text:
    In the Matter of the Amendment to a Trust Agreement between Judith D. Peabody, as Grantor, and Elizabeth T. Dunnington et al., as Trustees. Chase Manhattan Bank et al., Respondents; Howard M. Holtzmann, as Guardian ad Litem for Elizabeth T. Peabody, an Infant, Appellant.
    Argued February 23, 1959;
    decided April 16, 1959.

      Howard M. Holtzmann, in person, and Frank P. Broz for Howard M. Holtzmann, appellant.
    I. It is the general rule that a child en ventre sa mere has the same rights as a child already born. (Matter of Holthausen, 175 Misc. 1022; Quinlan v. Welch, 69 Hnn 584; Kelly v. Gregory, 282 App. Div. 542; Matter of Ranger [Wormser], 15 Misc 2d 754.) II. The determination of persons whose consent is necessary to revoke a trust must be made as of the date of revocation and the consent of the infant appellant was necessary. (Hussey v. City Bank Farmers Trust Co., 236 App. Div. 117; Thatcher v. Empire Trust Co., 243 App. Div. 430; Corbett v. Bank of New York & Trust Co., 229 App. Div. 570; Matter of Wall, 138 Misc. 213; Matter of Gebhardt, 139 Misc. 775; Matter of Abbe, 138 Misc. 210.) III. The consent of all persons in being and beneficially interested is required to revoke a trust and a child en ventre sa mere is a person in being. (Cram v. Walker, 173 App. Div. 804; Beam v. Central Hanover Bank & Trust Co., 248 App. Div. 182; Smith v. Title Guar. & Trust Co., 287 N. Y. 500; Matter of Backer, 148 Misc. 318; Matter of McEwan, 202 App. Div. 50; Matter of Gebhardt, 139 Misc. 775.) IV. The Smith case, relied upon by the Special Term, is not decisive of the issue herein. (Smith v. Title Guar. & Trust Co., 287 N. Y. 500.) V. The rule sought for herein would not create practical difficulties and, even if it would, that fact would be unimportant. (Matter of Gebhardt, 139 Misc. 775; Matter of Wall, 138 Misc. 213; Engel v. Guaranty Trust Co., 280 N. Y. 43.)

      Peyton H. Moss and Paul H. Fox for Judith Dunnington Peabody, respondent.
    I. An unborn foetus is not a person beneficially interested in a trust whose written consent must be obtained in order to effectuate an amendment thereof. (Smith v. Title Guar. & Trust Co., 287 N. Y. 500; Matter of Ranger [Wormser], 15 Misc 2d 754; Glanckopf v. Guaranty Trust Co. of N. Y., 274 App. Div. 39; Levy v. Empire Trust Co., 269 App. Div. 188; Marsellis v. Thalhimer, 2 Paige Ch. 35; Steadfast v. Nicoll, 3 Johns. Cas. 18; Mason v. Jones, 2 Barb. 229, 3 N. Y. 375; Trower v. Butts, 1 Sim. & S. 181; Villar v. Gilbey, [1907] A. C. 139; Matter of Holthausen, 175 Misc. 1022.) II. The tort cases are not in point. (Woods v. Lancet, 303 N. Y. 349; Drobner v. Peters, 232 N. Y. 220; Quinlen v. Welch, 69 Hun 584; Matter of Roberts, 158 Misc. 698.) III. The decision below satisfies both the legislative policy favoring posthumous succession to property and that encouraging its easy alienation. IV. Practicality and common sense require the affirmance of the decision below. (Matter of Gebhardt, 139 Misc. 775; Matter of Wall, 138 Misc. 213.)
    No appearance for remaining respondents.
   Fuld, J.

Whether or not a child en ventre sa mere is a “ person beneficially interested ” in a trust, within the meaning of section 23 of the Personal Property Law, is the sole question presented. If it is such a person, then, there may be no revocation of the trust even though all the living beneficiaries interested have given their consents.

On May 11, 1951, five days after reaching her twenty-first birthday, Judith Dunnington Peabody, recently married, created the irrevocable trust here involved. The corpus consisted of the grantor’s remainder interest in two trusts created by her great aunt along with over $200,000 in securities which she owned outright. The trustees, consisting of the grantor, the grantor’s mother and the Chase National Bank (now the Chase Manhattan Bank), were directed to pay the income to the grantor for life and, upon her death, to convey the principal to such beneficiaries as she might appoint by will. In default of testamentary appointment, the trust indenture provided, the corpus was to go to her surviving issue and, if there were none, to her mother; if, however, she were dead, then, it was payable to her father or if he, too, were dead, then, to certain designated charitable institutions.

In 1955, the grantor Judith Peabody, then childless, desiring to amend the deed of trust, took steps, pursuant to section 23 of the Personal Property Law, to obtain “ the written consent of all the persons beneficially interested in [the] trust None of the beneficiaries objected to what Mrs. Peabody proposed, and, by the end of September, 1955, she had obtained consents from all of them, except the Attorney-General whose consent, required as the representative of the indefinite and uncertain charity beneficiaries (Personal Property Law, § 12, subd. 3), was not obtained until March of 1956.

By that time, however, Mrs. Peabody had become pregnant and in May of 1956, one month before the child (Elizabeth) was born, the trustee Chase Bank advised that it would not recognize the proposed amendment because the child, conceived but not yet born, might be deemed a person beneficially interested in the trust. Accordingly, the bank filed a petition seeking instruction as to whether the unborn child’s consent was necessary to effectuate the amendment of the trust. The court at Special Term held that such consent was not required, the Appellate Division unanimously affirmed and we granted permission to appeal.

To construe the statute as requiring the consent of a foetus, of a child still unborn, is to impute to the Legislature an intent to require the impossible. That we will not do, and, indeed, this court has already made it clear that section 23 demands the consent only of those persons who are alive, who are actually born and living, at the time of the proposed revocation. (See Smith v. Title Guar, & Trust Co., 287 N. Y. 500, 502-504; County Trust Co. v. Young, 287 N. Y. 801; see, also, Glanchopf v. Guaranty Trust Co. of N. Y., 274 App. Div. 39, 41; Levy v. Empire Trust Co., 269 App. Div. 188, 190-191; Matter of Ranger [Wormser], 15 Misc 2d 754; 4 Powell, Real Property [1954], p. 416; Mariash Revocation of Intervivos Trusts in New York, 16 Brooklyn L. Rev. 41, 61; Revocation of Intervivos Trusts, 1951 Report of N. Y. Law Rev. Comm., pp. 83-85, 111.) In the Smith case, the court stated that “ consent of the unborn children, who in some contingency might become entitled to an estate or interest in the trust fund,” is not required (287 N. Y., at p. 504):

“ The words 1 persons beneficially interested ’ must be strained beyond their usual and natural meaning if construed to include those not in being who might in some contingency be entitled to an estate. If the Legislature intended to permit a trust deed to be revoked only where every person now living who has a beneficial interest, vested or contingent, consents and no person born thereafter could in any possibility become entitled to an estate, then the Legislature has used words which conceal rather than make manifest that purpose.”

Although the “ children ” in Smith were unconceived as well as unborn, nothing may be made to turn upon that circumstance, for the opinion is instinct with the thought that the “ unborn children ’ ’ referred to meant children who were not born, who were not living and had not seen the light of day.

Matter of Ranger (Wormser) (15 Misc 2d 754, supra) actually passed upon the question Avith which aa'o are here concerned in a brief but Avell-considered opinion. The grantor partially revoked the trust, Avhich he had created, after having obtained the consent of all persons then alive Avho had an interest in it. In an accounting proceeding, brought years later, it was established that a grandchild of the grantor had been conceived at the time he executed the revocation, and it was argued, just as it is here, that the revocation was ineffectual since the consent of the begotten but unborn child had not been obtained. The court rejected the contention, holding that a child en ventre sa mere is not a person beneficially interested in the trust. ‘ ‘ Any other view”, it was said, “ would create and be susceptible of innumerable practical difficulties.” For instance, it might be noted, trustees would not be privileged to act upon a proposed amendment until and unless they first determined that neither the settlor of the trust (if she be a woman) nor any other woman, whose offspring might have an interest in the trust, was pregnant. And the discovery, years later, of a child born after the revocation, but allegedly conceived prior thereto, would lead to litigation in which the decisive factor would be the time of conception, a matter rarely if ever capable of precise ascertainment.

As a matter of fact, the conclusion that there is no need to have the unborn child’s consent finds strong support in the legislative policy favoring the easier revocation of inter vivos trusts (see, e.g., Personal Property Law, § 23, as amd. by L. 1951, ch. 180; Real Property Law, § 118; 1951 Report of N. Y. Law Rev. Comm., pp. 83-85, 111). The Law Revision Commission, after remarking a general public policy ‘1 in favor of [the] revocability of trusts ” (1951 Report of N. Y. Law Rev. Comm., p. 85), stated that it has been “ recognized judicially” that such policy “ would be frustrated if revocation were made to depend upon consent of persons yet unborn".

The appellant contends, however, that, since a child en ventre sa mere is deemed ‘ ‘ in being ” or “ alive ’ ’ for purposes of taking property, it should likewise be so regarded under section 23. The argument overlooks the considerations, based on history, which led to the recognition of that concept. Because of the necessity in medieval England always to have available a living' person who could be charged with the performance of feudal duties, the common law developed the rule that a remainder estate was destroyed if the heir or devisee was not alive when the prior estate came to an end. Conception before such termination, followed by subsequent birth, was not enough; the lord of the manor needed a living person from whom, or from whose guardian, he could require allegiance and service. (See Moynihan, Preliminary Survey of Law of Real Property [1940], p. 43.) In consequence, therefore, a posthumous child could not take from or through his deceased father.

With the wane of the feudal system, however, the performance of feudal duties became less important and the courts sought a device by which they could mitigate the rigors of the rule. They found such a device in the fiction, already developed in the civil law, that, for the purpose of taking an estate or gift, a child en ventre sa mere would be considered born and living at the termination of the prior estate or the falling in of the inheritance, provided that the child was later born and able to take possession of the gift or inheritance. In adopting this fiction, the courts were merely providing a rule of construction by which property could, in spite of old technicalities, be allowed to pass to persons whom a decedent or testator most strongly desired to benefit, that is, his own children or issue or those of a chosen class, whether born in his lifetime or .posthumously. (See, e.g., Reve v. Long, 3 Lev. 408 [1695]; Trower v. Butts, 1 Sim. & S. 181 [1823]; Mason v. Jones, 2 Barb. 229, 251-252, affd. 3 N. Y. 375; Steadfast v. Nicoll, 3 Johns. Cas. 18, 21-29; Marsellis v. Thalhimer, 2 Paige Ch. 35, 40-41; 7 Holds-worth, History of English Law [1926], pp. 104-107,115; 5 Gray, Cases on Property [2d ed., 1908], pp. 47-54, 718-720.)

The Legislature of this State actually made it unnecessary for our courts to indulge any such fiction by providing, in the few situations where it desired to do so, for the protection of children conceived but not born when the prior interest in the property ended (Decedent Estate Law, § 83, subd. 12; Real Property Law, § 56; see, also, Personal Property Law, § 11; Real Property Law, § 42). Thus, for instance, in the Decedent Estate Law, it is declared that descendants and distributees of the deceased, “ begotten before his death, but born thereafter,” shall take in the same manner “ as if they had been born in the lifetime of the deceased, and had survived him ” (§ 83, subd. 12) and, in the Real Property Law, it is provided that, where a future estate is limited to heirs, issue or children, ‘ ‘ posthumous children shall be entitled to take in the same manner as if living at the death of their parents ” (§ 56). Here is clear demonstration that the Legislature knew full well how to protect the interests of the unborn child if it so desired.

Nor do the cases which permit a child to recover for injuries negligently or intentionally inflicted upon it before birth (see Woods v. Lancet, 303 N. Y. 349), assist the appellant. Reflecting a rule of equity requiring a wrongdoer to compensate a child for the damages which he caused, those decisions do not justify the conclusion that a foetus is a “ person ” before its birth. On the contrary, this court held just the opposite when it refused to allow the 1 ‘ parent ” of a stillborn child to sue for its wrongful death. (See Matter of Logan, 3 N Y 2d 800.) In short, just as in the cases involving succession to property, a child en ventre sa mere is not regarded as a person until it sees the light of day.

Birth, rather than the date of conception, is the controlling factor in ascertaining a person beneficially interested in the trust which the grantor is seeking to revoke. The cases, the underlying policy considerations and the legislative design, point the conclusion that an unborn child is not a person beneficially interested, within the meaning of section 23, and, accordingly, its consent is not required.

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

Chief Judge Conway and Judges Desmond, Dye, Feoessel, Van Vooehis and Bueke concur.

Order affirmed.

      . These remarks are contained in a study recommending an amendment to section 23, which was ultimately passed, to exclude from the category of “ persons beneficially interested ” persons described by the grantor as “ heirs or next of kin or distributees” (L. 1951, eh. 180). Although the modification has no direct bearing on the problem before us, it does indicate a legislative design to facilitate the revocation of trusts.


source: Caselaw Access Project

author: Froessel, J. Desmond, J. (dissenting).

license: Public Domain

text:
    In the Matter of John W. O’Neill et al., Appellants, against Joseph Schechter et al., Constituting the Civil Service Commission of the City of New York, Respondents.
    Argued January 20, 1959;
    decided April 16, 1959.

      William Goffen for appellants.
    I. To hold that the four-month Statute of Limitations starts to run before petitioners are in a position to seek judicial review of a determination is a denial of due process of law. (Matter of O’Connell v. Kern, 287 N. Y. 297; Matter of Abramson v. Commissioner of Educ. of State of N. Y., 1 A D 2d 366; People ex rel. Lahey v. Woodbury, 102 App. Div. 333; Matter of Connaughton v. Taylor, 285 App. Div. 1169, 1 N Y 2d 864.) II. For purposes of judicial review, the final determination was not when the key answers . were published in the City Record', but the date of promulgation of the eligible list. (Matter of Rumack v. McNamara, 195 Misc. 84.) III. The present proceeding did not accrue until the expiration of the two months within which petitioners may have procured an administrative review. (Matter of Jacoby v. McNamara, 275 App. Div. 695; Matter of Otis v. Silverman, 3 A D 2d 752; Matter of Poss v. Kern, 263 App. Div. 320; Matter of New York Cent. R. R. Co. v. Public Serv. Comm., 238 N. Y. 132.) IY. Special Term lacked jurisdiction to reverse itself on the issue of the Statute of Limitations.

      Charles H. Tenney, Corporation Counsel (Robert L. Ellis and Seymour B. Quel of counsel), for respondents.
    The determination of the commission sought to be reviewed herein became final and binding upon petitioners on March 26, 1957, the date of the publication of the final key answers. Accordingly, the instant proceeding, which was commenced on October 4, 1957, is barred by the four-month limitation of section 1286 of the Civil Practice Act. (Matter of Goldberg v. Municipal Civil Serv. Comm., 16 Misc 2d 11; Matter of Lennox v. McNamara, 16 Misc 2d 9, 275 App. Div. 1023, 276 App. Div. 757; Matter of Robinson v. McNamara, 16 Misc 2d 10, 275 App. Div. 918; Matter of Pollak v. Conway, 276 App. Div. 435; Matter of Firshein v. Reavy, 263 App. Div. 490; Matter of Allen v. Finegan, 254 App. Div. 858; People ex rel. Caridi v. Creelman, 150 App. Div. 746; Matter of Cavanagh v. Watson, 201 Misc. 899, 280 App. Div. 757, 280 App. Div. 862; Matter of O’Connell v. Kern, 287 N. Y. 297; People ex rel. Lahey v. Woodbury, 102 App. Div. 333; Matter of Abramson v. Commissioner of Educ., 1 A D 2d 366; Matter of Connaught-on v. Taylor, 285 App. Div. 1169, 1 N Y 2d 864; Matter of Feeney v. Schechter, 5 A D 2d 766.)
   Froessel, J.

Sixty-eight petitioners seek judicial review of 10 questions and answers on a competitive examination, administered by the New York City Civil Service Commission, to determine examinees’ eligibility for promotion from patrolman to sergeant in the New York City Police Department. Some of the petitioners achieved a passing grade on the examination, but have joined in this proceeding because a change of the contested answers would give them higher standings on the promotion list; the remaining petitioners, having failed the examination, would by the changes contended for attain passing grades and be placed on the promotion list.

The only question before us on this appeal is whether the proceeding was commenced within the time limited by section 1286 of the Civil Practice Act, which provides: “ a proceeding under this article to review a determination * * * must be instituted * * * within four months after the determination to be reviewed becomes final and binding, upon the petitioner (Emphasis supplied.)

The relevant dates, all in 1957, are:

January 5: Examination held
January 14: Beginning of week during which tentative answers were published in the City Record
January 29: Deadline for filing protests to tentative answers
March 26: Publication of final answers in the City Record
June 7: Receipt of failure notices by examinees who did not attain passing grade of 70%
July 31: Official promulgation of promotion list and receipt of eligibility notices by those who passed
October 3: Commencement of this proceeding.

The lower courts found, and respondents contend, that the four-month Statute of Limitations commenced running on March 26th, the date of publication of the final answers, since that was when the determination sought to be reviewed became final and binding. Petitioners argue, among other things, that such a holding would deny them due process of law, since the instructions on the examination booklet did not sufficiently apprise them of the necessity of making a personal copy of their answers, and they were not permitted to examine their papers and note their answers until June 7th as to the petitioners who failed, and July 31st as to those who passed.

Assuming a party knows or should know he is aggrieved by the commission’s determination of the correct answers to a competitive examination, we would agree with the lower courts that “ the act of finality which sets the period of limitation running is the adoption and promulgation, by publication, of final key answers; such adoption is the official response to any protest theretofore filed to a tentative key answer.” This was the holding in Matter of Lennox v. McNamara (16 Misc 2d 9, affd. 275 App. Div. 1023, motion for leave to appeal denied 276 App. Div. 757) and in Matter of Robinson v. McNamara (16 Misc 2d 10, affd. 275 App. Div. 918), and Matter of Goldberg v. Municipal Civil Service Comm. (16 Misc 2d 11), the latter two of which relied on the Lennox decision.

In none of those cases, however, did the petitioners claim that they were deprived of the opportunity to make an effective protest to the answers chosen, and this was the issue to which Special Term primarily directed its attention in the instant case. The court did not feel it could resolve that issue until after the “ submission of an agreed specimen copy of the examination book ’ ’, and it was principally on the basis of the examination instructions that it concluded that petitioners had not been “frustrated by respondents from presenting protests at the proper time ”.

But the record before us discloses the following: The examination here consisted of 100 multiple choice questions, to each of which there were four possible answers. The examinees were instructed to “ select that answer which you believe to be the acceptable one among those listed ” and to record their answers by printing the letter A, B, O or D in ink on the official answer sheet alongside the number of the question. Three and one-half hours were allowed to complete the test, and a bell system was employed to measure the running of the allotted time.

After the sounding of the first bell, the question booklets were distributed face up and the examinees were twice instructed:

‘ ‘ DO NOT OPEN THIS BOOKLET UNTIL THE SECOND BELL IS BUNG. BEAD THIS PAGE NOW.”
* * #
“Read this page only. Do not open booklet.” (Emphasis supplied.)

The only instructions on this first page relative to retaining a copy of the answers was the following: “You may, for future reference, make a record of your answers in the question booklet and take the question booklet with you. No time, however, may be taken for this purpose after the signal has been given for the end of the test.’’’ (Emphasis supplied.) At the end of the procedural instructions on the first page, the examinees were again cautioned for the third time: “ do not OPEN THIS BOOKLET UNTIL THE SECOND BELL IS BUNG”.

The sounding of the second bell signified the commencement of the test, and the third bell, indicating the end of the test, was sounded three and one-half hours later. On the page following the words “ End op Written Test ”, two further sets of iiistructions appeared. The first, entitled “Answer Sheet Collection ’ ’, stated: ‘ ‘ When finished, remain seated and summon a monitor to collect your answer sheet; then leave the building quickly and quietly ”. (Emphasis supplied.) Following this was the final set of instructions entitled “ Key Answers and Protests ’ ’, consisting of five paragraphs and setting forth in detail the procedure for contesting the correct answers selected by respondents. These instructions stated that examinees had two weeks, after publication of the tentative key answers, to file written protests in a prescribed form, and that the final key answers would be published in the City Record after all protests were considered. The publication of the final key answers was said to constitute “ official public notice by the Department of Personnel to all candidates of its final determination in this connection ”. Respondents were thus attempting to prescribe a different date from which the limitation period would otherwise commence to run were answers not published.

Some of the petitioners kept no copy of their answers, while others alleged that they had made hurried copies but were not sure that they were accurate. After publication of the tentative key answers, at least two petitioners sought permission to inspect their answer sheets with a view towards filing a protest; but these, as well as subsequent requests, were refused, as it was respondents’ policy not to permit examinees to see their examination papers until they were notified of their grades and were in possession of either failure or eligibility notices. Thus, those who failed the examination were first permitted to see their answer sheets on June 7th, while those who passed were first permitted access on July 31st, more than four months after publication of the final key ansiuers.

Unless an examinee made a personal copy of all his answers, he was not in a position either to file an administrative protest to the published tentative answers or to institute a judicial proceeding to challenge the determination as to the final answers, until he was permitted to see his answer sheet. The filing of an administrative protest to the tentative answers could not properly be regarded as a mandatory prerequisite to the bringing of a judicial proceeding to review the final answers, unless petitioners knew or should have known they were aggrieved by respondents’ choice of answers. Likewise, the four-month Statute of Limitations cannot fairly be said to have commenced running against petitioners on the date the final answers were published, unless they knew or should have known they were aggrieved by that determination. It is axiomatic that “ Administrative procedure will be reviewed only at the instance of a person allegedly aggrieved thereby ’ ’ (Lederman v. Board of Educ., 276 App. Div. 527, 531, affd. 301 N. Y. 476, 493). As the court pointed out in Matter of Abramson v. Commissioner of Educ. (1 A D 2d 366, 371), petitioners “ had no reason to institute a judicial proceeding to challenge [respondents’] decision until they knew that they were aggrieved by it ”.

Petitioners had a legal right to challenge the choice of correct answers as arbitrary and capricious (Matter of Gruner v. McNamara, 298 N. Y. 395), and the question then is whether they are chargeable with notice that they would have to retain a copy of their answers, in order to be in a position to assert that right. In view of the fact that the examinees would not be permitted access to their answer sheets until several months after they took the examination, it was particularly incumbent upon respondents to spell out the necessity of making and retaining a copy of the answers, in order to be able to challenge the tentative answers administratively and the final answers judicially. Yet, all the examinees were told on the first page of instructions was: “you may, for future reference, make a record of your answers in the question booklet and take the question booklet with you.”

While we agree with Special Term that these instructions, “ when read in the context with the directions as to protest procedure ”, were “ reasonably calculated to tell all that was necessary ”, the latter directions appeared at the end of the booklet, and it was only after all the questions had been answered that the examinee would come upon them. Since petitioners were not permitted to open their booklets until after the second bell sounded, the grant of permission to make copies of their answers could hardly be ‘ ‘ read in context ’ ’ with the directions as to protest procedure. The fact that it would not consume a great deal pf additional time to record 100 answers on the question booklet would be relevant only if petitioners were apprised of the necessity of so doing. Many petitioners may well have allowed themselves such time for each question as would consume the entire period alloted for the test. By the time they came upon and digested the five paragraphs of protest directions, it would be too late to copy their answers, as no time could be taken for this purpose after the third bell ending the test was sounded.

Moreover, the directions for protesting key answers were preceded by the instructions: “When finished, remain seated and summon a monitor to collect your answer sheet; then leave the building quickly and quietly.” These words would seem to mark the end of the examination, and might well have conveyed the impression that the subsequent paragraphs could be read after the examinee had turned in his answer sheet and left the building. In the excitement of the closing minutes of an examination, the examinee is more concerned with reviewing troublesome questions and making sure he has answered all the questions than with reading matter which from every indication could be read later on.at his leisure.

Respondents argue that on the first page of the question booklet petitioners were instructed to ‘ ‘ Examine your booklet after the second hell is rung to make sure that it contains all the pages and is not defective in any way. You are responsible for obtaining a complete booklet” (emphasis supplied), and that the “ obvious intention ” of these instructions “was that each examinee read all of the instructions before beginning the test.” Surely the “ obvious intention ” of this direction was merely to caution the examinees to. make sure their booklet contained all 100 questions, and not that they should use part of the allotted time to read five paragraphs of protest instructions, which appeared after the end of the written test.

One of the grounds of the holding below was that the reaction of examinees to “ the conditions surrounding an examination may be deemed part of the examination itself ’ ’ and inasmuch as “ All candidates received the same instructions, * * * it may well be said that the weighing of the importance of an opportunity to retain answers in these circumstances is properly part of a test to which candidates for police sergeant may be put.” We are- unable to see how an examinee’s ability to interpret instructions for protesting answers could possibly have entered into the computation of his grade. Petitioners were examined on the substantive content of 100 questions and not on their ability to interpret instructions. There is no evidence that, as between two examinees who received the same grade, the one who retained a copy o.f his answers would be accorded a higher priority on the. promotion list than the one who did not.

In conclusion, then, since petitioners could not reasonably have been expected to read the directions for protesting answers until it was too late, the Statute of Limitations cannot fairly be said to have commenced running until they were permitted to ascertain their answers to the questions — June 7th for those who failed and July 31st for those who passed. Since this proceeding was commenced on October 3d, less than four months after either date, it was timely brought and petitioners are entitled to their day in court on the merits. We do not deem the other arguments made in the briefs of sufficient merit to warrant discussion.

The order appealed from should be reversed, with costs in all. courts, and the matter remitted to Special Term for further proceedings not inconsistent with this opinion.

Desmond, J. (dissenting).

The four-month time limitation (Civ. Prac. Act, § 1286) ran (as has been held for many years, Matter of Robinson v. McNamara, 275 App. Div. 918; Matter of Lennox v. McNamara, 275 App. Div. 1023) from the official publication of the final answers in the City Record. This proceeding was brought long after that period had expired. The running of the Statute of Limitations could not be affected by any assertion that some petitioners did not have time or did not take time to copy their own answers for their own future reference. The very examination papers here gave express permission to petitioners to copy their own answers and gave notice that the final correct answers would be published in the City Record.

I see no question of law or fact here and no basis for any reversal. The order should be affirmed, with costs.

Chief Judge Conway and Judges Fuld and Burke concur with Judge Froessel ; Judge Van Voorhis concurring in the result upon the basis that the four months’ limitation commences to run from the announcement of the grades and relative standings of the applicants for the examination; Judge Desmond dissents in an opinion in which Judge Dye concurs.

Order reversed, etc.


author:
Froessel, J.
      Fuld, J. (concurring). Burke, J. (dissenting).

text:
    56-70 58th Street Holding Corp., Appellant, v. Fedders-Quigan Corporation, Respondent.
    Submitted January 7, 1959;
    decided April 17, 1959.

      Mario M. Cuomo, Nicholas S. Maltese and Vito J. Titone for appellant.
    I. The subject covenants were independent. There was no material breach sufficient to permit rescission. (Rosenthal Paper Co. v. National Folding Box & Paper Co., 226 N. Y. 313; Thomson-Houston Elec. Co. v. Durant Land Improvement Co., 144 N. Y. 34; Matter of Barnett, 12 F. 2d 73, 273 U. S. 699; Herstein v. Columbia Pictures Corp., 4 N Y 2d 117; 165 W. 46 St. Corp. v. Radio-Keith Orpheum Vaudeville Exch., 157 Misc. 816; Robitzek Investing Co. v. Colonial Beacon Oil Co., 265 App. Div. 749; Raner v. Goldberg, 244 N. Y. 438; De Angelis v. White-All Corp., 273 App. Div. 873; Harrington v. Harrington, 290 N. Y. 126; Boyd v. Boyd, 252 N. Y. 422.) II. Since appellant performed within a reasonable time after defendant’s notice, it did not breach the covenant. (Taylor v. Goelet, 208 N. Y. 253; Lawson v. Hogan, 93 N. Y. 39; Valashinas v. Koniuto, 308 N. Y. 233; Myers v. De Mier, 52 N. Y. 647; St. Regis Paper Co. v. Santa Clara Lumber Co., 186 N. Y. 89; Schmidt v. Reed, 132 N. Y. 108; Murray Co. v. Lidgerwood Mfg. Co., 241 N. Y. 455.) III. Public policy does not require that defendant be permitted to cancel the lease. (Hart v. City Theatres Co., 215 N. Y. 322; Hizington v. Eldred Refining Co., 235 App. Div. 486; Shontz Co. v. Laffay, 225 App. Div. 263; Minton v. Schulte, 153 Misc. 195; Silamar Estates v. Bien, 165 Misc. 239; Doyle v. Shuttleworth, 41 Misc. 42; Cooper v. Gossett, 263 N. Y. 491; Mesfree Realty Corp. v. Huyler’s, 153 Misc. 667.)

      Samuel R. Rudey, Arthur Sheinberg and Howard Modlin for respondent.
    The landlord breached the lease by failing to secure a certificate of occupancy, thereby making the tenant’s occupancy unlawful. The tenant had the right to vacate and treat the lease at an end. (People v. Lederle, 206 Misc. 244, 285 App. Div. 974; De Angelis v. White-All Corp., 273 App. Div. 873; Hart v. City Theatres Co., 215 N. Y. 322; Shontz Co. v. Laffay, 225 App. Div. 263; Hizington v. Eldred Refining Co., 235 App. Div. 486; Caroli v. Saxl, 192 Misc. 887; Herstein v. Columbia Pictures Corp., 4 N Y 2d 117.)
   Froessel, J.

On March 1, 1953 the parties entered into a written lease whereby the tenant rented the basement and first floor of a building owned by the landlord for a period of two years at an annual rental of $18,000, payable in monthly installments of $1,500. The lease stated that the premises were “ to be used and occupied by the Tenant for warehousing and shipping of its goods ”, although it nowhere designated the nature and type of those ‘ ‘ goods ”. Paragraph 39 of the lease obligated the landlord to make specified alterations and improvements in the premises ‘ ‘ with reasonable promptness after the execution of this lease ”, including concreting the basement floor, driveway and certain retaining walls, reconstructing and repairing the existing loading platform and cutting new openings for 8-foot doors. It made these promptly for the accommodation of the tenant.

The certificate of occupancy then in effect permitted the first floor of the leased premises to be used as a dance hall; the alteration application later made to and approved by the Department of Housing and Buildings showed the existing legal use of the basement to be “ Boiler Em & Storage ”. Notwithstanding the fact that, under section 026-185.0 of the Administrative Code of the City of New York, it was unlawful to make any changes of occupancy or use of any structure if such change is inconsistent with the last issued certificate of occupancy ”, the tenant, who “ couldn’t wait ”, immediately entered into possession.

In paragraph 43 of the lease, the landlord covenanted to “ make such application as may be necessary” to obtain a certificate of occupancy authorizing the use of the demised premises for warehousing and shipping. No time was fixed for performance of this covenant, but paragraph 48 of the lease provided that if a certificate were refused by the Department of Housing and Buildings, “ after the landlord has exhausted all remedies to compel [its] issuance ”, the tenant could vacate the premises within 60 days after notice from the landlord, and the lease would be at an end.

Before a new certificate of occupancy will issue for an altered building whose use is to be changed, plans must be submitted to and approved by the Building Superintendent, pursuant to section C26-161.0 of the Administrative Code, and the. alterations effected in accordance with the approved plans (§§ C26-187.0, C26-188.0). Accordingly, the landlord promptly retained an architect, plans were drawn up and approved, and, as noted, all the alterations specified in paragraph 39 of the lease were completed. Various alleged difficulties then ensued, including the illness and death of the architect and the filing of amendments to the approved plans by a new architect, and at the expiration of 14 months a new certificate had still not been issued. During this entire period, however, no violations were placed against the premises by any official agency, and the tenant made full use of them for the purposes specified in the lease.

Despite the fact that its possession was wholly undisturbed, the tenant, by letter dated April 27, 1954, informed the landlord that if a new certificate of occupancy was not forthcoming by June 30th it would deem the lease terminated, vacate the premises and cease paying rent. The landlord then contacted the Building Department and a building inspector visited the premises in the middle of June. On June 25th, five days before the deadline set by the tenant, the Building Department notified the landlord that approval of his application for a new certificate was being ‘ ‘ held up ’ ’ because of the storage of combustibles on the premises. The landlord’s application had stated that incombustible materials were being stored, and it was informed that the application would have to be amended or the combustibles removed.

Although the tenant adduced evidence that it had always stored combustibles on the premises, the landlord’s manager claimed that all he had ever seen were assembly line parts, and that from May on the tenant was storing “ less and less In any event, the landlord’s manager visited the premises on June 25th or 26th and found that they were completely empty, with the exception of two dollies with paint cans on them and one barrel of salvarasaul, used for diluting paint. Application was immediately made to the Fire Department for permission to store combustibles (New York City Charter, § 646, subd. e), and the landlord was assured that it would be approved as quickly as possible.

The following day, however, the landlord’s manager returned .to the premises and found that the combustibles had been removed, thus leaving the premises entirely vacant. The application filed with the Fire Department was hence withdrawn, and a new certificate of occupancy, authorizing the use of the first floor as well as the basement for storage and shipping, was duly issued on July 8th. It was thus established that the premises were in such condition before June 30th as to entitle the landlord to a certificate of occupancy at that time. No rent was paid by the tenant after July 1st.

In awarding judgment 1o the landlord for rent due for the balance of the lease term, the trial court ruled in part that the tenant ‘ ‘ could not simply vacate the premises in cavalier fashion * * * on the pretext that further occupancy was illegal ’ ’. The Appellate Division reversed, by a divided court, on the ground that ‘ ‘ the covenants to obtain the certificate and to pay the rent were dependent. The landlord, having failed to perform that condition of the lease upon its part, may not recover the rent reserved ”. The question posed is whether the landlord’s failure to obtain the new certificate of occupancy by June 30th justified the tenant in vacating the premises.

We agree with the trial court that, “under all the circumstances herein disclosed ”, the tenant’s removal was not justified. The lease itself was not void for illegality merely because the use of part of the premises for warehousing and shipping was not authorized under the then existing certificate of occupancy. As the court noted in Elkar Realty Cory. v. Kamada (6 A D 2d 155, 157), the lease “contemplated a correct and hence a lawfully occupied premises ” and “ the bar to legal use was * * * readily corrective ’’ (see, also, Minton v. Schulte, Inc., 153 Misc. 195; Mesfree Realty Cory. v. Huyler’s, 153 Misc. 667). The tenant knew, when it signed the lease and immediately entered into possession, that plans had to be drawn and approved and the specified alterations completed before a new certificate would issue. By providing that the landlord was to be afforded the opportunity to “ exhaust all remedies ” to obtain the certificate, the lease, in practical effect, fixed such event as the period for performance. The landlord had admittedly not exhausted his remedies and, in light of the fact that the tenant’s possession and use of the premises were wholly undisturbed, we do not think the tenant was justified in moving therefrom.

Moreover, a certificate authorizing the use of the entire leased premises for storage and shipping would have been issued by the date specified had it not been for the tenant’s storage of combustibles. The tenant claims this would have been no performance at all, since the lease authorized it to store its “goods”, that those “goods” included paints and thinners, and the certificate issued one week later did not authorize the storage of such combustibles. The salient fact, however, is that the tenant offered no evidence that the building was not sufficiently equipped to permit the storage of combustibles. So far as appears from the record, the only thing that was “ holding up ” the issuance of a suitable certificate was the approval of the Fire Commissioner, and the landlord immediately made application therefor upon being informed of the presence of combustibles.

Inasmuch as the lease did not specify the nature of the goods to be stored, and there is no evidence that the landlord knew of the storage of combustibles prior to being informed on June 25th by the Building Department, we agree with the trial court that the landlord ‘ ‘ should then have been afforded a reasonable opportunity to obtain a certificate of occupancy upon the basis of storage of combustibles ”. Not only did the tenant fail to inquire into the status of the pending application for a certificate of occupancy after fixing the date for performance, but it had apparently begun to move out in May and had completely vacated the premises, except for some combustibles, prior to the deadline set. In the light of such apparent lack of good faith and the circumstances outlined, we are unable to conclude that the landlord failed to perform its covenant 1 ‘ within a reasonable specified time ” (Taylor v. Goelet, 208 N. Y. 253, 260; Valashinas v. Koniuto, 308 N. Y. 233, 239).

Even assuming the landlord did breach its covenant, such breach did not entitle the tenant to vacate the premises and cease paying rent. In Rosenthal Paper Co. v. National Folding Box & Paper Co. (226 N. Y. 313), cited by the Appellate Division, this court stated (p. 320): “ By a long series of decisions, the rule has been established that the question whether covenants are to be held dependent or independent of each other is to be determined by the intention and meaning of the parties, as expressed by them, and by the application of common sense to each case submitted for adjudication.” (See, also, Rosenwasser v. Blyn Shoes, 246 N. Y. 340, 346.) Here, as in the Rosenthal ease, “ the intention of the parties is not obscure ” (226 N. Y., p. 320). Not only did the lease fail to expressly condition the continued payment of rent upon the landlord’s procurement of a suitable certificate, which of itself is highly significant (Raner v. Goldberg, 244 N. Y. 438, 441-442; Robitzek Inv. Co. v. Colonial Beacon Oil Co., 265 App. Div. 749, 753, motion for leave to appeal denied 291 N. Y. 831), but it made clear in paragraph 48 that only in the event a certificate was “ refused ” were the parties to be released from “ any and all further liability to [each] other”. That provision of the lease, in addition to making it clear that the landlord was to be permitted time to exhaust all remedies ” to obtain the certificate, expressly conferred on the landlord, not on the tenant, the right to cancel the lease ‘ ‘ if through no fault of the landlord such Certificate of Occupancy is refused by the Department of Housing and Buildings ”. (Emphasis supplied.)

Beading paragraph 48 most favorably to the tenant, it, as opposed to the landlord, would have the right to treat the lease as at an end if a certificate was refused due to the fault of the landlord. As noted by the trial court, however, ‘1 the certificate of occupancy was not refused but was ‘ held up ’ because combustible materials were stored on the premises by the defendant” (emphasis supplied), and there is no evidence in the record that the leased premises failed to comply with any applicable building or safety regulations which might have resulted in a refusal to issue a suitable certificate.

In Raner v. Goldberg (supra), where this court held that a tenant could not recover sums paid as a deposit and as rent on the ground that the refusal of a public official to grant him a license precluded him from lawfully using the premises for the purpose for which they were leased, we stated (244 N. Y., p. 442): “ The lessee might have refused to pay rent except on condition that the license would be granted. The lessor might have refused to make a contract to lease including in its terms provision for making repairs and alterations if the lessee had annexed a condition to his promise to pay rent. The lessee chose to make [an] unconditional promise. The lessor’s promise was made in return. We may not now imply a condition which the parties chose not to insert in their contract, nor hold that anticipated grant of a license constituted the foundation of the contract ”. The tenant is in a far weaker position here, since there was no incurable obstacle to the issuance of a suitable certificate and no one interfered with its use, occupancy and full enjoyment of the premises during the entire time it was in possession.

The only remaining ground that would justify the tenant’s unilateral cancellation of the lease would be that the landlord’s failure to procure the certificate was tantamount to a constructive eviction. To successfully maintain this defense, however, in an action for rent, a tenant must show that the acts of the landlord precluded him from “ the beneficial enjoyment of the property” (Herstein v. Columbia Pictures Corp., 4 N Y 2d 117, 120-121). The “ reason for the rule ”, as stated by us in the Herstein case, is that there was a failure of consideration — the tenant was deprived of the premises by the wrongful act of the landlord ”.

In the instant case, as already noted, the failure of the landlord to procure a new certificate of occupancy in no way interfered with the tenant’s beneficial enjoyment of the premises. The landlord promptly made the alterations the tenant required and no violations, complaints, notices or obligations were ever directed to the tenant in the year and four months during which it occupied the premises. Since it received and exercised all its rights under the lease, there was no such failure of consideration as would excuse the payment of rent (see Robitzek Inv. Co. v. Colonial Beacon Oil Co., supra; First Nat. Bank of New Rochelle v. Fairchester Oil Co., 267 App. Div. 281, 782, affd. 292 N. Y. 694).

The tenant relies heavily on Hisington v. Eldred Refining Co. (235 App. Div. 486) and De Angelis v. White-All Corp. (273 App. Div. 873) to justify its abandonment of the premises. In both those cases, however, it was impossible for the tenant lawfully to use the premises for the purpose contemplated in the lease. The former involved an incurable proscription against the use of the premises as a gas station while, in the latter, the tenant could not secure a license to conduct a billiard parlor until a new certificate of occupancy was issued, and the lease expressly prohibited the use of the premises for any purpose not provided for in the existing certificate. Here, there was no such substantial impairment of possession and no real frustration of the lease. All that was lacldng was the documentary evidence of the building’s suitability for the uses to which it was completely being put.

Finally, the tenant argues that since continued use of the premises for storage and shipping was unlawful, it “ was not required to await prosecution for such violation ” before vacating the premises. Under section C26-204.0 of the Administrative Code, however, no person who as here occupies and uses a structure in a manner inconsistent with the last-issued certificate of occupancy (§ C26-185.0, supra) may be subjected to “ any action or proceeding and any punishment ” until “ after having been duly notified as provided in this title that * * * the occupancy or use thereof ” is in violation of law. (Emphasis mine.) It is only for certain serious violations (§ 026-204.0, supra, subd. a, pars. 1-4), such as one producing an imminent hazard to persons or property by reason of a change of occupancy or use without a permit ”, that one may be exposed to civil and criminal sanctions “ without prior notification that a violation exists ” (id.). There is no evidence of any such serious violation here.

To the extent that the Appellate Division reversed 1‘ the findings of fact contained in the opinion of the trial court, insofar as they may be inconsistent ’ ’ with its own opinion, we have concluded that the weight of the evidence is with the findings of the trial court. The judgment of the Appellate Division should be reversed and that of Trial Term reinstated, with costs in. this court and in the Appellate Division.

Fuld, J. (concurring).

Although I am of the opinion that the landlord’s covenant to obtain a certificate of occupancy and the tenant’s covenant to pay rent were dependent, I am for reversal — solely on the ground, however, that the tenant in this case waived its right to demand timely compliance by the landlord. The certificate was actually procured on July 8, 1954, just nine days after the deadline date specified by the tenant and the delay between the beginning of the lease term and the obtaining of the certificate, though long, left the tenant’s possession wholly undisturbed. In the light of such facts and in view of the other peculiar circumstances present, the tenant was not entitled to insist upon a certificate by June 30, 1948.

Burke, J. (dissenting).

The claim here is solely to recover rental for a period when the tenant was no longer in occupancy. By a covenant, in a two-year lease commencing March, 1953, the landlord assumed the burden of obtaining a certificate of occupancy covering the use of the premises ‘ ‘ by the Tenant for warehousing and shipping of its goods ”. At the time, therefore, that the lease was made, the new use authorized under the lease concededly was unlawful (Administrative Code of City of New York, § C26-185.0; Shontz Co. v. Laffay, 225 App. Div. 263).

The documentary proof shows that the application for a certificate of occupancy was not dated nor filed until June, 1954, after a delay of 14 months. During the period from March, 1953 until April, 1954, a representative of the tenant complained repeatedly to the landlord in regard to the delay and reminded the landlord of its neglect to secure the certificate of occupancy as agreed. When the tenant’s patience had worn thin, a written notice was sent on April 27, 1954 to the landlord stating that the certificate of occupancy had not been granted as required by the lease, and that the continued occupancy by the tenant for the uses authorized by the lease would be in contravention of law. The landlord was informed that, unless a certificate of occupancy was issued in accordance with the landlord’s undertaking in the lease, the defendant would quit and remove from the premises on June 30, 1954 and deem that the date of the termination of the lease and its obligation to pay any rent for any subsequent period. No certificate of occupancy authorizing the use of the premises for the purposes described in the lease was obtained or granted, and the tenant vacated the premises and surrendered possession of the premises on June 30, 1954 and has not been in possession or occupancy since that date.

A mere recital of the facts reveals the failure of the landlord to use due diligence to obtain the certificate of occupancy despite the prodding from the tenant.

When no time for performance of the obligation of obtaining a certificate of occupancy is fixed in a lease, a landlord is ordinarily entitled to a reasonable time within which he may comply with such a covenant.

In this case the obligation to exhaust all available remedies to secure the certificate was the landlord’s. Nevertheless, the landlord took no effective action until after the written demand had been made. In granting more than a year of grace, the tenant gave the landlord more than a reasonable opportunity to secure the certificate of occupancy. The failure to secure the certificate resulted in a continued unlawful occupancy of the premises, constituting a breach of the covenant. Such a breach of an essential term of a lease prevents any recovery of the rent reserved in the lease, after the tenant has abandoned the demised premises.

Under the construction of the lease adopted by the majority opinion, the tenant would be obliged to pay rent for the entire term of the lease without regard to the landlord’s expressed agreement to provide premises which might be lawfully used and occupied. We believe that the obligation to pay rent was dependent upon the covenant to obtain the certificate. The landlord has failed to perform at any time prior to the expiration of the time set in the 60-day notice. It should not now be allowed to recover the rent claimed for nonoccupancy. (Hizington v. Eldred Refining Co., 235 App. Div. 486; De Angelis v. White-All Corp., 273 App. Div. 873.)

The contention that the tenant was responsible for the delay in the issuance of the certificate of occupancy is, of course, frivolous. The lease provided that the demised premises were to be “ used and occupied by the Tenant for warehousing and shipping of its goods ”. The landlord knew at the time the lease was made that the tenant’s goods included inventories of paints and thinners, the combustibles referred to in the opinion of the trial court. The landlord recognized the presence of the inventories of paints and thinners among the goods of the tenant in its application to the Fire Department to include combustibles. This application was withdrawn, and no further effort was made to comply with the law in that regard. The final issuance of the certificate on July 8, 1954 resulted solely from the fact that the defendant had vacated the premises and removed its goods. The certificate of occupancy then issued was without meaning as the landlord had made no attempt to secure the certificate of occupancy authorizing the storage of the tenant’s goods and combustibles. The tenant did nothing other than what it was permitted to do under the lease throughout the entire time of its occupancy.

The conduct of the tenant and the excuses of the landlord show that the parties intended that if the tenant did not have ■ the right to use the premises lawfully and did not occupy them, it should not pay rent for them (cf. Rosenthal Paper Co. v. National Folding Box & Paper Co., 226 N. Y. 313, 320, 321).

The plaintiff’s position that it had not exhausted all remedies, and, in effect, that the tenant was required to continue in unlawful possession even if it took the plaintiff the balance of the term to exhaust all available remedies, is patently a sham in the light of the facts developed at the trial. Instead of proceeding diligently to pursue all available remedies, the landlord did not even approach the municipal authorities until it was spurred into action by the summary notice of termination of the lease served by the tenant. Its unreasonable delay and its negligence. in seeking a restricted certificate of occupancy' denote an intention to evade the obligation assumed under the terms of the lease.

Here there was no waiver of performance of the provision relating to the certificate of occupancy. The tenant had on numerous occasions pressed the landlord to take action. Finally realizing the excuses given by the landlord were not bona fide, the tenant served the notice on the landlord hoping thereby to compel the landlord to secure a proper certificate of occupancy. (Cf. Krausi v. Fife, 120 App. Div. 490; Marks v. Dellaglio, 56 App. Div. 299.) The landlord, faced with the termination of the lease, pretended to comply by filing an improper application which failed to disclose the nature of the tenant’s goods which were to be warehoused on the premises even though it was acquainted with the character of the tenant’s business. Under the circumstances the tenant was justified in asserting a constructive eviction against the claim for rent due after the abandonment of the premises. The constructive eviction occurred before the rent became due. (Herstein v. Columbia Pictures Corp., 4 N Y 2d 117.)

Accordingly, the judgment of the Appellate Division dismissing the complaint should be affirmed.

Chief Judge Conway and Judge Van Vooehis concur with Judge Feoessel; Judge Fuld concurs in a separate opinion; Judge Bueke dissents in an opinion in which Judges Desmond and Dye concur.

Judgment reversed, etc.


author: Desmond, J. Froessel, J. (dissenting).

text:
    In the Matter of Conrad L. Berke, Appellant, against Joseph Schechter et al., Constituting the City Civil Service Commission of the City of New York, Respondent.
    Argued January 15, 1959;
    decided April 17, 1959.

      Emanuel Thebner and Abraham S. Robinson for appellant.
    I. The order appealed from, made by the Appellate Division, is error in law. It deprived appellant of the rule of law making the “ law of the case ” by disregarding the previous unappealed order made herein. It enlarged the order at the Special Term, limiting the issue to be tried, although no appeal was taken from such order. (Matter of Fahey v. Wright, 256 App. Div. 474; Henry v. New York Post, 168 Misc. 247, 255 App. Div. 973, 280 N. Y. 842, 281 N. Y. 665; Deyo v. Adams, 182 Misc. 459; Hornstein v. Podwitz, 254 N. Y. 443.) II. Any attempt to explore appellant’s acquittal at the court-martial is a deprivation of appellant’s constitutional rights both under the United States and New York State Constitutions. (Harmon v. Brucker, 355 U. S. 579; Woods v. Lancet, 303 N. Y. 349; Perkins v. Endicott Johnson Corp., 128 F. 2d 208; United States v. Ullmann, 221 F. 2d 760.)

      Charles H. Tenney, Corporation Counsel (Henry J. Shields and Seymour B. Quel of counsel), for respondents.
    I. Petitioner’s appeal is limited to a review of the modification of the order of the Trial Term by the striking out of the second decretal paragraph of the order, which paragraph permitted petitioner to make a de novo application to the City Civil Service Commission. (Stark v. National City Bank of N. Y., 278 N. Y. 388; Matter of Segall, 287 N. Y. 52; Matter of City

      of New York [43rd Ave.], 282 N. Y. 42.) II. Since the order of the Trial Term denied petitioner’s application and dismissed the proceeding on the merits, the court was without power to include the succeeding paragraph which permits petitioner “ to apply de novo to the Civil Service Commission for a certificate and, in the event of a denial, to apply to the Court under Article 78 for an order directing certification.” (Stark v. National City Bank of N. Y., 278 N. Y. 388; Matter of McDermott v. Johnson, 2 N Y 2d 608; Matter of Weinstock v. Hammond, 270 N. Y. 64; Matter of Nelson v. Kelly, 4 A D 2d 596; Matter of Gravatts v. Klozo Fastener Corp., 282 App. Div. 1014; Matter of Hall v. Leonard, 260 App. Div. 591, 285 N. Y. 719; Schieffelin v. Dolan, 204 App. Div. 351; Arnold v. Mayal Realty Co., 299 N. Y. 57; Matter of Van Tassell, 119 Misc. 478; Scheuer v. Martin, 250 App. Div. 46; People ex rel. Collins v. Ahearn, 120 App. Div. 95.) III. Petitioner failed to show good cause why his name should not be removed from the eligible list for patrolman. His refusal to submit handwritten specimens of the names signed to the forged checks prevented the Civil Service Commission from making its own determination of the guilt or innocence of petitioner. (People ex rel. Wood v. Board of Assessors of Bklyn., 137 N. Y. 201; People ex rel. Durant Land Improvement Co. v. Jeroloman, 139 N. Y. 14; People ex rel. Walters v. Lewis, 111 App. Div. 375; People ex rel. Cunningham v. Bingham, 134 App. Div. 602; Matter of Bender v. Board of Regents of Univ. of State of N. Y., 262 App. Div. 627; Matter of Lever v. Monaghan, 285 App. Div. 1161; Matter of Ben v. O’Connell, 277 App. Div. 833; People ex rel. Wood v. Department of Health of City of N. Y., 144 App. Div. 628, 202 N. Y. 610; Matter of Lynch’s Bldrs. Restaurant v. O’Connell, 303 N. Y. 408.)
   Desmond, J.

This proceeding (Civ. Prac. Act, art. 78) was brought to review the action of the New York City Civil Service Commission in removing petitioner’s name from the eligible list for appointment as patrolman, Police Department, on the ground that he had failed to show that he was a person of good character. After a trial a final order was entered which denied the application and dismissed the proceeding on the merits and, in addition, granted petitioner leave to apply de novo to the Civil Service Commission for a certification, and, in the event of a denial, to apply to the court under article 78 for an order directing certification.

From that Trial Term determination petitioner took no appeal at all to the Appellate Division although the order had in plain words defeated his petition “ on the merits ” (see Civ. Prac. Act, §§ 1295, 1300). The city appealed to the Appellate Division from so much of the lower court order as granted petitioner leave to apply anew for a certification. The Appellate Division struck out that latter provision but otherwise affirmed the Trial Term order. In so doing the Appellate Division correctly pointed out that “ The dismissal of the petition on the merits determines the propriety of the act complained of, i.e., the striking of the petitioner’s name from the eligible list ” and that, since there was no appeal to the Appellate Division from that part of the order, it could not be reviewed in the Appellate Division. As to the second part of the Trial Term order (granting leave to petitioner to apply de novo for certification) the Appellate Division stated — again correctly — that the striking of petitioner’s name had been confirmed by an order from which no appeal was taken and that there could be no certification unless of a name appearing on the eligible list.

Petitioner then appealed to this court and now asks us to review the merits of his claim. However, when he failed to appeal the “ on the merits ” dismissal to the Appellate Division, he lost forever his right to litigate it further. The second part of the Trial Term order (granting the right to apply de novo, etc.) is here for review but we agree with the Appellate Division that it was beyond the power of Trial Term to grant.

The order appealed from should be affirmed, with costs.

Froessel, J. (dissenting).

On January 30, 1954, while serving in the United States Navy, petitioner took and passed the written examination for the position of patrolman in the New York City Police Department. After being honorably discharged from the Navy in December, he was permitted to complete the examination as a special military candidate, and passed the medical and physical tests in April and May of 1955. His name was then placed on an eligible list, and he was certified to the Police Commissioner as eligible for appointment, subject to investigation as to his character and fitness. While the usual procedure of the commission was to complete the fitness investigation prior to certification, an exception was made in the cases of returning veterans, so as to afford them an opportunity to be considered for appointment in case the investigation was completed by the time their names were reached.

Petitioner had filled out a Police Department questionnaire in which he indicated that he had been court-martialed in the Navy but that the charges had been dismissed. A Police Department investigator inquired further, and learned that petitioner had been convicted by a general court-martial of forging endorsements on four money orders and one United States Treasury check, but that the conviction had been set aside by the Navy Board of Review on the ground that the evidence failed to establish guilt beyond a reasonable doubt.

According to the report of the Review Board, there was no evidence that petitioner had ever possessed or uttered the forged documents, nor that they had even passed through the office in which he worked, where some 40 other persons were employed. They were merely cashed by an unidentified person in the immediate vicinity of the Naval Air Station. The only evidence against him at the court-martial was the opinions as to similarity of handwriting expressed by two government employees, a United States Treasury Department examiner of questioned documents, and a document analyst of the United States Post Office Department. Since the board felt that expert opinions on handwriting similarity were of uncertain value (see Koag v. Wright, 174 N. Y. 36, 42, 44), and inasmuch as there was an abundance of good character evidence for the accused, it reversed “ the sentence and findings as incorrect in law and fact”, dismissed the charges and completely vindicated petitioner.

Notwithstanding this action of the Review Board and the subsequent grant of an honorable discharge to petitioner, the Police Department investigator sought to uncover the facts pertaining to the alleged forgeries. He interrogated petitioner; secured samples of his handwriting; charged him with forging what proved to be an authentic letter from the Navy Department; contacted the handwriting experts who testified at the court-martial; and secured photostatic copies of three Treasury checks involved in the case, on only one of which petitioner had been charged with forging the endorsement. At the •investigator’s request, the handwriting expert at the police laboratory, who had no 1 ‘ preparatory education for this type of work” before entering the Police Department, compared the forged endorsements with the samples of petitioner’s handwriting and concluded that petitioner was the author of the endorsements. The investigator then forwarded all his data to the Chief of the commission’s Bureau of Investigation, informing him that the court-martial conviction had been set aside on a “ technicality of law ’ ’ and recommending that petitioner be disqualified. The Bureau Chief did not so recommend, but submitted a report of investigation to the commission incorporating the data furnished by the police investigator and made the following recommendation: For consideration re Military Disciplinary Record. Otherwise qualified.”

Thereafter, petitioner was summoned to appear before the commission to show cause why his name should not be removed from the eligible list, and he appeared with counsel on November 7, 1955. He was examined with respect to the forgeries, which he vigorously denied, and a week later was informed that the commission had reserved decision on his eligibility, and toould advise him when further action in his case was to be taken.

On January 9, 1956, without giving notice to petitioner, the commission held an ex parte hearing. The Police Department investigator and handwriting expert were examined and the latter testified that in his opinion petitioner had forged the endorsements on the three Treasury checks forwarded to him for analysis. In addition to this opinion evidence, character testimony and rank hearsay were admitted against petitioner in his absence. Although under the commission’s rules petitioner had the burden of proving his good character, he was never given an adequate opportunity to do so. On January 31, 1956, petitioner was notified that the commission had marked him not qualified. Thereafter, on March 22, 1956, petitioner instituted this proceeding to annul the commission’s determination as arbitrary and capricious, and to compel it to restore his name to its rightful position on the eligible list and to certify him for appointment.

The petition alleged in part that the commission lacked power, under subdivision 4 of section 14 of the Civil Service Law, to strike from the eligible list a candidate who had passed the competitive examination and had been duly certified on the list. The answer denied these allegations, but did not set forth any facts as to the procedure followed with special military candidates, nor allege that petitioner had been certified subject to investigation as to his character and fitness. It was apparently for this reason that Special Term decided that the pleadings “ set forth an underlying issue of fact whether the petitioner was actually certified ”, and ordered a jury trial of this issue.

Although the pleadings on their face did raise an issue of fact as to whether petitioner had actually been certified, the decision of this issue could hardly have been dispositive of the controversy, since the commission had power to revoke a certification upon a finding that petitioner lacked the requisite character and fitness for the position (Rules of City Civil Serv. Comm., rule III, § VII, subd. 1, par. [b]; Matter of Hamilton v. Brennan, 203 Misc. 536; Matter of Haynes v. Brennan, 16 Misc 2d 13; Matter of Volts v. City Civil Serv. Comm., 8 Misc 2d 916). Since a finding on the issue of actual certification could in no way aid in resolving the main issue of law, namely, whether the commission had acted arbitrarily and capriciously in striking petitioner’s name from the eligible list and marking him not qualified, it would appear that Special Term erred in merely directing a trial of this issue. No appeal was taken from this intermediate determination, however, although the court granted permission to appeal pursuant to section 1304 of the Civil Practice Act.

The matter next came before Justice Greenberg at Trial Term,. and the parties waived a jury trial. The commission introduced evidence as to the procedure followed with respect to special military candidates, and the court concluded that petitioner had not been “ duly ” certified. The court went on to say that the commission’s conduct was “ subject to the strongest condemnation for the manner in which this matter was treated ’ ’, that ‘ ‘ The police officer who conducted the investigation ’ ’ was ‘ ‘ unworthy of the slightest belief ’ ’, and that on the basis of expert testimony alone, with no factual evidence, petitioner was ‘ ‘ being deprived of his right to a position in the Police Department ’ The court had expressed similar sentiments at the trial and had indicated in no uncertain terms that ‘ ‘ if there is any way that I can find, legally and legitimately, based on the evidence, in favor of the Petitioner, I intend to do so, sir”. In concluding its opinion, the court stated: “ If this matter were before the court for definite disposition under article 78 * * *, it would unhesitatingly direct the Civil Service Commission to certify the petitioner. However, since the only matter which the court is called upon to determine is one of fact under the order of Special Term, it is constrained to conclude that the petitioner was not duly certified”. (Emphasis supplied.)

It is thus crystal clear that the trial court felt it lacked power, in the light of Special Term’s order, to reach the merits of the controversy, pass on the issues presented and award petitioner the relief prayed for. Inasmuch as section 1295 of the Civil Practice Act provides that the court which tries issues of fact in a special proceeding shall have power to render the final order ”, it would appear that the court took an erroneously narrow view of its power, and imposed a procedural strait jacket of its own making. The very reason for giving the trial court power to render the final order which, when section 1295 of the Civil Practice Act was enacted in 1937, represented a departure from existing law (Matter of Small v. Moss, 277 N. Y. 501, 507-508), was that the “ trial court is undoubtedly as capable as the court at special term to pass on the issues of law, and to compel a motion for a final order to be made to a court other than the trial court in such a case only makes for delay.” (Third Annual Report of N. Y. Judicial Council, 1937, p. 188.)

In any event, the grant of authority to the trial court to render the final order is permissive only and, inasmuch as the court felt it lacked power to pass on the issues of law, the logical and proper procedure would then have been to send the case back to Special Term. The court "not only failed to do this, but proceeded to enter a final order, the first portion of which dismissed the petition “ on the merits ”. In the second portion,

The commission appealed to the Appellate Division from the second portion of the order, and petitioner did not file a cross appeal from that part of the order dismissing his petition “ on the merits ”. To him—not unreasonably—this disposition related to the only issue tried, namely, whether he had been fully certified; indeed, it could have no other meaning, particularly since the court gave him leave to begin anew. The Appellate Division, however, struck out the second portion of the order and, as so modified, affirmed on the erroneous ground that “ The dismissal of the petition on the merits determines the propriety of the act complained of, i.e., the striking of petitioner’s name from the eligible list. There being no appeal from that portion of the order we may not review it.” While the court recognized that it was “ apparent ” from the opinion of the trial court ‘ that it considered itself limited to- the determination of ’ ’ the specific issue of fact as to which a trial had been ordered, it . concluded that the trial court nevertheless did make a final order dismissing the petition ‘ on the merits ’ as it had the power to do ”.

The second portion of the trial court’s order was in and by itself erroneous, since the four-month Statute of Limitations to review the commission’s determination had expired and the court lacked power to extend it by authorizing, in effect, a completely new proceeding. The Appellate Division, however, in striking out the leave to begin anew, looked to the first portion of the order and squarely based its holding on the substantive inconsistency between the two parts of the order. The court thus treated the two portions of the order as inextricably connected and ruled in effect that the commission’s notice of appeal could not segregate part of the trial court’s disposition and present only that for review (see Matter of Burk, 298 N. Y. 450, 455). Of course we may not reach the merits of the commission’s action in striking petitioner’s name from the eligible list, as the Appellate Division could not, since no court of original instance had ever passed on it; but inasmuch as the Appellate Division did in fact review the entire order of the trial court, to the extent of holding that the dismissal on the merits ” necessarily determined the “ propriety of the act complained of ”, we may do likewise, to the extent of holding that there has in reality never been a trial on the merits and that petitioner is entitled to one.

Since it is clear that the trial court felt it lacked power to reach the substantial issues, its dismissal “ on the merits ” could logically relate only to the narrow issue of fact which it tried. The only issue it felt empowered to rule upon was whether petitioner had been unconditionally certified for appointment, and all it decided was that he had not been. Even had petitioner taken a cross appeal from the first portion of the trial court’s order, there was in actual fact nothing to review (other than the narrow nondispositive issue decided), since no court of original instance had ever passed upon the merits.

It was not until the Appellate Division divorced the trial court’s opinions from its order, notwithstanding the fact that said opinions were incorporated therein, and looked at the latter in complete isolation, that petitioner became genuinely aggrieved by the dismissal of his petition “on the merits”. Only when the Appellate Division attributed to that dismissal a meaning it could not possibly have been intended to have did petitioner find himself completely out of court, without a trial on the merits. By holding that the trial court, in dismissing the petition “ on the merits ”, had thereby decided that petitioner’s name was properly stricken from the eligible list, the Appellate Division substantially changed the effect of the first portion of the trial court’s order to the irreparable detriment of petitioner. Inasmuch as petitioner has appealed to this court “ from each and every part ” of the Appellate Division’s order, we have the necessary jurisdiction to correct this gross error and to remit the proceeding to Special Term to pass on the merits of the controversy, namely, whether the action of the commission was arbitrary and capricious.

The order of the Appellate Division should be modified by reversing that part of the order affirming the dismissal of the petition on the merits, affirming that part of the order striking the second decretal portion of the trial court’s order and remitting the matter to Special Term to pass on the merits of the controversy.

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

Order affirmed.


author: Desmond, J.

text:
    In the Matter of Suffolk County Federal Savings & Loan Association, Appellant, against George M. Bragalini et al., Constituting the State Tax Commission, Respondents.
    Argued February 23, 1959;
    decided April 17, 1959.

      Joseph F. O’Neill, Arthur L. Milligan and George J. Aspland for appellant.
    I. An agreement relating to a mortgage which does not increase the indebtedness is not subject to taxation. II. Where the original mortgage is extended and there is no increased or new indebtedness and the original indebtedness remains undischarged and the mortgage lien is continued, there is no new tax. (Matter of Fifth Ave. & 46th St. Corp. v. Bragalini, 4 A D 2d 387; Matter of Park & 46th St. Corp. v. State Tax Comm., 295 N. Y. 173; People ex rel. Jewelers Bldg. Corp. v. State Tax Comm., 214 App. Div. 99, 241 N. Y. 524; Matter of Lloyds First Mtge. Corp. v. Lynch, 260 N. Y. 642;
      People ex rel. Banner Land Co. v. State Tax Comm., 244 N. Y. 159; People ex rel. United States Tit. Guar. Co. v. State Tax Comm., 230 N. Y. 102.) III. The mortgage tax is based upon the amount of the principal indebtedness, not upon whether there is a new debtor. The rationale of the decision of the court below seems to be that, when you have a new debtor, there is a new indebtedness and a new tax. Therein the court below erred. (Matter of Park & 46th St. Corp. v. State Tax Comm., 295 N. Y. 173; Matter of Lloyds First Mtge. Corp. v. Lynch, 260 N. Y. 642; People ex rel. Banner Land Co. v. State Tax Comm., 244 N. Y. 159.) IV. Although the court below said that the case at bar comes within the language of Matter of Erie R. R. Co. v. State Tax Comm. (260 App. Div. 268, affd. 284 N. Y. 673), that case does not seem applicable. (People v. Boston & Maine R. R., 202 App. Div. 54, 234 N. Y. 629; Matter of New York, N. H. & H. R. R. Co. [State Tax Comm.], 266 App. Div. 470.) V. The Liebl extension agreement is a supplemental instrument recorded for the purpose of perfecting the primary mortgage, or pursuant to some provision or covenant therein and, as a consequence, is exempt from taxation under section 255 of the State Tax Law. VI. The imposition of a mortgage tax on the Liebl extension agreement constitutes double taxation. (Matter of Cooley, 186 N. Y. 220; Matter of City Tit. Ins. Co. v. Orgel, 205 Misc. 1076, 2 A D 2d 250.)

      Willard P. Scott and P. J. Riordan for Savings Banks Association of the State of New York, amicus curia, in support of appellant’s position.
    I. The court below erroneously held that for purposes of sections 253 and 255 of the Tax Law a new debt is created where there is a substitution of obligors. (Matter of City Tit. Ins. Co. v. Orgel, 2 A D 2d 250; People ex rel. Banner Land Co. v. State Tax Comm., 244 N. Y. 159; Matter of Lloyds First Mtge. Corp. v. Lynch, 233 App. Div. 782, 260 N. Y. 642; People ex rel. Metropolitan Playhouses v. Graves, 251 App. Div. 655, 275 N. Y. 621; People ex rel. Williamsburgh Sav. Bank v. State Tax Comm., 245 N. Y. 414; Matter of Erie R. R. Co. v. State Tax Comm., 260 App. Div. 268, 284 N. Y. 673; Matter of Park & 46th St. Corp. v. State Tax Comm., 269 App. Div. 7.) II. The decision below upsets a long-established business and administrative practice of such consequence that any change at this late date should be made only by legislation. (Grimmer
      v. Tenement House Dept. of City of N. Y., 205 N. Y. 549; Crowley v. Lewis, 239 N. Y. 264; Town of Amherst v. County of Erie, 236 App. Div. 58, 260 N. Y. 361; Miller v. Discount Factors, 1 N Y 2d 275; RKO-Keith-Orpheum Theatres v. City of New York, 308 N. Y. 493.)

      Daniel McNamara for Savings Association League of New York, amicus curice, in support of appellant’s position.
    I. The extension agreement recorded by petitioner-appellant is not subject to the additional mortgage tax for the reason that it did not create a new indebtedness. II. The fact that the builder was released from liability by the terms of the extension agreement is no more significant than if the lending institution, after the building operation is completed, gives the builder a separate general release and acquittance. III. There is no tax upon an agreement that modifies, extends or consolidates a mortgage unless there is a newly created debt, a new or increased lending of money and, when there is an increase, the mortgage tax is levied only upon the increase. The tax is upon the mortgage and not upon the personal liability created by a bond. (People ex rel. Banner Land Co. v. State Tax Comm., 244 N. Y. 159; Matter of Fifth Ave. 46th St. Corp. v. Bragalini, 4 A D 2d 387; Matter of Park & 46th St. Corp. v. State Tax Comm., 295 N. Y. 173; Murray v. Marshall, 94 N. Y. 611; People ex rel. Metropolitan Playhouses v. Graves, 251 App. Div. 655, 275 N. Y. 621; National Sav. Bank v. Fermac Corp., 241 App. Div. 204, 266 N. Y. 443.)

      Arthur W. Renander for Jamaica Savings Bank, amicus curice, in support of appellant’s position.
    I. The language of this extension agreement between the purchaser, Liebl, and petitioner does not discharge or increase the principal indebtedness which is the prerequisite under section 255 for an additional mortgage tax. It secures no new or further indebtedness or obligation. (Matter of Park & 46th St. Corp. v. State Tax Comm., 295 N. Y. 173; People ex rel. New York Tit. & Mtge. Co. v. State Tax Comm., 220 App. Div. 396.) II. The levying of a second mortgage tax would be inconsistent with the language of section 253 which establishes the basis for computing the mortgage tax as the amount of the principal indebtedness, not a change in the obligor. (Matter of Park & 46th St. Corp. v. State Tax Comm., 295 N. Y. 173; Matter of New York State

      Gas & Elec. Corp. v. Gilchrist, 209 App. Div. 771.) III. The agreement whereby Liebl assumed the mortgage constitutes a supplemental mortgage within the language of section 255 and is therefore not taxable. (Metropolitan Trust Co. of City of N. Y. v. State Bd. of Tax Comrs., 172 App. Div. 653; Matter of Erie R. R. Co. v. State Tax Comm., 260 App. Div. 268, 284 N. Y. 673.) IV. The court has concerned itself with the formalities and not the substance of this transaction, V, The court’s interpretation will produce hardships never intended by the Legislature. (People ex rel. New York Tit. d Mtge. Co. v. State Tax Comm., 220 App, Div. 396,)

      Louis J. Lefkowitz, Attorney-General (Julius L. Sackman and Paxton Blair of counsel), for respondents.
    I. The extension agreement between Liebl and appellant created a new indebtedness or obligation which is subject to payment of the mortgage recording tax. (People ex rel. Home Mtge. Inv. Co. v. State Bd. of Tax Comrs., 182 App. Div. 699; People v. Boston d Maine R. R., 202 App. Div. 54, 234 N. Y. 629; People ex rel. Jewelers Bldg. Corp. v. State Tax Comm., 214 App. Div. 99, 241 N. Y. 524; People ex rel. Banner Land Co. v. State Tax Comm., 244 N. Y. 159; Matter of Erie R. R. Co. v. State Tax Comm., 260 App. Div. 268, 284 N. Y. 673; Matter of New York, N. H. & H. R. Co. [State Tax Comm.], 266 App. Div. 470; Matter of Park d 46th St. Corp. v. State Tax Comm., 295 N. Y. 173; People ex rel. Williamsburgh Sav. Bank v. State Tax Comm., 245 N. Y. 414; People ex rel. New York Tit. & Mtge. Co. v. State Tax Comm., 220 App, Div. 396, 245 N. Y. 603; People ex rel. Westbrook-Buffalo v. State Tax Comm., 257 App. Div. 705, 283 N. Y. 552; Matter of Sverdlow v. Bates, 283 App. Div. 487; Matter of Fifth Ave. & 46th St. Corp. v. Bragalini, 4 A D 2d 387,) II, The extension agreement does not fall into any of the excepted categories set forth in section 255, which would establish it as a supplemental mortgage. (Hygienic Ice & Refrig. Co. v. Franey, 142 App. Div. 143; People ex rel. Astor Trust Co. v. State Tax Comm., 174 App. Div. 320; People ex rel. United States Tit. Guar. Co. v. State Tax Comm., 230 N. Y. 102; People ex rel. New York State Gas & Elec. Corp. v. Gilchrist, 209 App. Div. 771, 240 N. Y. 552; People ex rel. Jewelers Bldg. Corp. v. State Tax Comm., 214 App. Div. 99, 241 N. Y. 524; People ex rel. Banner Land Co. v.
      State Tax Comm., 244 N. Y. 159; People ex rel. Williamsburgh Sav. Bank v. State Tax Comm., 245 N. Y. 414; People ex rel. New York Tit. & Mtge. Co. v. State Tax Comm., 220 App. Div. 396, 245 N. Y. 603; People ex rel. Metropolitan Playhouses v. Graves, 251 App. Div. 655, 275 N. Y. 621; People ex rel. Westbrook-Buffalo v. State Tax Comm., 257 App. Div. 705, 283 N. Y. 552; Matter of Sverdlow v. Bates, 283 App. Div. 487; Matter of Fifth Ave. & 46th St. Corp. v. Bragalini, 4 A D 2d 387.) III. The tax herein does not constitute double taxation, nor does it imperil existing mortgage investments.
   Desmond, J.

Petitioner, a savings and loan association which loans money on real property mortgages, brought this proceeding for the refund to it of a $100 mortgage recording tax imposed on the supposed authority of section 253 of the Tax Law. The first sentence of section 253 is as follows :“A tax of fifty cents for each one hundred dollars and each remaining major fraction thereof of principal debt or obligation which is, or under any contingency may be secured at the date of the execution thereof or at any time thereafter by a mortgage on real property situated within the state recorded on or after the first day of July, nineteen hundred and six, is hereby imposed on each such mortgage, and shall be collected and paid as provided in this article.” The State Tax Commission had already imposed and collected a mortgage recording tax on the mortgage here involved. The dispute is as to whether it was entitled to another such $100 tax on the recordation of an extension agreement relating to that same mortgage. All concerned agree that ordinarily the recording of an agreement extending an existing mortgage does not call for the imposition of a new mortgage recording tax. However, in this instance the Tax Commission and the Appellate Division have held that this extension agreement, because it released the original obligor and brought in as new obligors the purchasers of the property, created for recording tax purposes a new mortgage debt. Therefore, they ruled, the putting on record of this particular extension agreement amounted to the recording of a new mortgage and justified the collection of another $100 tax. We take a different view.

The facts are few and undisputed. A building contractor (Gene Williams) to finance the construction of a residence entered into a building loan agreement with petitioner and at the same time executed a one-year $20,000 bond and mortgage to petitioner without any provisions for amortization of principal. On the recording of this mortgage there was paid the full $100 tax levied by section 253 {supra). Petitioner advanced the $20,000 during the construction. After the house was completed, contractor Williams conveyed the property to purchasers named Liebl, the deed reciting that the transfer was subject to the mortgage held by petitioner. On the same date there was executed the agreement between petitioner and the Liebls which extended the time of payment of the original indebtedness (reduced by payment at the same time to $18,500) with provisions for monthly payments over a 20-year term and a stipulation that the original mortgage on which the recording tax had been paid was continued as a valid first lien on the premises. No new money was loaned or advanced. This extension agreement contained this paragraph which caused the present controversy :£ ‘ In consideration of the present Mortgagor’s assumption of the mortgage debt herein, Mortgagee hereby releases Gene Williams from any liability in connection with the aforesaid obligation.” That release of the original obligor plus the assumption of the mortgage debt by new obligors made this agreement, according to the State Tax Commission, a new mortgage for the recording of which a new tax was due. Petitioner paid the additional tax under protest, then brought this proceeding for a refund.

One statute is involved here: Section 253 of the Tax Law {supra) which imposes a 50 cents-per-$100 recording tax on each mortgage. Inapplicable is section 250 of the Tax Law which says that the recording of an agreement increasing a mortgage indebtedness shall be taxable as to the increase, or section 255 of the Tax Law which taxes the recording of a supplemental mortgage which “ creates or secures a new or further indebtedness ”. Our whole question is whether this extension agreement is to be considered a new mortgage because it substituted new obligors for the old obligor.

In answering our question we keep in mind that tax laws are, at least when ambiguous or doubtful, construed strictly against the taxing power and liberally in favor of the taxpayer (Metropolitan Convoy Corp. v. City of New York, 2 N Y 2d 384, 390) and construed, if possible, so as to avoid double taxation (Mat ter of Cooley, 186 N. Y. 220, 227). It would offend against those principles to say that the extension agreement we are here examining was a new “ mortgage ” subject to a new recording tax.

None of the precedents point to a different answer. People ex rel. Banner Land Co. v. State Tax Comm. (244 N. Y. 159, 162) tells us that this section 253 tax ‘ ‘ is upon the mortgage and not upon personal liability created by a bond ’ \ Matter of Erie R. R. Co. v. State Tax Comm. (260 App. Div. 268, affd. 284 N. Y. 673) dealt with an issue of new mortgage bonds sold to a new lender to finance the payment of old notes and the redemption of old mortgage bonds pledged as collateral for the old notes, in other words, a wholly new loan and loan agreement. Matter of Park & 46th St. Corp. v. State Tax Comm. (295 N. Y. 173, 177) makes it clear that the mortgage recording tax is measured by the principal amount of the mortgage debt and “ not by the maturity date of the mortgage debt, nor by the interest rate. ’

We hold, therefore, that this extension agreement was as matter of law not such a “mortgage” as to be subject to the recording tax of section 253 (supra).

The order should be reversed and the determination of the State Tax Commission annulled and the prayer of the petition for refund granted, with costs in this court and in the Appellate Division.

Chief Judge Conway and Judges Dye, Fuld, Fboessel, Van Voobhis and Bueke concur.

Order reversed, the determination of the State Tax Commission annulled and the matter remitted for further proceedings in accordance with the opinion herein, with costs in this court and in the Appellate Division.