Weinberg v. D-M Restaurant Corp.

• Citation: 426 N.E.2d 459,442 N.Y.S.2d 965,53 N.Y.2d 499
• Decision Date: 18 June 1981
• Docket Number: D-M
• Parties: , 426 N.E.2d 459 Nicole WEINBERG, Respondent, v.RESTAURANT CORPORATION, Appellant.
• Court: New York Court of Appeals

Page 965

442 N.Y.S.2d 965

53 N.Y.2d 499, 426 N.E.2d 459

Nicole WEINBERG, Respondent, v. D-M RESTAURANT CORPORATION, Appellant.

Court of Appeals of New York.

June 18, 1981.

Joseph D. Ahearn, Joseph W. Conklin and Michael Majewski, New York City, for appellant.

Morris Block, New Rochelle, for respondent.

Gerard A. Navagh, New York City, for New York State Restaurant Association, Inc., amicus curiae.

OPINION OF THE COURT

MEYER, Judge.

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, 73 A.D.2d 1066, 423 N.Y.S.2d 975 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, 400 N.Y.S.2d 524). 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. 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.

II

Subdivision 1 of section 201 of the General Business Law provides in relevant part: "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, 155 N.E. 65, 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, 155 N.E. 65):

"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 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, 177 N.Y.S. 488 affd. 228 N.Y. 579, 127 N.E. 909; Matter of Sloate v. Rochester Taxicab Co., 177 App.Div. 57, 163 N.Y.S. 904, affd. 221 N.Y. 491, 116 N.E. 1076; see Ann., 75 A.L.R. 1223), of the income tax (Ann., 10 A.L.R.2d 191) and of unemployment compensation taxes (Ann., 83 A.L.R.2d 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, 62 S.Ct. 659, 669, 86 L.Ed. 914, reh. den. 315 U.S. 830, 62 S.Ct. 909, 86 L.Ed. 1224; see People v. Vetri, 309 N.Y. 401, 408, 131 N.E.2d 568; Ann., 65 A.L.R.2d 974 or as a part of the employer's income (Ann., 73 A.L.R.3d 1226 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, 357 P.2d 327; see Ann., 73 A.L.R.3d 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, 357 P.2d 327) "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, 408 N.E.2d 1182, 42 Ill.Dec. 473). The United States District Court for the Southern District of New York reached a result similar to Beaman in Restaurants & Patisseries Longchamps v. Pedrick, D.C. 52 F.Supp. 174, but noted (at pp. 174-175) that "A patron in a restaurant is under no compulsion...