Summary
In Weinberg v D-M Rest. Corp. (53 NY2d 499, 507), we quoted with approval the Arizona Supreme Court's determination in Beaman v Westward Ho Hotel Co. (89 Ariz 1, 4-5, 357 P2d 327, 329) that "[a] tip is in law, if not always in fact, a voluntary payment."
Summary of this case from Samiento v. World Yacht Inc.Opinion
Argued March 26, 1981
Decided June 18, 1981
Appeal from the Appellate Division of the Supreme Court in the First Judicial Department, Louis Grossman, J., Hilda G. Schwartz, J.
Joseph D. Ahearn, Joseph W. Conklin and Michael Majewski for appellant. Morris Block for respondent.
Gerard A. Navagh for New York State Restaurant Association, Inc., amicus curiae.
Section 201 of the General Business Law has no bearing upon an action against a restaurant owner sued for the conversion of a coat checked by a patron. It does limit recovery by a patron who sues for negligence: to the value of the coat if negligence be shown, a fee or charge is exacted for checking the coat, and a value in excess of $75 is declared and a written receipt stating such value is issued when the coat is delivered to the checkroom attendant; to $100 if a value in excess of $75 is declared and the other conditions are met but negligence cannot be shown; to $75 in any event if no fee or charge is exacted or a value in excess of $75 is not declared and a written receipt obtained when the coat is delivered. For the reasons hereafter stated, the order of the Appellate Division affirming judgment of $9,578.75 entered February 7, 1979 for plaintiff after trial by jury must be modified by reducing the amount awarded to $75.
I
Plaintiff's complaint contained but one cause of action predicated upon the negligence of defendant restaurant owner. Defendant moved for summary judgment limiting plaintiff's recovery to $75. The affidavits presented by defendant established that neither defendant's president nor anyone else in his employ could explain the disappearance of the Russian sable fur coat which plaintiff checked with defendant's checkroom attendant, that no value had been declared by plaintiff nor had any written receipt stating a value been given, acknowledged that no sign had been posted but stated that section 201 of the General Business Law did not require posting by a restaurant, and quoted a portion of plaintiff's deposition in which she acknowledged that no charge had been made for the checking of the coat. Plaintiff cross-moved for summary judgment. Her affidavit noted the admission of defendant's president that tipping was discretionary and characterized it as contrary to common knowledge. Attached to it also was the deposition of the coatroom attendant in which she conceded that on the night in question she received $20 to $30 in tips.
Special Term denied both the motion and cross motion. On appeal the Appellate Division modified and remanded for trial as to damages, holding that plaintiff was entitled to judgment on liability but that on the issue of damages there existed questions of fact concerning whether defendant restaurant had "exacted" a fee or charge and whether the loss was the result of theft by defendant, its agent, servants or employees ( 60 A.D.2d 550). On remand the Trial Judge, after testimony by defendant's president that the checkroom attendant received an hourly rate of pay plus a percentage of the tips given her, the owner receiving the balance of the tips, ruled that notwithstanding that there was no sign concerning tips nor other open solicitation of them and that some people received their coats without leaving any tip, the gratuities paid the checkroom attendant constituted, as a matter of law, the exaction of a fee within the meaning of the section. He noted further that the issue of theft by defendant or its employees had become academic, that were that not so he would have directed a verdict for plaintiff on that ground also because defendant had presented no evidence on the question of theft. He submitted to the jury, therefore, only the question of the value of plaintiff's coat. The jury fixed that value at $7,500 and judgment was entered for that sum plus interest and costs.
On appeal from the judgment entered on the jury's verdict, the Appellate Division affirmed, without opinion, but granted defendant leave to appeal to our court from the final judgment pursuant to CPLR 5713. In reliance on CPLR 5601 (subd [d]), defendant had previously filed a notice of appeal from the earlier Appellate Division order granting summary judgment to plaintiff and affirming denial of its motion for summary judgment. For the reasons stated below we hold that (1) the tip or gratuity customarily given a checkroom attendant is not a "fee or charge * * * exacted" for the checking service within the meaning of section 201 of the General Business Law; (2) restaurants are not required to post the provisions of section 201 in order to be entitled to its limitation of liability; and (3) in granting summary judgment to plaintiff rather than defendant and in affirming the judgment entered February 7, 1979 the Appellate Division erred; its order of affirmance must, therefore, be modified and judgment directed to be entered for plaintiff in the amount of $75 with interest from March 3, 1975.
The appeal as of right has become unnecessary in view of the Appellate Division's grant of leave to appeal from its own order on the second appeal. Such an appeal automatically brings up for review any prior nonfinal order "which necessarily affects the final judgment" (CPLR 5501, subd [a], par 1; see 7 Weinstein-Korn-Miller, N Y Civ Prac, par 5501.01). Because the prior order in the instant case granted summary judgment to plaintiff it necessarily affects the final judgment (7 Weinstein-Korn-Miller, op. cit., par 5501.05; Cohen and Karger, Powers of the New York Court of Appeals, § 79, p 341).
II
Subdivision 1 of section 201 of the General Business Law provides in relevant part: "[A]s to property deposited by guests or patrons in the parcel or check room of any hotel, motel or restaurant, the delivery of which is evidenced by a check or receipt therefor and for which no fee or charge is exacted, the proprietor shall not be liable beyond seventy-five dollars, unless such value in excess of seventy-five dollars shall be stated upon delivery and a written receipt, stating such value, shall be issued, but he shall in no event be liable beyond one hundred dollars, unless such loss occurs through his fault or negligence." In a case strikingly similar to the instant case, Honig v Riley ( 244 N.Y. 105), that language was construed by this court. Plaintiff Honig sought to recover the value of the fur coat she left at the checkroom of defendant's restaurant on New Year's Eve 1925. She received a check but was not questioned as to value and made no statement to the attendant concerning value. The Trial Judge charged that plaintiff was entitled to full value of the coat if they found defendant to have been negligent. On appeal by defendant from a judgment of $850 entered on the jury's verdict and affirmed by the Appellate Term and the Appellate Division, this court reversed and directed reduction of the judgment to $75. In an opinion by Judge CARDOZO, we said ( 244 N.Y., at pp 108-109):
"The defendant maintains that where property is deposited in a parcel or check room without statement of value or delivery of the prescribed receipt, there is a limit of liability to $75 for loss from any cause. Disclosure of the value, if followed by a receipt, will extend liability for fault or negligence up to the limit of the value stated, though even then the liability, if any, as insurer will be $100 and no more. The plaintiff on her side maintains, and the courts below have held, that the exemption from liability in excess of $75 where the value is not disclosed, is not to be read as a limitation of liability for loss from any cause, but is confined to losses not due to the fault or negligence of the proprietor.
"We think the defendant's construction is the true one, however clumsy and inartificial may be the phrasing of the statute. A limitation of liability affecting merely the measure of recovery is applicable, if not otherwise restrained, to loss for any cause. * * * From the beginning of the section to the end, the exemption from liability in excess of the prescribed maximum is absolute where value is concealed. Only where value is stated and a receipt delivered is the exemption made dependent upon freedom from negligence or other fault."
Under that reading of the statute plaintiff's recovery is limited to $75, no value having been declared or receipt obtained, unless it can be found that a "fee or charge [was] exacted." The ruling of the lower courts that the acceptance by the checkroom attendant of a gratuity in which the restaurant owner shares constitutes an "exaction", made not as a finding of fact but as a matter of law was, however, erroneous. Though tips may constitute compensation to an employee for purposes of the Workers' Compensation Law (Matter of Bryant v Pullman Co., 188 App. Div. 311, affd 228 N.Y. 579; Matter of Sloate v Rochester Taxicab Co., 177 App. Div. 57, affd 221 N.Y. 491; see Ann., 75 ALR 1223), of the income tax (Ann., 10 ALR2d 191) and of unemployment compensation taxes (Ann., 83 ALR2d 1024), it does not follow that a tip to an employee may be regarded for all purposes as compensation to the employee (Williams v Terminal Co., 315 U.S. 386, 404, reh den 315 U.S. 830; see People v Vetri, 309 N.Y. 401, 408; Ann., 65 ALR2d 974 [Federal Fair Labor Standards Act and State wage laws]) or as a part of the employer's income (Ann., 73 ALR3d 1226 [sales tax]). As to the employer the test generally is whether the payment is a "service charge" exacted by the employer or a voluntary payment by the patron to the employee (Beaman v Westward Ho Hotel Co., 89 Ariz. 1; see Ann., 73 ALR3d 1226, 1231). So in Beaman the Arizona Supreme Court held a service charge collected by the hotel, where direct tipping of employees was not permitted, to be subject to sales tax. In so doing, it distinguished the customary employee gratuity saying ( 89 Ariz, at pp 4-5) "A tip is in law, if not always in fact, a voluntary payment" (see, also, Peoria Hotel Co. v Department of Revenue, 87 Ill. App.3d 176, 179). The United States District Court for the Southern District of New York reached a result similar to Beaman in Restaurants Patisseries Longchamps v Pedrick ( 52 F. Supp. 174), but noted (at pp 174-175) that "A patron in a restaurant is under no compulsion to leave a 'tip'" (see, also, United States v Conforte, 624 F.2d 869, 874, cert den 449 U.S. 1012).
The more clearly should such a distinction be made when, as here, we deal with a statute not at all concerned with the compensation of the employee or the taxes payable to the State, but rather with whether the employer in permitting gratuities to be paid to the employee has exacted a fee or charge (see Williams v Terminal Co., supra, at p 404). So a restaurant owner or hotel that imposes a fixed charge for the service of checking a coat and does not leave to the patron the decision whether to give and what amount to give may properly be said to have exacted a service charge or fee (semble Aldrich v Waldorf Astoria Hotel, 74 Misc.2d 413, 414 [35 cents per garment paid; held a "fee or charge"]).
When the service cannot be obtained without the payment of a fixed sum a fee has been exacted, but when, as the papers on the summary judgment motions showed, plaintiff acknowledges that no charge was made and presents no evidence that there was a sign indicating a fixed charge, or of solicitation of any kind, or that the giving and the amount were other than discretionary with the customer, there has, as a matter of law, been no exaction of a fee or charge.
III
Plaintiff argued on the original motions, and the dissenter in this court agrees, that section 201 is not applicable because defendant failed to comply with subdivision 2 of the section. That subdivision requires that "A printed copy of this section shall be posted in a conspicuous place and manner in the office or public room and in the public parlors of such hotel or motel." While that provision was not added to the section until 1960 (L 1960, ch 840), section 206 has since 1909 required posting of a printed copy of section 201. Section 206 is by its terms limited, however, to a "hotel or inn" just as subdivision 2 of section 201 is limited to a "hotel or motel." To read subdivision 2 to require posting by a restaurant because subdivision 1 groups "hotel, motel or restaurant" together is to fly in the face of usual rules of statutory construction that a statute (in this instance, subdivision 2's posting requirement) is to be read and given effect as it was written, and that the courts under guise of interpretation may not enlarge or change the scope of a legislative enactment (see Matter of Jeter v Ellenville Cent. School Dist., 41 N.Y.2d 283, 286; McKinney's Cons Laws of NY, Book 1, Statutes, §§ 73, 144, 363). Nor is the dissent's reliance upon the language of Honig v Riley (supra) a proper basis for concluding otherwise. No issue of posting was presented in that case. Moreover, since section 201 contained no posting requirement when Honig was decided and no mention was made in the opinion of section 206, the phrases from that opinion quoted by the dissent cannot be fairly read as having been written with respect to the point for which those phrases are now cited. If posting by restaurants is to be required as a condition of the limitation of liability granted them by subdivision 1 of section 201, it is the Legislature rather than this court that must impose the requirement.
IV
Though neither the posting nor the fee exaction provisions of section 201 limit defendant's right to the benefits of its provisions, plaintiff, pointing to the statement in Honig v Riley (supra, at p 110), that "The statute is aimed at loss or misadventure. It has no application to theft by the defendant or his agents," contends she is entitled to affirmance of the judgment because defendant failed to come forward with proof that the coat had not been stolen by its employees. The difficulty with plaintiff's position is that the complaint declares for negligence only and has never been amended either by motion addressed to Special Term or by a motion to conform pleadings to proof at the end of the trial. Quite simply, plaintiff cannot recover on a conversion theory which she has never pleaded.Accordingly, the Appellate Division's order of February 7, 1979 should be modified, with costs to defendant in all courts, by reducing the amount awarded to plaintiff to $75 with interest from March 3, 1975.
Invited, of course, to do so by its management, plaintiff, a restaurant patron, deposited her fur coat, now found to have been worth $7,500, at the defendant's cloakroom at the plush Rainbow Grill in Rockefeller Center. Without explanation, it was never to be returned. Yet, the majority would relegate her to a recovery of $75. Neither the history or public policy of the statutory scheme which governs such a case, nor the common sense or the elementary fairness that go with a living law will abide such a result. I therefore vote to uphold the Trial Term award to the plaintiff for the full amount of her loss as thereafter unanimously affirmed by the Appellate Division. Here follow my reasons, grounded, I would like to believe, on principle, practicality and, withal, sound law.
I start with section 201 of the General Business Law, which as we have seen, so drastically and arbitrarily limits the amount which even the grievously damaged patronbailor may recover for the loss of property entrusted without separate fee to restaurants, hotels or, since they arrived on the scene, motels. Indeed, its provisions, enacted, as the legislative history makes clear, at the instance of restaurant and hotel industry functionaries, are so harsh that, even when a restaurateur, hotelkeeper or motel owner to whom an article is committed is proved to have knowingly engaged a dishonest checkroom attendant, collectable damages may not exceed the more munificient sum of $100. This cap, I might add, has remained unaltered since it was fixed in the antedeluvian monetary times of 57 years ago.
But, as one might have suspected, there had to be and, indeed, are compensating provisions designed to ameliorate the confiscatory nature of this scheme or at least to warn those who otherwise could be caught within its web. So, when a patron requests a receipt containing the declared value of the item he or she decides to check, the limitations are inoperative, and the restaurant, hotel or motel resumes its traditional liability for full value (General Business Law, § 201).
Now, it goes without saying that, unless a restaurant proffers receipts and invites declarations, or unless patrons in some other manner are advised of the existence of this option (or, for that matter, of the limitations that prevail in the absence of its exercise), it would be but a secret, and, therefore, ineffective privilege. It was to avoid this paradoxical consequence that the Legislature, apparently recognizing that almost no one is likely to consult the Consolidated Laws before deciding to dine out, enacted section 206 as an auxiliary to the statutory scheme. In my view, this provision, a precondition to the enforcement of the limitation preferences granted restaurants by section 201, requires them to informatively post a printed copy of the statute in a conspicuous place and manner. This, concededly, the defendant here did not do. Yet, because the posting appendage, though part of what Judge CARDOZO called a "connected plan" embracing both restaurants and hotels (Honig v Riley, 244 N.Y. 105, 109), does not refer to restaurants by name, the majority, by choosing to deal with section 206 as though it stood in isolation rather than as a dependent part of a whole, would stultify the salutary purpose it was intended to achieve.
It takes no missionary zeal to observe that, while canons of construction are helpful, they can never take the place of reasoned analysis (Beary v City of Rye, 44 N.Y.2d 398, 410-411; Becker v Huss Co., 43 N.Y.2d 527, 533). Signposts at best, they are not to be followed blindly when they appear to point in the wrong direction. All the more is this so when we treat with a statute which Judge CARDOZO also deservedly characterized as "clumsy and inartificial" (Honig v Riley, supra, at p 109). For, the notion that, because words are plain, their meaning is also plain is "merely pernicious oversimplification" (United States v Monia, 317 U.S. 424, 431 [FRANKFURTER, J., dissenting], quoted in People v Brooks, 34 N.Y.2d 475, 478). So, when words, read literally, lead to an unreasonable result plainly at variance with the policy of legislation as a whole, a court must look "to the purposes of the act" (New York State Bankers Assn. v Albright, 38 N.Y.2d 430, 437). Or, as we suggested, in Brooks, the goal of judicial inquiry is not always to be satisfied by a "mechanical" reading of a statute, but rather by understanding that its phrases have "'some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning'" (People v Brooks, supra, at p 478, quoting Cabell v Markham, 148 F.2d 737, 739 [LEARNED HAND, J.]).
Turning then to the purpose of the statute before us now, its genesis goes back to the days when, if food and drink were to be provided outside the home, it was primarily the business of the innkeeper to provide it. In this unitary concept, the same responsibility was borne toward the wayfarer who applied for lodging and the one who applied for a meal. One of these in the beginning was that of absolute liability, as an insurer, for the loss of a guest's property and, later, a combination of statutorily fixed limited liability matched by compulsory safeguards against loss (Zaldin v Concord Hotel, 48 N.Y.2d 107, 111-112, and authorities cited therein). However, with time, as a growing urban population developed an everincreasing habit of taking meals at restaurants, the obligation of its proprietors was reduced to that imposed by the general law of negligence (Montgomery v Ladjing, 30 Misc. 92; Simpson v Rourke, 13 Misc. 230).
Then, the year 1924 saw the birth of the legislation which Judge CARDOZO so critically was to describe that same year and which we, as his successors, today confront. Its intended goal and format, as described in hotel terms by the counsel to the New York State Hotel Association and the Hotel Association of New York City, who did the drafting, is revealing: "Heretofore the hotelkeeper has been practically at the mercy of the unscrupulous guest and has often been compelled to pay heavy claims for the loss of property from store-rooms and checking-rooms in cases where, when the property was originally deposited with the hotel-keeper, he had no knowledge of the real value thereof nor was such value called to his attention by the guest. The * * * bill relieves the situation and at the same time works no hardship on the guest, for all he is required to do is to notify the hotelkeeper of the value of the property at the time of depositing the same. Furthermore, when so notified, the hotelkeeper at all times continues to be liable for the full value of such property in case of negligence, and copies of the law are required to be posted, pursuant to Section 206 of the General Business Law" (emphasis added; legislative bill jacket, Document No. 3, L 1924, ch 506).
As formally enacted, however, the bill, to be known as section 201, without further definition, put restaurants within the ambit of its general protection. Then, significantly, when it was construed by this court, Judge CARDOZO made clear that, however ineptly presented, its inclusion of restaurants made them part of an integrated whole. Specifically, he not only referred to them "in conjunction with the provisions immediately preceding it as part of a connected plan," but also declared that "the statute is not aimed at the protection of proprietors of restaurants exclusively". Crucially, he went on to say that, "[ f] or the purpose of the new exemption, proprietors of inns and proprietors of restaurants are grouped as a single class" (Honig v Riley, 244 N.Y. 105, 110, supra [emphasis added]).
Examination of the record in Honig reveals that the posting provision was not raised in that case.
That sensible crossover among the different sections of the General Business Law was intended is well illustrated by these observations. For "the new exemption" for "proprietors of restaurants" to which Honig refers is also contained in article 12 of the General Business Law under what ordinarily might be regarded as the misleading heading "Hotels and Boarding Houses". It follows from this most confusing arrangement that the posting requirement applicable to hotels, if they are to make any sense, must be deemed equally applicable to restaurants.
It was in the same vein that, in 1960, section 201 was amended to include, as had been the case with restaurants, the newly emerging motel industry as well. On that occasion, in language again reflecting the recognized trade-off between the benefits and obligations of the statutory framework, the Department of Commerce and the Association of the Bar of the City of New York advised the Governor that those desiring the protection should be "subjected to the posting provisions of the law" (legislative bill jacket, Document Nos. 14, 31, L 1960, ch 840).
Sound policy too supports this conclusion. In the past, this court, dehors the present context, has repeatedly emphasized that it would be misleading and unfair to allow a hotel to assert a limited liability when it had not posted a copy of a statute so that a guest would be "notified of the true situation and acts with knowledge" (Millhiser v Beau Site Co., 251 N.Y. 290, 296). It would be equally misleading and unfair for one who patronizes a restaurant to be confronted with a defense of limited liability without such notice. (See, also, Klar v H M Parcel Room, 270 App. Div. 538, 542, affd 296 N.Y. 1044 [claim check limiting damages recoverable for loss at parcel room in railroad terminal, though otherwise comporting with public policy, held inadequate in absence of "conspicuous signs * * * calling attention to the limitation * * * or that there was any opportunity afforded to plaintiffs to assent to or dissent from the alleged contract"]).
In fine, history and policy lead to inexorable conclusions: The Legislature did not intend to extend the salutary benefits of section 201 of the General Business Law to the proprietors of either restaurants, hotels or motels without appropriate notice of the condition — exaction of a receipt containing a statement of value — without which the most extensive loss would bring but a pittance. When the bill was originally enacted, it would have served nothing but an impermissibly overprecious and overliteral reading to assume it intended to charge only hotels with its posting requirement, when, though its hotel sponsors had ignored restaurants, the Legislature affirmatively and expressly took the trouble to include them within the "connected" statutory scheme (Matter of Allstate Ins. Co. v Shaw, 52 N.Y.2d 818, 820-821).
Therefore, while, no doubt, the statutory language could be clearer, it surely is remiss not to give effect to the clear-cut underlying intent that, at least for checkroom posting purposes, restaurants are in the "same class" with the other kinds of establishments to be found in the related subdivisions of the statute.
It is for all these reasons that the order of the Appellate Division should be affirmed.
The majority's passing reference to an unpleaded conversion action in the circumstances of this case can serve no practical purpose, since an attempt to activate such a theory could hope to do no more than launch a trusting and factually uninformed patron on a legally frustrating "fool's errand".
Chief Judge COOKE and Judges JASEN, GABRIELLI, JONES and WACHTLER concur with Judge MEYER; JUDGE FUCHSBERG dissents and votes to affirm in a separate opinion.
Order modified, with costs to defendant in all courts, in accordance with the opinion herein and, as so modified, affirmed.