(223 N. Y. 373)

PEOPLE ex rel. NEW YORK RYS. CO. et al. v. PUBLIC SERVICE COMMISSION OF FIRST DISTRICT et al.

(Court of Appeals of New York. May 14,

1918.)

1. STREET RAILROADS 652, New, vol. 16 Key-No. Series-PUBLIC SERVICE COMMISSION -POWER-AMORTIZATION FUNDS.

Pursuant to this plan the New York Railways Company was organized and the prop erties of the old company were conveyed to it. Then mortgages were prepared to secure the bonds issued, and were presented to the Public Service Commission for approval, . Subsequently, and on February 27, 1912, the Public Service Commission consented to the execution of the mortgages.

Under Public Service Commissions Law (Consol. Laws, c. 48) § 52, providing that the Public Service Commission may establish a system of accounts to be used by railroad corporations or other common carriers, and prescribe the manner in which such accounts shall be kept, and may, after a hearing, prescribe by order the accounts in which particular outlays and receipts shall be entered, charged, or credit- The mortgages required the mortgagor to ed, and section 4, giving the commission all maintain, replace, and renew the mortgaged powers necessary or proper to enable it to carry property out of the earnings of the company. out the purposes of this chapter, the Public Service Commission had no authority to require the The interest on the income bonds was to be preservation of 20 per cent. of the gross receipts paid solely out of the net income of the mortto establish an amortization fund for the renew-gagor, and the net income was to be deteral of a street railway when the existing equip-mined after setting aside the reserve proment should be no longer capable of use. vided for in the mortgage. The interest on

2. PUBLIC SERVICE COMMISSIONS 6-STAT- the income bonds was not cumulative, and

UTFS-CONSTRUCTION.

Though the power of the Public Service Commission is extensive, and the act creating it should be construed in the same spirit in which it was enacted, still when a particular power is exercised by or claimed for the commission, it should have its basis in the language of the statute, or be necessarily implied therefrom.

Hogan, J., dissenting.

if not earned in any year was lost to the bondholders. Subsequently, by a further order dated on the same day, February 27, 1912, the Public Service Commission required the relator before paying any dividends on its stock or interest on its income bonds to expend each month beginning January 1,

Appeal from Supreme Court, Appellate 1912, for maintenance and depreciation durDivision, First Department.

Certiorari by the People, on the relation of the New York Railways Company and others, against the Public Service Commis sion of the First District and others. From an order of the Appellate Division (181 App. Div. 338, 168 N. Y. Supp. 760), dismissing the writ, relators appeal. Reversed.

Richard Reid Rogers and Burt D. Whedon, both of New York City, for appellants. William L. Ransom and Oliver C. Semple, both of New York City, for respondents.

ing the month 20 per cent. of its gross operating revenue for such month, and if this amount was not expended within the month, to credit the unexpended portion thereof to an account called "Accrued Amortization of Capital." The relator objected to the provisions of this last-mentioned order, and brought this proceeding to review the same. The sole question here is whether the commission had power to make the order. The Public Service Commission bases its authority to make the order under review on section 52 of the Public Service Commissions Law. Cons. Laws, c. 48.

CUDDEBACK, J. Though this is an imSection 52 provides that the Public Service portant proceeding, it presents nevertheless Commissions may establish a system of aca simple question. The issue involves simply counts to be used by railroad corporations the interpretation and meaning of certain sec or other common carriers, and prescribe the tions of the Public Service Commissions Law. manner in which such accounts shall be kept, The Metropolitan Street Railway Company and may, after a hearing, prescribe by order was in the hands of receivers for several the accounts in which particular outlays and years, and on December 29, 1911, the proper- receipts shall be entered, charged or credited. ties of the company were sold, pursuant to a In other sections of the statute it is predecree in foreclosure of the United States scribed that the commission shall have suCircuit Court, to a committee of the bond-pervision over all railroads and other common holders of the company. The bondholders carriers, with power to examine the same committee had prepared a plan of reorgani- and keep informed as to their general condization of the company under sections 9 and tion and with respect to their compliance 10 of the Stock Corporation Law of this state. with the provisions of law, and the orders The plan was approved by the Public Serv- of the commissions. Such corporations are ice Commission, and, pursuant thereto, the required to furnish safe and adequate servproperties of the company were to be taken ice to the public at reasonable rates and over by a new corporation to be organized, without discrimination as between persons or

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

HISCOCK, C. J., and CHASE, CARDOZO and MCLAUGHLIN, JJ., concur. COLLIN, J., taking no part. HOGAN, J., dissenting. Order reversed, etc.

localities, and whenever the commission shall [ be of the opinion that any railroad or other common carrier has violated the provisions of the act, they may order the railroad or other common carrier to comply with the law. The power of such corporations to borrow money and to issue stock or bonds can be exercised only with the approval of the commission. Section 4 of the act contains general provi- (Court of Appeals of New York. May 14, 1918

sions that the commission shall have "all powers necessary or proper to enable it to carry out the purposes of this chapter."

SABINE v. PAINE.

(223 N. Y. 431)

BILLS AND NOTES 376-VALIDITY-HOLD
ERS IN DUE COURSE-USURY.

General Business Law (Consol. Laws, c. 20) Section 52, on which the commission relies, §§ 370, 371, 373, provides that notes reserving and which relates to the establishment of a void, prosecution thereof enjoined, and the notes a greater interest than 6 per cent. shall be system of accounts, was plainly intended to surrendered and canceled. Negotiable Instrumake the method of accounting by these cor- ments Law (Consol. Laws, c. 38) § 96, provides that a holder in due course holds the instrument porations uniform so that the accounts could free from any defect of title of prior parties, be readily comprehended by those required and free from defenses available to prior parties to examine the same. By establishing a among themselves. Section 91 provides that a system of accounts the corporations were re-holder in due course is one who takes the in strument under certain prescribed conditions. quired to show under particular heads what Held, that the usury statute is not abrogated they had done. It was not to regulate the by the Negotiable Instruments Law, and hence management of their finances, but to show a note void in its inception for usury cannot be enforced even by a holder in due course. what the management was.

The other sections of the act to which reference has been made clearly do not in express terms authorize the commission to require the creation of a reserve fund to renew the plant when the same shall be worn out or shall become obsolete. It is not pretended by anybody that they do.

[1, 2] The power of the Public Service Commission is extensive, and the act creating the commission should be construed in the same spirit in which it was enacted. Still, when a particular power is exercised by the commission, or is claimed for it, that power should have its basis in the language of the statute, or should be necessarily implied therefrom. I think that the assertion of au

thority under review here is outside of and beyond the statute. In Matter of Quinby v. Public Service Commission, 223 N. Y. 244, 119 N. E. 433, a very recent case, we held that the Legislature had not delegated to the Public Service Commission the power to increase the rates of fare that may be charged by street surface railroads in the city of Rochester, on the ground that we found no word in the statute which disclosed a legislative intent to delegate such power to the commission. The decision in Matter of Quinby v. Public Service Commission, supra, is controlling here, and requires us to hold that the Public Service Commission had no authority to make the order requiring the relator to reserve 20 per cent. of its gross operating revenue for maintenance and depreciation, and for the creation of the amortization of capital account.

The order appealed from should be reversed, and the determination of the Public Service Commission annulled, with costs in this court and in the Appellate Division.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by C. Olivia Sabine against Maggie S. Paine, impleaded, etc. From a judgment for defendant entered on a verdict and the denial of a new trial affirmed by the Appellate Division, 166 App. Div. 9, 151 N. Y. Affirmed. Supp. 735, plaintiff appeals.

Joseph P. Tolins, of New York City, for appellant. Hector M. Hitchings, of New York City, for respondent.

COLLIN, J. The action is upon a promisSory note in the sum of $2,100, made by the defendant and owned by the plaintiff. The note was payable, four months after its date, to the order of Eugene F. Vacheron. It was

delivered to him as the agent of the defendfor her. He, after indorsing it, transferred it ant for the purpose of having it discounted to the plaintiff for the sum of $1,850. Under

the evidence and the decision of the Appellate Division, this appeal presents the single question, Is a usurious promissory note enforceable by a holder in due course?

The negotiable Instruments Law (Consol. Laws, c. 38) enacts:

"A holder in due course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parment of the instrument for the full amount ties among themselves, and may enforce paythereof against all parties liable thereon." Section 96.

"A holder in due course is a holder who has taken the instrument under the following conditions: 1. That it is complete and regular upon its face; 2. That he became the holder of it before it was overdue, and without notice that it had been previously dishonored. if such was the fact; 3. That he took it in good faith and for value; 4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it." Section 91.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes 119 N.E.-54

When the Negotiable Instruments Law | not affect the rule. He is bound to know the was enacted, it was an established rule of character of the paper he is dealing in. law in this state and many other jurisdic- Eastman v. Shaw, 65 N. Y. 522, 530; Miller tions that a holder of a note void by virtue v. Zeimer, 111 N. Y. 441, 18 N. E. 716. of a statutory declaration because of usury, who became such before the maturity of the note for value and without notice of the usury, could not enforce the note. The rule is an exception to the general principle that a negotiable instrument, in the hands of an innocent holder, who had received it in good faith in the ordinary course of business, for value, and without notice of a defense, is not invalid and is enforceable by the holder. The general principle has been stated:

(223 N. Y. 392)

MCKEON v. VAN SLYCK et al. (Court of Appeals of New York. May 14, 1918.) 1. WILLS 158(2)-CONTRACT TO DEVISE

EVIDENCE-SUFFICIENCY.

but his drunken and intoxicated condition was so objectionable that Mrs. McKeon protested against his being brought to the house. Brown, it is alleged, thereupon talked with Mrs. McKeon, and made an arrangement In an action to recover upon a promise to that if she would provide him permanently will a certain amount of money or upon a quantum meruit, it might be proper to instruct the with a room in her home and board him and jury that they could reject the testimony, though take care of him when he came to the city, he uncontradicted, unless they found it clear and would leave her by his will $25,000. Brown convincing, and that they could reject the testi- having died without keeping his promise, this mony of the claimant if not corroborated by dis-action is brought to recover from his estate interested witnesses, but they could not properly be instructed that such corroboration was essential as a matter of law, or that the law, irrespective of the circumstances, viewed the claim with suspicion; a fair preponderance of the evidence being sufficient.

2. CONTRACTS 92-INTOXICATED PERSONS. An intoxicated man may be able to make a binding contract, depending on the effect of the intoxication upon his understanding and mental capacity.

3. WORK AND LABOR 30(3)—MISLEADING INSTRUCTIONS.

In an action to recover on an express contract, or on a quantum meruit, where it was not explained that recovery on a quantum meruit is based upon a contract, express or implied, and in its instructions the court only spoke of contracts in referring to the express contract, it was misleading, upon the jury adjourning to the court, to ask if a verdict could be returned for plaintiff for some amount, notwithstanding the fact that they did not recognize the existence of the contract, to instruct the jury that where there is no contract the verdict must be for the defendant.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Margaret McKeon against Frederick N. Van Slyck and William C. Albro, as administrators with the will annexed of the estate of George Brown, deceased. From a judgment of the Appellate Division (171 App. Div. 913, 155 N. Y. Supp. 1122), affirming a judgment for the defendants, plaintiff appeals. Reversed, and new trial ordered.

Oswald N. Jacoby and Samuel J. Levinson, both of New York City, for appellant. N. Otis Rockwood, of New York City, and M. Glenn Folger, of Poughkeepsie, for respondents.

CRANE, J. George Brown, a resident of Dutchess county, was a bachelor. He made frequent visits to New York City to collect the rents of valuable real property which he owned. On these occasions, after having transacted his business, he indulged so liberally in drink as to be unable to take care of himself for days at a time. Friends and acquaintances looked him up, straightened him out, and sent him home. Among these was a business acquaintance, Bartholomew McKeon, who had done plumbing work on Brown's property. As their acquaintanceship became more intimate, Brown employed McKeon to manage his properties and collect the rents, which arrangement continued until Brown's death in May, 1912. At the time of his death, Brown was 72 years of age.

Prior to 1897 Brown became a frequent visitor at the McKeon home in New York City,

the $25,000 upon an express contract, the complaint also alleging the fair and reasonable value of the services performed by Mrs. McKeon as a basis for a recovery upon quantum meruit. On the trial of the action the jury rendered a verdict for the defendants, and the judgment entered thereon has been affirmed on appeal to the Appellate Division, two justices dissenting. We are asked to reverse this judgment because of the errors committed by the trial justice in his charge to the jury.

There is much evidence to show that Mr. Brown, after 1897, came to the home of the plaintiff nearly every month for a week or more, and that he was there taken care of by the plaintiff and her servants and furnished with his meals. His condition from drink made him at times so filthy and helpless that for a period of 7 years a man named William A. Johnson was employed by the plaintiff to take care of him and clean him up. The various services which were rendered by the plaintiff were testified to by the said Johnson by Ellen Seay, a chambermaid and waitress with Mrs. McKeon for 9 years, by

The

Anna McCloskey, a visitor, and by Bartholo-
mew McKeon, the plaintiff's husband.
latter and Anna McCloskey testified to the
express promise to pay by will the $25,000
while the witnesses Sampson Friedlander, a
agreed upon for the services to be rendered,
lawyer, Oscar A. De Polo, a broker, Franklin
L. Gilon, an employé in the county clerk's
office, Ellen Seay, and Mary Moran all gave
evidence of conversations with Brown, where-
in he related his arrangement with Mrs. Mc-
Keon to provide him with a room and board,
and stated that he had promised to compen
sate her well for her services. Although no
witnesses were called by the defendants, yet
the cross-examination of some of the plain-
tiff's witnesses left the case where the jury
might have found for either party; that is, the
result depended upon whether or not the jury
believed the plaintiff's witnesses.

[1] Under these circumstances, the instructions of the court to the jury should have been very clear and concise, and should have left them in no doubt about the law. The justice said that claims of this kind are looked upon by the courts with suspicion; that every detail of the claim must be brought out and proven by a preponderance of the evidence; that a contract of this kind must be

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

given in all particulars by absolutely disinterested witnesses and established by the clearest and most convincing evidence. These statements were incorrect.

In civil cases a plaintiff is never required to prove his case by more than a preponderance of evidence. This is as true of actions against an executor, founded on claims put forward for the first time after the death of the testator, as it is of other actions. Lewis v. Merritt, 113 N. Y. 386, 21 N. E. 141. No doubt, in determining whether the preponderance exists, the triers of the facts must not forget that death has sealed the lips of the alleged promisor. They may reject evidence in such circumstances which might satisfy them if the promisor were living. They must cast in the balance the evidence offered upon the one side and the opportunities for disproof upon the other. They may therefore be properly instructed that to make out a preponderance, the evidence should be clear and convincing. Roberge v. Bonner, 185 N. Y. 265, 77 N. E. 1023. But all these instructions in last analysis are mere counsels of caution. The responsibility of determining whether the evidence is clear and convincing must ultimately rest upon the jury, subject, of course, to the power of the court to set aside their verdict. There is no rule of law that the claimant's contract must be in writing, or even that it must be made out in all substantial particulars by disinterested witnesses. Hamlin v. Stevens, 177 N. Y. 39, 69 N. E. 118, is sometimes cited for such a rule, but mistakenly. There, the action was in equity for specific performance, and the trial judge found against the contract. The only question was whether evidence erroneously excluded would have changed the result. We held that, even with the evidence admitted, the result would have been the same. We reached that conclusion in the light of the accepted principles which guide courts of equity in decreeing specific performance. We said that oral declarations of an intention to bequeath one's estate to another ought not to be held sufficient basis for the finding of a contract unless corroborated in all substantial particulars by disinterested witnesses. In saying that we did not mean to lay down a rule of law. We gauged the significance of the excluded testimony by the tests and standards which commonly guide the judicial conscience. Winston v. Winston, 165 N. Y. 553, 59 N. E. 273. In like manner, we have sometimes said that divorces ought not to be granted on the uncorroborated evidence of private detectives (Moller v. Moller, 115 N. Y. 466, 22 N. E. 169), but when a trial judge put before a jury as a rule of law this caution designed to guide the judicial conscience, we pronounced the ruling error (Yates v. Yates, 211 N. Y. 163, 105 N. E. 195).

In the instant case the jury might properly have been instructed that they could reject the testimony, though uncontradicted, unless they found it clear and convincing. They

might even have been instructed that they could in their discretion reject it if it was not corroborated in all substantial particulars by disinterested witnesses. But they could not properly be instructed that such corroboration was essential as a matter of law, or that the law, irrespective of the circumstances, viewed the claim with suspicion.

This action is not for specific performance, but for a sum of money due on an alleged express contract for services rendered. It is also to recover upon quantum meruit for those services if rendered at the request of the deceased. The plaintiff could recover $25,000 by proving the express contract, or she could recover upon a quantum meruit when the special promise was not established, but the evidence in fact showed a rendition of services under circumstances which implied an agreement to pay therefor. Sturtevant v. Fiss, Doerr & Carroll Horse Co., 173 App. Div. 113, 159 N. Y. Supp. 399. on either of these propositions the plaintiff was bound to make out her case by a fair preponderance of evidence and by nothing more. Southard v. Curley, 134 N. Y. 148, 31 N. E. 330, 16 L. R. A. 561, 30 Am. St. Rep. 642; Roberge v. Bonner, supra; Lewis v. Merritt, 113 N. Y. 386, 21 N. E. 141.

Up

[2] In his charge to the jury the justice said:

"If you determine that Brown, when in an intoxicated condition, said that he would take care of the plaintiff in his will, she cannot recover, and your verdict should be for the defendant."

This was

error for two reasons: First, there was no evidence of Brown's intoxication at the time of the promise; second, an intoxicated man may be able to make a contract, depending upon the effect of the intoxication upon his understanding and mental capacity.

While the justice left it to the jury to find upon quantum meruit, or, as he said, "to fix what would be a proper compensation to award her under the circumstances," he also charged "that there is absolutely no evidence as to the value of the services rendered." This was not true, as the witness De Polo had testified that the fair charge for the room that Mr. Brown occupied would be $10 or $12 weekly.

[3] After the jury had been out awhile, they returned to the court with the following question:

"They are all agreed that no contract existed, but nevertheless feel that some compensation is due to the plaintiff for the services rendered Brown. The question is, Can the jury find a verdict in favor of the plaintiff for the services rendered notwithstanding the fact that they do not recognize the existence of an agreement or contract between Brown and Mrs. McKeon?"

The court answered:

gentlemen, that if you determine, as you say in "In answer to your inquiry I want to say, this question, that there was no contract, why then your verdict must be for the defendants."