author: Chief Judge Conway. Fuld, J. (dissenting).

text:
    The People of the State of New York, Respondent, v. Aaron Glubo, Appellant. The People of the State of New York, Respondent, v. Seymour Exelberth, Appellant. The People of the State of New York, Respondent, v. Robert B. Epstein, Appellant. The People of the State of New York, Respondent, v. Atlantic Sewing Stores, Inc., Appellant.
    Argued November 21, 1958;
    decided April 9, 1959.

      Edward H. Levine and Vernon G. Rossner for appellants.
    I. Section 421 of the Penal Law made criminal only advertising where the intention was “ to sell the merchandise so offered,” and the entire prosecution and the trial below was based upon appellants’ intention not to sell the merchandise they advertised. II. Only the Legislature can declare that certain acts and practices shall henceforth constitute criminal activity. (People v. Fein, 292 N. Y. 10; De Veau v. Braisted, 5 A D 2d 603.) III. The conspiracy count as alleged in the information was fatally defective and failed to confer jurisdiction in Kings County to prosecute. (People v. Hines, 284 N. Y. 93; People v. Tavormina, 257 N. Y. 84; People ex rel. Hart v. Truesdell, 260 App. Div. 884; People v. Shakun, 251 N. Y. 107; People v. Benc, 288 N. Y. 318; People v. Vetri, 309 N. Y. 401; People v. Mather, 4 Wend. 229; People v. Hudson Val. Constr. Co., 217 N. Y. 172; People v. Spivak, 237 N. Y. 460; People v. Fein, 292 N. Y. 10.) IV. The evidence was insufficient as a matter of law to establish a conspiracy to violate section 421 of the Penal Law. (People v. LeWinter’s Radio Stores, 256 App. Div. 1098; People v. Custom Shops, 267 App. Div. 168; People v. Grant Co., 272 App. Div. 947; People v. Fleming, 273 App. Div. 1014; Commonwealth v. Stone, 321 Mass. 713; People v. Weiner, 248 1ST. Y. 118; People v. Lewis, 238 N. Y. 1.)

      Edward S. Silver, District Attorney (Aaron E. Koota and William Sonenshine of counsel), for respondent.
    I. The falsity of the advertisement was established by overwhelming proof that appellants, pursuant to their preconceived plan, never intended to sell the advertised product. (People v. Harris, 294 N. Y. 424; McSweeney v. Bazinet, 269 App. Div. 213, 295 N. Y. 797; Browder v. United States, 312 U. S. 335; People v. Hines, 284 N. Y. 93; People v. Richter’s Jewelers, 291 N. Y. 161; People v. Federated Radio Corp., 244 N. Y. 33; People v. Kelly, 204 Misc. 145.) II. The court below had jurisdiction of the information which properly charged the commission of a crime in Kings County. (Adams v. People, 1 N. Y. 173; People v. Werblow, 241 N. Y. 55; Matter of Polansky v. Sobel, 285 App. Div. 1178; Matter of Quill v. County Court of Kings County, 3 A D 2d 717; People v. Henderson, 298 N. Y. 462; People v. Tavormina, 257 N. Y. 84.) III. The construction of section 421 of the Penal Law accorded it by the courts below is not affected by the 1958 amendment to the General Business Law. (Davis v. Supreme Lodge, Knights of Honor, 165 N. Y. 159; People ex rel. Westchester Fire Ins. Co. v. Davenport, 91 N. Y. 574.)
   Chief Judge Conway.

Defendants stand convicted of the crime of conspiracy to commit false advertising over a radio station and in other ways in violation of section 421 of the Penal Law.

The information filed against them contains two counts.

In the first count, defendants are accused of a conspiracy to commit the crime of violation of section 421 of the Penal Law in that, in the County of Kings, defendants continuously from June, 1953 to December, 1954, with intent to sell and dispose of merchandise, to wit, sewing machines and attachments and appurtenances thereto, offered by them for sale to the public corruptly conspired and agreed to disseminate and place before the public in this State over a radio station and in other ways, advertisements regarding such merchandise; that such advertisements contained assertions, representations and statements of fact which were untrue, deceptive and misleading, and that such advertisements over said radio station were intended to be, and were, heard by the public in Kings County.

As part of the first count, the information recites five overt acts committed by defendants in furtherance of the conspiracy: (1) that on December 7,1953 defendants entered into a contract with television station WATY for the telecasting of a commercial advertisement prepared by defendants, (2) that in and about the month of November, 1953, defendants instructed an employee to enter fictitious sales in the books and records of defendant Atlantic Sewing Stores, Inc., at $23 a machine, (3) that in or about the month of May, 1954, defendant G-lubo instructed a salesman for defendant Atlantic Sewing Stores, Inc., not to sell the sewing machine advertised, under any circumstances, at the advertised price of $29.50, (4) that in or about the month of May, 1954, defendants instructed a salesman in the method of rigging a $29.50 sewing machine so that it would not work for the customer when demonstrated for the purpose of discouraging said customer from purchasing the machine at the advertised price and (5) that in or about the month of July, 1954, defendants’ salesman informed a prospective customer in Kings County that the advertised machine was made of cast iron and was cheap and advised said customer not to buy it.

In the second count defendants are accused of violating said section 421 in that defendants, in the same county, during the same period and with the same intent, in the form of a live commercial television announcement, over a television station, disseminated and placed before the public an advertisement regarding such sewing machines, and that such advertisement contained an assertion, representation, and statement of fact which was untrue, deceptive and misleading, in that it was falsely represented that defendants would sell a “ Queen Anne Console Magic Stitcher” sewing machine with a sewing chair for the price of $29.50, whereas in truth and in fact defendants did not intend to sell the article so advertised at the stated price.

The second count of the information, by which defendants were accused of the substantive crime of false advertising in violation of section 421 of the Penal Law, was dismissed at the end of the People’s case upon motion of the defendants, the trial court stating that it was dismissing such count upon the ground that “asa matter of law * * * no crime was committed in Kings County.” Thereafter, the court found defendants guilty of the first, or conspiracy, count. Bach of the individuals was sentenced to a fine of $500 or 90 days, and 4 months in the city prison, the latter part of the sentence being suspended. The corporate defendant was fined $500.

The record discloses the following facts: At the time of the alleged crime, the defendants were engaged in the business of selling sewing machines throughout the metropolitan area. They operated under the firm name of Atlantic Sewing Stores, Inc. (the corporate defendant), and their place of business was located in Queens County. To obtain and increase the sale of their sewing machines, defendants determined to procure leads to prospective customers, in part by advertising over the medium of television. Shortly before December 10,1953 defendants entered into an agreement to broadcast or telecast over station WATV, located in Newark, New Jersey, but received all over the metropolitan area, an advertisement which offered to sell “ for the closeout price of just $29.50,” a “ beautiful Queen Anne console * * #, a fine sewing chair with large storage compartment ” and a “ brand new 1954 model top quality sewing machine” with “the sensational new, exclusive Magic Stitcher ’ ’ which darns, mends, embroiders, monograms, sews on zippers, appliques, quilts, sews over pins and needles and sews forward and reverse — all without additional attachments. The advertisement further offered to the first 50 persons to call the telephone numbers given by the announcer “ if you do decide to buy ” a “ gorgeous 22 piece sewing kit, including a pair of pinking shears.”

It seems quite clear from the evidence that defendants agreed that they would systematically subvert the sale of the $29.50 machine by proving to prospective customers that the advertised machine was actually of inferior quality and could not function properly, with the intent and purpose of bringing about a “ step up ” sale, i.e., a sale of a higher priced machine. The “ step up ” scheme was to be operated as follows: In response to an inquiry for the $29.50 Magic Stitcher, defendants would first send to the prospective customer’s home a so-called “ lead man” who would take the customer’s order by accepting a deposit of as little as 25 cents on the $29.50 machine and who would then advise the customer that another man would deliver the machine and would instruct the customer in its operation. Thereafter, the second man, known as a “ BF ” man, would visit the customer, demonstrate the $29.50 machine, undertake to prove it to be inoperable and point out that it was basically defective and inferior, and then attempt to persuade the customer to order a better sewing machine at a much higher price. Should the “BF” man fail in his efforts to “step up” the sale, he would leave with the $29.50 machine and the customer’s deposit would subsequently be returned by mail. Commissions were earned on the sale of the higher priced machines only.

In pursuance of their agreement to “ kill ” the sale of the advertised machine and to “ step up ” the customer, defendants conducted instruction sessions or clinics for the salesmen. The sales pitch and selling methods used by the “ BF ” men in attempting to switch the prospective customers from the advertised machine to the higher priced machine were numerous. For example, the advertised machine was rigged so that when it was demonstrated it would operate for the “ BF ” salesman but would jam up for the customer. The customer would be told that his television set would have to be turned off when the advertised machine was demonstrated, otherwise the television tube or fuses would blow out. The customer would be told that the machine would have to be oiled every few minutes; that a five-pound can of grease would be needed to pack the bearings; that the customer could lose an eye if the machine jammed and the needle broke; or that the customer had a heavy foot for sewing. The “ BF ” men were specifically instructed that they could not sell the $29.50 advertised machine. As mentioned above, after the customer had been discouraged from purchasing the $29.50 machine, the “ BF ” men would undertake to sell the higher priced machine.

Defendants maintain that they intended only to discourage the sale of the advertised $29.50 machine which, incidentally, cost the defendants $45, and that they always intended to sell the advertised product where the customer could not be “ switched.” They point to testimony of six witnesses who bought the advertised $29.50 machine and to the testimony of two others who purchased and received at the advertised price a “Square Bond” machine which, according to defendants’ witnesses, was the same basic machine as the Magic Stitcher but having a different casing. Defendants also point to the fact that their records of sales reveal that, for the period May 31, 1953 to December 31, 1954, 26 of the advertised machines were sold.

In our judgment the intent of defendants to sell the advertised product is hardly spelled out by company records of 26 sales of advertised machines, 3 of which were fictitious, as hereinafter indicated. We say this because, while the defendants’ records of sales thus demonstrates that during the period May 31, 1953 to December 31, 1954 they sold 26 of the advertised machines, their records also reveal that during such period 10,951 customers entered into conditional sales contracts for the advertised machines. Between May of 1953 and December of 1953 there were 799 conditional sales contracts entered into for. the advertised machine. Of these, only three were entered on the books as sold. These three sales were fictitious and were entered in the records so that an examination of the books and records would show that advertised machines were sold. From January 1, 1954 to June 30, 1954, 3,161 conditional sales contracts for the advertised machine were entered into, but only one advertised machine was recorded as sold. From June 30, 1954 to December 31,1954, 6,991 conditional sales contracts were entered into. However, only 22 advertised machines are recorded as sold.

Thus, it will be seen that the bulk of the sales of the $29.50 machines took place during the period June to December, 1954. Seemingly by that time defendants had received a number of complaints from the television station and from the Better Business Bureau concerning their advertising and sales methods. So it would appear that the sales of the advertised machine were merely part of a well-calculated scheme to disguise or conceal defendants’ intent not to sell the advertised machine.

In brief, the record before us, read in its entirety, justifies the findings implicitly made below to the effect that when defendants originally planned the television advertising campaign in December of 1953, and for at least a considerable period of time thereafter while the advertising was continuing, defendants had no intention of making any sales of the advertised machines and that their salesmen, following their instructions. implemented this negative intent by various means, and that it was defendants’ intention at all times to sell sewing machines which were higher priced than those advertised.

We think it advisable at this juncture to point out that the defendants were not charged with nor tried for conspiring to advertise falsely that the $29.50 machine had certain capacities and qualities which it did not in fact have. The question of the true capacities and qualities of the $29.50 machine was not litigated. The sole claim of falsity, upon which claim the information is based, is that defendants had no intention whatever of selling the machine they advertised for sale. In his opening statement'the prosecutor told the court that he would show that the defendants ‘ were not in the business to sell 29.50 machines ’ ’ and that ‘ Under no circumstances were the salesmen to sell a 29.50 machine ’ ’. What is more, the evidence adduced by the prosecutor was designed to prove an intent on the part of defendants not to sell the advertised product. The People’s case rests on the fact that defendants advertised for sale a sewing machine which they did not intend to sell in order to obtain leads so that they might sell a higher priced sewing machine.

fThis brings us to the first question of law presented, viz., whether the agreement of defendants to advertise for sale a sewing machine which they did not intend to sell in order to obtain leads to persons to whom they might sell a sewing machine which was not advertised constitutes a conspiracy to violate section 421 of the Penal Law.

Insofar as pertinent section 421 of the Penal Law read at the time of conviction: ‘ Any person * * * who, with intent to sell * * * merchandise, * * * or anything offered by such person, * * * directly or indirectly, to the public for sale or distribution, or with intent to increase the consumption thereof, * * * makes, publishes, disseminates, circulates, or places before the public, or causes, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in this state, * * * over any radio station or in any other way, an advertisement, announcement or statement of any sort regarding merchandise, * * * or anything so offered, * * * which advertisement contains any assertion, representation or statement of fact which is untrue, deceptive or misleading, shall be guilty of a misdemeanor.”

Defendants’ contention is that they cannot be found guilty of violating section 421 for, to establish a violation of that section, it must be shown that defendants had the actual intent to sell the merchandise offered in the advertisement and here the People’s case proceeds on the contrary theory, i.e., that defendants did not sell the merchandise offered in the advertisement.

The People, on the other hand, urge that the statute requires proof of but three elements, namely, (1) an intent to sell merchandise, (2) the placing before the public of an announcement or statement of any sort regarding merchandise and (3) the existence in such statement or announcement of deceptive or misleading matter.

The People go on to argue that the three elements were proved in the present ease since (1) defendants intended to sell merchandise, to wit, sewing machines; (2) they caused an advertisement to be placed before the public over television regarding these sewing machines; and (3) the offer of defendants to sell sewing machines at $29.50 contained in that advertisement was an assertion or representation that was deceptive and misleading, in that defendants never intended to sell sewing machines at $29.50.

Defendants are quite correct in their assertion that section 421 requires proof of an “ actual intent ’ ’ to sell as distinguished from a “ prima facie intent ”, visible intent “ audible intent ” or “ ostensible present intent.” The words in penal statutes (indeed, the words in all statutes) are to be accorded their commonly accepted meaning in order that the citizenry may be apprised of exactly what is forbidden. Had it been the legislative purpose in enacting section 421 to depart from the ordinary meaning of intent ”—to give to the term a sense different from that in which it would be understood by the average citizen—the lawmakers could easily have selected phraseology designed to evidence that purpose. Instead, the lawmakers used the common word intent ’ ’ and a court interpreting or construing section 421 must give that word its natural and common meaning. There can be no doubt, of course, that actual intent may, under certain circumstances. properly be inferred from one’s acts. Here, it is not possible to draw the inference that defendants actually intended to seE the Magic Stitcher from the fact that they advertised to sell it, in the face of the theory of the People, and the proof adduced in support thereof, which establishes beyond doubt that defendants did not intend to sell the advertised Magic Stitcher.

While we agree with defendants that section 421 requires proof of an actual intent to sell, we part company with the defendants, however, at the point where defendants argue that to violate section 421 they must actuaEy intend to sell the particular item of merchandise falsely advertised. The statute does not so read. It states simply that a merchant is guilty of violating its provisions if “ with intent to seE * * * merchandise ” he places before the public an advertisement “ regarding merchandise” whieh advertisement is false. Defendants did just that. With actual intent to seE expensive sewing machines defendants placed before the public a false advertisement regarding inexpensive sewing machines. Just as defendants had planned, the credulous were duped by the advertisement. The statute evinces the sweeping intent of the Legislature to make it unlawful to advertise as a fact that which is not a fact. Nowhere does it appear, by any semantic twist, that the Legislature limited the crime to a deceptive or. misleading advertisement as to the particular item advertised.

Although there is no claim or proof that defendants cheated or defrauded any who purchased sewing machines from them (by which we mean that for all that appears and for all that is claimed [a] the defendants made no false representations concerning the machines they did sell and [b] the sewing machines sold by defendants were worth the money paid therefor), defendants did put before the public a false and misleading advertisement to enable them to obtain sales leads. The false advertisement was specifically designed to lead defendants to credulous buyers. The record attests to defendants’ success in this respect. Section 421 of the Penal Law does not require a showing that anyone has been cheated or defrauded by the false advertising—it merely requires a showing that the defendants have been guilty of false advertising. So, in People v. Richter’s Jewelers (291 N. Y. 161), we-upheld a conviction under section 421 upon a mere showing that defendant had displayed a diamond ring with a tag attached stating, “ 1 Ct. Perfect Diamond ”, when the fact was that it was an inferior smaller stone. An inspector of weights and measures detected the falsity in the advertisement. Defendants’ claim was that the tag was intended for a perfect, one-carat diamond, and that it was attached by innocent mistake to an inferior smaller stone. In rejecting that defense we said (pp. 165-166): “ The Court of Special Sessions might have accepted the explanation if it had chosen. It was not bound to do so. In any event, though innocent error might render the offense venial, a statement of fact which is untrue, deceptive, or misleading, placed upon a tag ‘ with intent to sell or in any wise dispose of merchandise ’ constitutes a violation of section 421 of the Penal Law even when the statement is made without 1 actual evil design or contrivance to perpetrate fraud or injury upon others.’ The statutory offense is committed by material misrepresentations intended to influence the bargain ’ though at times such misrepresentations may be due to lack of care rather than to dishonesty. (People v. Federated Radio Corp., 244 N. Y. 33, 39, 41).”

From the foregoing it will be seen that the statute before the court for construction was designed to prevent deceptive, careless or negligent conduct resulting in misrepresentation and to protect the credulous against themselves. A construction which achieves that purpose is in accord with the ‘ fair import ’ of its terms, is designed ‘ to promote justice and effect the objects of the law ’ and does harm only to the wrongdoer who either intentionally or carelessly puts out for public consumption deceptive, misleading or untrue advertising or other printed material. (People v. Reilly, 255 App. Div. 109, affd. 280 N. Y. 509.) ” (People v. Kelly, 204 Misc. 145, 148.)

The rule of morality recognized by this construction of section 421 can hardly be deemed too rigid for respectable merchants. To borrow language from Chancellor Walworth in People v. Haynes (14 Wend. 546, 560): Neither do * * * [we] believe any honest man will be in danger of becoming a tenant of the state prison, if the statute against * * * [false advertising], is carried into full effect * * *. But it may indeed limit and restrain the fraudulent speculations and acts of some, whose principles of moral honesty are regulated solely by the denunciations of the penal code.”

Defendants argue that an addition to the General Business Law enacted two days prior to the affirmance herein by the Appellate Division proves that the Legislature intended section 421 of the Penal Law to be inapplicable in a situation where the advertiser does not intend to sell the item advertised. This contention is predicated upon new section 396 of the General Business Law (L. 1958, ch. 849), which authorizes the Attorney-General to bring a civil action for an injunction where it appears that a person advertises merchandise with the intent, design or purpose (a) not to sell the merchandise so advertised at the price stated in the advertisement or (b) not to sell the merchandise so advertised. However, the enactment of section 396 does not militate against the view that defendants’ conduct violated the provisions of section 421 of the Penal Law. By the enactment of section 396 of the General Business Law, the Legislature merely gave to the Attorney-General the right to seek a civil injunction against certain acts which are criminal. This is not without precedent. The false advertising of securities comes within the ban of section 421 of the Penal Law. Nevertheless, the Attorney-General is authorized by the Martin Act (General Business Law, art. 23-A) to seek a civil injunction against untrue and misleading advertisements made with the intent to sell securities (People v. Federated Radio Corp., 244 N. Y. 33).

Defendants rely upon the Governor’s 1958 Message to the Legislature as indicating that section 421 does not cover their acts. In such message the Governor wrote (N. Y. State Legis. Annual, 1958, p. 381): “ As various district attorneys have indicated publicly, the present Penal Law does not give them adequate authority to prosecute those who cheat consumers by means of vicious sales promotional practices. One such practice is bait advertising, where products are advertised for sale at a price at which the seller has no intention of selling. Another problem is that of fictitious bargain claims. I recommend legislation to provide adequate protection to the consumer against those evils, both through changes in the Penal Law and by the provision of new civil remedies.”

It would seem from the quoted message that the Governor’s objective was to urge the Legislature to increase the restriction on so-called bait advertising ”. Assuming, however, that the message reveals that the Governor and various district attorneys ” were under the impression that section 421 was inapplicable to bait advertising, that impression may not influence our decision. In the ordinary situation where a court looks to an extrinsic aid to construction, such as a Governor’s memorandum, it does so to ascertain the purpose of legislation thereafter enacted. Here, defendants ask us to take the Governor’s memorandum into account in construing a statute enacted years before the memorandum was written. If we were to rely on the memorandum for such purpose, we would be investing the Governor with the power of construction properly belonging to the judicial branch of government. It goes without saying that the courts construe statutes, not the Governor, and certainly not the various District Attorneys within the State.

Finally, defendants call our attention to the fact that on the same day the Legislature enacted section 396 of the General Business Law it also amended section 421 of the Penal Law, but only to add the words “ or over any television channel” to the various media of communication covered by the statute. The argument is made that while thus amending section 421 of the Penal Law, and while also enacting section 396 of the General Business Law to provide for a civil injunctive remedy against advertising with an intent, scheme or purpose not to sell, the Legislature did not see fit to amend section 421 of the Penal Law further so as to include in the penal statute the same prohibition against an intent, scheme or purpose not to sell as contained in the nonpenal enactment. This, it is claimed, demonstrates that defendants’ conduct was never intended to be covered by section 421 of the Penal Law. The short answer to this argument is that the Legislature deemed it unnecessary to amend section 421 of the Penal Law to include the language employed in section 396 of the General Business Law for the reason that they concluded that the section adequately covered conduct such as defendants’. It must be borne in mind that defendants were not convicted of violating section 421 simply because they advertised items of merchandise which they never intended to sell. They were convicted because they falsely advertised ‘‘ with intent to sell * * * merchandise,” albeit not the precise items advertised.

Defendants were charged, in the words of section 421, with placing false advertisements before the public “ over a radio station and in other ways ”, The proof shows that the advertisements were communicated to the public over a television channel. This conduct would clearly be encompassed by the broad language of the statute, to wit, “ in any other way ”. The amendment of section 421, after defendants’ conviction, to specifically include the phrase or over any television channel ” does not mean that advertising over a television channel prior to the amendment was not covered by the sweeping phrase * ‘ in any other way”. By the amendment the Legislature merely spelled out that which was previously set forth in general terms.

The final point to be considered is whether the Court of Special Sessions of the City of New York, Borough of Brooklyn, possessed jurisdiction to try defendants on the conspiracy count.

It is clear that except in connection with the commission of certain crimes, not here material, an overt act is an essential ingredient of the crime of conspiracy (Penal Law, § 583)., “ Whatever the relative weight of the unlawful agreement and of the overt act as necessary parts of the crime, the latter is a required element. Since no agreement to commit a crime amounts to a conspiracy unless some act be done to effect the object thereof, the crime is not complete until the doing of the overt act. Thus, the commission of the crime depends for its validity upon the overt act and the unlawful agreement or combination without the overt act is insufficient to constitute the crime.” (People v. Hines, 284 N. Y. 93, 112-113.)

The information here charges that 6 ‘ From, in and about the month of June, 1953, and continuously thereafter, to in or about the month of December, 1954, in the County of Kings, defendants wilfully, knowingly, unlawfully and corruptly conspired ”, etc. (emphasis supplied). Five overt acts are alleged in the information. The first four overt acts specified occurred outside of Kangs County. The first overt act specified occurred in Queens County and Newark, New J ersey. The second overt act specified occurred in Queens County since all bookkeeping entries were made there. The third and fourth overt acts specified would appear to have taken place in the defendants’ place of business in Queens County. The fifth and final overt act aEeged is that: “A salesman, agent or representative of said defendants, in or about the month of July, 1954, in the County of Kings, told the customer that the sewing machine, as advertised by defendants over station WATV, was made of cast iron and was cheap, and advised said customer not to purchase said machine.”

Defendants argue that this fifth overt act cannot serve to confer jurisdiction to try them in Kings County since such act must necessarily have occurred after the conspiracy to commit false advertising had been completed. We do not agree. The conspiracy is alleged, and was proved, to have extended over the period of June, 1953 to December, 1954. It was thus a conspiracy of a continuing nature. The fifth overt act alleged in the information was proved to have occurred in September, 1954, during the period of the false advertising campaign.

Even if we accept defendants’ premise that the fifth overt act followed the false advertising in point of time, the proof of such overt act taking place in Kings County was sufficient to warrant a conviction in Kings County inasmuch as the overt act was done to effect the object of the conspiracy (Penal Law, § 583). The conspiracy necessarily involved dissuading customers from purchasing the $29.50 advertised machine.

The Appellate Division has offered a further sound reason for holding that an overt act in furtherance of the conspiracy was committed in Kings County. After stating that the broadcasts were relayed or rebroadcast from the Empire State Building in New York County and were heard in every county of the city, the Appellate Division wrote:

“ While the overt acts of broadcasting are not specifically labeled or described in the information as ‘ overt acts ’ in accordance with the literal requirements of section 398 of the Code of Criminal Procedure, nevertheless such overt acts are implicitly incorporated therein. The gravamen of the general conspiracy count is that appellants conspired to violate section 421 of the Penal Law, by disseminating untrue statements in advertisements ‘ over any radio station ’, with the intention of selling their sewing machine to the public, knowing and intending that such advertisements should be heard in Kings County. It may be said that here the ‘ requirement of section 398 * * * respecting the allegation of overt acts has been met, although quite ineptly. The use of the words overt acts ” is not indispensable, although they should be used. It is sufficient if overt acts are in fact alleged ’ (People v. Scobie, 257 App. Div. 854, affd. 281 N. Y. 796; cf. Code Crim. Pro., § 284, subd. 7).
‘ ‘ In any event, the trial proceeded upon the basis of the overt acts broadcasting the advertisements containing the false assertions. Indeed, the trial revolved upon proof of such broadcasts as the foundation of the conspiracy count. Reading the information in its entirety, as we must, it is our opinion that appellants were sufficiently apprised of all the overt acts relied upon (including the broadcasting) to enable them, as they actually did, to prepare their defense to such acts. Hence, it is of no moment now, after the trial, that overt acts which are implicit in the general charge, and which have been proved without objection, were not specifically labeled as ‘ overt acts ’ in the information (cf. People v. Willis, 158 N. Y. 392, 397, 398; People v. McCarthy, 250 N. Y. 358, 363; People v. Scobie, 257 App. Div. 854, supra; cf. Code Crim. Pro., § 284, subd. 7).”

It is true that the overt acts of broadcasting and rebroadcasting the advertisements containing the false statements also constituted the substantive crime of false advertising under section 421 of the Penal Law. That is of no moment, however, for as the Appellate Division has said: “ While the overt act need not ‘ be of itself a criminal act ’ and need not ‘ constitute the very crime that is the object of the conspiracy ’ (United States v. Rabinowich, 238 U. S. 78, 86; People v. Tavormina, 257 N. Y. 84, 93), nevertheless it may well be, and frequently is, for the ‘ overt act is usually the commission of the substantive offense ’ (Weiss v. United States, 103 F. 2d 759).”

The judgments of conviction should be affirmed.

Fuld, J. (dissenting).

I agree with the court that the advertising practices charged against the defendants were wrongful and offensive, but I cannot agree that they were rendered criminal by section 421 of the Penal Law. That statute declares, in essence, that a person

who, “ with intent to sell * * * merchandise,” publishes an advertisement or makes a statement, “ regarding [the] merchandise * * * so offered,” which is untrue, deceptive or misleading,”

is guilty of a misdemeanor. Reasonably read, the section condemns false advertising concerning the merchandise offered for sale-, as its language makes clear, its purpose is to protect the public against advertisements calculated to deceive customers as to qualities and values of the advertised article in order to induce them to purchase it. Section 421 does not, in terms or by any reasonable construction, encompass a case of advertising where the intent of the advertiser is not to sell the merchandise offered.

In the case before us, it is conceded that no false or deceptive statement was made regarding the merchandise, the $29.50 sewing machine, which had been advertised; in fact, the court acknowledges that the defendants “ had no intention of making any sales of [such] advertised machines ” (opinion, p. 468).

Bait advertising — the sort designed to lure customers into exposing themselves to the efforts of the advertisers to sell merchandise other than that offered by the advertisement— is without doubt highly reprehensible, but it rests with the Legislature, not the courts, to create and define crimes. The simple fact is that until 1958, more than two years after the defendants herein had been convicted, there was nothing on the statute books prohibiting bait advertising. In that year, Governor Harriman, in his Message to the Legislature, observing that, ‘ As various district attorneys have indicated publicly, the present Penal Law does not give them adequate authority to prosecute those who cheat consumers by means of vicious sales promotional practices ** * * [such as] bait advertising, where products are advertised for sale at a price at which the seller has no intention of selling,” recommended legislation to fill the legislative void. (N. Y. State Legis. Annual, 1958, p. 381, italics supplied.) A bill was subsequently introduced and, favorably acted on by the Legislature, became section 396 of the General Business Law (L. 1958, ch. 849).

In short, the defendant’s advertising practices, wrongful though they may have been, were not made a crime by section 421. The judgment should, therefore, be reversed and the information dismissed.

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

In each action: Judgment affirmed.

      . So far as pertinent, section 396 provides that “ No person * * * shall * * * by any means of advertisement, or other means of communication, offer for sale any merchandise * * * as part of a plan or scheme with the intent, design or purpose not to sell the merchandise * * * so advertised


source: Caselaw Access Project

author: Burke, J.

license: Public Domain

text:
    Woods Patchogue Corp., Respondent, v. Franklin National Insurance Company of New York, Appellant.
    Argued January 14, 1959;
    decided April 9, 1959.

      Norman 8. Rein, Paul D. Compton and Ernest E. Rosenberg for appellant.
    I. The Appellate Division erred in its conclusion that the policy at bar is a severable grouping of separate risks. (Ming v. Corbin, 142 N. Y. 334; American Sur. Co. of N. Y. v. Rosenthal, 206 Misc. 485, 1 A D 2d 652; International Ind. Co. v. Duncan, 254 S. W. 233 [Tex.]; Hartford Fire Ins. Co. v. Owens, 272 S. W. 611 [Tex.]; Donley v. Glens Falls Ins. Co., 184 N. Y. 107; Schuster v. Dutchess County Ins. Co., 102 N. Y. 260.) II. The New York Insurance Law does not require a jewelers’ block policy to conform to the standard fire insurance policy. (Fireman’s Fund Ins. Co. v. Vermes Credit Jewelry, 185 F. 2d 142; Northwestern Nat. Ins. Co. v. Nortensen, 230 Wis. 377; Motors Ins. Corp. v. Stowers, 206 Okla. 692; Benvenuto v. Central Mfrs. Mut. Ins. Co., 80 Pa. Super. Ct. 213.) III. The jewelers ’ block policy is not a contract of fire insurance under the Insurance Law. (Davis Yarn Co. v. Brooklyn Yarn Dye Co., 293 N. Y. 236.) IV. The administrative approval of the policy form is entitled to great weight. (People ex rel. Werner v. Prendergast, 206 N. Y. 405; Grimmer v. Tenement House Dept. of City of N. Y., 205 N. Y. 549; People v. Durkee, 189 App. Div. 276; Gimenez v. Great Atlantic & Pacific Tea Co., 242 App. Div. 485; Matter of Heissenbuttal v. Abrams, 286 App. Div. 646.) V. Even if the provisions of section 168 are applicable to the jewelers’ block policy, the policy at bar was voided for material misrepresentations. (Bloomquist v. Parson, 222 N. Y. 375; Armour v. Transatlantic Fire Ins. Co., 90 N. Y. 450; American Sur. Co. v. Patriotic Assur. Co., 242 N. Y. 54; Rakov v. Bankers Life Ins. Co., 164 App. Div. 645.)

      Sidney N. Zipser and Howard E. Levitt for respondent.
    I. Fundamental principles of statutory construction clearly show that the Legislature never intended to make the distinction between fire insurance in one policy and fire insurance in another policy. (People v. Bell, 306 N. Y. 110; Matter of Sullivan Co., 289 N. Y. 110; Matter of Moran v. La Guardia, 270 N. Y. 450; Cimo v. State of New York, 306 N. Y. 143;
      Matter of New York Post Corp. v. Leibowitz, 2 N Y 2d 677; Hennessy v. Walker, 279. N. Y. 94.) II. Persuasive judicial precedent requires that the order appealed from he affirmed. (Fireman’s Fund Ins. Co. v. Vermes Credit Jewelry, 185 F. 2d 142; American Sur. Co. of N. Y. v. Rosenthal, 206 Misc. 485, 1 A D 2d 652; International Ind. Co. v. Duncan, 254 S. W. 233 [Tex.]; Hartford Fire Ins. Co. v. Owens, 272 S. W. 611 [Tex.].) III. Public policy requires that the order appealed from be affirmed. (De Lancey v. Insurance Co., 52 N. H. 581.) IV. The affirmative defenses were insufficient in law because they were not referable to the fire insurance portion of the all-risk policy and, moreover, the defenses were violative of the standard form prescribed by section 168. (Schweinburg v. Altman, 145 App. Div. 377.) V. The Superintendent of Insurance has not purported to, and could not, nullify the effect of section 168 as applied to this insurance contract.
   Burke, J.

Plaintiff, a retail jeweler, sustained a loss of $22,045.69—the result of a fire in its premises. Defendant insurance company resisted payment of the claim made under a jewelers’ block policy issued to plaintiff.

In this action to recover the loss, defendant’s answer set forth five affirmative defenses based upon breaches of warranties contained in the proposal, or application for the jewelers’ block policy. This proposal was annexed to and made a part of the insurance contract. Although plaintiff, the insured, does not dispute that these warranties were breached, it claims that the defenses are ineffectual to preclude recovery where the loss sustained occurs, as here, as the result of fire. In this instance, it is urged, the standard fire insurance policy (Insurance Law, § 168, subd. 6), which does not include the warranties, is controlling, and is incorporated into the jewelers’ block policy.

Accordingly, at the trial, the plaintiff moved to strike these defenses. This motion was denied. Similarly, at the close of the evidence, it requested the court to charge that section 168 of the Insurance Law is incorporated into the fire feature of this policy. This request too was refused, and the question of breaches of the warranties was submitted to the jury.

The jury returned a verdict for the insurer, and a judgment dismissing the complaint was entered thereon. The Appellate Division reversed, and ordered a new trial.

Section 46 of the Insurance Law reads, in part, as follows: ‘ ‘ The kinds of insurance which may be authorized in this state, subject to the other provisions of this chapter, are set forth in the following paragraphs. * * * 4. ‘ Fire Insurance,’ meaning insurance against loss of or damage to any property resulting from fire, including loss or damage incident to the extinguishment of a fire or to the salvaging of property in connection therewith. * * * 20. ‘ Marine Insurance,’ meaning insurance against any and all kinds of loss or damage to: * * * (c) Precious stones, jewels, jewelry, gold, silver and other precious metals, whether used in business or trade or otherwise and whether the same he in course of transportation or otherwise ”.

Under a jewelers’ block policy then all risks of loss or damage to jewelry may be insured. Hence, insurance against loss by fire is one of the risks which may be covered by this type of marine policy. A reading of the next paragraph of subdivision 20, which expressly excludes such fire losses in particular types of marine policies under some circumstances (Insurance Law, § 46, subd. 20, par. [d]), supports this conclusion.

In section 46 the Legislature has enumerated and defined the different kinds of insurance which may be underwritten in this State. The section clearly indicates that fire insurance and marine insurance are two different types of insurance. Since this is so, we find no legislative mandate requiring marine insurance contracts, insofar as they cover loss by fire, to comply with the statutory fire insurance provisions of section 168 of the Insurance Law.

The inception and history of the jewelers’ block policy also points to this conclusion. The idea was conceived by a Lloyds of London underwriter at the turn of the century. Many American jewelers availed themselves of this policy since it provided them with the only adequate coverage for the various risks inherent in their businesses. The inadequacy of coverage offered to jewelers by domestic insurance companies was highlighted by the Superintendent of Insurance in urging the passing of legislation permitting jewelers ’ block insurance. Under the American System, a jeweler insuring property in specific locations must get a standard form of policy against fire from a fire company, and also, a second policy from a fire company which will include those coverages not contained in the standard form. He must obtain a policy from a casualty company, also a policy from a surety company, and a policy from a marine company if the property is to be transported, and then he is not covered as fully as he would be under the Lloyds policy.” (65th Annual Report of Superintendent of Insurance, N. Y. Legis. Doc., 1924, No. 21, p. 15.)

A block policy, then, as understood by the jewelers, by the insurance underwriters, by the Superintendent of Insurance, and by the Legislature, was not a combination of various risks united in one policy for convenience, but was, in reality, a new and totally different kind of insurance which was not authorized prior to the passage of the permissive legislation. Indeed, if this type of insurance were considered merely a combination of risks, there would have been no need for the enactment. It was precisely because combination policies were inadequate to serve the interests of jewelers that this new insurance was allowed. Hence, those cases cited by the plaintiff, dealing as they do with true combination policies (American Sur. Co. v. Rosenthal, 206 Misc. 485, affd. 1 A D 2d 652; International Ind. Co. v. Duncan, 254 S. W. 233 [Tex.] ; Hartford Fire Ins. Co. v. Owens, 272 S. W. 611 [Tex.]), are inapposite.

A comparison of the fire protection given by the standard fire policy and the Lloyds jewelers’ block policy indicates that the former is not incorporated into the latter.

Although the fire coverage feature of the block policy is optional, in that the insured may exclude this coverage, as a practical matter, the jewelers’ block policy includes the risk of loss by fire. The option is given to the insured to exclude it. Of course, standing alone this is but meager evidence to support a construction that the provisions of the fire policy are not incorporated into the block policy. But there are other considerations which militate against a contrary conclusion.

Thus, while the basic fire insurance rating bureau rates are used in determining the premium to be paid for the fire coverage, the actual rates are based upon the amount of inventory in unprotected areas. That percentage of jewelry which is stored, for example, in safes, receives the benefit of reduced rates. Hence the cost of the fire coverage may be substantially less than ordinary fire insurance rates where a large percentage of the inventory is stored in protected areas.

Finally, the standard fire policy insures against direct loss by fire of property at the location named in the policy. (Insurance Law, § 168, subd. 6.) The block policy coverage is more extensive, providing for both direct and indirect loss by fire, and is not confined to loss in a particular location.

Yermes Credit Jewelry v. Fireman’s Fund Ins. Co. (92 F. Supp. 905, affd. 185 F. 2d 142) lends no assistance to plaintiff. Although the factual pattern in Yermes is not significantly different from the case sub judice, the court there was obliged to consider the block policy in the light of a general Minnesota law, which authorized the writing of personal property floater risks and inland marine risks, and established the financial requirements for companies engaged in underwriting this type of insurance. (Minn. Stat. Ann., § 60.29.) Section 65.011 (formerly § 65.01) of the Minnesota laws sets forth that State’s standard fire insurance policy. The next section (§ 65.02) exempted motor vehicle insurance against loss or damage by fire from the requirements of former section 65.01, when other risks were also included in the same policy. The court reasoned that, if the jewelers’ block policy were similarly exempted, that exemption too would appear in the legislation. Consequently, it held that under Minnesota law the standard fire policy was incorporated into the block policy. To overcome this court decision, the Minnesota Legislature soon thereafter enacted appropriate legislation (Minn. Stat. Ann., § 65.02).

Our insurance law is not comparable to the Minnesota statutes. The intent of our Legislature was clearly expressed by its exhaustive definition of the different kinds of insurance. Section 46 (subd. 20, par. [c]) of the Insurance Law specifically permits all risk insurance on jewelry, whether in transportation or not.

We, therefore, are of the opinion that the provisions of the standard fire insurance policy are not incorporated into the jewelers’ block policy.

Accordingly, the order of the Appellate Division should be reversed, and the judgment of Trial Term reinstated, with costs in this court and in the Appellate Division.

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

Ordered accordingly.


author: Burke, J. Dye, J. (dissenting).

text:
    In the Matter of National Merchandising Corp., Appellant, against Public Service Commission of the State of New York et al., Respondents.
    Argued January 7, 1959;
    decided April 9, 1959.

      Paul W. Williams, William E. Hegarty and A. Warren Wilkinson for appellant.
    I. The commission may approve only a tariff provision which relates to the business of telephonic communication and which is just, reasonable and lawful. (People ex rel. Public Serv. Interstate Transp. Co. v. Public Serv. Comm., 262 N. Y. 39; People ex rel. Municipal Gas Co. v. Public Serv. Comm., 224 N. Y. 156; Matter of Quinby v. Public Serv. Comm., 223 N. Y. 244; People ex rel. Pavilion Natural Gas Co. v. Public Serv. Comm., 188 App. Div. 36; People ex rel. New York Tel. Co. v. Public Serv. Comm., 157 App. Div. 156; Matter of City Ice & Fuel Co. v. Public Serv. Comm., 260 App. Div. 537, 285 N. Y. 858; Matter of Solomon v. Public Serv. Comm., 286 App. Div. 636; Abco Moving & Stor. Corp. v. New York Tel. Co., 193 Misc. 96, 199 Misc. 309, 274 App. Div. 779, 298 N. Y. 637.) II. The instant provision is neither related to the business of telephonic communication nor just, reasonable and lawful. (New England Tel. & Tel. Co. v. National Merchandising Corp., 335 Mass. 658; Germanow v. Standard Unbreakable Watch Crystals, 283 N. Y. 1; Matter of Barry v. O’Connell, 303 N. Y. 46;
      Securities & Exch. Comm. v. Chenery Corp., 318 U. S. 80; Hamilton Employment Serv. v. New York Tel. Co., 253 N. Y. 468.)

      Kent H. Brown and George H. Kenny for Public Service Commission, respondent.
    I. Directories are telephone facilities essential for proper service. The telephone company may properly retain title to them and place reasonable restrictions upon their use by means of tariff provisions. (Matter of Certain Subscribers v. New York Tel. Co., [1937] 1 P. S. C. 676, 20 P. U. R [N. S.] 223; Matter of Solomon v. Public Serv. Comm., 286 App. Div. 636; Board of Comrs. v. New York Tel. Co., 271 U. S. 23; Illinois Bell Tel. Co. v. Miner, 11 Ill. App. 2d 44; National Tel. Directory v. Dawson, 214 Mo. App. 683; Michigan Bell Tel. Co. v. Wharram, 82 P. U. R [N. S.] 94.) II. The directory attachment provision of the tariff is a reasonable regulation of subscriber use of the company’s property. Its adoption by the telephone company and its approval by the commission are fully supported by the record in this case and by the law. (Hush-A-Phone Corp. v. United States, 238 F. 2d 266; California Fireproof Stor. Co. v. Brundige, 199 Cal. 185; District of Columbia v. Chesapeake & Potomac Tel. Co., 179 F. 2d 814; New England Tel. & Tel. Co. v. National Merchandising Corp., 335 Mass. 658.)

      Edward S. Wood for Cazenovia Telephone Corporation, respondent.
    I. The tariff amendment was a proper exercise of the authority of the Public Service Commission because of its effect upon revenues of respondent Cazenovia Telephone Corporation. II. Auxiliary cover advertising in any form is a discriminatory practice and the Public Service Commission is authorized to forbid the same. (Matter of Solomon v. Public Serv. Comm., 286 App. Div. 636, 1 A D 2d 793.)

      Sidney B. Gordon and Frederick C. Stimmel for Seneca-Gorham Telephone Corporation, respondent.
    I. The Public Service Commission’s jurisdiction extends to reasonable regulation of the public’s use of telephone company property. (People’s Tel. & Tel. Co. v. East Tennessee Tel. Co., 103 F. 212; Board of Comrs. v. New York Tel. Co., 271 U. S. 23; Matter of Solomon v. Public Serv. Comm., 286 App. Div. 636.) II. The Public Service Commission’s order was based upon conclusions substantiated by the record and was neither unreasonable, arbitrary nor capricious. (Staten Is. Edison Corp. v. Maltbie, 296 N. Y. 374; People ex rel. Consolidated Water Co. v. Maltbie, 275 N. Y. 357; Matter of Humphrey v. State Ins. Fund, 298 N. Y. 327; Matter of City of New York v. Maltbie, 248 App. Div. 36.)
   Burke, J.

This appeal, by permission of this court, involves

a review of a determination of the Public Service Commission permitting several telephone companies to amend their tariffs to include the following regulation: “ Telephone directories distributed from time to time by the Telephone Company remain the property of the Telephone Company, shall not be mutilated, and shall be surrendered upon request or upon delivery of the subsequent issue. No binder, holder, insert, auxiliary cover or attachment of any kind not furnished by the Telephone Company shall be attached to or used with the directories owned by the Telephone Company, except that this prohibition shall not apply to a subscriber-provided binder, holder, insert or auxiliary cover which contains no advertising, and which is not so attached as to impede reference to essential service information or otherwise interfere with service.”

The proposed tariff amendments, contained in the original applications of the Cazenovia Telephone Corporation and the Seneca-Gorham Telephone Corporation were couched in much broader language. On its own motion, the Public Service Commission instituted a proceeding to investigate the propriety of these proposed regulations. The telephone companies concerned, as well as petitioner, National Merchandising Corp.— appeared as parties in the proceeding. The commission concluded that some regulation was necessary and drafted the tariff set forth above, authorizing any telephone company so desiring to include it in its tariff schedules filed with the commission.

National, seeking a review of the commission’s determination in this article 78 proceeding, now appeals from an order of the Appellate Division confirming the decision.

National is engaged in promotional advertising, and distributes to telephone subscribers in a particular area a clear plastic directory cover, to which is attached a single opaque sheet containing advertisements of local merchants, together with their telephone numbers, as well as several emergency numbers for the locality. It is made clear that these covers are distributed with the compliments of the local advertisers. Once delivered, National retains no control over the use to which the covers may be put by the subscribers.

The tariff, as approved by the commission, ostensibly governs the contractual relations of the telephone company and its subscribers, but its admitted purpose is to inhibit the activities of National and other firms engaged in similar enterprises.

The questions presented on this appeal involve the power of the Public Service Commission to authorize the filing of such a regulation, and its reasonableness, under the circumstances.

The repository of the commission’s regulatory authority is the Public Service Law, and the commission is powerless to exceed the authority conferred on it by that statute. (People ex rel. Public Serv. Interstate Transp. Co. v. Public Serv. Comm., 262 N. Y. 39; People ex rel. Municipal Gas Co. v. Public Serv. Comm., 224 N. Y. 156; Matter of Quinby v. Public Serv. Comm., 223 N. Y. 244.) An order of the commission “‘may be vacated as unreasonable * * * if it is beyond the power granted to the commission * * * or if there is no evidence to support it, or if, having regard to the interests of both the public and the carrier, it is so arbitrary as to be beyond the exercise of a reasonable discretion and judgment. ’ ” (People ex rel. New York & Queens Gas Co. v. McCall, 219 N. Y. 84, 88.)

Subdivision 1 of section 92 of the Public Service Law requires telephone companies to file with the commission schedules stating “ all charges and all privileges or facilities granted or allowed ”. Subdivision 2 of that section empowers the commission to hold hearings on any proposed changes in “ any general privilege or facility” to determine the propriety of the proposed change. Section 94 vests the commission with general supervisory powers over telephone lines within its jurisdiction. A telephone line is defined as apparatus used in “ the business of affording telephonic communication.” (Public Service Law, § 2, subd. 18.)

A telephone directory is, to some extent, a device used in the business of telephonic communications, and is, therefore, subject to the regulatory powers of the commission. Directories provide a useful and necessary service which facilitates the use of telephones. Accordingly, ordinary alphabetical listings in both the general directory and in the classified directory are subject to the jurisdiction of the commission (Matter of Certain Subscribers v. New York Tel. Co., [1937] 1 P. S. C. 676, 20 P. U. R. [N. S.] 223). While this alphabetical listing in the directories is an essential public service, once a telephone company had discharged this duty, it is under no obligation to solicit advertisements for its directories. Indeed, the sale of advertisements for publication in the directories is not considered an essential public service. (Matter of Solomon v. Public Serv. Comm., 286 App. Div. 636; see Matter of City Ice & Fuel Co. v. Public Serv. Comm., 260 App. Div. 537.) In this regard, “ the position of a telephone company is analogous to that of a publisher of a newspaper or magazine.” (Abco Moving & Stor. Corp. v. New York Tel. Co., 193 Misc. 96.) The commission’s jurisdiction is limited to ‘ ‘ seeing to it that advertising in the classified directory is set up in a manner which does not unduly interfere with the use of the ordinary listings and that the privilege of inserting advertisements is available to all subscribers upon the same terms and conditions, without discrimination.” (Matter of Solomon v. Public Serv. Comm., supra, p. 639.)

The commission may not posit its jurisdiction upon the possible impact of these covers on advertising revenues. It is one thing to have limited jurisdiction over advertisements in the directory to see that all advertisers are treated equitably, and to insure that maximum revenues are derived from the sale of advertisements (Matter of Solomon v. Public Serv. Comm., supra); it is quite another thing to assert jurisdiction to immunize these telephone companies from competition, where the telephone companies engage in activities which do not come within the scope of an essential public service. (Cf. Matter of City Ice & Fuel Co. v. Public Serv. Comm., supra.)

Further, this attempted usurpation of power cannot be justified on the ground that the activity of National constitutes unfair competition or interference with the telephone companies ’ property rights since these matters are for the courts. (Matter of City Ice & Fuel Co. v. Public Serv. Comm., supra, p. 542.)

We conclude, therefore, that the commission lacks authority to prohibit, either directly or indirectly, a lawful business enterprise from competing with the telephone companies in nonpublic service areas (New England Tel. & Tel. Co. v. National Merchandising Corp., 335 Mass. 658; Hush-A-Phone Corp. v. United States, 238 F. 2d. 266, 268, n. 9).

The telephone companies, in seeking the regulation, also maintain that these covers could interfere with telephone service. It cannot be disputed that the commission has jurisdiction over such matters, and the scope of our inquiry in this area is to determine whether there is substantial evidence to sustain the commission’s determination.

In the recent case of New England Tel. & Tel. Co. v. National Merchandising Corp. (335 Mass. 658, supra), thé highest court of Massachusetts refused injunctive relief sought by the telephone company to prevent this very same petitioner from distributing its covers in that State. Although the Massachusetts court had under consideration a general tariff provision which forbade the attachment of any device to telephone equipment except those provided by the telephone company, it did take up the charge that these covers constituted potential interference with service. The court found that the few errors in the telephone numbers listed on these covers were quickly corrected, and were too trivial to sustain a finding that they interfered with service. Similarly, the court noted (p. 663) that there was “no basis in the evidence for concluding that any noticeable interference with service occurs from concealing these instructions [found on the binders of these directories.] ”

The evidence — or rather, lack of evidence—in the hearings before the Public Service Commission substantiates the conclusions of the Massachusetts court. The Midstate Telephone Company—servicing an area in New York where these covers were distributed — did show a small loss in advertising revenues, but an officer of that company did not indicate that the use of these covers interfered with service, except for a “ feeling ” that they would. It was also brought out that as a practical matter, even without these covers on the directories, the subscribers usually ask the operator to connect them with the appropriate public agency in cases of emergencies. Indeed, the record is singularly lacking in evidence that these covers could cause interference with telephone service.

We conclude then that there is no rational basis for that part of the tariff regulation which forbids the use of directory covers which contain advertising. Indeed, this type of regulation constitutes an unwarranted invasion of the home of a subscriber, who should remain free to use such covers, once in his possession, as he sees fit.

Accordingly, the order of the Appellate Division should be reversed, and the determination of the Public Service Commission authorizing the inclusion of this regulation in the tariffs filed with the commission should be vacated insofar as it forbids the use of telephone directory binders, holders, inserts, auxiliary covers or attachments containing advertisements, which are not provided by the subscriber, and which do not interfere with or impede telephone service.

Dye, J. (dissenting).

I vote to affirm on the ground that the provision of the tariff prohibiting use of advertising attachments to telephone directories is a reasonable regulation for subscriber use of the company’s property, not only because of its potential interference and impairment of telephone service, but also because such use is a direct invasion of the company’s property rights which will adversely affect the company’s revenues and require higher rates for telephone service. The determination of the Public Service Commission in approving such tariff regulation is within the scope of its authority to reasonably regulate the use of telephone directories, which are the personal property of the company (People’s Tel. & Tel. Co. v. East Tennessee Tel. Co., 103 F. 212), for purposes of advertising (Public Service Law, § 91, subd. 2; Matter of Solomon v. Public Serv. Comm., 286 App. Div. 636).

The order as made by the Public Service Commission is substantially supported by the evidence and, being neither unreasonable, arbitrary nor capricious, may not be disturbed by the courts (Staten Is. Edison Co. v. Maltbie, 296 N. Y. 374; People ex rel. Consolidated Water Co. v. Maltbie, 275 N. Y. 357; Matter of Humphrey v. State Ins. Fund, 298 N. Y. 327).

The order appealed from should be affirmed, with costs.

Judges Desmond, Fuld, Fboessel, and Van Voobhis concur with Judge Bubble ; Judge Dye dissents in an opinion in which Chief Judge Conway concurs.

Order of Appellate Division reversed and determination of the Public Service Commission annulled to the extent indicated in the opinion herein, with costs in this court and in the Appellate Division, and the matter remitted to Special Term for further proceedings in accordance with the opinion herein.


author: Froessel, J.

text:
    In the Matter of Norman Allen et al., Appellants, against Anthony J. Rizzardi, as Assessor of the City of New Rochelle, et al., Respondents. In the Matter of Harold B. Chiron et al., Appellants, against Anthony J. Rizzardi, as Assessor of the City of New Rochelle, et al., Respondents.
    Argued January 15, 1959;
    decided April 9, 1959.

      James M. Landis and Isadore Illman for appellants.
    I. The instant petitions for review of tax assessments may be united in accordance with the express terms of section 290-c of the' Tax Law. (People ex rel. Washington Bldg. Co. v. Feitner, 30 Misc. 247, 163 N. Y. 384; People ex rel. Zollikoffer v. Feitner, 74 App. Div. 130, 172 N. Y. 618; People ex rel. Litchfield v. O’Donnel, 113 App. Div. 713, 187 N. Y. 536; People ex rel.

      Williamsburgh Sav. Bank v. Miller, 248 App. Div. 764; People ex rel. Adrian Corp. v. Sexton, 251 App. Div. 181; Borgos v. Duerstein, 283 App. Div. 1069, 284 App. Div. 890, 307 N. Y. 932.) II. Consolidation should be granted as a matter of policy in this case since a fair and uniform adjudication of the' question of assessed valuation will result without prejudice to any of the parties. (Akely v. Kinnicutt, 238 N. Y. 466.)

      Murray C. Puerst, Corporation Counsel (Francis S. Claps of counsel), for respondents.
    I. In order for two or more persons to unite in the same petition to review assessments, the petition must show on its face that the properties are of the same nature and are so situated and the extent of the overvaluation is such that an adjudication of one parcel would necessarily determine the extent of the overvaluation of all the other properties sought to be reviewed. (People ex rel. Washington Bldg. Co. v. Feitner, 49 App. Div. 385, 163 N. Y. 384; People ex rel. Adrian Corp. v. Sexton, 251 App. Div. 181; People ex rel. Zollikoffer v. Feitner, 74 App. Div. 131; People ex rel. Litchfield v. O’Donnel, 113 App. Div. 713, 187 N. Y. 536.) II. The remedies contained in article 13 of the Tax Law for the review of taxes are exclusive. (Matter of Bablo v. Andrews, 4 Misc 2d 105; Matter of State Ins. Fund v. Boyland, 203 Misc. 741; People ex rel. Lehigh Val. Ry. Co. v. Vandemark, 189 Misc. 42, 455; People ex rel. Kendall v. Feitner, 51 App. Div. 196; Mercantile Nat. Bank v. Mayor of City of N. Y., 172 N. Y. 35; New York Cent. & H. R. R. R. Co. v. City of Yonkers, 238 N. Y. 165; People ex rel. New York Cent. R. R. Co. v. Bissell, 207 App. Div. 705; People ex rel. New York Cent. R. R. Co. v. Block, 178 App. Div. 251; Lewis v. City of Lockport, 276 N. Y. 336.)
   Froessel, J.

These two proceedings to review real property assessments for the 1955 (Allen) and 1956 (Chiron) tax years were each commenced jointly by 35 and 48 petitioners, respectively, all residents of the Bayberry Development in New Rochelle. Certain petitioners are involved in both proceedings. Attached to each petition is a schedule setting forth the name of each petitioner, a description of his property, the actual assessment of land and improvements, the claimed value of each, and the extent of alleged overvaluation.

Prior to answer, respondents moved to sever on the grounds that the joinder was prejudicial to respondents, it would cause confusion and delay, that each parcel differed from the'others, and that “ each is a separate and distinct valuation

Petitioners in their opposing affidavit stated that all of the homes involved were located in the same development, built by the same builder to conform to the same basic model, built from the same plans, were of the same size and made of the same construction, inside and out; that none of them was custom built but all were of “ assembly line ” construction; that the homes differed only in that some have expansion attics while others do not, and some have a 2- rather than a 1-car garage. The opposing affidavit further alleged that among the common issues are: (1) the treatment of a 16-acre tract of land, including a swimming pool and recreation facilities, which was allegedly improperly assessed against the individual parcels; (2) inclusion in the assessed valuation of appliances and similar personal property; (3) inclusion of the actual cost of street construction for which petitioners had already paid.

Special Term granted respondents ’ motions to sever the causes of action in each proceeding and ordered each petitioner to file a separate notice and petition. The Appellate Division affirmed. We are called upon to decide in each case whether the order granting severance was ‘ ‘ properly made ’ ’. Since it appears that the courts below felt constrained to grant the motions as a matter of law by reason of our decision in People ex rel. Washington Bldg. Co. v. Peitner (163 N. Y. 384 [1900], affg. 49 App. Div. 385), we construe the question certified as one of law, and interpret it as follows: Was the order of Special Term, granting the motion to sever as a matter of law and without the exercise of discretion, properly made?

Section 290-c of the Tax Law provides, so far as here pertinent: “ Two or more persons assessed upon the same roll or rolls, who are affected in the same manner by the alleged illegality, error or inequality, may unite in the same petition.” In the Washington Building case (supra), construing the virtually identical predecessor of section 290-c, four of the Judges held that 22 owners of separate and unlike parcels in different parts of Manhattan (from No. 1 Broadway to 122 West 72nd Street; 30 Misc. 247, 249) were not “affected in the same manner ” by the alleged fact that it so happened the percentage increase in the 1898 valuation in all Manhattan was greater than that in all Brooklyn. The facts in that case constituted ample ground for the court’s actual decision. In the course of the prevailing opinion, it was stated (p. 386) that the joinder statute “was intended to apply to a situation wherein the adjudication upon the complaint of one taxpayer necessarily determines the complaints of others, as where in reality but a single issue is presented, so that the law being settled as to the facts of one case it is alike applicable to all other cases, but was not intended to permit any and all parties to unite who are aggrieved because of their local assessments. The statute was not, for instance, intended to countenance such an absurdity as uniting as relators in proceedings to review assessments ” three different street railroad companies having properties in three different boroughs of New York City. There followed two cases, People ex rel. Zollikoffer v. Feitner (74 App. Div. 130, affd. 172 N. Y. 618 [1902]) and People ex rel. Litchfield v. O’Donnel (113 App. Div. 713, affd. 187 N. Y. 536 [1907]), in which we affirmed the quashing of writs for misjoinder of parties, without opinion, citing the Washington Building case.

On analysis of the Washington Building case, and in the light of the vast changes which, during the intervening period of over half a century, have been written into our practice, we are persuaded that the quoted language therefrom, unnecessary to the actual decision, should not control us here.

These three cases were decided between 1900 and 1907, long before the enactment of the modern and “ rather revolutionary ” joinder statutes (see Akely v. Kinnicutt, 238 N. Y. 466, 470, 472; cf. Code Civ. Pro., § 446, with Civ. Prac. Act, former § 209 [L. 1920, ch. 925], and with present § 212, subds. 1, 3 [L. 1949, ch. 147]; Fifteenth Annual Report of N. Y. Judicial Council, 1949, pp. 216-219; see, also, Civ. Prac. Act, § 96, and Report of Joint Legislative Committee on Simplification of Civil Practice, N. Y. Legis. Doc., 1919, No. 111, p. 41). At that time, our court, in construing the statute, was probably mindful of the limited provisions of section 446 of the Code of Civil Procedure, prescribing who may be joined as parties plaintiffs in an action. Now that we are required for the first time in over 50 years to apply section 290-c, we may not read the statute in a vacuum or in the light of our practice statutes of half a century ago. Indeed this has already been indicated in People ex rel. American Sugar Ref. Co. v. Sexton (274 N. Y. 304, 307), which reasserts the rule that, in proceedings to review tax assessments, pertinent and nonconflicting provisions of the Civil Practice Act must be invoked where the Tax Law is silent.

In the last-cited case, decided in 1937 when our practice had been largely liberalized, a New Jersey sugar refining corporation and a New York cooperage corporation, parent and subsidiary, joined in three separate proceedings to review assessments for 1933, 1934 and 1935 on 8 separate parcels in Brooklyn, 6 owned by the parent and 2 by the subsidiary. Motions to quash for misjoinder were denied at Special Term. The Appellate Division reversed on the authority of the Washington Building, Zollikoffer and Litchfield cases (supra). We unanimously reversed the Appellate Division, stating (p. 308) with respect to section 290 (now § 290-c): “ It is urged by respondents that petitioners are not ‘ affected in the same manner, ’ and that, consequently, there is a misjoinder of parties (petitioners). There is much to be said in favor of a contrary conclusion.” (Emphasis supplied.)

We refrained from deciding this question, however, since we held that the proceeding could not be defeated by a motion to quash for misjoinder. We said that “ both parties are properly before the court, and the court, had a timely motion been made, might have ordered a severance (Civ. Prac. Act, § 96[]) * * * Section 192 of the Civil Practice Act specifically provides that no action or special proceeding shall be defeated by the misjoinder of parties ”. (Emphasis supplied.) Hence, motions to quash as employed in the Washington Building, Zollikoffer and Litchfield cases (supra) were no longer available under the new practice, and, as the American Sugar case (supra) clearly indicates, a motion for severance governed by section 96 of the Civil Practice Act could be resorted to. Thus now section 290-c of the Tax Law and section 96 of the Civil Practice Act may be read together.

In the instant case, respondents have moved for such a severance. If we look to section 96 we find that “A special proceeding may be severed * * * whenever it can be done without prejudice to a substantial right. ’ ’ (Emphasis supplied.) Petitioners urge they were so prejudiced, that the unnecessary and burdensome procedure of having multiple trials on precisely identical issues might well prove so expensive as to deprive them, practically speaking, of all right to review the assessments (see Fifteenth Annual Report of N. Y. Judicial Council, 1949, pp. 328-329).

It should be noted that the broad and liberal provisions of section 96 of the Civil Practice Act apply to consolidation of proceedings to review tax assessments as well as to their severance. Section 290-d of the Tax Law permits the court on its own motion to consolidate or join for trial two or more proceedings where the assessments “ are affected in the same manner ”. This amendment was recommended in the final and summarizing Report of the Joint Legislative Committee on Assessing and Reviewing (N. Y. Legis. Doc., 1943, No. 69) after the following finding (p. 105): 22. The Committee found it is not widely understood that the Tax Law, section 290, permits the uniting of petitions by two or more persons similarly affected as well as by one owner of many properties similarly affected (Emphasis supplied.) Thus we have the Legislative Committee construing the words ‘ ‘ affected in the same manner ’ as meaning ‘ similarly affected ’ ’. Where a party moves to have several proceedings consolidated or tried together, sections 96 and 96-a of the Civil Practice Act apply since the Tax Law is silent in this respect (see Fifteenth Annual Report of N. Y. Judicial Council, 1949, pp. 338-339; Powell & Jacobs, Reducing Realty Taxes [3d ed., 1949 Supp.], p. 13). If, then, parties bring separate proceedings and thereupon apply for consolidation under section 96 of the Civil Practice Act, the court could grant consolidation 1 ‘ whenever it can be done without prejudice to a substantial right ”. It would be anomalous to say that a court by the grant of a severance may prevent what the law permits by way of consolidation.

In short, then, we conclude that the construction of the predecessor statute of section 290-c, as set forth in the dictum in the Washington Building case, followed by the Zollikoffer and Litchfield cases (supra), is not controlling here in view of the modern, liberalized and in some respects revolutionary changes written into our practice since the decisions in those cases, affecting among other things the joinder of parties, severance and consolidation, the expedition of litigation by the avoidance of a multiplicity of suits, and the speedy and less expensive administration of justice.

The orders appealed from should be reversed, with costs in all courts, and the matters remitted to Special Term for further proceedings not inconsistent with this opinion. The question certified as above interpreted should be answered in the negative in each case.

Chief Judge Conway and Judges Desmond, Dye, Fuld, Van Vooehis and Bubke concur.

In each proceeding: Order reversed, etc.

       Civ. Prac. Act, § 96, did not authorize severance of a special proceeding until L. 1935, eh. 626,