New York Law Review

Tag: 1968

  • Sarnoff v. Charles Schad, Inc., 22 N.Y.2d 180 (1968): General Contractor’s Non-Delegable Duty to Provide Safe Scaffolding

    Sarnoff v. Charles Schad, Inc., 22 N.Y.2d 180 (1968)

    A general contractor who undertakes to furnish scaffolding for subcontractors’ employees has a non-delegable duty under Labor Law § 240 to ensure the scaffolding is safe, even if the contractor delegates the actual construction to a subcontractor; however, a subcontractor who merely furnishes the scaffolding, without directing the injured worker, is not liable under the statute and is not liable under common-law negligence for patent defects.

    Summary

    Sarnoff, an employee of a painting subcontractor, was injured when he fell from a scaffold lacking a safety rail. He sued the general contractor, Associated Church Arts, and the scaffolding subcontractor, Charles Schad, Inc. The New York Court of Appeals held that Associated, having undertaken to furnish the scaffolding, had a non-delegable duty to comply with Labor Law § 240, which requires safety rails on scaffolds over 20 feet. However, Schad was not liable under the statute because it did not employ or direct Sarnoff. Schad also was not liable under common-law negligence because the lack of a safety rail was a patent defect.

    Facts

    Associated Church Arts (Associated) was the general contractor for repairs at a church. Associated hired Hans Schmidt as a painting subcontractor, who employed Sarnoff. Associated also contracted with Charles Schad, Inc. (Schad) to furnish and erect scaffolding for the project. Sarnoff was injured when a plank tilted on a scaffold, approximately 21 feet high and lacking a safety rail, causing him to fall.

    Procedural History

    Sarnoff sued Associated and Schad based on common-law negligence and violation of Labor Law § 240. The trial court initially found both defendants liable. However, the court later reversed its decision as to Schad’s liability, holding a supplier is not liable for a patently dangerous appliance. The Appellate Division affirmed. Associated appealed, arguing it was denied a jury trial on the Labor Law claim and that it delegated its duty. Sarnoff appealed the dismissal of claims against Schad.

    Issue(s)

    1. Whether a general contractor who contracts to furnish scaffolding for the use of subcontractors’ employees can be held liable under Labor Law § 240 for injuries resulting from a lack of safety rails, even if the contractor delegates the actual construction to a subcontractor?

    2. Whether a subcontractor who merely furnishes the scaffolding, without employing or directing the injured worker, can be held liable under Labor Law § 240?

    3. Whether a supplier of a chattel owes a duty, extending to all foreseeable users, of reasonable care in furnishing safe chattels where the alleged defect is patent?

    Holding

    1. Yes, because when a general contractor undertakes to furnish scaffolding, it cannot avoid its statutory duty under Labor Law § 240 by delegating this obligation to another subcontractor.

    2. No, because Labor Law § 240 imposes a duty on those employing or directing another to perform labor, and Schad did neither.

    3. No, because liability should not rest upon a theory that a supplier of a chattel owes a duty extending to all foreseeable users where the alleged defect is patent.

    Court’s Reasoning

    The court reasoned that Associated, by contracting to have Schad build scaffolding for the subcontractors, undertook the responsibility of furnishing the scaffolds and implicitly required the workmen to use them. The uncontroverted facts that the scaffolding lacked a safety rail, was over 20 feet high, and the jury’s special verdict on causation mandated a finding of a violation of Labor Law § 240. The court emphasized that the statute was intended to protect workmen and should be liberally construed. The court quoted Labor Law § 240, which states that a “person employing or directing another to perform labor…shall furnish or erect…scaffolding…which shall be so constructed…as to give proper protection”.

    As to Schad’s liability, the court found no evidence that Schad employed or directed the plaintiff. The court distinguished this from situations involving latent faults or hidden dangers. The court stated: “Liability should not rest upon a theory that a supplier of a chattel owes a duty, extending to all foreseeable users, of reasonable care in furnishing safe chattels where the alleged defect is patent.” Referring to *MacPherson v. Buick Motor Co.*, the court concluded that the doctrine of liability as enunciated therein would not extend to a situation involving patent defects.

  • Nagle v. Motor Vehicle Acc. Indemnification Corp., 22 N.Y.2d 165 (1968): Defining ‘Innocent Victim’ Under MVAIC Laws

    Nagle v. Motor Vehicle Acc. Indemnification Corp., 22 N.Y.2d 165 (1968)

    Under New York’s Motor Vehicle Accident Indemnification Corporation (MVAIC) laws, the term “innocent victim” refers to freedom from negligence that proximately caused the injury, not merely being a wrongdoer in a general sense; the determination of whether a claimant is an “innocent victim” is an issue for arbitration.

    Summary

    Danny Nagle, a 16-year-old, was injured after being struck by a car driven by a minor to which he had affixed his license plates. Nagle sought arbitration with MVAIC, but MVAIC moved to vacate, arguing Nagle wasn’t an “innocent victim” due to his participation in an illegal act. The lower courts agreed, but the Court of Appeals reversed, holding that the term “innocent victim” as used in the Insurance Law is synonymous with being “without fault” in a negligence context. Therefore, the question of whether Nagle’s actions were a proximate cause of his injuries was an issue for the arbitrator, not the court.

    Facts

    Sixteen-year-old Danny Nagle drove with two other juveniles to purchase a car. On the return trip, Nagle affixed his license plates to the newly purchased car. The newly purchased car, driven by a fifteen-year-old, stalled, and Nagle walked back to assist. As Nagle returned to his own vehicle, he was struck by the other car. He then sought to make a claim against MVAIC.

    Procedural History

    Nagle served a notice of intention to make a claim and demanded arbitration from MVAIC. MVAIC moved to vacate the notice of arbitration, arguing that Nagle was not an “innocent victim”. Special Term agreed with MVAIC and the Appellate Division affirmed. Nagle appealed to the New York Court of Appeals.

    Issue(s)

    Whether the issue of a claimant’s status as an “innocent victim” under subdivision 2 of section 600 of the Insurance Law is a determination to be made by an arbitrator, or by the court as a condition precedent to arbitration.

    Holding

    Yes, because the term “innocent” is synonymous with “without fault” in the context of negligence, and whether Nagle’s actions were a proximate cause of his injuries is a determination that should be made by the arbitrator.

    Court’s Reasoning

    The court reasoned that the legislative history of Article 17-A of the Insurance Law, which created MVAIC, intended to supplement the Motor Vehicle Financial Security Act. The purpose of this statute was to provide compensation through MVAIC as if the owner or driver of the vehicle causing the injury were insured. The court rejected the idea that a claimant against MVAIC must sustain a greater burden than proving fault in the other party and freedom from contributory negligence. The court stated, “In sum, we are convinced that the Legislature intended the term ‘innocent’ to be synonymous with the phrase “without fault” insofar as it connotes a freedom from negligence.” The court noted that if the issue concerned the contributory negligence of the claimant, it would not be a proper one upon which to base the application to vacate arbitration. The court stated, “The matter to be resolved is not whether Nagle was a wrongdoer in any criminal or moral sense, but whether his acts were a proximate cause of his injuries.” Therefore, the Court of Appeals concluded the order should be reversed and the matter remanded for arbitration.

  • McCabe v. Queensboro Farm Products, Inc., 22 N.Y.2d 204 (1968): Third-Party Indemnity Before Actual Loss

    22 N.Y.2d 204 (1968)

    A third-party plaintiff in an indemnity action can obtain a conditional judgment against a third-party defendant, fixing potential liability, even before the third-party plaintiff has sustained an actual loss by paying the underlying judgment, allowing for an early determination of reimbursement obligations.

    Summary

    McCabe sued Gelfand, a roofing contractor, for injuries sustained at a construction site. Gelfand then impleaded Banner Roofing, alleging a joint venture agreement to share losses. After McCabe won against Gelfand, Banner moved to dismiss the third-party complaint, arguing Gelfand hadn’t personally paid the judgment since his insurer covered part of it. The Court of Appeals held that while actual loss is required for recovery under an indemnity agreement, a conditional judgment can be issued to determine potential liability before payment. This allows for earlier resolution of the indemnity claim, promoting judicial efficiency, and Gelfand is entitled to reimbursement regardless of whether his insurer paid part of the judgment.

    Facts

    Bernard McCabe was injured at a construction site and sued Sam Gelfand, the roofing contractor.
    Gelfand impleaded Banner Roofing Co., claiming they were joint venturers and agreed to share losses.
    The main action (McCabe v. Gelfand) was severed and proceeded to trial, resulting in a judgment for McCabe against Gelfand for over $176,000.
    Gelfand’s insurance paid $55,000 towards the judgment.

    Procedural History

    McCabe sued Gelfand in Supreme Court.
    Gelfand filed a third-party complaint against Banner Roofing, which was severed.
    The main action resulted in a judgment for McCabe against Gelfand.
    Gelfand amended his third-party complaint against Banner to reflect the judgment amount.
    Banner moved to dismiss the third-party complaint, arguing Gelfand had not personally paid the judgment.
    Special Term denied the motion, but the Appellate Division reversed and dismissed the third-party complaint.
    Gelfand appealed to the Court of Appeals.

    Issue(s)

    Whether a third-party plaintiff seeking indemnity must demonstrate actual loss by personal payment of the underlying judgment before obtaining a conditional judgment against the third-party defendant.
    Whether payments made by the third-party plaintiff’s insurance company towards the underlying judgment constitute a loss that triggers the indemnity agreement with the third-party defendant.

    Holding

    No, because while actual loss is required for ultimate recovery under an indemnity agreement, a third-party plaintiff can obtain a conditional judgment fixing potential liability before demonstrating actual loss, which promotes judicial efficiency.
    Yes, because whether Gelfand pays the judgment himself or his insurer pays it, he is entitled to reimbursement from his partner under the joint venture agreement.

    Court’s Reasoning

    The court stated that under the joint venture agreement, Banner was obligated to indemnify Gelfand for half of any loss suffered due to McCabe’s lawsuit, assuming Gelfand wasn’t actively negligent. Quoting 755 Seventh Ave. Corp. v. Carroll, 266 N.Y. 157, 161, the court acknowledged that no obligation accrues under an agreement for indemnity against loss until actual loss has been sustained.
    Despite the absence of payment, the court allowed Gelfand to implead Banner, reasoning that while a showing of actual loss is required before recovery, a conditional judgment can fix potential liability without requiring payment until the main judgment is satisfied. The court cited 125 W. 45th St. Rest. Corp. v. Framax Realty Corp., 249 App. Div. 589, 590, and other cases in support.
    The court rejected Banner’s argument that Gelfand’s insurer’s payment didn’t count as a loss, holding that the joint venture agreement and insurance policy are independent contracts, and Gelfand is entitled to reimbursement regardless of who pays the judgment.
    The court emphasized efficiency and the proper administration of justice, demanding the contractual obligation between Banner and Gelfand be determined without further delay. The court reversed the order dismissing the complaint, remanding the case for trial to determine the nature of Banner’s obligation. Should Gelfand prevail, he can recover half of any amounts paid toward the satisfaction of McCabe’s judgment, even if the payment was made by his insurer.

  • Krause v. American Guarantee & Liability Insurance Co., 22 N.Y.2d 147 (1968): Insurer’s Right to Implead Third Parties Before Payment

    Krause v. American Guarantee & Liability Insurance Co., 22 N.Y.2d 147 (1968)

    An insurer may implead a third party who is or may be liable to the insured, even before the insurer has made any payment to the insured, to avoid multiplicity of actions and ensure judicial efficiency, provided no contractual provision bars such action.

    Summary

    These cases, arising from the “salad oil swindle,” address whether an insurer can implead a third party allegedly responsible for the insured’s losses before the insurer pays the insured’s claim. The New York Court of Appeals held that impleader is permissible under CPLR 1007, promoting judicial efficiency by resolving primary and ultimate liability in one proceeding. The Court reasoned that delaying the third-party action could prejudice the insurer’s subrogation rights. The Court distinguished its prior holding in Ross v. Pawtucket Mut. Ins. Co. by emphasizing the absence of contractual restrictions on subrogation rights and the unique context of broker’s bonds involving potentially large losses, as opposed to minor auto collision claims.

    Facts

    D.R. Comenzo, Inc., and Ira Haupt & Co., two brokerage houses, suffered losses due to fraudulent warehouse receipts related to Allied Crude Vegetable Oil Refining Corporation’s (“Allied”) commodities storage. The plaintiffs, trustees in bankruptcy for Comenzo and Haupt, sought recovery on broker’s bonds issued by the defendant insurance companies. The insurers impleaded American Express Company (Amexco), alleging that Amexco, through its control of its subsidiary, American Express Warehousing, Ltd., was responsible for supervising Allied’s tanks and contributed to the losses.

    Procedural History

    In Krause, both the trustee and Amexco moved to dismiss the third-party complaint, which Special Term granted. The Appellate Division reversed, reinstating the third-party complaint. In Seligson, Amexco sought similar relief. Special Term denied the motion to dismiss but granted a stay. The Appellate Division affirmed the denial of dismissal. The Court of Appeals granted leave to appeal and consolidated the issues.

    Issue(s)

    Whether an insurer can implead a third party who may be liable to the insured before the insurer has made any payment to the insured.

    Holding

    Yes, because CPLR 1007 permits a defendant to implead any person “who is or may be liable to him.”

    Court’s Reasoning

    The Court reasoned that CPLR 1007’s language is broad enough to encompass contingent claims based on subrogation. Permitting impleader aligns with the spirit of an advanced practice code, which seeks “the avoidance of multiplicity and circuity of action, and the determination of the primary liability as well as the ultimate liability in one proceeding, whenever convenient.” While acknowledging potential concerns like delaying recovery for the insured, the Court emphasized that procedural devices like severances, separate trials, and stays can mitigate prejudice. The Court rejected arguments that impleader would deprive the insured of control over their claim, noting the insured’s freedom to press on with their claim or settle if no payment has been made by the insurer. The Court also reasoned that delaying the third-party action could severely prejudice the insurer’s subrogation rights, potentially leading to lost evidence or time-barred claims. Distinguishing Ross v. Pawtucket Mut. Ins. Co., the Court noted that the policy in Ross had specific restrictions on subrogation rights. The Court clarified that while impleader could be denied in minor auto collision cases for efficiency, this case involved a broker’s bond with the potential for ruinous losses. As stated in the opinion, “Procedural rules exist to further the ends of justice, not to force parties to forego substantive rights and not to give parties advantages which the true merits of their claims or defenses do not warrant.”

  • People v. Mancuso, 22 N.Y.2d 679 (1968): Timeliness of Objection to Peremptory Challenge

    People v. Mancuso, 22 N.Y.2d 679 (1968)

    An objection to a peremptory challenge during jury selection must be timely, but the specific circumstances of the jury selection process can affect what constitutes a timely objection.

    Summary

    This case addresses the timeliness of an objection to a peremptory challenge during jury selection. The defense argued that the prosecution’s peremptory challenge violated the Code of Criminal Procedure. The dissenting judges argued that the defense’s objection, although not immediately made, was timely because the trial court’s deviations from proper jury selection methods created confusion. The dissent emphasized that the trial court itself considered the motion on its merits, suggesting it viewed the objection as timely within the context of the proceedings. The dissent underscores the importance of adhering to proper jury selection procedures to avoid confusion and potential prejudice.

    Facts

    The specific facts regarding the crime are not detailed in the dissenting memorandum. The focus is solely on a procedural issue during jury selection: the prosecution’s use of a peremptory challenge and the defense’s objection to it.

    Procedural History

    The case reached the New York Court of Appeals. The Appellate Division had previously noted the potential for prejudice from deviations in jury selection. The trial court had apparently ruled inconsistently on jury selection procedures. The Court of Appeals modified the judgment, affirming it as modified, based on the dissenting memorandum’s reasoning regarding the timeliness of the objection.

    Issue(s)

    Whether the defense’s objection to the prosecution’s peremptory challenge was timely, considering the trial court’s deviation from proper jury selection procedures and its own rulings.

    Holding

    Yes, the objection was timely because the trial court’s departures from proper procedure created confusion, potentially excusing the defense’s delay in objecting, and the trial court considered the motion on its merits.

    Court’s Reasoning

    The dissenting memorandum reasoned that the Appellate Division correctly identified the risk of confusion when a trial court deviates from established jury selection methods. The memorandum noted that the trial court and the prosecution did not follow section 385 of the Code of Criminal Procedure or the trial court’s own previous rulings on procedure. The dissent argued that defense counsel’s failure to immediately recognize the impropriety should be excused because the inconsistent rulings likely caused confusion. The dissent also pointed out that the trial court, which was best positioned to evaluate the impact on justice, addressed the defense’s motion on its merits, suggesting the trial court considered the objection timely. The dissent implied a standard where flexibility in determining timeliness is appropriate when the court’s own actions contribute to the delay in raising the objection. The memorandum also implicitly highlights the importance of preserving the integrity of the jury selection process and ensuring fairness to the defendant. There is no record of the majority’s reasoning in the provided text.

  • Saratoga Harness Racing Assn., Inc. v. Agriculture and New York State Horse Breeding Development Fund, 22 N.Y.2d 119 (1968): Constitutionality of Funds for Industry Growth

    Saratoga Harness Racing Assn., Inc. v. Agriculture and New York State Horse Breeding Development Fund, 22 N.Y.2d 119 (1968)

    The New York State Constitution permits the legislature to allocate a portion of revenues from parimutuel betting to a fund dedicated to the improvement and growth of the horse racing industry, as this serves a legitimate public purpose, and such a fund is not necessarily considered a fund under the state’s direct management requiring strict budgetary control.

    Summary

    Saratoga Harness Racing Association challenged the constitutionality of the Agriculture and New York State Horse Breeding Development Fund, arguing that the diversion of breakage revenues (odd cents from parimutuel betting) to the fund violated the state constitution. The Association claimed the funds were not used for the support of government and that the fund operated without proper legislative control over expenditures. The Court of Appeals upheld the fund’s constitutionality, finding that the allocation of revenue to improve the horse racing industry served a valid public purpose and that the fund did not constitute a state-managed fund subject to strict appropriation requirements. The Court reasoned that the state constitution did not require all revenues from parimutuel betting to directly support the government, and the fund’s limited autonomy did not violate constitutional budgetary principles.

    Facts

    The New York Legislature created the Agriculture and New York State Horse Breeding Development Fund to promote the harness racing industry, a significant source of state revenue. The fund received 25% of the “breakage” from private racing associations, representing the odd cents over any multiple of ten from parimutuel betting payouts. Saratoga Harness Racing Association, a licensed racing corporation, refused to pay approximately $45,222.89 in breakage to the fund, arguing the legislation was unconstitutional.

    Procedural History

    Saratoga Harness Racing Association initiated an action to enjoin the fund from collecting the breakage moneys. The lower courts ruled in favor of the Agriculture and New York State Horse Breeding Development Fund, upholding the constitutionality of the legislation. The case was then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the allocation of breakage revenues to the Agriculture and New York State Horse Breeding Development Fund violates Article I, Section 9 of the New York Constitution, which permits parimutuel betting if the state derives reasonable revenue for the support of government.
    2. Whether the operation of the Agriculture and New York State Horse Breeding Development Fund violates Article VII, Section 7 of the New York Constitution, which requires legislative appropriation and control over state funds.

    Holding

    1. No, because the constitutional provision does not mandate that all revenues from parimutuel betting be directly used for the support of government; allocating a portion to improve the industry is permissible.
    2. No, because the Agriculture and New York State Horse Breeding Development Fund is not a fund under the direct management of the state, and its limited autonomy in administering expenditures does not violate constitutional budgetary principles.

    Court’s Reasoning

    The Court reasoned that the constitutional amendment permitting parimutuel betting does not require all revenue exceeding expenses to directly support the government. The legislature can condition licensing for private racing associations by requiring a portion of revenue to be set aside for improving the sport and its facilities. The Agriculture and New York State Horse Breeding Fund is a legitimate tool for achieving this public interest.
    Regarding Article VII, Section 7, the Court clarified that not all funds comprised of public moneys fall under this section’s purview. The critical factor is whether the fund’s operation undermines legislative control over expenditures, potentially leading to state obligations exceeding income. Here, the fund’s obligations do not become the state’s responsibility, and its expenditures are limited to its income. Furthermore, the legislation specifies the revenue source and allocates funds for various programs furthering the legislative purpose. The Court emphasized that “public visibility of legislative control over the raising of revenues and their disbursement” would not be endangered, as the legislation clearly defines how revenue is raised and allocated. The Court found that the fund’s role is primarily administrative, executing expenditures according to the legislative mandate. Therefore, striking down the legislation would “needlessly hamper and cripple a significant legislative program,” a result not mandated by the Constitution.

  • McDonald v. Ames Supply Co., 22 N.Y.2d 111 (1968): Sufficiency of Service on a Corporation

    McDonald v. Ames Supply Co., 22 N.Y.2d 111 (1968)

    Personal service on a corporation requires delivery of the summons to a person authorized to receive service; leaving it with a receptionist who is not an employee of the corporation, even if the receptionist later delivers it to the correct person, does not constitute valid service.

    Summary

    McDonald sued Ames for injuries sustained from a defective can of spray paint. Ames then attempted to serve a third-party complaint on Aerosol, the manufacturer of the defective spray head, by leaving the summons with a receptionist in Aerosol’s New York office. The receptionist, not an employee of Aerosol, later gave the summons to Aerosol’s eastern sales manager, Schlossman. The court held that this did not constitute valid personal service on Aerosol because the summons was not “delivered” to an authorized agent of the corporation as required by CPLR 311. The requirement of delivery necessitates more than leaving the summons with any available person.

    Facts

    • John McDonald was injured by a defective can of spray paint in 1961.
    • McDonald sued Ames Supply Co., the seller of the paint can, alleging negligence and breach of warranty.
    • Ames then attempted to serve a third-party summons and complaint on Aerosol Research Co., the manufacturer of the spray head, on November 19, 1965.
    • The process server left the summons with a receptionist in Aerosol’s New York office, who was not an employee of Aerosol.
    • The receptionist later handed the summons to Jack Schlossman, Aerosol’s eastern sales manager.
    • Aerosol was not licensed to do business in New York.

    Procedural History

    • McDonald sued Ames; Ames then filed a third-party complaint against Aerosol.
    • Aerosol defaulted on the third-party complaint.
    • The trial court severed the main action and the third-party action.
    • McDonald recovered against Ames in the main action.
    • Ames was awarded recovery over against Aerosol after inquest on the default.
    • Aerosol moved to dismiss the third-party complaint for lack of personal jurisdiction.
    • The Special Referee quashed service and dismissed the third-party complaint.
    • The Appellate Division affirmed.
    • The Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the requirement of CPLR 311 that the summons be “delivered” to a person authorized to receive service for a corporation is satisfied when the summons is left with a receptionist, not employed by the corporation, who later redelivers it to the proper person.

    Holding

    1. No, because personal delivery of a summons to the wrong person does not constitute valid personal service, even if the summons ultimately reaches the party to be served.

    Court’s Reasoning

    The Court reasoned that CPLR 311 requires that service be made by “delivering the summons” to a specified agent of the corporation. Leaving the summons with a receptionist who is not an employee of the corporation does not constitute valid delivery, even if the receptionist later hands it to an authorized agent. The Court emphasized the importance of adhering to the statutory requirements for service of process to ensure proper notice and protect against default judgments. The Court cited numerous prior cases holding that personal delivery to the wrong person is insufficient, even if the summons eventually reaches the correct party. The Court distinguished cases where the process server acted reasonably and diligently in attempting to effect service, such as when a defendant resists service, finding no evidence of such diligence here. The court reasoned that upholding service in this case would “encourage carelessness, or worse, thus increasing the risk of default by parties who in fact fail to receive the summons.” The court distinguished the facts from situations where process servers have acted with due diligence and where the redelivery was “so close both in time and space that it can be classified as part of the same act”.

  • In re Estate of Hillowitz, 22 N.Y.2d 107 (1968): Enforceability of Partnership Agreements Transferring Interests to Widows

    In re Estate of Hillowitz, 22 N.Y.2d 107 (1968)

    A partnership agreement that designates a deceased partner’s widow as the recipient of the partner’s interest is a valid third-party beneficiary contract and not an invalid testamentary disposition.

    Summary

    The executors of Abraham Hillowitz’s estate sought to invalidate a provision in his investment club’s partnership agreement, which stipulated that upon his death, his share would transfer to his widow. The executors argued this was an invalid testamentary disposition. The court held that such partnership agreements are essentially third-party beneficiary contracts, enforceable at death, and do not need to comply with the statute of wills. This case clarifies that partnership agreements can designate a deceased partner’s interest to pass to their widow without being considered an invalid testamentary transfer, thereby facilitating business succession and estate planning.

    Facts

    Abraham Hillowitz was a partner in an investment club. The partnership agreement stated: “In the event of the death of any partner, his share will be transferred to his wife, with no termination of the partnership.” Upon Hillowitz’s death, the club paid his widow $2,800, representing his interest in the partnership. The executors of Hillowitz’s estate initiated a discovery proceeding, contending that the partnership agreement’s provision was an invalid attempt at a testamentary disposition, and thus the proceeds should be part of the estate.

    Procedural History

    The Surrogate’s Court initially agreed with the widow, upholding the agreement. The Appellate Division reversed, holding the agreement invalid as an attempted testamentary disposition. The case was remitted to Surrogate’s Court for further proceedings on another issue, and the Appellate Division again ruled against the widow. The New York Court of Appeals then reviewed the Appellate Division’s order.

    Issue(s)

    Whether a partnership agreement provision, stipulating that a deceased partner’s share transfers to his widow, constitutes an invalid testamentary disposition, or a valid third-party beneficiary contract enforceable without compliance with the statute of wills?

    Holding

    No, because such partnership agreements are effectively third-party beneficiary contracts, performable at death, and therefore do not need to conform to the requirements of the statute of wills.

    Court’s Reasoning

    The court reasoned that partnership agreements dictating the transfer of a partner’s interest upon death are contractual in nature and do not violate the statute of wills. It stated, “These partnership undertakings are, in effect, nothing more or less than third-party beneficiary contracts, performable at death.” The court found no difference in principle between agreements transferring interests to surviving partners and those transferring interests to a deceased partner’s widow. The court emphasized that many contractual instruments providing for property disposition after death do not need to comply with the statute of wills, citing examples like contracts to make a will, inter vivos trusts with reserved life estates, and insurance policies. The court distinguished McCarthy v. Pieret, limiting it to its facts, and noting that in that case, there was merely an intention to make a testamentary disposition, not an immediate conveyance of interest, and the beneficiaries were unaware of the agreement’s provisions. Judge Keating concurred in the result, but found it difficult to distinguish McCarthy v. Pieret, preferring to base the reversal on the widow’s right of survivorship as outlined in the Surrogate’s second opinion.

  • People v. Owens, 22 N.Y.2d 95 (1968): Prejudice from Co-defendant’s Invocation of Fifth Amendment

    People v. Owens, 22 N.Y.2d 95 (1968)

    It is reversible error to permit a co-defendant to call another co-defendant as a witness, knowing that the witness will invoke their Fifth Amendment right against self-incrimination, because of the inherent prejudice to the witness, even if the court provides a curative instruction.

    Summary

    Robert Owens and Charline Brown were convicted of grand larceny for taking money from Clarice Harriss through false pretenses. During the joint trial, Brown called Owens as a witness, knowing he would invoke his Fifth Amendment privilege against self-incrimination. The trial court allowed this, providing a cautionary instruction to the jury. The Appellate Division reversed Owens’ conviction, finding this prejudicial. The Court of Appeals affirmed, holding that compelling a defendant to invoke the Fifth Amendment in front of the jury is inherently prejudicial, and a curative instruction is unlikely to eliminate the harm. The court also discussed the importance of considering severance when a co-defendant’s testimony is needed.

    Facts

    Clarice Harriss was approached by Owens at a bank. Owens showed her an envelope, claiming it contained $15,000 and that she had left it in a phone booth. Brown then prompted Owens to open the envelope. Owens, Brown and Harriss then agreed to split the money, with Harriss paying $2,000 for the right to receive $5,000. Harriss withdrew $1,000 from her savings and gave it to Owens, along with the $318 she had withdrawn earlier. Owens and Brown then disappeared with the money.

    Procedural History

    Owens and Brown were jointly indicted for grand larceny in the first degree. Before trial, Brown moved for a mistrial and severance because she intended to call Owens as a witness, knowing he would invoke his Fifth Amendment privilege. The motion was denied. Brown renewed the motion at the close of the People’s case; it was denied. Brown then called Owens as a witness. Owens invoked his Fifth Amendment privilege. The trial court denied Owens’ motion for a mistrial. The jury convicted both defendants. The Appellate Division reversed Owens’ conviction. The People appealed to the Court of Appeals.

    Issue(s)

    Whether the trial court committed reversible error by allowing co-defendant Brown to call co-defendant Owens to the witness stand, knowing that Owens would invoke his Fifth Amendment privilege against self-incrimination before the jury.

    Holding

    Yes, because compelling a defendant to invoke the Fifth Amendment privilege in front of the jury is inherently prejudicial, and instructions are unlikely to cure that prejudice.

    Court’s Reasoning

    The Court of Appeals agreed with the People’s concession that it was error to allow Brown to call Owens to the stand. The court stated, “[T]he privilege against self incrimination is violated whenever a criminal defendant is compelled to take the stand and claim his privilege, whether at the behest of the prosecution or a codefendant.” The court recognized the right of a defendant to call a co-defendant as a witness but noted that this right is qualified when a joint trial is involved and the witness invokes their Fifth Amendment right. The court reasoned that the stigmatizing effect of claiming the privilege before the jury is so powerful that curative instructions are unlikely to eliminate the prejudice. The court noted that the proof of guilt was not overwhelming, so the error was not harmless beyond a reasonable doubt. The court emphasized that trial courts must carefully consider whether to sever trials when a defendant intends to call a co-defendant as a witness, especially where there is a showing of a need for the co-defendant’s testimony. “But there must be a showing of intention to call the codefendant as a witness and a need to do so; the mere statement of intention is hardly sufficient unless the circumstances indicate sincerity of intention and reasonable need.” A defendant must make the severance motion “as early as it is reasonably feasible.”

  • Saratoga Harness Racing Assn. v. Agriculture & New York State Horse Breeding Development Fund, 22 N.Y.2d 119 (1968): Requiring Legislative Appropriation for State Funds

    22 N.Y.2d 119 (1968)

    State funds, even those managed by public benefit corporations, generally require legislative appropriation for disbursement under Article VII, Section 7 of the New York State Constitution, ensuring legislative control over state finances.

    Summary

    Saratoga Harness Racing Association challenged the constitutionality of a New York law requiring racing associations to contribute a portion of their “breakage” (odd cents from pari-mutuel betting) to the Agriculture and New York State Horse Breeding Development Fund. The Association argued that the fund’s disbursement of these revenues without legislative appropriation violated Article VII, Section 7 of the New York Constitution. The Court of Appeals affirmed the lower court’s ruling, holding that the fund’s structure and limited scope did not violate the constitutional requirement for legislative appropriation, as the fund’s obligations did not become obligations of the state.

    Facts

    The New York legislature created the Agriculture and New York State Horse Breeding Development Fund, a public benefit corporation, to support the harness racing industry. The fund was financed by requiring private racing associations to pay 25% of their “breakage” to the fund. The fund was authorized to use these revenues for programs designed to improve the sport and facilities. Saratoga Harness Racing Association refused to pay $45,222.89 in breakage, arguing the legislative program violated the New York State Constitution.

    Procedural History

    Saratoga Harness Racing Association filed suit to enjoin the fund from collecting the breakage. The Supreme Court, Saratoga County, initially granted the fund’s cross-motion for summary judgment in part. The Appellate Division, Third Department, modified the order to allow the fund full recovery. The New York Court of Appeals granted review.

    Issue(s)

    Whether the legislative program requiring racing associations to pay a portion of their “breakage” to the Agriculture and New York State Horse Breeding Development Fund, which can then disburse those funds without legislative appropriation, violates Article VII, Section 7 of the New York Constitution.

    Holding

    No, because the Agriculture and New York State Horse Breeding Development Fund is not a fund under the management of the state, as the term is employed in the Constitution. The purpose of section 7 of article VII is to ensure legislative control over state expenditures to prevent the state from incurring obligations in excess of its income.

    Court’s Reasoning

    The Court reasoned that Article VII, Section 7 was designed to prevent the state from incurring obligations beyond its income by requiring legislative control over expenditures. The Court acknowledged that not every fund made up of public moneys is subject to this provision. The Court found that the Fund’s obligations did not become the obligations of the State because the legislature created a corporate entity whose obligations do not become the obligation of the State. Further, the court reasoned there was no risk to public visibility of legislative control because the method of raising revenue and proportion of funds allocated to various programs was specifically defined by the legislature. The court stated that “all that is left to the ‘Fund’ is the administration of the expenditures in accordance with the legislative mandate.” The dissenting opinion argued that the breakage moneys were funds under the management of the state, and that disbursement without appropriation violated the constitutional controls upon State finances. The dissent emphasized the importance of legislative control over revenues and disbursements, and the potential for evading constitutional safeguards.