285 N.Y. 425 | NY | 1941
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *428 This is a representative action brought by two mortgage certificate holders on behalf of all of the holders of certificates of participation in a certain bond and mortgage of $1,400,000 on improved realty. The complaint contains two alleged causes of action, one against the Mortgage Commission of the State of New York and its wholly owned subsidiary, The Mortgage Commission Servicing Corporation, and the other against a private corporation, The Mortgage Corporation of New York. Upon motion made by the Mortgage Commission and by its subsidiary, Special Term granted judgment dismissing the complaint as to them, but the Appellate Division reversed and denied the motion. The Mortgage Corporation of New York did not join in the motion to dismiss the *429 complaint, and this appeal concerns only the first cause of action alleged in the complaint which is directed solely against the Commission and its subsidiary corporation. The questions certified to this court are: (1) whether the Supreme Court of this State has jurisdiction over the moving defendants, i.e., the Commission and its subsidiary; (2) whether the Supreme Court has jurisdiction over the subject matter of the action; and (3) whether the complaint alleges facts sufficient to constitute a cause of action against the Commission and its subsidiary.
Plaintiffs charge that certain acts and omissions on the part of the Mortgage Commission and of its subsidiary constitute a breach of their fiduciary obligations to certificate holders and that, therefore, the Commission and its subsidiary are liable for the damage caused. The complaint was dismissed by Special Term on the ground that the action, if maintainable at all, may be brought only in the Court of Claims. (Court of Claims Act, §§
The foregoing language leaves no room for doubt as to the status of the Commission as a mere agency of the State, created in the exercise of its police power to meet the public emergency existing with respect to certificated mortgages. The expenses of the Commission are to be met out of a revolving fund appropriated by the Legislature. (Mortgage Commission Act, as amd. L. 1935, ch. 290, §§ 24, 26.) The moneys constituting the fund may be paid out by the State Comptroller only for the "lawful purposes" of the Commission, and only upon duly audited claims. (§ 26.) These moneys are used for the benefit of the people of the State and for the purpose of carrying out the governmental functions of the Commission. The moneys are the property of the State and until expended remain public moneys. (Matter of People [WestchesterTitle Trust Co.],
Plaintiffs-respondents urge, however, that a different principle is applicable here, on the ground that there has been a waiver of immunity to suit on the part of the State by reason of the provision in the Mortgage Commission Act empowering the Commission "to sue and be sued." (§ 4, subd. 1.) From the fact that the Legislature has granted to the Commission the right to sue and has granted to certificate holders and others the right to sue the Commission in proper cases, it does not follow that the State has consented to be sued for a claim against it in the Supreme Court of the State rather than in the Court of Claims. Statutes in derogation of the sovereign immunity of the State to suit are strictly construed. (Smith v. State,
Plaintiffs-respondents also urge that the determining factor is the fact that the action at bar is upon a claim in contract for breach of fiduciary obligations rather than against the State for the torts of its agents. Defendants-appellants, on the other hand, urge the converse of that proposition. This dispute as to whether the suit is in contract or in tort is irrelevant, for in either event the liability sought to be imposed is a liability on the part of the State. The essential question is whether the State has consented to a determination of its liability in the manner chosen by plaintiffs. The State has not so consented. Whether the action is in contract or in tort may be of some consequence in determining the question of substantive law as to whether the State is liable for the acts of its agents: that question cannot be reached until it is first determined that the State has consented to be sued in the forum elected by the claimant. (Smith v. State,
The subsidiary corporation was organized pursuant to the authority of the Commission "to organize a subsidiary corporation or corporations wholly owned and controlled by it and with trust powers only * * *." (Laws of 1935, ch. 19, § 4, ¶ 19.) So far as the case at bar is concerned, there is no difference between the status of the wholly owned *433
and wholly controlled subsidiary corporation and that of the Commission itself. (Cf. Keifer Keifer v. ReconstructionFinance Corp.,
Attention may also be called to the fact that the action is now being prosecuted against two entities which no longer exist. The existence of both the Commission and of its subsidiary corporation has been terminated and their functions transferred to the Superintendent of Insurance. (Laws of 1939, ch. 944.)
The order of the Appellate Division should be reversed and the judgment of the Special Term affirmed, without costs. The first certified question should be answered in the negative. The remaining questions need not be answered.
LOUGHRAN, RIPPEY, LEWIS, CONWAY and DESMOND, JJ., concur; LEHMAN, Ch. J., taking no part.
Ordered accordingly.