author: Froessel, J. Bubke, J. Desmond, J.

text:
    The People of the State of New York ex rel. Frank J. Valenti, on the Petition of Gilbert S. Rosenthal, Respondent, against John J. McCloskey, as Sheriff of the City of New York, et al., Appellants. The People of the State of New York ex rel. Costenze P. Valenti, on the Petition of Gilbert S. Rosenthal, Appellant, against John J. McCloskey, as Sheriff of the City of New York, et al., Respondents.
    Argued May 25, 1959;
    decided July 8, 1959.

      Eliot H. Lumbard, Nathan Skolnik, Arnold M. Weiss, Alfred Donati, Jr., and Joseph Fisch for Commission of Investigation, appellant in the first above-entitled proceeding and respondent in the second above-entitled proceeding.
    I. As a matter of law relators must be continued in custody until they answer the commission’s inquiries ‘ ‘ truthfully and responsively. ’ ’ (Matter of Finkel v. McCook, 247 App. Div. 57, 271 N. Y. 636.) II. Answers which are false or evasive, and obstructive, may not be the basis for release from commitment pursuant to the authority of section 406. (People ex rel. Falk v. Sheriff of New York County, 258 N. Y. 437; Matter of Joint Legis. Comm. to Investigate Educational System of State of N. Y. [Little], 177 Misc. 27; Matter of Kamell, 170 Misc. 868, 258 App. Div. 723; Matter of Finkel v. McCook, 247 App. Div. 57, 271 N. Y. 636; Ex parte Hudgings, 249 U. S. 378; People v. De Feo, 284 App. Div. 622, 308 N. Y. 595; People v. Caidin, 283 App. Div. 813, 267 N. Y. 551; United States v. McGovern, 60 F. 2d 880; O’Connell v. United States, 40 F. 2d 201; United States v. Appel, 211 F. 495.) III. Relators’ answers were equally false, evasive and obstructive of the commission’s inquiry. (Matter of Benjamin, 289 N. Y. 554; Pocket Books v. Meyers, 292 N. Y. 58; People v. Parkin, 263 N. Y. 428; Matter of Monachino v. New York State Liq. Auth., 6 A D 2d 378; People v. Saperstein, 2 N Y 2d 210.) IV. Section 406 provides an appropriate remedy for relators’ obstructive conduct, and there is no legal requirement that the commission discontinue these proceedings or consent to relators’ release in the event of noncompliance with the orders and warrants of commitment. (Ex parte Hudgings, 249 U. S. 378; Matter of Finkel v. McCook, 247 App. Div. 57; O’Connell v. United States, 40 F. 2d 201; United States v. Appel, 211 F. 495.)

      Gilbert S. Rosenthal and Aaron J. Jaffe for Frank J. Valenti, respondent in the first above-entitled proceeding, and Costenze ‘ P. Valenti, appellant in. the second above-entitled proceeding.
    I.' The responses given by the Valenti brothers to the critical 26 questions must be evaluated without recourse to any other matter contained in the record. (Matter of Doyle, 257 N. Y. 244; Northern Securities Co. v. United States, 193 U. S. 197; Matter of Steingut v. Imrie, 270 App. Div. 34; People v. Saperstein, 2 N Y 2d 210.) II. The Valenti brothers have complied with the orders of commitment and have purged their con-tempts. (Matter of Michael, 326 U. S. 224; Master of Foster v. Hastings, 263 N. Y. 311; People ex rel. Falk. v. Sheriff of N. Y. County, 258 N. Y.. 437; Matter of Finkel v. McCook, 247 App. Div. 57, 271 N. Y. 636; Matter of Steingut v. Imrie, 270 App. Div. 34; People v. Finkelstein, 202 Misc. 1080; People v. De Feo, 284 App. Div. 622, 308 N. Y. 595; Ex parte Hudgings, 249 U. S. 378; Blim v. United States, 68 F. 2d 484; Matter of Grand Jury of Westchester County, 281 App. Div. 706; Matter of Kamell, 170 Misc. 868, 258 App. Div. 723; Matter of Comm. of Investigation v. Lombardozzi, 7 A D 2d 48, 5 N Y 2d 1026; United States v. Appel, 211 F. 495.)
   Froessel, J.

The real question presented on this appeal is whether a witness before the State Commission of Investigation, who answers questions enumerated in a warrant of commitment procured by the commission, may be incarcerated indefinitely until he consents to give a character of testimony which in the opinion of the commission and the courts is not perjured.

Relators, along with others, were subpoenaed to testify before the Commission of Investigation of the State of New York at public hearings, which commenced during August of 1958, concerning the so-called Apalachin ‘ ‘ meeting ’ ’ held at the home of Joseph Barbara, Sr., in Apalachin, Tioga County, New York. Relators appeared before the commission and claimed their privilege against self incrimination as to all questions asked other than those directed merely to identifying data. After the commission granted relators complete immunity from prosecution by New York State authorities, they persisted in their refusal to testify and were committed to civil jail, pursuant to subdivision 3 of section 406 of the Civil Practice Act. That statute provides, in pertinent part, that if a person duly subpoenaed to appear before certain officials and nonjudicial bodies specified in subdivision 1 “ refuses without reasonable cause * * * to answer a legal and pertinent question ”, he may, by order and warrant of the court, be committed to jail “ there to remain until he submits to do the act which he was so required to do ”.

The orders and warrants committing relators specified 26 questions which relators had refused to answer. This was in accordance with subdivision 4 of section 406, which provides that ‘ ‘ if the witness is committed for refusing to answer a question, the question must be inserted in the warrant ”. The 26 questions were designed to elicit the witnesses’ knowledge of Barbara, the circumstances under which they attended the alleged “ meeting ”, what happened there, and any prior relationship among those who attended. The Appellate Division unanimously affirmed the commitment of relators, along with five other recalcitrant witnesses (Matter of Commission of Investigation v. Lombardozzi, 7 A D 2d 48), and we unanimously affirmed (5 N Y 2d 1026).

Six days after this court’s order of affirmance was handed down, the commission convened a hearing, at the request of relators, to give them an opportunity to answer the enumerated questions and obtain their release. Over the repeated objections of counsel, questions far afield of the 26 enumerated in the orders and warrants of commitment were asked; but during the course of the interrogation the 26 specific questions were asked of each witness. The commission concedes that both relators gave “some sort of answer to each question”, but contends that the answers given were “ in varying degrqes, false, evasive, and obstructive of its investigation; indeed, in many instances the answers are inherently incredible ”.

The evidence given by relators in answer to the 26 and directly related questions was virtually the same. On November 13, 1957, Costenze, who was suffering from lead poisoning and not feeling well, decided while at Rochester to take a pleasure and rest trip to New York City for a few days, and asked Frank to join him. Frank agreed to accompany him if they would later go on to Pittsburgh, where Frank was arranging the sale of his house. He had recently moved from Pittsburgh to Rochester, where Costenze resided, but had not yet disposed of his Pittsburgh home. Costenze agreed to the Pittsburgh trip, and on their way to New York they stopped at Syracuse to visit a friend named Sam Scro. They spent the night of the 13th in a motel on the outskirts of Syracuse.

The following morning, during breakfast, Costenze suggested that before proceeding to New York they drive to Apalachin to visit a friend who was ill. Frank had never before met this friend, one Barbara, but, without eliciting or obtaining any additional information, agreed to the detour since he had no definite appointment in Pittsburgh and his brother was killing “ three or four days anyway”. Costenze had met Barbara some 5 to 7 years previously at a beer convention in Rochester, and had met him some 3 or 4 times since — once at a wedding, though he did not recall the details, and once at Barbara’s Apalachin home, when he also dropped in unannounced to inquire after Barbara’s health. During the years he had known Barbara they never corresponded, spoke on the telephone, or had any business dealings, and Barbara had never visited Costenze at the latter’s home. As to his knowledge of Barbara’s illness, Costenze testified that when he had first met Barbara at the convention Barbara told him that he was not feeling well and had lost a tremendous amount of weight. He subsequently learned that Barbara was about to undergo a heart operation, but he could not recall when or where he had learned this.

When they arrived at Barbara’s home, they were both surprised to see such a large gathering there, which they estimated to be anywhere from 25 to 70 people. Frank testified: “I didn’t go over there and visit a guy and go over and count how many people there was there. I don’t know how many was there. There could have been 30, 20, 40; I don’t know. Three or four guys here with a sandwich, drinking; four or five guys at one end of the yard and at the other end of the yard ”, and then in answer to question 14, which called for the approximate number of persons present, stated: “To the best of my knowledge, I’d say I saw about 30 or 40 or 50 people, tops.” Costenze testified that he “honestly and truthfully” did not remember how many people were there, as he did not count them, but later, in specific answer to question 14, answered: ‘ Approximately 30, 25. ’ ’

When they arrived on the premises they proceeded directly to the house and met their host in the living room. Costenze introduced Frank to Barbara, and Frank said he “was glad to meet him and that was it. To me he was a stranger ”. Costenze inquired after Barbara’s health; Barbara said he “wasn’t feeling like he should and that he had to take it easy ’ ’, and 5 or 10 minutes of casual conversation ensued, “ All pertaining to his, more or less, you’d say, medical report ”. Barbara then invited them to partake of food and drink, which was available in the yard on a self-service basis, and to ‘ ‘ walk around, make yourself right at home”. Neither Frank nor Oostenze saw Barbara again until they said their goodbyes some 6 hours later.

Both Frank and Oostenze testified that they met a number of friends and acquaintances on the premises, whom they identified by name, and their conversation was only casual. There were no public officials present, to their knowledge, and neither had had any business dealings with any of the persons present. Frank testified that he did not ask Barbara or any of the other persons he met why they had come, or what the occasion for such a large gathering was, as it was not his home and he did not think it was any of his business. Oostenze testified likewise, except as to a conversation he had with a friend named Jimmy La Duca, whom he met on the premises. He had no discussion with La Duca as to why so many people were there, since That wasn’t my home. I don’t think it was up to me to ask anything. I went to see a sick friend and I don’t see where it’s any of my business to go around asking people 1 What are you doing here? ’ It’s not my house.”

During the 6 hours they were there they wandered around admiring the premises and the surrounding countryside, sat down on chairs in the yard, and partook of the refreshments. They did not return to the house, and both repeatedly testified that there was no meeting ” and that no one addressed the gathering. Frank testified that Oostenze ‘ was with me, practically all the time ’ ’, and Oostenze testified likewise. They left at about 6:00 p.m., and, according to Oostenze, Barbara didn’t say nothing outside of goodbye. He was glad to see me. I was glad to see him. I told him to take care of himself and to do what the doctor tells him to do, and that was it.”

Upon leaving the premises they were stopped by the State Police and taken to the State Police Barracks at Vestal, where they were stripped, frisked and questioned. After they were released, they decided to curtail their trip and return to Rochester. Frank testified that he ‘ ‘ was disgusted with the whole thing” and decided to make his Pittsburgh trip alone at a later date. Oostenze testified that he “ didn’t know why I was stopped or why I was frisked, or any of this, why it went on ” and “ thought it would be best to go home and stay with my wife ”, who was expecting a child.

At the conclusion of Frank’s questioning, counsel sought the consent of the commission to his release on the ground that he had complied with the order and warrant committing him. The chairman refused to give such consent on the ground that Frank’s testimony was “unworthy of belief”, “inherently incredible ’ ’ and 14 calculated to impede and thwart the efforts of the Commission in this investigation ’ ’. His basis for so concluding was that “it is incredible to us that if the answers given here are the truth why those answers could not have been given way back last August, when he was first asked about it, and why he had to resort to the privilege against self-incrimination, and, why, from his own standpoint, he found it necessary to serve seven months in prison before coming here and giving us this kind of a story.” The chairman adjourned the hearing as to Frank ‘ until such time as he is prepared to come in here and tell us the truth ”.

Although counsel took vigorous exception to the chairman’s remarks with reference to the assertion of the privilege, the chairman later interrogated Costenze at length as to his reason for invoking the privilege against self incrimination. At the conclusion of Costenze’s testimony, the chairman stated that he believed his answers to be untrue and advised Costenze, as he had Frank, ‘ that at any time that you are prepared to come forward and tell us the truth the Commission will be ready to hear you”.

The narrow issue before us, as framed by Special Term, is ‘6 whether the questions have or have not been answered within the purview of the statute ”. In passing on that issue, it is important to note that relators’ prior invocation of the privilege against self incrimination may not be used as a basis for concluding that they have evaded their obligation to answer. In People ex rel. Falk v. Sheriff (258 N. Y. 437, 439-440), the only case in which this court considered the precise issue now before us, we pointed out that the purpose of a commitment pursuant to subdivision 3 of section 406 of the Civil Practice Act is “to enforce the duty to answer a pertinent inquiry by keeping the witness in jail till the answer has been supplied * * * When once that is done, he is entitled to his discharge, though there was evasion or deceit in setting up the claim of privilege whereby an answer was delayed. * * * Whatever contempt may have been involved in his deceitful claim of privilege must have redress in some other proceeding and not improbably in another forum ”. (Emphasis supplied.) (See, also, Slochower v. Board of Educ., 350 U. S. 551, 557.)

It is well-settled law in this State, as recognized in principle by both courts below, that false testimony is not punishable summarily as a civil contempt (Fromme v. Gray, 148 N. Y. 695; Matter of Foster v. Hastings, 263 N. Y. 311; Matter of Silberman Dairy Co. v. Econopouly, 177 App. Div. 97), or as a criminal contempt (Matter of Finkel v. McCook, 247 App. Div. 57, affd. 271 N. Y. 636; People v. De Feo, 284 App. Div. 622, revd. on another ground 308 N. Y. 595; Matter of Steingut v. Imrie, 270 App. Div. 34). In the Foster case we unanimously rejected the argument that “false swearing is not to be distinguished from a refusal to testify ”, and held "that on the issue of perjury the witness who is alleged to have testified falsely “ is entitled to a trial by jury under the safeguards of the criminal law ” (263 N. Y., p. 314; see, also, Matter of Finkel v. McCook, 247 App. Div., pp. 64-65, affd. 271 N. Y. 636, supra).

With respect to both civil and criminal contempt, however, the courts of this State have recognized that under certain circumstances a response to a question may be so false and evasive as to be equivalent to no answer at all. Thus in the Foster case we noted that “ when it plainly appears that the witness denies knowledge or recollection of a fact, obviously to evade an answer as to matters within his recollection, the court may refuse to aid in a mere subterfuge and may compel an answer ’ ’ (263 N. Y., supra, p. 314; emphasis supplied), and in the Finkel case the Appellate Division wrote: “ There is a distinction between the untruthful statement which does not clearly appear to be such from the face of the record but is uncovered only with the aid of extrinsic evidence and testimony which is so plainly inconsistent, so manifestly contradictory and so conspicuously unbelievable as to make it apparent from the face of the record itself that the -witness has deliberately concealed the truth and has given answers which are replies in form only and which, in substance, are as useless as a complete refusal to answer. This distinction was considered by the Supreme Court of the United States in Ex parte Hudgings (249 U. S. 378).” (247 App. Div., supra, p. 63; emphasis supplied.) (See, also, People v. De Feo, supra, pp. 624-626.)

We think we may safely assume, as did the Appellate Division, that “ the rules developed in relation to the distinction between the merely false answer and the evasive one in the field of judicial contempt are wholly applicable to proceedings arising under section 406.” (In this connection, note the cases cited by this court in the Falk case, 258 N. Y., supra, p. 439; see, also, Matter of Barnes, 204 N. Y. 108, 122.) This would certainly seem so as regards civil contempt under sections 753 (subd. 5) and 774 of the Judiciary Law, pursuant to which a person who refuses to answer after being subpoenaed as a witness may be imprisoned until he performs the act which it is in his power to perform (see Stewart v. Smith, 186 App. Div. 755; Ditomasso v. Loverro, 242 App. Div. 190, 193-194). The function of both a civil contempt and a section 406, subdivision 3, commitment is remedial and coercive, and the recalcitrant witness holds the key to his freedom. We think that it is likewise so as to criminal contempt under subdivision 5 of section 750 of the Judiciary Law, pursuant to which a witness may be summarily punished for a Contumacious and unlawful refusal * i;: * to answer any legal and proper interrogatory ’ ’, though it must be remembered that the maximum term of imprisonment for a summary criminal contempt, under any circumstances, is 60 days (Judiciary Law, § 751; see Ex parte Hudgings, 249 U. S. 378, 384).

The problem is to give meaningful content to the distinction between the false answer and the answer that is so false and evasive as to be tantamount to no answer at all. The example given in the Foster case (supra, p. 314) was the witness who “ denies knowledge or recollection of a fact, obviously to evade an answer as to matters within his recollection ”. In a similar vein, the court in the He Feo case noted (284 App. Div., supra, pp. 624-625): “ Consistent lack of memory or recollection of all transactions for a recently passed period relating to large and significant expenditures covering a principal activity of a business is not understandable, except as a deliberate and contemptuous evasion of the questions put.” (Emphasis supplied.)

In United States v. Appel, probably the most oft-cited case on the subject, Judge Hand noted (211 F. 495-496): “ it could not be enough for a witness to say that he did not remember where he had slept the night before, if he was sane and sober, or that he could not tell whether he had been married more than a week.” (Emphasis supplied.) The witness in that case had been questioned as to his disposition of certain funds, and, in holding (p. 497) that his story as to alleged gambling losses was “ obviously a mere sham ”, Judge Hand emphasized (p. 496) his inability 1 ‘ to give the names of any places but one of these where he had lost any such sum as he stated, and his entire vagueness about matters which were so recent, and which must have impressed themselves upon his memory at the time to a greater extent.”

In the Finkel case (and see, also, Matter of Kamell, 170 Misc. 868, affd. 258 App. Div. 723, which involved very similar facts and the same issue), one of the subjects of a Grand Jury investigation was racketeering in the restaurant and cafeteria business, and of particular concern was an association, ostensibly made up of restaurant and cafeteria owners, the persons in control of which were suspected of extortion in combination with certain labor union officials. Finkel, who was an officer and principal stockholder of a restaurant corporation, was called as a witness and his examination centered around six payments made by him—as shown on the books of the corporation; the persons to whom payments were made and the dates thereof; the circumstances surrounding the payments; and any connection they may have had with his joining the association.

In holding that the witness’s answers to these questions were equivalent to a “ Contumacious and unlawful refusal * * * to answer ”, i.e., a summary criminal contempt under subdivision 5 of section 750 of the Judiciary Law, the Appellate Division noted (p. 60) that his testimony “‘was of such a nature as to permit contradiction by documentary proof ’ ” and (p. 62) by “ his own admission he [was] chargeable with perjury As to one expenditure, Finkel “ offered three distinct explanations” (p. 61) and, as to another, he “gave many different explanations ”, The “ contradictions and changes in his testimony ” and “his denials of the evidence set forth in his own records ” led the court to conclude (p. 65) that his answers were “ answers in form only and were clearly tantamount to a refusal to answer

In the leading case of Ex parte Hudgings (249 U. S. 378, 383, supra), relied upon by the Appellate Division in the Finkel case, and cited by us in Falk, the Supreme Court held: “ in order to punish perjury in the presence of the court as a contempt there must be added to the essential elements of perjury under the general law the further element of obstruction to the court in the performance of its duty. As illustrative of this, see United States v. Appel, 211 Fed. Rep. 495.” (See, also, United States v. McGovern, 60 F. 2d 880; Blim v. United States, 68 F. 2d 484.)

The court then warned of the danger of “ mistakenly attribut[ing] a necessarily inherent obstructive effect to false swearing ”, since “it would follow that when a court entertained the opinion that a witness was testifying untruthfully the power would result to impose a punishment for contempt with the object or purpose of exacting from the witness a character of testimony which the court would deem to be truthful; and thus it would come to pass that a potentiality of oppression and wrong would result and the freedom of the citizen when called as a witness in a court would be gravely imperiled.” (p. 384; emphasis supplied.)

It is significant to note that in Hudgings the order of commitment “ directed that it should continue in force until the petitioner had purged himself of the contempt for which he was being punished ” (p. 382). In holding that “ the punishment was imposed for the supposed perjury alone without reference to any circumstance or condition giving to it an obstructive effect ” and hence was unlawful, the Supreme Court (p. 384) noted that “when the provision of the commitment directing that the punishment should continue to be enforced until the contempt, that is, the perjury, was purged, the impression necessarily arises that it was assumed that the power existed to hold the witness in confinement under the punishment until he consented to give a character of testimony which in the opinion of the court would not be perjured.” (Emphasis supplied.)

Finally, in Matter of Michael (326 U. S. 224) the witness had been adjudged in criminal contempt and sentenced to six months ’ imprisonment “ on findings that he had given ‘ false and evasive ’ testimony before a Grand Jury which ‘ obstructed the said Grand Jury in its inquiry and the due administration of justice ’ ’ ’ (p. 225). The Supreme Court granted certiorari in view of the close similarity of the issues here to those decided in Ex parte Hudgings, 249 U. S. 378 ” (p. 225), and, in defining the necessary element of obstruction, said (pp. 227-228): All perjured relevant testimony is at war with justice, since it may produce a judgment not resting on truth. Therefore it cannot be denied that it tends to defeat the sole ultimate objective of a trial. It need not necessarily, however, obstruct or halt the judicial process. For the function of trial is to sift the truth from a mass of contradictory evidence, and to do so the fact-finding tribunal must hear both truthful and false witnesses. It is in this sense, doubtless, that this Court spoke when it decided that perjury alone does not constitute an obstruction ’ which justifies exertion of the contempt power and that there must be added to the essential elements of perjury under the general law the further element of obstruction to the Court in the performance of its duty. ’ Ex parte Hudgings, supra, 382, 383, 384. And the Court added, ‘ the presence of that element [obstruction] must clearly be shown in every case where the power to punish for contempt is exerted. ’ ’ ’

The court reversed the conviction because “ no element except perjury ” was “ ‘ clearly shown’” (p. 228), and in so doing-provided us with the only workable test in distinguishing between the false answer and the answer that is so false and evasive as to amount to no answer at all. In this connection, the court held that “ a reading of the evidence persuades us that the Circuit Court of Appeals correctly found that [the witness] had directly responded with unequivocal answers. These unequivocal ansivers were clear enough so that if they are shown to be false petitioner would clearly be guilty of perjury.” (p. 226; emphasis supplied.) The court distinguished the Appel case (supra) on the ground that the testimony there “ was ‘ on its mere face, and without inquiry collaterally, * * * not a bona fide effort to answer the questions at all ’ ” (pp. 228-229; emphasis supplied). (See, also, Nilva v. United States, 352 U. S. 385, 398; Brown v. United States, 356 U. S. 148,153.)

It must be remembered that in the Falk case this court held (258 N. Y., supra, p. 439): “We are not at liberty to say, * * * that ‘ the testimony is not a bona fide effort to answer the questions at all ’ and in the Foster case (263 N. Y., supra, p. 314) we similarly held: “ Nothing on the face of the judgment debtor’s evidence * * * suggests that it was not a bona fide effort to answer the questions.” (See, also, People v. Caidin, 238 App. Div. 813, appeal dismissed 267 N. Y. 551.)

The teaching of the Michael case (supra) is that if the witness directly responds with unequivocal answers which are clear enough to subject him to a perjury indictment, then he has made a “ bona fide effort to answer ” and may not be summarily committed for refusing to answer.

The obvious advantage of this test is that it focuses exclusively on the internal content of the witness’s answers, and avoids any need of characterizing the testimony by such nebulous and elusive standards as palpably false and evasive of the obligation to answer”, “ so false as to offer not the slightest probability of truthfulness ”, so false and preposterous as to preclude the raising of any issue of fact ’ ’, and ‘ ‘ so patently obstructive and evasive as to raise no issue of fact ’ ’. All four of the quoted standards were invoked by the Appellate Division at one point or another in its opinion, and the court itself recognized that the terminology used was hardly satisfactory ’ ’. The chief difficulty in applying these nebulous standards is that the mere statement of any one of them requires a further definition of just what it means, and the process of definition and redefinition can continue ad infinitum. In our opinion, the only meaningful standard by which it may be determined whether each of the relators “ submit [ted] to do the act which he was so required to do ” (Civ. Prac. Act, § 406, subd. 3) is whether he ‘ directly responded ’ ’ to the enumerated 26 questions with unequivocal answers * * * clear enough so that if they are shown to be false [he] would clearly be guilty of perjury ” (Matter of Michael, supra, p. 226). If they did so respond, then they have purged themselves of their refusal to answer and their perjury, if any, must be proven and punished in the criminal tribunal in accordance with the safeguards of the criminal law. When the answers given by Frank and Oostenze are carefully measured against this standard, it becomes apparent that, though they may have been false, they were definite and unequivocal (see Matter of Michael, supra, p. 226, n.).

The Appellate Division’s basis for distinguishing between the answers given by relators was that ‘1 since both Frank and he had concurred that it was he who brought Frank to the meeting, he had the heavier burden to explain the happening of the event.” The aspects of Oostenze’s testimony which in its opinion distinguish his answers from Frank’s related to (1) the former’s knowledge- of Barbara’s illness; (2) his failure to find out whether his presence was an intrusion; (3) his estimate of the number of persons present at Apalachin, and (4) his failure to ask his host obvious questions. Frank’s situation was no different from Oostenze’s, except that the latter had known Barbara before. The commission as well as the relators agree that there can be no distinction between Frank and Oostenze. Both Frank and Oostenze had exactly the same burden in this proceeding, namely, to supply definite answers to 26 identical questions and thus purge their refusal to answer. To each of these questions each witness gave a definite answer and thereby subjected himself to a multi-count perjury indictment, if the answers are shown to be false. It bears constant repetition that the truth or falsity of the answers is immaterial here.

We are not unmindful of the problem of the commission in seeking to uncover the true purpose of the gathering at Apalachin. But if, as we have said, ‘ Punishment for a criminal contempt [by not more than 60 days’ imprisonment] is a drastic remedy for willful wrong” (Matter of Spector v. Allen, 281 N. Y. 251, 259; People v. De Feo, 308 N. Y. 595, 605, supra), then an indefinite incarceration for a refusal to “ answer ” questions must be sanctioned with even greater caution. A reading of this record impels us to the conclusion that relators were in effect sentenced ” by Special Term to imprisonment “ with the object or purpose of exacting from [them] a character of testimony which the court would deem to be truthful” (Ex parte Hudgings, supra, p. 384). If the power existed to hold a witness in confinement # * * until he consented to give a character of testimony which in the opinion of the court would not be perjured ’ ’, then ‘ ‘ it would come to pass that a potentiality of oppression and wrong would result and the freedom of the citizen when called as a witness * * * would be gravely imperiled ” (id.).

By keeping relators in prison until they supply answers which satisfy the commission and the courts, they are not only being sentenced to conceivable life imprisonment, without a trial by jury or any of the other traditional rights which the law accords to a defendant, but they are in effect being compelled to admit they committed perjury in giving the answers they did. Such an arbitrary deprivation of liberty makes a hollow mockery of the “ due process of law ” requirement. To cull a phrase from Chief Judge Cabdozo, used in a different context but appropriate here, “ A community whose judges would be willing to give it whatever law might gratify the impulse of the moment would find in the end that it had paid too high a price (Matter of Doyle, 257 N. Y. 244, 268.)

The order of the Appellate Division respecting Frank Valenti should be affirmed, and the order of that court respecting Costenze Valenti should be reversed, and his discharge directed.

Bubke, J.

There is no discernible distinction in the degrees of falsity between the answers given by Costenze Valenti and Frank Valenti which justifies different treatment on these appeals. Alleged differences based upon the fact that one relator drove the automobile to Apalachin, N. Y., and the other relator was a passenger are slight. The answers given which are obstructive of the investigation were concerned with the six hours spent at the premises of Mr. Barbara. Both relators were confined under similar court orders until they would answer “ truthfully and responsively” the questions put to them by the Commission of Investigation. Incredible, evasive, inconsistent testimony designed to thwart the legitimate object of the inquiry does not constitute compliance with the court order, and serves no basis for the issuance of a writ of habeas corpus. (Cf. People ex rel. Falk v. Sheriff, 258 N. Y. 437; United States v. Appel, 211 F. 495.) It is no answer that relators may be subject to prosecutions for perjury, since that remedy is designed solely to punish relators and will not achieve the purposes of section 406 of the Civil Practice Act, which is designed to obtain truthful answers to legitimate objects of investigation and inquiry.

Accordingly, the order of the Appellate Division affirming the dismissal of the writ of habeas corpus as to Costenze P. Valenti should be affirmed. The order of the Appellate Division granting the writ of habeas corpus to Frank J. Valenti should be reversed, and the writ dismissed.

Desmond, J.

Costenze Valenti’s answers were on their face not only false but so clearly evasive and obstructive as to amount to a refusal to answer at all and so were contemptuous and contumacious as matter of law. But, like the Appellate Division, I feel differently as to the answers of Frank Valenti. Those answers, as pointed out in the Appellate Division opinion, were sufficiently responsive so as to raise an issue of credibility only. Accordingly, I am in full agreement with the Appellate Division and vote to affirm in each case.

Upon the appeal of the People as to Frank Valenti: Order affirmed.

Judges Fuld and Van Voobhis concur with Judge Froessel ; Judge Desmond concurs for affirmance in a separate opinion.

Upon the appeal of the relator, Costenze P. Valenti: Order affirmed.

Chief Judge Conway and Judge Dye concur with Judge Burke; Judge Desmond concurs for affirmance in a separate opinion.

Orders affirmed.


source: Caselaw Access Project

author: Van Voobhis, J.

license: Public Domain

text:
    International Firearms Co., Ltd., Appellant, v. Kingston Trust Company, Respondent.
    Argued May 14, 1959;
    decided July 8, 1959.

      Hugh R. Elwyn for appellant.
    I. The Kingston Trust Company had no right to countermand payment of its draft, for the purchase of a bank draft results in an executed sale of credit which is not subject to rescission or countermand. (Duke v. Johnson, 127 Wash. 601; Bull v. Bank of Kasson, 123 U. S. 105; Munn v. Boasberg, 292 N. Y. 5; Kerr S. S. Co. v. Chartered Bank of India, 292 N. Y. 253; Gravenhorst v. Zimmerman, 236 N. Y. 22; Schweitzer v. Fargo, 255 N. Y. 60; Baruch v. Buckley, 167 App. Div. 113; Bobrick v. Second Nat. Bank of Hoboken, 175 App. Div. 550, 224 N. Y. 637; Kohler v. First Nat. Bank of Tonasket, 157 Wash. 417.) II. Plaintiff had a valid legal title to the draft and the right to enforce it against the drawer. (Newcombe v. Fox, 1 App. Div. 389, 154 N. Y. 754; Corporation Holding Co. v. Wieber, 230 App. Div. 636.) III. The judgment of the Canadian court was competent evidence to establish that plaintiff had acquired as against the remitter the lawful right to the possession of defendant’s draft and is admissible against the trust company as a muniment of plaintiff’s title. (Barr v. Gratz, 4 Wheat. [17 U. S.] 213; Greenleaf v. Brooklyn, F. & C. I. R. R. Co., 132 N. Y. 408; Railroad Equip. Co. v. Blair, 145 N. Y. 607; Skelly v. Jones, 61 App. Div. 173; Gage v. Goudy, 141 Ill. 215; Chapman v. Moore, 151 Cal. 515; Williams v. Armroyd, 11 U. S. 423; Hilton v. Guyot, 159 U. S. 113.) IV. Defendant cannot escape liability on its unconditional engagement that on due presentment its draft would be paid by pleading defenses which are available only to the remitter as against the payee, since the remitter is not a party to the instrument. (Central Hanover Bank & Trust Co. v. Duffy, 258 N. Y. 600; Sullivan v. Bonesteel, 79 N. Y. 631; Rogers v. Squires, 98 N. Y. 49; Bowles v. Oakman, 246 Mich. 674; Farmers State Bank v. Koffler, 60 N. D. 11; Gamel v. Hynds, 34 Okla. 388; Caldwell v. Lawrence, 84 Ill. 161; Hurley v. Union Trust Co. of Rochester, 244 App. Div. 590.) V. Defendant having countermanded payment of its draft, presentment for payment and notice of dishonor were unnecessary to bind the drawer and consequently the bank cannot be discharged by any delay in presentment of the draft for payment. (Jacks v. Darrin, 3 E. D. Smith 557; Purchase v. Mattison, 6 Duer 587; Usher v. Tucker Co., 217 Mass. 441; Moskowitz v. Deutsch, 46 Misc. 603; Carroll v. Sweet, 128 N. Y. 19; Greenwich Ins. Co. of City of N. Y. v. Oregon Improvement Co., 76 Hun 194, 148 N. Y. 758; Dehoust v. Lewis, 128 App. Div. 131.)

      George Rusk and Bernard A. Feeney, Jr., for respondent.
    I. The draft in question is a negotiable instrument and the Negotiable Instruments Law of New York State applies to all rights and liabilities arising under it. (Swift & Co. v. Bankers Trust Co., 280 N. Y. 135.) II. Plaintiff is not a holder in due course of the instrument. (Grossman v. Chechila, 127 Misc. 151; Matter of Brunswick, 143 Misc. 573.) III. The instrument never had a valid inception as to the payee because no valid delivery was made to it. (Grannis v. Stevens, 216 N. Y. 583; Irving Trust Co. v. Leff, 253 N. Y. 359; Herrmann & Grace v. City of New York, 130 App. Div. 531,199 N. Y. 600; Sheehy v. Madison Sq. Garden Corp., 266 N.Y. 44; Hanna v. Stedman, 230 N. Y. 326; His Majesty’s Treasury v. Bankers Trust Co., 304 N. Y. 282; Pope v. Heckscher, 266 N. Y. 114.) IV. Defendant may assert all defenses existing on the instrument. (Hurley v. Union Trust Co. of Rochester, 244 App. Div. 590; Bathgate v. Exchange Bank of Chola, 199 Mo. App. 283; Grubel v. Nassauer, 210 N. Y. 149.) V. Plaintiff has a defective title to the instrument. The complaint was properly dismissed. (Finkelstein v. Fine, 182 App. Div. 521; Walkof v. Strober, 200 App. Div. 104; German-American Bank v. Cunningham, 97 App. Div. 244; Bankers’ Commercial Security Co. v. Piercy Corp., 145 Misc. 649; Vosburgh v. Diefendorf, 119 N. Y. 357; American Exch. Nat. Bank v. New York Belting & Packing Co., 148 N. Y. 698; Canajoharie Nat. Bank v. Diefendorf, 123 N. Y. 191; Niblick v. Sprague, 200 N. Y. 390; Munn v. Boasberg, 292 N. Y. 5.) VI. Defendant had the right to stop payment on the instrument. (Bobrick v. Second Nat. Bank of Hoboken, 175 App. Div. 550; Wolf v. Title Guar. & Trust Co., 251 App. Div. 354, 277 N. Y. 626.) VII. The delay in presenting the draft for payment discharged defendant from liability thereon to the extent of the loss caused by the delay. (Commercial Nat. Bank v. Zimmerman, 185 N. Y. 210; Grant v. MacNutt, 12 Misc. 20; Matter of Brunswick, 143 Misc. 573; Klemann v. Collins, 223 App. Div. 161; Sulsberger & Sons v. Cramer, 170 App. Div. 114.)
   Van Voobhis, J.

This appeal is based on the legal principle that a bank draft bought and paid for is an executed sale of credit, and is not subject to rescission or countermand (Kerr S. S. Co. v. Chartered Bank of India, 292 N. Y. 253; Schweitzer v. Fargo, 255 N. Y. 60; Gravenhorst v. Zimmerman, 236 N. Y. 22; Bobrick v. Second Nat. Bank, 175 App. Div. 550, affd. 224 N. Y. 637). This principle has become axiomatic, nor does it appear that Special Term or the Appellate Division questioned it. We think that they erred, however, in failing to give effect to a Canadian judgment which established title to this draft in plaintiff. If that is true, it resolves the. issue in favor of plaintiff-appellant. .

The root of the controversy is a contract with plaintiff’s predecessor in interest for the sale of firearms. Five hundred revolvers were to be delivered by this concern in the Province of Quebec to one Betting, who was then a resident of Kingston, New York. The purchase price was $7,750. A deposit of $1,000 was to be made by Betting under this executory agreement. He purchased a New York draft in this amount of defendant, Kingston Trust Company, drawn on the Federal Beserve Bank of New York, which Betting forwarded to his escrow agent in Canada to constitute the deposit under the agreement which has been mentioned for the purchase of these revolvers, to be applied on the purchase price when the revolvers cleared the United States Customs at Ogdensburg, N. Y. A dispute arose over the performance of this contract between Betting and plaintiff, or plaintiff’s predecessor in interest. Plaintiff asserted that, although this merchandise had not cleared the United States Customs, it was prevented from doing so by Betting himself, who had refused to complete the necessary forms to get these firearms through the customs. Plaintiff sued Betting in the Province of Quebec, joining Betting’s Canadian escrow agent (the Boyal Bank of Canada) which had possession of this draft, and the drawee of the draft (the Federal Beserve Bank of New York). Jurisdiction in rem was obtained over Betting, by what is known as a conservatory attachment, under procedure similar to that in force in New York State. The draft was attached in the hands of Betting’s Canadian escrow agent, to which it had been remitted by Betting to be applied on the contract subject to the condition mentioned, obtaining jurisdiction over Betting insofar as Betting’s property was attached by substituted service according to Quebec law, and the court held that the executory contract of sale of these revolvers had been broken by Betting through his refusal to co-operate by signing the necessary forms in clearing the United States Customs. This decision was evidently made in the light of the familiar principle that there is an implied obligation of good faith binding parties to contracts, that they will not deliberately frustrate their performance (O’Neil Supply Co. v. Petroleum Heat & Power Co., 280 N. Y. 50, 54-55; Wigand v. Bachmann-Bechtel Brewing Co., 222 N. Y. 272, 277). It was held, in effect, that Betting was no longer entitled to take advantage of the condition under which he had transmitted this draft to his Canadian escrowee, that the draft constituted the deposit which Betting had made on the contract, freed from the condition the performance of which he had frustrated, and was forfeited to plaintiff for the reason that Betting had broken the contract. In these respects, the law of Quebec appears to parallel our own. It is unimportant, however, whether the courts of Quebec decided the issue as it would have been decided in New York, so long as it does not do violence to our public policy. The law is well settled that, under principles of comity, our courts give effect to the judgment of the Canadian court (Williams v. Armroyd, 7 Cranch [11 U. S.] 423; Hilton v. Guyot, 159 U. S. 113). In the Williams case, the opinion said (p. 432), per Chief Justice Marshall : ‘ ‘ It appears to be settled in this country, that the sentence of a competent Court, proceeding in rem, is conclusive with respect to the thing itself, and operates as an absolute change of the property. By such sentence, the right of the former owner is lost, and a complete title given to the person who claims under the decree. No Court of co-ordinate jurisdiction can examine the sentence. The question, therefore, respecting its conformity to general or municipal law, can never arise, for no co-ordinate tribunal is capable of making the inquiry.”

The only defect which respondent claims to exist in this reasoning is that the defendant in the instant action, Kingston Trust Company, was not a party to the Canadian lawsuit. That circumstance is irrelevant. In this firearms transaction, the New York draft bought by Betting from the Kingston Trust Company was, for the purposes of the transaction, equivalent to money. Kingston Trust Company no more needed to be a party to the Canadian action than the United States Government would need to have been, if its currency had been the subject of the deposit. That follows from the legal principle mentioned at the beginning, that the purchase of a bank draft results in an executed sale of credit which is not subject to rescission or countermand. Kingston Trust Company was not involved in the contract for the purchase and sale of firearms between Betting and plaintiff’s predecessor. Betting had simply bought the draft to be used as the equivalent of money in whatever manner he elected to pursue. The bank had no duty or function to take part in Betting’s controversy. If Betting had remitted cash to his escrow agent in Canada, with instructions to apply it on his executory contract under the same condition, and the Canadian court had held the deposit to have been appropriated to the contract, plaintiff would have been entitled to retain the money. The United States could not refuse to honor its money on account of mischance of Betting for the reason that it was not a party to the action in Quebec; neither could the Kingston Trust Company, whose credit had been unconditionally sold to Betting and was used for the same purpose.

In Barr v. Gratz (4 Wheat. [17 U. S.] 213, 220) the United States Supreme Court said: “It is true that, in general, judgments and decrees are evidence only in suits between parties and privies. But the doctrine is wholly inapplicable to a case like the present, where the decree is not introduced as per se binding upon any rights of the other party, but as an introductory fact to a link in the chain of the plaintiff’s title, and constituting a part of the muniments of his estate.” (Railroad Equipment Co. v. Blair, 145 N. Y. 607, 610; Israel v. Wood Dolson Co., 1 N Y 2d 116.)

There can be no doubt that the judgment of the Quebec court binds Betting with respect to this draft, whose property it had been. The Canadian court held, in view of his transactions, that the draft belonged not to Betting but to plaintiff. Kingston Trust Company had no interest in that transaction. No question was involved that the draft had been duly issued by defendant bank and paid for by Betting. If the bank reimbursed Betting, as it did, for the purchase price of this instrument, without surrender of the draft, it did so at its own risk. It was under no obligation to reimburse Betting without receiving the return of the draft, and if the indemnity agreement which it took from Betting proved to be valueless, that is the misfortune of the bank and not of plaintiff. If it chose to satisfy an erstwhile customer, that does not furnish a reason why it should not be compelled to honor its drafts or on account of which the transactions between Betting and plaintiff’s predecessor should be relitigated in our courts after they have been finally adjudicated in the courts of Canada.

The judgment appealed from should be reversed, and judgment entered in favor of plaintiff as prayed for in the complaint, with costs in all courts.

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

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


text:
    Margaret Johnson, Respondent, v. Martin Stein, Appellant, et al., Defendant.
    Argued May 22, 1959;
    decided July 8, 1959.

      Joseph F. O’Neill, Arthur L. Milligan and George J. Aspland for appellant.
    I. The right of redemption exists only as permitted by the statute. (Mabie v. Fuller, 255 N. Y. 195; People ex rel. Marsh v. Campbell, 143 N. Y. 335; Matter of Blatnicky v. Ciancimino, 1 A D 2d 383.) II. Since the right of redemption exists only as permitted by the statute, and since the Suffolk County Tax Act permits only ‘ ‘ the owner of, or any person interested in, or having a lien upon any real estate sold for taxes ” to redeem, plaintiff-respondent has no right to redeem.

      Jacob Patent and Emanuel Pearlman for respondent.
    I. The statutes relating to tax certificates were designed to prevent strangers from obtaining title to real property by mere payment of taxes, but were not designed to prevent strangers from paying taxes. (People ex rel. Marsh v. Campbell, 143 N. Y. 335; Matter of Blatnicky v. Ciancimino, 1 A D 2d 383, 2 N Y 2d 943.) II. Where a sum is tendered to a County Treasurer in payment of taxes and the County Treasurer accepts, the owners can take advantage of such payment to protect their title, even if the payor had no interest in the property.
   Van Voobhis, J.

This action is brought under article 15 of the Real Property Law to compel the determination of claims to title to a parcel of real property in Babylon, Suffolk County. It had been owned by one Anthony Funk, who died in March, 1948. His distributees were his children, who supposed that their father had died intestate and that they had inherited his real estate. Instead, he left a will devising the real property in suit to a woman named Emma Gerow of White Plains, who died in 1950. Letters of administration on her estate were issued to the Public Administrator. Plaintiff-respondent at first purchased from Funk’s children, believing them to be the owners, and later acquired title from the estate of Emma Gerow by a deed from the Public Administrator approved by the Westchester County Surrogate. Meanwhile a tax title was incubating in defendant-appellant.

Appellant bases his claim to title on a sale for nonpayment of the 1949-1950 taxes. The three-year period of redemption expired November 21,1953. Two days previously, on November 19,1953, respondent paid and the County Treasurer accepted the full amount required to redeem these premises from this tax sale. This payment, within the statutory redemption period, was made by respondent after she had received her deed from Funk’s children (who had no title to convey) and before she had obtained title from the estate of Emma Gerow. Appellant insisted unsuccessfully before Referee Steotbbiitk and the Appellate Division that, although the redemption money was paid to the County Treasurer before the period to redeem had expired, redemption was ineffectual for the reason that the money was paid by the wrong person. The same contention is made in this court.

Section 49 (added by L. 1929, ch. 152) of the Suffolk County Tax Act (L. 1920, ch, 311) provides insofar as material: ‘1 § 49. When Owner May Redeem. The owner of, or any person interested in, or having a lien upon, any real estate sold for taxes and assessments as aforesaid, may redeem the same at any time within thirty-six months after the date of such sale * * *. In case such payment be made to the county treasurer, he shall receive the same for the benefit of the holder of the tax certificate thus discharged, and shall give notice thereof to the purchaser ”.

Appellant relies on Matter of Blatnicky v. Ciancimino (206 Misc. 916, affd. 1 A D 2d 383, affd. 2 N Y 2d 943). There a petition in an article 78 proceeding was dismissed for an order directing a County Treasurer to deliver a tax deed to the purchaser of a tax sale certificate under the general Tax Law. The purchaser of the tax certificate did not claim to have acquired title by redemption, but, as on the instant appeal, he tried to perfect his title by overcoming the effect of payment of the redemption money by another person before the time to redeem had expired. The tax certificate holder was not allowed to defeat redemption there, nor should he be allowed to do so here. The words “ any other person ”, used in a tax sale statute to describe a person authorized to redeem, have been held not to authorize redemption for the benefit of a stranger to the title (People ex rel. Marsh v. Campbell, 143 N. Y. 335, 338). In Matter of Blatnicky v. Ciancimino (supra) it was held, however, that a stranger to the title could redeem within the time limit- for. the benefit of the owner, at least where the County Treasurer accepted payment which was not disavowed by the owner. Blatnicky was decided under section 152 of the general Tax Law, after it had been amended in 1930 so as to omit “ having an interest in any real estate sold for taxes ” as a qualification of a person entitled to redeem. Omission of this phrase put section 152 of the Tax Law in virtually the same form as the statute that was under consideration in People ex rel. Marsh v. Campbell (supra) which provided that the occupant or “ any other person ’ ’ might redeem. Since the 1930 amendment to section 152 of the Tax Law conformed it substantially to the statute underlying People ex rel. Marsh v. Campbell, it is not probable that the 1930 amendment to section 152 overruled that authority. The Marsh decision, and others like it, would prevent a tax title from being invalidated on the ground that notice of the sale was not given to one claiming to have been an owner or occupant who proved not to have been an owner or occupant, and would prevent a stranger to the title from acquiring title by redemption due to having had a merely colorable interest to protect. The same has been held in the case of an endeavor by a wife to redeem on the basis of her inchoate right of dower (Rosenblum v. Eisenberg, 123 App. Div. 896). Those consequences ensue, even under a broadly worded statute. In the Marsh and Rosenblum cases, however, the time to redeem had expired, and the issue resolved itself into whether the person then attempting to redeem had such an interest in the property as to have invalidated the tax sale by entitling him or her to notice of the sale which was not given. Notice was held not to have been required for the reason that the person seeldng to redeem lacked such an interest in the property as to be entitled to be notified. Consequently he could not extend the time in which to redeem, and, being a stranger to the title, he could not at any time redeem for himself. It is quite clear that the omission in 1930 from section 152 of the Tax Law of the qualifying words “ having an interest in any real estate sold for taxes ” did not require notices of tax sales to be given to strangers nor did it entitle strangers at any time to redeem in their own interests. Neither the presence nor absence of those words in the statute, upon the other hand, would preclude an owner or other person interested in a parcel of real property sold for taxes from taking advantage of a redemption payment made in his behalf by a stranger to the title, which has been accepted by the County Treasurer.

The argument for appellant is based on the circumstance that section 49 of the Suffolk County Tax Act retains words purporting to qualify the persons who may redeem which are similar to those which were eliminated from section 152 of the general Tax Law in 1930. It is argued that the presence of the words ‘ ‘ any person interested in, or having a lien upon, any real estate sold for taxes ” in the Suffolk County Act prevents an owner from taking advantage of a redemption payment accepted by the County Treasurer from a stranger to the title within the redemption period. We think that these words do not have that effect. They may have been omitted by the Legislature from section 152 of the Tax Law in order to leave no doubt that timely redemption by a stranger does redound to the benefit of the owner, but we consider that their presence in section 49 of the Suffolk County Tax Act does not have an opposite effect. Although respondent had no title when she paid the tax redemption money, she later obtained title from the record owner, viz., by deed from the administrator of Emma Gerow, approved by the Surrogate. As a stranger, respondent prevented appellant from perfecting his tax title by herself paying the arrearage within the redemption period, but she did not acquire title by paying these tax arrears. Her payment redounded to the benefit of the legal owner. She kept the title alive in the estate of Emma Gerow, which made it possible for Gerow’s estate later to deed it to her.

The judgment appealed from should be affirmed, with costs.

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

Judgment affirmed.


author: Fkoessel, J. Desmond, J. (concurring).

text:
    Martin L. Merriweather, Plaintiff, v. Boland & Cornelius, Defendant and Third-Party Plaintiff-Appellant; Pittston Stevedoring Corp., Third-Party Defendant-Respondent.
    Argued April 15, 1959;
    decided July 8, 1959.

      Fenton F. Harrison for appellant.
    I. The accident to plaintiff, having occurred aboard a ship on navigable waters engaged in interstate commerce and in the discharge of maritime work, makes the instant litigation one involving a maritime tort and, hence, within the scope of the admiralty and maritime law. (Atlantic Transp. Co. v. Imbrovek, 234 U. S. 52; Weyerhaeuser S. S. Co. v. Nacirema Co., 355 U. S. 563; Seas Shipping Co. v. Sieracki, 328 U. S. 85; Alaska S. S. Co., v. Petterson, 205 F. 2d 478, 347 U. S. 396; Mahnich v. Southern S. S. Co., 321 U. S. 96; Pope & Talbot v. Hawn, 346 U. S. 406; Riley v. Agwilines, 296 N. Y. 402; McFall v. Compagnie Maritime Belge, 304 N. Y. 314.) II. The holding of the Appellate Division in this case unduly limits the scope and purpose of section 193-a of the Civil Practice Act by requiring this defendant to admit liability to plaintiff and then claim indemnity from a third-party defendant only upon the theory that defendant and third-party plaintiff was guilty of a breach of statutory and nondelegable duty to plaintiff and to the exclusion of all other theories or causes of action contained in plaintiff’s original complaint. (Luce v. New York, C. & St. L. R. R. Co., 213 App. Div. 374, 242 N. Y. 519; Brady v. Weiss & Sons, 6 A D 2d 241; Kile v. Riefler Bros. Contrs., 282 App. Div. 1000; Weisman v. Hyams, 5 A D 2d 1000; Putvin v. Buffalo Elec. Co., 3 A D 2d 805, 4 A D 2d 1009.) III. The decision of the Appellate Division, Fourth Department, is inconsistent with the holding of the Court of Appeals in McFall v. Compagnie Maritime Belge (304 N. Y. 314). (Palazzolo v. Pan-Atlantic S. S. Corp., 211 F. 2d 277; Tarantino v. Buck, 6 A D 2d 894; Ryan Co. v. Pan-Atlantic Corp., 350 U. S. 124; Weyerhaeuser S. S. Co. v. Nacirema Co., 355 U. S. 563.) IV. The construction placed upon section 193-a of the Civil Practice Act by the decision of the Appellate Division, Fourth Department, renders such section unconstitutional and void as violative of section 2 of article III of the Constitution of the United States insofar as it deprives Boland of a substantial right under the admiralty and maritime jurisdiction of the United States. (Ryan Co. v. Pan-Atlantic Corp., 350 U. S. 124; Weyerhaeuser S. S. Co. v. Nacirema Co., 355 U. S. 563; Crumady v. The J. H. Fisser, 358 U. S. 423; Parenzan v. Iino Kaiun Kabushiki Kaisya, 251 F. 2d 928, 356 U. S. 939; American President Lines v. Marine Terms. Corp., 234 F. 2d 753, 352 U. S. 926; Hagans v. Farrell Lines, 237 F. 2d 477; Oleszcuk v. Calmar S. S. Corp., 164 F. Supp. 628; Brown v. American-Hawaiian S. S. Co., 211 F. 2d 16; Considine v. Black Diamond S. S. Corp., 163 F. Supp. 109; States S. S. Co. v. Rothschild Int. Stevedoring Co., 205 F. 2d 253; Oceanic Steam Nav. Co. v. Compania Transatlantica Espanola, 134 N. Y. 461.) V. The decision of the Appellate Division, Fourth Department, deprives defendant and third-party plaintiff of a substantial remedy to which it is entitled under the admiralty and maritime law and thereby impinges upon the constitutional guaranty of uniform administration of the admiralty law. (Genesee Chief v. Fitzhugh, 53 U. S. 443; The Moses Taylor, 4 Wall. [71 U. S.] 411; Roth v. Cox, 210 F. 2d 76, 348 U. S. 207; Knickerbocker Ice Co. v. Stewart, 253 U. S. 149; Wilburn Boat Co. v. Firemen’s Ins. Co., 348 U. S. 310; Pope & Talbot v. Hawn, 346 U. S. 406; Seas Shipping Co. v. Sieracki, 328 U. S. 85; Garrett v. Moore-McCormack Co., 317 U. S. 239; Robins Dry Dock Co. v. Dahl, 266 U. S. 449; Southern Pacific Co. v. Jensen, 244 U. S. 205.) VI. There is a material error in the basic premise of the Special Term’s decision holding that the shipowner’s duties to plaintiff were controlled by the Jones Act. (Miller v. Browning S. S. Co., 73 F. Supp. 185, 165 F. 2d 209, 334 U. S. 834.)

      J. Edmund De Castro, Jr., for respondent.
    I. Appellants’ attempt to raise a question of the constitutional validity of section 193-a of the Civil Practice Act for the first time upon a petition for reargument in the Appellate Division and subsequently upon an appeal to the Court of Appeals is not timely. (Herndon v. Georgia, 295 U. S. 441; Yakus v. United States, 321 U. S. 414.) II. Where there are allegations of active joint fault there can be no third-party liability. (Brady v. Weiss & Sons, 6 A D 2d 241; Connors v. Brown S. S. Co., 115 F. Supp. 775; Halcyon Lines v. Haenn Ship Corp., 342 U. S. 282; Lo Bue v. United States, 188 F. 2d 800; American Mut. Liab. Ins. Co. v. Matthews, 182 F. 2d 322; Kile v. Riefler Bros. Contrs., 282 App. Div. 1000; Ingraldi v. Chazen, 205 Misc. 977.) III. Pittston is not liable to indemnify Boland since there is no contractual relationship between Pittston and Boland. (Ryan Co. v. Pan-Atlantic Corp., 350 U. S. 124; McFall v. Compagnie Maritime Belge, 304 N. Y. 314; Crumady v. The J. H. Fisser, 358 U. S. 423; Hagans v. Farrell Lines, 237 F. 2d 477; Trygstad v. States Mar. Corp., 150 F. Supp. 556; Autobuses Modernos, S. A., v. Federal Mariner, 125 F. Supp. 780; Union Sulphur & Oil Corp. v. Jones & Sons, 195 F. 2d 93; Slattery v. Marra Bros., 186 F. 2d 134; Considine v. Black Diamond S. S. Corp., 163 F. Supp. 109; Lawrence v. Fox, 20 N. Y. 268; Seaver v. Ransom, 224 N. Y. 233.) IV. The Longshoremen’s Compensation Act precludes the assertion by a shipowner of a stevedoring contractor’s liability to the shipowner where the contractor is also the employer of the injured longshoreman and no contractual relationship exists between shipowner and stevedoring contractor. (Brown v. American-Hawaiian S. S. Co., 211 F. 2d 16.) Y. There can be no action of indemnity between shipowner and stevedore for a condition of unseaworthiness where there is no contract between the parties. (Pope & Talbot v. Hawn, 346 U. S. 406.)
   Fkoessel, J.

In this negligence action by a stevedore against Boland & Cornelius (hereinafter called Boland), the operator of the ship upon which he was working when injured, the third-party complaint of Boland against the stevedore’s employer, Pittston Stevedoring Corporation (hereinafter called Pittston), was dismissed by the courts below. We think this was error. Special Term looked to the main complaint, found that it charged Boland with active negligence and decided that Boland and Pittston must be regarded as joint tort-feasors in pari delicto. We note that among the many acts of negligence alleged are some which, if proven at the trial, would make Boland guilty of nothing more than passive negligence. This, however, as will presently appear, is not the basis for our reversal.

We are here involved in the area of maritime law in which Federal law is controlling (McFall v. Compagnie Maritime Belge, 304 N. Y. 314, 323-324, and cases cited therein). It is urged by the third-party defendant that under Federal statute and case law it is immune from liability to the ship operator in the absence of a contractual undertaking to indemnify. Section 5 of the Longshoremen’s and Harbor Workers’ Compensation Act (U. S. Code, tit. 33, § 905) provides that the liability of an employer “ shall be exclusive and in place of all other liability of such employer to the employee * * * and anyone otherwise entitled to recover damages from such employer at law or in admirality on account of such injury ” (emphasis supplied). The question is whether recovery over by a shipowner against the injured stevedore’s employer based upon common-law indemnity is “ on account of such injury ”.

In the McFall case (supra) we said (pp. 331-332) that it was not on account of the injury, pointing out that the Federal rule did not seem to be different from our construction of identical language in the New York statute (Workmen’s Compensation Law, § 11). The shipowner in seeking recovery, we stated, “ is not suing for the damage sustained by the employee but asserts its own right of recovery for breach of an alleged independent duty or obligation owed to it by the employer as indemnitor. (Westchester Lighting Co. v. Westchester Co. Small Estates Corp., 278 N.Y. 175.) ” (Emphasis supplied.) This rule avoids the somewhat unjust result of immunizing an actively negligent employer from tort recovery and enabling him to enforce his compensation lien against such recovery, often at the expense of a passively negligent third party (see Weinstock, The Employer’s Duty to Indemnify Shipowners for Damages Recovered by Harbor Workers, 103 U. of Pa. L. Rev. 321, 322; Note, 66 Yale L. J. 581, 582-583).

Since McFall Avas decided in 1952, however, certain Federal cases have formulated a different rule, distinguishing between an independent contractual assumption of indemnity by the employer (and thus a voluntary waiver of the limited liability afforded employers under § 5 of the act) and a quasi-contractual (McFall type, active-passive) theory of indemnity. In the latter situation recovery over is considered to be “ on account of ’’ the injury and is thus held to be precluded by section 5 (Brown v. American-Hawaiian S. S. Co., 211 F. 2d 16, 18; Crawford v. Pope & Talbot, 206 F. 2d 784, 792; see Weinstock, op. cit., p. 342; see, also, Slattery v. Marra Bros., 186 F. 2d 134, 139, cert, denied 341 U. S. 915; contra, States S. S. Co. v. Rothschild, Int. Stevedoring Co., 205 F. 2d 253, 256).

While the Supreme Court has thus far not expressly adopted the above rule, it has Avritten three significant decisions on the subject- to which we uoav look for guidance. In Ryan Co. v. Pan-Atlantic Corp. (350 U. S. 124 — see 349 U. S. 901, affirmance by an equally divided court), a bare majority of five Justices held that section 5 did not preclude a shipowner from obtaining indemnity based upon the stevedoring contractor’s “ breach of its purely consensual obligation owing to the shipowner to stoAV the cargo in a reasonably safe manner ” (pp. 131-132). This obligation was implied from the contractor’s agreement to perform the work. Although the circuit court opinion (211 F. 2d 277) had used the language, if not the theory of quasi-contract, the majority of the Supreme Court took pains to point out (p. 133) that “ This obligation is not a quasi-contractual obligation implied in law or arising out of a noncontractual relationship ”. The four dissenting Justices refused to impose liability on the employer in the absence of an express contract of indemnity, aside from the absence of any contract whatever. The dissent stated (p.-142): “ Plainly, common-law indemnity should not be used to fasten such a liability on a stevedoring company. I suppose it is for this reason that the Court purports to find an actual contract to indemnify and thus decides the case on an issue neither presented in the complaint nor considered by the trial court.” (Emphasis supplied.)

Had the majority remained silent as to the quasi-contract theory of indemnity, we would have had no difficulty whatever in reading the decision as an implicit rejection of such theory. It stated in a footnote (p. 132, n. 6), however, that it did not reach the issue of the exclusionary effect of the Compensation Act upon a right of action of a shipowner under comparable circumstances without reliance upon an indemnity or service agreement of a stevedoring contractor.’’ (Citing, among others, the Brown, Rothschild, Slattery and McFall cases, supra, and the Weinstock article.)

Although this footnote possibly left room for argument that there was still some life to the quasi-contract theory in maritime indemnity, it would be precarious for a State court to rely upon such a possibility in interpreting Federal law, particularly when the whole thrust of the opinion imports a rejection of that theory. Indeed, in a decision soon after Ryan, the Ninth Circuit Court of Appeals—which had authored the Rothschild opinion (supra) based upon quasi-contract — stated that since the question was “ left open ” in Ryan, “ we prefer not to rest our decision upon this ground” (American President Lines v. Marine Terminals Corp., 234 F. 2d 753, 757, cert. denied 352 U. S. 926; cf., however, Parenzan v. Iino Kaiun Kabushiki Kaisya, 251 F. 2d 928, cert, denied 356 U. S. 939, decided alternatively on the contract theory of indemnity).

In the second Supreme Court case, Weyerhaeuser S.S. Co. v. Nacirema Co. (355 U. S. 563), we think the question 11 left open ” in Ryan was necessarily decided. While agreeing with the circuit court dissent that the shipowner was entitled to a trial on its claim of indemnity, the unanimous opinion of the court implicitly disapproved the dissenting Judge’s rationale, stating (p. 569): In view of the new trial to which petitioner is entitled, we believe sound judicial administration requires us to point out that in the area of contractual indemnity an application of the theories of active ’ or passive ’ as well as 1 primary ’ or ‘ secondary ’ negligence is inappropriate [citing Ryan].”

Although this statement may be taken by some as merely a rejection of the active-passive test in determining the breach of a contractual duty (see Weinstock, op. cit., p. 343), we think it goes further than that. Since the claim of indemnity rested at least partly upon quasi-contract (see 355 U. S. 565) the court would surely have permitted the shipowner to try out this theory as well, if it were available. We can only conclude that it was not. It is, of course, for this reason that in the instant case we must necessarily determine the sufficiency of each of the two alternative theories of indemnity—contract and quasi-contract.

The final and most recent case is Crumady v. The J. H. Fisser (358 U. S. 423). There, the District Court had found the ship unseaworthy and thus liable to the plaintiff, but, since the negligence of the stevedores was the 11 sole active or primary cause ’ ’ of the unseaworthiness, the ship was granted liability over (142 F. Supp. 389, 401-402). The court expressly disclaimed the existence of any contract between the shipowner and the stevedoring contractor. The circuit court reversed, finding no liability on the part of the ship in the first instance (249 F. 2d 818). In a six to three decision (the four dissenters in Ryan now in the majority) the court reversed and reinstated the District Court judgment, rejecting at the same time that court’s reasoning.

The court held that the case came within Ryan, despite the fact that the service agreement did not run between the shipowner and the stevedoring contractor, as in Ryan, but between the latter and the charterer of the ship. The contract mentioned the name of the ship and contained an agreement by the contractor ‘ ‘ to faithfully furnish such stevedoring services ”. The court concluded (358 U. S. 423, 428): “We think this case is governed by the principle announced in the Ryan case. The warranty which a stevedore owes when he goes aboard a vessel to perform services is plainly for the benefit of the vessel whether the vessel’s owners are parties to the contract or not. That is enough to bring the vessel into the zone of modern law that recognizes rights in third-party beneficiaries.” (Emphasis supplied.)

If it were not certain after By an and Weyerhaeuser that the Supreme Court had ruled out the quasi-contract theory in maritime indemnity, it surely must be so after Grumady and the lengths to which the court felt necessary to go to find a contractual relationship between the parties.

With this background in mind, we have no difficulty in concluding here that the third-party complaint is sufficient in law and that Boland is entitled to a trial on its claim of indemnity against Pittston. We base this not upon the fact that Boland may be found only passively negligent—for we think such a theory is foreclosed—but upon the fact that Boland pleads the existence of a contract with and a warranty by Pittston to perform its engagement to load the ship in a safe and seamanlike manner. Whether Boland can prove facts sufficient to bring it within the “ contract ” theory spelled out in Grumady is not to be decided on a motion such as this. Nor can we now decide whether, assuming the existence of some form of contractual indemnity, Boland will be entitled to recovery over. This will depend upon proof of facts constituting a breach of Pittston’s warranty under the principles enunciated in the three Supreme Court cases discussed above. The allegations of the main complaint are such that we may not now say that such a breach may not be made out.

The judgment appealed from should be reversed, with costs, and the third-party complaint reinstated.

Desmond, J. (concurring).

I concur in the result only. Since this third-party complaint states a cause of action on a theory of contractual duty, it is unnecessary and inadvisable to pass on a question not here presented as to what the law maritime is or would be on different allegations of fact.

Chief Judge Conway and Judges Dye, Fttld, Van Voobhis and Bubke concur with Judge Fboessel ; Judge Desmond concurs in the result only in a separate memorandum.

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


author: Burke, J.

text:
    Sidney Weisner, Respondent, v. 791 Park Avenue Corporation et al., Appellants.
    Argued May 20, 1959;
    decided July 8, 1959.

      Ben A. Matthews and Walter E. Warner for Adrienne M. Gilbert, appellant.
    I. The order granting plaintiff an injunction pendente lite cannot be upheld in the absence of facts stating a cause of action on behalf of plaintiff against defendants. Since the action is in equity, cognizance must be taken of the facts existing at the time of hearing. II. This court will reverse and direct dismissal of the complaint where an injunction pendente lite has been granted below and plaintiff has failed to state a cause of action upon the face of the complaint, standing alone or as supported by the papers before the courts below. (Sherman v. Abeles, 265 N. Y. 383; McHenry v. Jewett, 90 N. Y. 58.) III. The approval of 791 Park Avenue Corporation is a condition precedent to the enforcibility of the contract. When fulfillment of the condition became impossible, the contract by its terms was rendered null and void. (Stabile v. McCarthy, 336 Mass. 399; Connor v. Rockwood, 320 Mass. 360; Kirke La Shelle Co. v. Armstrong Co., 263 N. Y. 79; Axelrath v. Kellogg & Sons, 265 App. Div. 874, 290 N. Y. 767.) IV. When a lease forbids assignment or subletting by the tenant without the landlord’s consent, the landlord may unreasonably or even arbitrarily withhold such consent. (Ogden v. Riverview Holding Corp., 134 Misc. 149, 226 App. Div. 882: Boskowitz v. Cohn, 197 App. Div. 776; Symonds v. Hurlbut, 208 App. Div. 147; Singer Sewing Mach. Co. v. Eastway Plaza, 5 Misc 2d 509; Barrington Apt. Assn. v. Watson, 38 Hun 545; 68 Beacon St. v. Sohier, 289 Mass. 354; Penthouse Props. v. 1158 Fifth Ave., 256 App. Div. 685.)

      Stephen S. Bernstein, Alvin J. Burnett and James TT. Poivell for 791 Park Avenue Corporation, appellant.
    I. There is no proof of bad faith; the decision of the board of directors is not subject to judicial review. (Kalmanash v. Smith, 291 N. Y. 142; Gerdes v. Reynolds, 281 N. Y. 180; McHenry v. Jewett, 90 N. Y. 58; Flynn v. Brooklyn City R. R. Co., 158 N. Y. 493; Globe Woolen Co. v. Utica Gas Elec. Co., 224 N. Y. 483; City Bank Farmers Trust Co. v. Hewitt Realty Co., 257 N. Y. 62; Everett v. Phillips, 288 N. Y. 227.) II. Appellant 791 Park Avenue Corporation could arbitrarily withhold its consent to a transfer of Mrs. Gilbert’s lease to plaintiff. (White v. Huber Drug Co., 190 Mich. 212; Coulos v. Desimone, 34 Wn. [2d] 87; Muller v. Beck, 94 N. J. L. 311; Zucker v. Dehm, 128 N. J. L. 435; Alwen v. Tramontin, 131 Wash. 78; Gruman v. Investors Diversified Servs., 247 Minn. 502; Matter of Cosh, [1897] 1 Ch. 9; Barrington Apt. Assn. v. Watson, 38 Hun 545; 68 Beacon St. v. Sohier, 289 Mass. 354; Penthouse Props. v. 1158 Fifth Ave., 256 App. Div. 685.)

      Harold L. Herrick and Edward G. McLaughlin for Tenant-Owned Apartment Association, Inc., amicus curiae, in support of appellants’ position.
    I. The court below erred in holding that the corporate landlord must show that its refusal to consent to the transfer of' stock and accompanying proprietary lease was based upon reasonable or justifiable grounds. (Barrington Apt. Assn. v. Watson, 38 Hun 545; 68 Beacon St. v. Sohier, 289 Mass. 354; Penthouse Props, v. 1158 Fifth Ave., 256 App. Div. 685.) II. The court may not compel defendant corporation to consent to the assignment of the lease to plaintiff by remaking the contract between the corporation and its tenant-stockholders and thus deprive both of substantial rights firmly established by law. (Halbe v. Adams, 172 App. Div. 186; Werfelman v. Quick, 187 App. Div. 732; Gillette Bros. v. Aristocrat Restaurant, 239 N. Y. 87; Arkansas Smelting Co. v. Belding Co., 127 U. S. 379; Harrigan v. Pounds, 239 App. Div. 1; Weintraub v. Weintraub, 302 N. Y. 104; Taylor v. United States Cas. Co., 269 N. Y. 360.) III. No cause of action is stated since it is not claimed that the directors withheld consent in bad faith to which defendant Gilbert was a party through her control of the directors or in collusion with them. (Van Iderstine Co. v. Barnet Leather Co., 242 N. Y. 425; Wilhelm v. Wood, 151 App. Div. 42.) IV. Plaintiff’s contract became unenforcible according to its terms when the approval of the directors or stockholders was not obtained. (Portuguese-American Bank v. Welles, 242 U. S. 7.)

      Copal Mints for respondent.
    I. Appellants’ contention that plaintiff lacks standing or right to sue is untenable. Plaintiff, as equitable owner, has full right to sue to enforce vesting of complete legal title. (Henderson v. Tomb, 169 Misc. 737; Matter of City of New York [Jefferson Houses—Lombardi], 306 N. Y. 278; Williams v. Haddock, 145 N. Y. 144; Crippen v. Spies, 255 App. Div. 411; Karp v. Twenty-Three Thirty Ryer Corp., 185 Misc. 440.) II. The record is clear that defendant Gilbert breached her contract with plaintiff. III. The record shows that defendant Gilbert’s “election” on June 3, 1958 was in bad faith. (Simon v. Etgen, 213 N. Y. 589; Wood v. Duff-Gordon, 222 N. Y. 88; Mandel v. Liebman, 303 N. Y. 88; Alper Blouse Co. v. Connor & Co., 309 N. Y. 67; Matter of Casualty Co. [Bliss Co. Claim], 250 N. Y. 410; Patterson v. Meyerhofer, 204 N. Y. 96; Pneumatic Signal Co. v. Texas & Pacific Ry. Co., 200 N. Y. 125; Mokar Props. Corp. v. Hall, 6 A D 2d 536; Meyer v. Custom Manor Homes, 4 A D 2d 488; Carter v. Bradlee, 245 App. Div. 49, 269 N. Y. 664.) IV. Defendant Gilbert withdrew her 6‘ election ’ ’; hence the contract subsists in full vigor. V. The provisions in the by-laws and “proprietary leases” prohibiting and voiding transfers of capital stock and proprietary leases are invalid. (Kalmanash v. Smith, 291 N. Y. 142; Flynn v. Brooklyn City R. R. Co., 158 N. Y. 493; Allen v. Biltmore Tissue Corp., 2 N Y 2d 534; Manacher v. Central Coal Co., 284 App. Div. 380, 308 N. Y. 784; Jenkins v. Moyse, 254 N. Y. 319; 542 Morris Park Ave. Corp. v. Wilkins, 120 Misc. 48; Prudence Co. v. 160 West 73d St. Corp., 260 N. Y. 205; Penthouse Props. v. 1158 Fifth Ave., 256 App. Div. 685; Curtis v. Le May, 186 Misc. 853; Smith v. Feigin, 273 App. Div. 277, 298 N. Y. 534; Matter of Danforth v. McGoldrick, 201 Misc. 480; Matter of Flamman v. McGoldrick, 279 App. Div. 854; Matter of Massey v. Temporary State Housing Rent Comm., 279 App. Div. 1090; Judson v. Frankel, 279 App. Div. 372; People ex rel. McGoldrick v. Sterling, 283 App. Div. 88; Gilligan v. Tishman Realty & Constr. Co., 283 App. Div. 157, 306 N. Y. 974; 20 East 74th St. v. Minskoff, 308 N. Y. 407.) VI. It is not established that a provision in a conventional lease absolutely restraining its assignment is exempt from the rule against unreasonable restraint of alienation. (Riggs v. Pursell, 66 N. Y. 193; Presby v. Benjamin, 169 N. Y. 377; Gillette Bros. v. Aristocrat Restaurant, 239 N. Y. 87; 1165 Fifth Ave. Corp. v. Alger, 288 N. Y. 67; Roosevelt v. Hopkins, 33 N. Y. 81; Dunlop v. Mulry, 85 App. Div. 498; Lynch v. Joseph, 228 App. Div. 367; Liebmann’s Sons Brewing Co. v. Lauter, 73 App. Div. 183; Storms v. Manhattan Ry. Co., 77 App. Div. 94, 178 N. Y. 493;
      Johnston v. Flickinger, 97 Misc. 169, 183 App. Div. 887; Gazlay v. Williams, 210 U. S. 41.) VII. In the absence of compelling language to the contrary, there is read into every contractual instrument the implication of obligation of good faith, fair dealing, honesty and reasonableness. (Simon v. Etgen, 213 N. Y. 589; Wood v. Duff-Gordon, 222 N. Y. 88; Mandel v. Liebman, 303 N. Y. 88; Alper Blouse Co. v. Connor & Co., 309 N. Y. 67; Reliable Press v. Bristol Carpet Cleaning Co., 261 App. Div. 256; Price v. Spielman Motor Sales Co., 261 App. Div. 626; Matter of Grean & Co., 274 App. Div. 279; Vogel v. Pathe Exch., 234 App. Div. 313; Haber v. Jacobson Co., 185 App. Div. 650.) VIII. Defendant corporation’s board of directors are under a fiduciary relationship to the stockholder-proprietary lessees. (Blaustein v. Pan American Petroleum & Transp. Co., 263 App. Div. 97.)
   Burke, J.

Plaintiff instituted this action for specific performance of a written contract negotiated by a real estate broker and entered into between plaintiff and defendant Gilbert, providing for the sale of 330 shares of stock of the defendant 791 Park Avenue Corporation, and for the assignment to plaintiff of a proprietary lease of an apartment at 791 Park Avenue, New York City. By an order to show cause served with the complaint, plaintiff moved for an injunction pendente lite restraining the assignment of the lease and the sale of the corporate stock to others. The answer of defendant Gilbert alleges the defense of impossibility of performance of the contract of sale and sets forth as a second separate and partial defense facts alleging prospective damages including maintenance charges on the apartment, interest, counsel fees and other expenditures which defendant Gilbert will sustain if an injunction pendente lite is granted. Special Term denied the injunction, but on appeal the Appellate Division granted it. The order of reversal of the Appellate Division directs that undertakings theretofore given by the plaintiff shall continue as security for any damage, including interest, which defendant Gilbert might sustain by reason of the injunction granted by that court.

These appeals are here by permission of the Appellate Division which certified the following question for review by this court. ‘ ‘ Did the Appellate Division err in reversing the order of Special Term denying plaintiff’s motion for an injunction pendente lite and in granting said motion?”

We believe the question should be answered in the affirmative. No cause of-action against either of the defendants is stated whether the complaint be considered alone or with all the other papers before the courts below. The order granting plaintiff an injunction pendente lite cannot be upheld in the absence of facts which establish either rights of the plaintiff or duties of the defendant Gilbert which would constitute a cause of action on behalf of the plaintiff against defendants.

The appellant corporation, formed in 1947 pursuant to a plan of co-operative organization, is the owner of an apartment house at Park Avenue and East 74th Street in New York City. The building is occupied by 31 tenants, each of whom has a proprietary lease, identical in form, for his apartment, and stock in 791 Park Avenue Corporation. Defendant Gilbert’s lease contains the following provisions:

“ The Lessee shall not assign this lease, or any interest therein, and no such assignment shall take effect as against the Lessor for any purpose, unless and until all of the following requirements have been complied with and satisfied:
* # *
4. A written consent to such assignment, authorized by a resolution of the board of directors, or signed by a majority of the directors or by lessees owning of record at least two-thirds of the capital stock of the Lessor accompanying proprietary leases then in force, must be delivered to the Lessor. ’ ’

And it is further provided:

“No executor, administrator, personal representative or. successor of the Lessee, or trustee, or anyone to whom the interest of the Lessee hereunder shall pass by law, shall be entitled to assign this lease, or to sublet the apartment, or any part thereof, except upon compliance with the requirements of this paragraph Sixth. The character of and restriction upon the occupancy of the apartment, and upon assignment of this lease, as hereinbefore expressed, restricted and limited, are an especial consideration and inducement for the granting of this lease by the Lessor to the Lessee ”.

There are similar provisions in the by-laws of the corporation.

Gilbert contracted with the plaintiff, a member of the Bar of this State, to transfer her stock in the 791 Park Avenue Corporation and the lease for her apartment in the building. The following clause was made a condition of the agreement: “ This sale is subject to the approval of 791 Park Avenue Corporation in the manner required under the Certificate of Incorporation, by-laws and proprietary lease. If the said approval is not obtained, this contract shall become null and void and neither party hereto shall be under any liability to the other by reason thereof, and all sums paid on account of this contract shall be returned, without interest, by the Seller to the Purchaser ”.

During the period intervening between the execution of the contract by the plaintiff on May 7, 1958 and its delivery to the plaintiff on May 16, 1958, several conversations took place between the plaintiff and defendant Gilbert’s attorney, who was in charge of the pending negotiation.

On May 12th plaintiff spoke to Gilbert’s attorney and requested him to withhold submission of the contract to the 791 Park Avenue Corporation for a few days to enable plaintiff to assemble and submit his references.

Pursuant to plaintiff’s request the managing agent for defendant 791 Park Avenue Corporation was not formally notified of the proposed sale until May 16, 1958 when a copy of the contract was sent by certified mail to the agent. On the same day the duplicate original of the contract was delivered to plaintiff, together with a letter which reminded plaintiff that: ‘ ‘ your application to purchase the cooperative apartment must be approved by a majority of the Board of Directors under Article Sixth of the lease. Accordingly, I would suggest that you submit several reference letters ”.

Before the contract was delivered to the corporation, plaintiff was informed that there would be difficulties in procuring the requisite consent. Plaintiff could have withdrawn from the contract before it was delivered, instead he preferred to proceed. He was then given forms to supply information to the board which he did not utilize. During the period of 12 days between the delivery of the contract and the directors’ meeting, plaintiff endeavored to persuade individual directors to accept him as a fellow tenant.

Plaintiff concedes that he consulted with the managing agent. On May 28, 1958 the agent notified the attorney for Gilbert that a meeting of the board of directors of 791 Park Avenue Corporation had been held and that the board did not approve of the proposed transfer by Gilbert of her apartment to plaintiff. The attorney immediately informed plaintiff of the board action and sent him a copy of the notice.

On June 2, 1958 Gilbert’s attorney telephoned and then personally called upon a Mr. Gustave Ross who was the treasurer and a director of defendant 791 Park Avenue Corporation. On both occasions he requested a reconsideration and resubmission to the board of the plaintiff’s application to purchase Gilbert’s apartment. The request was refused.

While the case was sub judice in the Appellate Division, Gilbert, at the suggestion of a Justice of the Appellate Division, solicited the consent of the stockholders. Eighteen of the 31 who received her request returned it with the notation that they did not consent to the transfer; only 1, the defendant Gilbert, voted to the contrary.

It is properly asserted by the respondent that the order granting the injunction may be reversed only if as a matter of law the plaintiff has no standing to sue or the directors of 791 Park Avenue Corporation have an absolute right to restrain the transfer of stockholders’ interests in the corporation.

Respondent assumes that the defendant Gilbert had a contract obligation to persuade the directors and/or stockholders to look with favor on his references. No such duty is imposed on Gilbert either by law or the terms of the agreement. Indeed, plaintiff gave a practical construction to the agreement when he acknowledged his obligation to convince the board members or the stockholders of his worth as a fellow tenant and co-owner by requesting time to gather the necessary references. Further recognition that the exercise of diligence and persuasion rested on his shoulders is found in his activity in arranging personal interviews with the treasurer of the corporation and two of the director-tenants. At no time prior to the notice of rejection did he indicate a belief that Gilbert was under a duty to plead his cause.

In this case the condition inserted in the contract, in terms, rebuts any presumption that Gilbert was willing to agree to procure the approval of the corporation. Words of condition were carefully chosen to avoid the imposition on Gilbert of any burden relative to procuring the required consent. By express condition her obligation is merely made “ subject ” to the favorable action by 791 Park Avenue Corporation. Since the consent of the corporation was not obtained, the plaintiff is not entitled to specific performance (see e.g. Connor v. Rochwoocl, 320 Mass. 360).

Plaintiff, having agreed that the lease-stock transfer had to be ratified by the corporation in accordance with the conditions of the lease and in the manner provided by the by-laws, is bound, insofar as Gilbert is concerned, by his failure to secure approval of the transaction.

The statute which prohibits discrimination in co-operatives because of race, color, religion, national origin or ancestry is not involved in this case. Absent the application of these statutory standards, and under the terms of the agreement between plaintiff and Gilbert, there is no reason why the owners of the co-operative apartment house could not decide for themselves with whom they wish to share their elevators, their common halls and facilities, their stockholders’ meetings, their management problems and responsibilities and their homes.

The distinction between clauses importing an obligation to seek and obtain approval as a condition precedent to the exercise of a right to terminate and clauses making the vendor’s obligation to convey merely “ subject ” to the granting of an approval is aptly stated in the case of Stabile v. McCarthy (336 Mass. 399, 403): “If the parties had intended no obligation on the plaintiff to take action they could have used a clause in the special provision importing no suggestion of obligation, inability or impossibility, or could have made the vendor’s obligation to convey and the vendee’s obligation to purchase ‘ subject to ’ the granting of approval (compare Connor v. Rockwood, 320 Mass. 360; Livoli v. Stoneman, 332 Mass. 473, 475-476), instead of making inability to obtain planning board approval a condition precedent to the exercise of a right to cancel. ’ ’

Since the complaint does not state a meritorious cause of action against either of the defendants, the issuance of the injunction pendente lite is unwarranted.

Accordingly, the order of the Appellate Division should be reversed, the injunction pendente lite should be dissolved, with costs, and the matter remitted to the Special Term. The certified question is answered in the affirmative.

Chief Judge Conway and Judges Desmond, Dye, Fuld and Froessel concur with Judge Burke ; Judge Van Voorhis dissents and votes to affirm.

Order reversed, 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. Question certified answered in the affirmative.