(211 N.Y.S.)

[8] (b) The sole assets of the Frontier Mortgage Corporation consist of certain shares of stock in a New York corporation. Ownership of that stock carries with it the right to name a majority of the directors of the New York corporation. To do so is its only business. While it is created under the laws of Delaware, it resides in New York. All of its officers and directors, save one, are residents of New York; so are nearly all of its stockholders. It is authorized under the law of its creation to hold all its stockholders' meetings in New York. Ail of them have been held there, including the meeting here in question. It is to be presumed that it has been licensed to carry on its business in New York.

The court below rested its decision on the question of jurisdiction. on the authority of Wilcox v. Supreme Council, Royal Arcanum, 123 App. Div. 86, 108 N. Y. S. 483. We need not rely alone on the authority of that case in holding that the New York courts might exercise jurisdiction. Under the facts here, none of the reasons which have led to a refusal by our courts to adjudicate such controversies exists. See Travis v. Knox Terpezone Co., 215 N. Y. 259, 263, 109 N. E. 250, L. R. A. 1916A, 542, Ann. Cas. 1917A, 387.

There is absent, neither jurisdiction in the strict sense, nor ability to make a decree effective; nor does any substantial consideration of policy interfere. 12 R. C. L. 33; 28 Harvard Law Review, 611; Ernst v. Rutherford & Boiling Springs Gas Co., 38 App. Div. 388, 392, 56 N. Y. S. 403.

[9] We deem it unnecessary to discuss other and more or less incidental questions argued in the briefs. We think it was proper for the court below to order the judges of election to reconvene, to accept the disputed proxies, and to count the vote cast thereunder, except as to such of those proxies as were lawfully revoked by later written proxies, and to order the Frontier Mortgage Corporation, its officers, directors, and stockholders, forthwith to convene and to receive the report of the judges of election, and to complete whatever other business might properly come before the meeting. Beyond those matters the order should not have gone. The order appealed from should be modified in accordance with the foregoing opinion, and, as modified, affirmed, without costs to any party.

The order of May 15, 1925, granting a peremptory order of mandamus, is modified in accordance with the opinion, and, as modified, affirmed, without costs of this appeal to either party. The order of May 12, 1925, overruling preliminary objections, and the order of May 15, 1925, vacating the stay are affirmed without costs of this appeal to either party. All concur.

(125 Misc. Rep. 660)

GRACE et al. v. SCOTT et al.

(Supreme Court, Westchester County. September 29, 1922.)

1. Municipal corporations 1000 (5)-Evidence held not to sustain charges of wrongdoing by city officials and paving contractors, nor waste of public funds.

Evidence held not to sustain charges of collusion between city officials and paving contractors, nor illegal acts by such officials, nor waste of public funds.

2. Municipal corporations 350-Contract obligating paving contractors to do as much repairing at unit prices as might be required held legal. Where condition of paving was such that any attempt to determine in advance, exact amount of repair work to be done was impossible, requirements of contract obligating contractors to do as much work at unit prices as might be required during year was legal.

3. Municipal corporations 987-Statute authorizing actions against city officers to prevent illegal acts is intended for taxpayer's benefit.

General Municipal Law, § 51, authorizing actions against municipal officers to prevent illegal acts, waste of public funds, etc., is intended to protect taxpayers against dishonest officials, and illegal contracts with contractors and individuals, and not as instrument of unwarranted attacks against honest officials.

Action by Patrick Grace, as a taxpayer of the City of New Rochelle, and others, against Harry Scott, individually and as Mayor of the City of New Rochelle, and others. Judgment for defendants.

Judgment affirmed in 214 App. Div. 792, 211 N. Y. S. 75. See, also, 201 App. Div. 859, 193 N. Y. S. 69.

Milton Mayer, of New York City (Goodman Block, of New York City, of counsel), for plaintiffs.

Charles A. Van Auken, Corp. Counsel, of New Rochelle (Humphrey J. Lynch, of White Plains, of counsel), for defendants city officials. Moore, Hall, Swan & Cunningham, of New York City (Wm. A. Moore, of New York City, of counsel), for defendant contractors, Wilkes-Casey Engineering Co., and William Halton.

MORSCHAUSER, J. This action is brought under section 51 of the General Municipal Law, by Patrick Grace against Harry Scott, individually and as mayor of the city of New Rochelle, Harry A. Archibald, as comptroller of the city of New Rochelle, John A. Hadert, individually and as commissioner of streets of the city of New Rochelle, Harry Scott, Harry A. Archibald, and Joseph Zauner, as members of and constituting the board of estimate and apportionment of the city of

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

(211 N.Y.S.)

New Rochelle, Benjamin B. Badeau, as treasurer of the city of New Rochelle, the Wilkes-Casey Engineering & Contracting Company, Inc., Tony Miele, and William Halton-the three latter defendants being contractors who performed work for and furnished material to the said city of New Rochelle during the years 1920 and 1921. Subsequent to the institution of the action, and in or about the month of June, 1922, and by an order of this court, Mrs. Helen Mayer, plaintiff attorney's wife, and Goodman Block, Esq., his partner, were permitted to intervene as plaintiffs with the said Patrick Grace.

The plaintiffs in the amended complaint have made charges against a number of officials of the city of New Rochelle in respect to the manner in which certain contracts for the repair of the city streets were let, claiming that the provisions of the city charter were violated, in that contracts were let without proper competitive bidding, and that after contracts were let the various officials charged with the duty of enforcing the performance of the contract were derelict in their duty, with the result that the city's funds were wasted and misappropriated. There is also a specific charge made against the street commissioner, John A. Hadert, to the effect that he misappropriated moneys of the street department. It is also charged that the contractors who were named as defendants were illegally engaged with some of the city officials, and that as a result the city was required to pay excessive prices for the work done and the materials furnished, and that the taxpayers of the city of New Rochelle were damaged as a result of this action upon the part of the defendants.

Where such charges are made against public officials, it is most important to the public, the taxpayers, rent payers, and citizens of the municipality, as well as to the defendants, that a full and searching inquiry should be had, to the end that, if the charges are justified, such offending parties should be held responsible. It is equally important. that, where honest and upright officials, who are unselfishly serving the public, and reputable business men, are unjustly accused of wrongdoing, they should be fully exonerated of any charge made against them, if such charges fail.

In this case such a full and searching inquiry has been had. The plaintiffs were permitted by an order of the court to examine the defendants before trial, and they were required by an order of the court to appear before Hon. Isaac N. Mills, acting as the official referee in this judicial district, and they were required, on the application of the plaintiffs, to produce not only the records of the defendant city of New Rochelle, but also the records of the various contractors who were named as defendants. There were numerous hearings had before the very learned referee, and voluminous testimony was taken, and apparently all of the records of the defendants were placed at the dispos

al of the plaintiff's counsel upon such examination, and such of them as were material were offered in evidence upon that examination before trial.

The case appeared upon the calendar of the June term of the court, and, owing to the congestion of the calendar, the case was heard in the month of July. All of the evidence and documents that were offered in evidence on the examination before trial were offered and received in evidence, and in addition thereto a large number of witnesses were called by all the parties to the action, and every latitude was extended by the court, to the end that a full and complete investigation be made of the charges contained in plaintiffs' amended complaint, and in view of the fact that it was claimed by the plaintiffs that the city of New Rochelle had been imposed upon by some of the contractors, in that they had improperly repaired the streets, upon request and consent of the attorneys for the parties the court made a personal inspection of the streets of the city of New Rochelle, in order that it might by an ocular inspection, determine the truth or the falsity of this charge.

The important questions presented in this case are: Did the street commissioner of the city have legal authority to do street repair work by contract, and were the provisions of the city charter complied with in the letting of the 1920 and 1921 contracts, and was there open and competitive bidding in the letting of said contracts? Did the WilkesCasey Engineering & Contracting Company, Inc., do certain work under the 1920 contract, for which it was paid, which it should have done under an alleged guaranty in a former contract? In an action of this kind, can the head of a department be compelled to refund certain moneys misappropriated by an employee of such department, when the head of the department in no way participated in the misappropriation. or had knowledge of it?

The evidence in this case clearly establishes that in the early part of 1920, when Mayor Scott assumed the duties of his office, the streets of the city were in a very bad state of repair, due no doubt to the result of economy that was practiced by the previous officials of the city during the period of the work, of which, of course, there is no criticism. The method formerly adopted by the street department was to make such repairs by the street commissioner with laborers employed in the strect department. The evidence shows that a certain street, viz., Winyah avenue, had been repaired by this method the year preceding at a very high cost. The rate of wages paid laborers in the street department was $4.25. The prevailing rate of wages in the city was $6 to $6.50 per day. It was also established that it was with great difficulty that suf ficient laborers could be obtained. With these conditions confronting Mayor Scott and his official associates, it was decided to do this street repair work by contract.

There are 105 miles of improved streets in New Rochelle, many of which were out of repair, and the extent of such repairs could not be definitely determined at the time of the letting of the contracts, or until the work was under way, how much yardage should be done upon a given street, and how much of the existing street could be retained in the interest of economy by "patching." Hence it was impossible to prepare specifications and advertisements for a definite number of yards of work of the different kinds required, as could have been done if a single street were to be reconstructed. The policy adopted was, wherever possible, to repair or patch the holes in the street, and then to cover the same with a coat of tar and grit, commonly known as a seal or carpet coat, which sealed and preserved the street. This made it more difficult to determine with any degree of accuracy the amount of work that would be done during the season.

The commissioner of streets, taking this into consideration, advertised for bids based upon a unit price per yard for the several kinds of work to be done, viz., resurfacing, repairing without foundation, and repairing with foundation. Bids were received, and the contracts awarded to the lowest bidder. The street repair work for the year 1920 was done under this contract, without any attempt being made to criticize or enjoin this method of doing the work. During the year 1920 a certain street in the city, viz. Fourth street, necessitated repairing throughout considerable of its length. This was known as straightaway work, as distinguished from patch work. It was decided that specifications be prepared by the department of public works, then a separate department of the city government, and bids were advertised for the repair of this street, with the idea in view that perhaps a better price might be obtained. Bids were received and the contract let for prices considerably in excess of what the work would have cost under the yearly contract prices.

In the spring of 1921, bids were again received for the work of that year on the same basis, and the work progressed and was completed, and the contractors were paid for said work according to the terms of the respective contracts. At the time of the bringing of this action in October, 1921, the city of New Rochelle was in the midst of a political campaign. It has been strongly urged on the part of the defendants that this action emanated out of such political controversy. Whether this be so or not, the rights of the taxpayers must be determined upon. the evidence produced, rather than any motive which may have inspired the bringing of such action.

[1] The plaintiffs claim that the city officials acted in collusion with certain contractors, to the end that said contractors might be the successful bidders. There is no testimony to support such contention. On the contrary, the evidence shows that some time in 1920 the comptroller