). Since defendant did not assign as error the prosecutor’s failure to make an opening statement, the trial court was not required to make a return as to that fact (Code Crim. Pro., § 756, and cases cited above).

.Hence the County Court erred in deciding that the trial court’s failure to make a return as to this fact was a basis for holding that no opening statement was made by the prosecutor. He certainly had no power to do so on the mere statement to that effect first made on “ the argument of the appeal” by defendant’s counsel. The return — which constituted the record before the County Court (Code Crim. Pro., § 763) — simply provided no basis for such determination.

Prior to the entry of an order upon the decision of the County Court, the People moved for reargument, and in support thereof submitted an amended return of the trial court wherein it was certified: Opening was made by Assistant District Attorney Jerome Cohen and no objection was made.” Defendant vigorously opposed the motion, contending that the People and the County Court were bound by the original return. Nowhere in the opposing affidavits did defendant deny the quoted certification of the amended return, or the prosecutor’s sworn statement “ that he had opened to the jury on the trial ”, nor does he claim that no such opening statement was made.

The County Court overruled defendant’s objection to the filing of the amended return and granted reargument. It adhered to its original decision, however, holding: The requirement * * * is that the People make an opening which is adequate in the circumstances of the particular case on trial. In order to determine the adequacy of an opening, it is necessary that a return be made of either the opening statement of the district attorney, or a summary of the content thereof adequate to enable the appellate court to determine its sufficiency.” In both its decisions the County Court recognized the rule that the appellate court may only review questions raised in the affidavit of errors, but held that this rule should not ‘ ‘ be applied to a case in which the error involves a fundamental right of the defendant ”.

It is true that the statute mandates an opening statement by the District Attorney (Code Crim. Pro., § 388); that the reading of a short indictment does not constitute an opening (People v. Levine, 297 N. Y. 144); and that the District Attorney’s opening may not be waived (People v. McLaughlin, 291 N. Y. 480, 483; People v. Levine, supra, p. 147). But the record before the County Court did not present the question first raised by the defendant on the “ argument of the appeal ”, and an appellate court is not empowered to reverse a judgment of conviction because of a “ defect in the proceedings, which could not be waived or cured and is fundamental ”, unless “ the record discloses [such defect] upon its face ” (emphasis supplied) (People v. Bradner, 107 N. Y. 1, 4-5; see, also, People v. Levine, supra, p. 147). Judgments of conviction may not be lightly set aside upon the mere statement of counsel on the argument of an appeal. If defendant felt the amended return was insufficient or defective in any way, it was his duty to make application for a “ further or amended-return ”, as authorized by section 758 of the Code of Criminal Procedure.

In People v. Wallens (supra, p. 60) defendant alleged in his affidavit of errors ‘1 that he ‘ did not have a fair and impartial trial ’ ”, and the Police Justice had stated in his supplemental return that he ‘ did not charge the Jury ’ ”. We held that this was “ sufficient specification ” under section 751 of the Code of Criminal Procedure to enable this court to consider the violation of subdivision 7 of section 388 of the Code of Criminal Procedure. Here, none of the errors specified in defendant’s affidavit can, by the most liberal construction, be deemed to include the failure of the prosecutor to open, and hence the trial court was not obliged to make a return as to this matter; Moreover, the amended return certified that such an opening was made, and defendant, as noted, never controverted the amended return, nor did he move for a further and more complete return on the ground that the opening made was inadequate. Under these circumstances, the County Court erred in refusing to credit the return. As we held in People v. Prior (supra, p. 73), which also involved a claimed violation of a fundamental right, namely, an adequate opportunity to secure counsel, ‘ ‘ The return of a Magistrate or Police Justice — in the absence of defendant’s motion to correct alleged defects therein (Code Grim. Pro., §§ 757, 758) — is 6 conclusive as to all controverted matters within the Magistrate’s knowledge, not only on the County Court but on the defendant and the People as well.’ ”

Inasmuch as the order of the County Court did not specify whether its determination was on the law or on the facts, or both, it must be considered a reversal on the law alone (Code Grim. Pro., § 543-a, subd. 4; People v. Dusing, 5 N Y 2d 126, 127). Hence the order appealed from should be reversed and the case remitted to the County Court, Orange County, for determination of the questions of fact raised in that court (Code Grim. Pro., § 543-b).

Chief Judge Conway and Judges Desmond, Dye, Fuld, Van Voorhis and Burke concur.

Order reversed, etc.