author: Wachtler, J. Jasen, J. (dissenting). Cooke, J. (dissenting).

text:
    Patrolmen’s Benevolent Association of the City of New York, Respondent, v City of New York, Appellant. Louis J. Lefkowitz, as Attorney-General of the State of New York, Intervenor.
    Argued October 12, 1976;
    decided December 22, 1976

      W. Bernard Richland, Corporation Counsel (James G. Greilsheimer and L. Kevin Sheridan of counsel), New York City, for appellant.

      Frederick R. Livingston, Jay W. Waks and William C. Zifchak, New York City, for respondent.

      Louis J. Lefkowitz, Attorney-General (George D. Zuckerman and Samuel A. Hirshowitz of counsel), New York City, for intervenor.
   Wachtler, J.

This is an action by the Patrolmen’s Benevolent Association of the City of New York, Inc., seeking to enforce an order and judgment requiring the City of New York to pay a 6% salary increase for the 1975-1976 fiscal year. On this appeal the city contends, inter alia, that it is prohibited from paying the increase by the wage freeze legislation adopted by the Legislature in September, 1975.

Having failed to reach accord on the terms of a collective bargaining agreement to cover the two-year period beginning July 1, 1974, the PBA and the city submitted their dispute to an impasse panel pursuant to the provisions of the New York City Collective Bargaining Law (Administrative Code of City of New York, § 1173-1.0 et seq.). The decision and recommendations of the impasse panel, handed down on April 30, 1975, provided that the PBA be granted an 8% salary increase for the first year to be covered by the contract. The salary increase for the second year was set at 6%. The panel’s findings were accepted in writing by both parties and neither sought to appeal the determination to the Board of Collective Bargaining, although that avenue was open to them. Subsequently, the panel’s findings were incorporated into a tentative collective bargaining agreement. While the representative of the PBA signed this tentative agreement, the city refused to do so, giving as a reason the city’s increasingly grave financial outlook.

Faced with the city’s refusal to execute and perform the agreement, the PBA, by order to show cause, brought on a proceeding under CPLR article 75 to confirm the award of the impasse panel. The city cross-moved to dismiss the petition on the ground that the decision of the impasse panel did not constitute an award within the meaning of article 75. The city’s cross motion was denied. The city having subsequently failed to timely serve its answer to the petition, the petition was granted upon default, and the impasse panel’s determination was confirmed by an order and judgment dated and entered on July 1, 1975.

Thereafter the city commenced computing and paying the retroactive salary increase for the 1974-1975 fiscal year and the increase ordered for the 1975-1976 fiscal year, in compliance with the terms of the July 1 order. In September, 1975, however, the Legislature enacted the law freezing the wages of the city’s employees (L 1975, ch 868, § 2, subd 10, as amd by L 1975, ch 870, §11), and the city immediately discontinued paying the 1975-1976 increase.

The PBA then moved to compel the city to comply with the July 1, 1975 judgment, and the city opposed the motion. The PBA urged that the wage freeze should not be imposed in their case since their salary increase was contained in a judgment of a court and the legislation had no application to wage increases pursuant to judicial judgments. They also mounted a broadside constitutional attack against the statute imposing the wage freeze. The city, on the other hand, asserted that the legislation did apply to the instant set of facts and that the statute suffered no constitutional infirmity.

The lower court held that the wage freeze legislation was not applicable to the instant case involving a salary increase embodied in a judicial judgment. Nevertheless, that court imposed a stay on the enforcement of its judgment until June 30, 1978, declaring that it was doing so "in the interests of justice and equity and in an attempt to further the recovery of the City of New York from its financial plight”. Both parties appealed that court’s determination.

On appeal the Appellate Division also found that the wage freeze legislation did not cover judgments. In addition, they modified the lower court’s order by deleting that portion staying enforcement of the order since "there [was] neither warrant here for judicial legislation nor power to do so.” Having so held, the Appellate Division certified the following question: "Was the order of this court, entered April 26, 1976, properly made?”

The pertinent provision of the wage freeze legislation provides: "Increases in salary or wages of employees of the city * * * which have taken effect since June thirtieth, nineteen hundred seventy-five or which will take effect after that date pursuant to collective bargaining agreements or other analogous contracts, now in existence or hereinafter entered into * * * are hereby suspended.” The threshold question now before us, therefore, is whether this statute applies to the present case.

It is fundamental that a court, in interpreting a statute, should attempt to effectuate the intent of the Legislature (Matter of Petterson v Daystrom Corp., 17 NY2d 32, 38; see Matter of Carr v New York State Bd. of Elections, 40 NY2d 556), and where the statutory language is clear and unambiguous, the court should construe it so as to give effect to the plain meaning of the words used (Bender v Jamaica Hosp., 40 NY2d 560; New Amsterdam Cas. Co. v Stecker, 3 NY2d 1; Meltzer v Koenigsberg, 302 NY 523; Matter of De Peyster, 210 NY 216). The statute under scrutiny in this case suspends wage increases "pursuant to collective bargaining agreements or other analogous contracts.” In this case, the wage increase did not "take effect” by virtue of a collective bargaining agreement,, but rather it took effect as the result of a judicially mandated remedy embodied in a judgment. Even if it would be constitutionally permissible for a statute to suspend a judgment, nowhere is there language which would suggest this legislative intent; nor can it be said that the language employed permits an interpretation which would broaden the scope of the statute so as to encompass such increases (see New Amsterdam Cas. Co. v Stecker, supra; Matter of Patrolmen’s Benevolent Assn. of City of Buffalo v City of Buffalo, 50 AD2d 101). Hence, where as here the statute describes the particular situations in which it is to apply, "an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded” (McKinney’s Cons Laws of NY, Book 1, Statutes, § 240).

Had the Legislature intended that the wage freeze also apply to situations involving judicially mandated salary increases, they were free, assuming arguendo constitutional validity, to draft appropriately worded legislation (cf. Bright Homes v Wright, 8 NY2d 157). We would but note that the statute in question was adopted some two months after the July 1 judgment requiring that the city pay the salary increase and we must assume the Legislature was well aware of this fact when the statute was passed. Other statutes, adopted at the same time as the wage freeze law and also seeking to alleviate the financial plight of the city, by their very terms have specific application to judgments (see, e.g., Local Finance Law, § 85.10, L 1975, ch 870, § 24; Local Finance Law, § 85.30, L 1975, ch 870, § 26).

Nor is our view altered because the July 1 judgment was one confirming the award of the impasse panel. "A judgment entered upon the confirmation of an arbitral award has the same force and effect in all respects as * * * a judgment in an action” (23 Carmody-Wait 2d, NY Prac, § 141:186; see Jacobowitz v Herson, 268 NY 130, 135-136).

Finally, we are in agreement with the Appellate Division in its holding that the lower court was without power to stay the enforcement of its order (see Matter of Young v Gerosa, 11 AD2d 67, 74; accord Matter of Bird v McGoldrick, 277 NY 492, 500).

We find no merit in any of the other arguments proffered by the city.

Accordingly, the order of the Appellate Division should be affirmed and the certified question answered affirmatively.

Jasen, J. (dissenting).

I agree with Judge Cooke that the wage increase awarded to New York City police officers by the impasse panel is encompassed by the terms of the wage freeze legislation. To his discussion, I would add but one observation. It is undisputed that had the city agreed to the wage increase voluntarily the wage freeze statute would apply. I fail to see how the city’s position is undermined, and the statute rendered inapplicable, because the city exhausted every available procedural and judicial avenue in an effort to resist the payment of a wage increase. The net result of the collective bargaining procedures and the litigation commenced to enforce the impasse panel’s award is to require the city, in a collective bargaining agreement and setting, to pay wage increases to one class of its employees. This is exactly what the statute was designed to freeze.

I also agree with Judge Cooke, although on more narrow grounds, that there is no constitutional impediment to the enforcement of wage freeze legislation. To be sure, a collective bargaining agreement is a contract. Although the Federal Constitution prohibits the States from impairing contractual obligations (US Const, art I, § 10), the constitutional prohibition has never been read literally. (See Home Bldg. & Loan Assn, v Blaisdell, 290 US 398, 429.) The cases establish, all too conclusively, that the language of the Constitution does not mean exactly what it says. The cases also establish, again conclusively, that the impairment clause has been interpreted variously, and sometimes inconsistently, by different courts, both institutionally and compositionally, confronted with factual settings. The diffused lines of authority result not from any institutional or judicial failure to adequately articulate often close reasoning. The difficulty results from the fact that, once the literal approach is rejected, the clause becomes amorphous. Its scope cannot be shaped from its sparse language. Shape is given by judicial holdings, rather than by abstract and abstracted judicial language.

It suffices in this case to state that the impairment clause and the impairment cases never stripped from the States the power to regulate the terms and conditions of work for municipal employees. Whether couched in terms of emergency power or public policy, a State certainly has warrant to adjust the terms of public employment in order to cope with exigent circumstances. The intimate relation between government and its employees permits flexibility of a kind that is absent from agreements between private parties. More dramatically, the same elasticity is missing from the relationship existing between government and its creditors. (Cf. Flushing Nat. Bank v Municipal Assistance Corp. for City of N. Y., 40 NY2d 731.) Flexibility does not, of course, mean that public employers can abrogate contracts with employees at will. Municipal employees are public servants; but they are not public serfs. The State and its subdivisions are not feudal landlords who may move employees around or adjust their compensation by whim or caprice. However, the State’s exercise of its residual power over municipal employees is, in this case, far from whimsical and far from capricious.

The City of New York, it is hardly necessary to state, is confronted by a grave financial emergency. Much of the debt with which the city is confronted is constitutional debt—debt which the city must, by Constitution, pay. Obviously, payment requires the city to make budgetary adjustments. Since expenses relating to personnel constitute a significant and quite sizeable budgetary allotment, obviously, too, personnel expenses are candidates for reduction. Here, too, the city is faced with fixed and vested pension payments that are constitutionally unassailable. (NY Const, art V, § 7.) Instead, it is again apparent that future benefit increases are a prime target for the budgetary axe. It is significant, in this connection, that the State has made substantial contributions necessary to sustain governmental operations of the city. It is not unreasonable for the Legislature to demand, as a condition, for State assistance, that the city does not increase its expenses at a time when all State taxpayers are contributing the moneys necessary to avert local fiscal collapse. Although the city cannot deflect responsibility, it is not without significance that the wage freeze has been ordered by the State. It is also not without significance that the city had been resisting wage increases and, but for the collective bargaining procedures provided by the Legislature, such increases would never have been. Moreover, the increases have not been abrogated but "suspended”. The city’s faith, in this instance, has been good; there is no direct constitutional provision prohibiting wage freezes nor can such prohibition be drawn by reasonable implication. The measures taken by the State have been appropriate to the circumstances. Hence, I conclude that the wage freeze statute is constitutional.

For these reasons, I would reverse the order of the Appellate Division.

Cooke, J. (dissenting).

I dissent and vote to reverse.

The majority’s construction of the terms of the Financial Emergency Act (L 1975, ch 868, § 2, subd 10, as amd by L 1975, ch 870, § 11) elevates form over substance. The act suspends wage increases "pursuant to collective bargaining agreements or other analogous contracts.” The judgment of Special Term confirming the impasse panel’s award did not create the police officers’ right to the wage increases. The right was obtained "pursuant to collective bargaining” to which the parties were required to submit; the judgment was merely an attempt to enforce that which had been obtained pursuant to the collective bargaining. It is as simple as that.

The majority asserts that since the statute describes "particular situations” to which it applies, "an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded” (quoting from McKinney’s Cons Laws of NY, Book 1, Statutes, § 240). This analysis misapplies the quoted principle and overlooks various other dominant principles of statutory construction.

First of all, the statute speaks to "Increases in salary or wages * * * pursuant to collective bargaining agreements or other analogous contracts.” The judgment obtained was not separate and apart from the collective bargaining agreement on which it was based. A judgment does not create new rights but defines and determines what rights already exist. That the terms "agreements or other analogous contracts” embrace judgments obtained for the enforcement thereof has been determined previously and effectively by this very court in Jacobs v Newman (254 NY 298). There, at the close of testimony, the complaint was dismissed on the ground that under the defendant’s contract, he was obligated to pay to the plaintiff only one half the payments made by plaintiff to Kelsey "pursuant to the said Kelsey contract,” and that the plaintiff defaulted under that contract and subsequent payments were made not "pursuant to that contract” but in settlement of a judgment obtained against the plaintiff (p 302). This court held that dismissal was error and that it rested upon "too narrow a construction of the defendant’s obligation” (p 302). It was held at pages 303-304: "Here the plaintiff’s previous default under the contract with Kelsey had resulted in Kelsey declaring the full purchase price due and bringing an action to recover that price. That action did not terminate the contract of sale. On the contrary, it was based upon the existence of the contract and was brought to enforce the obligation of the contract. (D’Aprile v. Turner-Looker Co., 239 N. Y. 427.) Title to the stock still remained in the plaintiff or plaintiff’s assignee, and the stock was still held as security for the purchase price. Even though in a sense the original obligation of plaintiff to Kelsey was merged in the judgment, the judgment does not obliterate the essential features of the obligation on which it is rendered. ’ (Murphy v. Manning, 134 Mass. 488.)” (Emphasis added.) Here, too, the judgment did not terminate the collective bargaining agreement and was merely a part of the enforcement of the obligation of that agreement.

A review of these other principles manifests the technical nature of the majority’s analysis. In construing a statute, the " 'intent of the Legislature in enacting legislation is the primary object to be found’ ” and " '[wjhenever such intention is apparent it must be followed in construing the statute’ ” (Matter of Astman v Kelly, 2 NY2d 567, 572; see McKinney’s Cons Laws of NY, Book 1, Statutes, § 92, subd a). " 'It is a familiar legal maxim that "he who considers merely the letter of an instrument goes but skin deep into its meaning”, and all statutes are to be construed according to their meaning, not according to the letter’ ” (Matter of River Brand Rice Mills v Latrobe Brewing Co., 305 NY 36, 43-44). Here, it is clear that the Legislature intended to suspend wage increases during a period of financial emergency. In using the term "collective bargaining agreements” in the act, it must be assumed that the Legislature knew that judgments might be obtained to enforce such agreements. It is totally unreasonable to assume that by omitting the term judgments from the act, the Legislature intended to allow a particular group of employees to overcome the effect of the act by obtaining a judgment. By this reasoning, if the act had used the term "judgment”, but failed to use the term "award”, a wage increase pursuant to the award of an impasse panel, would not be subject to the wage freeze.

The fact that other portions of the act refer specifically to judgments (Local Finance Law, §§ 85.10, 85.30; L 1975, ch 868, § 19, as repealed and superseded by L 1975, ch 870, §§ 24, 26, respectively), casts little light on the intention of the Legislature with respect to the wage freeze, since those provisions of the act were designed specifically to deal with "claims” against the municipality.

The majority states that the act does not apply in this case because "the wage increase did not 'take effect’ by virtue of a collective bargaining agreement” (p 208). This misreads the act, which in relevant part provides: "Increases in salary or wages of employees of the city * * * which have taken effect since June thirtieth, nineteen hundred seventy-five or which will take effect after that date pursuant to collective bargaining agreements or other analogous contracts, now in existence or hereinafter entered into * * * are hereby suspended.” (Emphasis added.) The words "taken effect” and "take effect” modify the reference to June 30 or dates thereafter and do not modify the words "pursuant to collective bargaining agreements.” The Legislature intended to limit the act to wage increases that "take effect” after a certain date and that is why the drafters inserted the words "take effect”; the words were not inserted to limit the act to wage increases that "take effect” pursuant to collective bargaining agreements as contrasted with judgments. Moreover, even if one were to accept the majority’s interpretation, it is still no more than a strained attempt to say that, because a judgment was obtained, the wage increase was not pursuant to collective bargaining.

The majority further notes that since "the statute in question was adopted some two months after the July 1 judgment requiring that the city pay the salary increase * * * we must assume the Legislature was well aware of this fact when the statute was passed” (p 209). This does not mean that the Legislature intended to omit judgments from the act. One may just as easily assume not only, as the majority implies, that the Legislature was aware of the judgment, but also that it was rendered on July 1, and, therefore, that the act was made applicable to wage increases "which have taken effect since June thirtieth” specifically to cover this wage increase.

It is a recognized principle that "statutes promoting the public good are liberally construed” (McKinney’s Cons Laws of NY, Book 1, Statutes, § 341; see Englishbe v Helmuth, 3 NY 294; People v Dennis, 206 Misc 402 [Munder, J.]). There can be no doubt that the purpose of the Financial Emergency Act was to protect the public from the chaos that would result from the inability of the city to continue to provide essential services (see L 1975, ch 868, § 1). Yet, under the guise of literal interpretation of the act, the majority imposes a technical construction of its terms which defeats that purpose.

The fundamental constitutional principle of the separation of powers among the three departments of government is included by implication in the pattern of government adopted by the State of New York (Matter of Gottlieb v Duryea, 38 AD2d 634, affd 30 NY2d 807, cert den 409 US 1008). Under this principle of separation of powers, it is fundamental that courts may not without warrant restrict the scope of legislation in a manner that would thwart the legislative policy or engraft exceptions where none exist (see Matter of People [Lawyers Westchester Mtge. & Tit. Co.], 288 NY 40, 50; 9 NY Jur, Constitutional Law, § 118).

There is no question but that the act applies to judgments arising out of the negotiating contracts and, therefore, we should reach the PBA’s contentions as to the act’s validity.

It is asserted that the judgment obtained at Special Term may not be impaired by the subsequent passage of the act suspending wage increases. In this respect, it is sufficient to note that where a statute "is enacted after judgment and pending appeal, the appellate court may dispose of the case in accordance with the law as changed by the statute” (Robinson v Robins Dry Dock & Repair Co., 238 NY 271, 281; cf. Matter of Demisay, Inc. v Petito, 31 NY2d 896; see Veix v Sixth Ward Assn., 310 US 32; United States v Schooner Peggy, 1 Cranch [5 US] 103, 110; see, generally, 1 Antieau, Modern Constitutional Law, § 3:33, p 254).

The next and principal contention of the PBA is that the act contravenes the Federal contract clause (US Const, art I, § 10). In this respect, the case of Flushing Nat. Bank v Municipal Assistance Corp. for City of N. Y. (40 NY2d 731, 740) has no application here, since there the majority stated: "The Federal issues are not reached and therefore cases construing Federal constitutional provisions, especially the impairment clause, cast little light on the State constitutional issues in this case.” Here, there are no State constitutional provisions that in any sense are determinative. Although the respondents contend that the wage freeze violates the prohibition of impairment of pension benefits in the State Constitution (NY Const, art V, § 7), it is sufficient to note that existing benefits are not impaired by the act; the only effect of the act is to prevent increased benefits that may be derived from a wage increase (cf. Kleinfeldt v New York City Employees’ Retirement System, 36 NY2d 95). Equally without merit is the PBA’s contention that the creation of the Emergency Financial Control Board pursuant to the act is a violation of the "Home Rule” guarantee (art IX, § 1) of the State Constitution (see Matter of Toia v Regan, 40 NY2d 837, 838; cf. Wein v City of New York, 36 NY2d 610, 619-620)

Turning then to the question of whether the Federal contract clause prohibits the wage freeze, the principles are well established. As one noted authority has stated: "When a state permits within its jurisdiction certain contracts, or enters into contracts itself with private parties, it always reserves the right as a sovereign to make whatever changes are necessary to protect the public health, safety, morality or general welfare.” (1 Antieau, Modern Constitutional Law, § 3:30, p 250.)

This principle was derived from the ruling of the United States Supreme Court in Home Bldg. & Loan Assn, v Blaisdell (290 US 398) wherein it was stated (pp 434-435): "Not only is the constitutional provision qualified by the measure of control which the State retains over remedial processes, but the State also continues to possess authority to safeguard the vital interests of its people. It does not matter that legislation appropriate to that end ’has the result of modifying or abrogating contracts already in effect. ’ Stephenson v. Binford, 287 U. S. 251, 276. Not only are existing laws read into contracts in order to fx obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. The policy of protecting contracts against impairment presupposes the maintenance of a government by virtue of which contractual relations are worthwile,—a government which retains adequate authority to secure the peace and good order of society. This principle of harmonizing the constitutional prohibition with the necessary residuum of state power has had progressive recognition in the decisions of this Court.” (Emphasis added.) Indeed, there can be no doubt of the broad application , of these principles for: "[t]he economic interests of the State may justify the exercise of its continuing and dominant protective power notwithstanding interference with contracts” (290 US, at p 437).

Despite the broad language of the court in Blaisdell, it is argued that the exercise of the police power is limited to a temporary impairment and that, thus, depending on the degree of impairment, in some instances the State may not exercise the police power to provide essential services. This same argument was raised in Blaisdell and there the court responded: "The argument is pressed that in the cases we have cited the obligation of contracts was affected only incidentally. This argument proceeds upon a misconception. The question is not whether the legislative action affects contracts incidentally, or directly or indirectly, but whether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that end” (290 US, at p 438). Here, the legislation is most assuredly addressed to a legitimate end. The Legislature expressly found that "a financial emergency * * * exists in the city of New York. The city is unable to obtain the funds needed by the city to continue to provide essential services to its inhabitants or to meet its obligations to the holders * * * These events [nonpayments to unpaid employees, vendors and suppliers, recipients of public assistance and city obligations] would effectively force the city to stop operating as a viable governmental entity and create a clear and present danger to the health, safety and welfare of its inhabitants * * * If the city were unable, because of the lack of funds, to function in its normal manner, the economy of the state would, therefore, be drastically harmed * * * This situation is a disaster and creates a state of emergency” (L 1975, ch 868, § 1).

The PBA argues, however, that the legislative measures here taken are not reasonable and appropriate. This argument is totally without merit. It is indeed reasonable and appropriate to freeze wages and to take various other measures to reduce expenditures in order to provide funds for essential services—such as hospitals, schools, fire protection, sanitation and indeed, even a continuation of police protection itself. The need for the State to act for the general welfare of its people was definitively expressed in East N. Y. Bank v Hahn (326 US 230, 232-233) in this manner:

"The Blaisdell case and decisions rendered since (e.g., Honeyman v. Jacobs, 306 U. S. 539; Veix v. Sixth Ward Assn., 310 U. S. 32; Gelfert v. National City Bank, 313 U. S. 221; Faitoute Co. v. Asbury Park, 316 U. S. 502), yield this governing constitutional principle: when a widely diffused public interest has become enmeshed in a network of multitudinous private arrangements, the authority of the State 'to safeguard the vital interests of its people,’ 290 U. S. at 434, is not to be gainsaid by abstracting one such arrangement from its public context and treating it as though it were an isolated private contract constitutionally immune from impairment.

"The formal mode of reasoning by means of which this 'protective power of the State,’ 290 U. S. at 440, is acknowledged is of little moment. It may be treated as an implied condition of every contract and, as such, as much part of the contract as though it were written into it, whereby the State’s exercise of its power enforces, and does not impair, a contract. A more candid statement is to recognize, as was said in Manigault v. Springs, supra, that the power 'which in its various ramiñcations is known as the police power, is an exercise of the sovereign right of the Government to protect the * * * general welfare of the people, and is paramount to any rights under contracts between individuals. ’ 199 U. S. at 480. Once we are in this domain of the reserve power of a State we must respect the 'wide discretion on the part of the legislature in determining what is and what is not necessary.’ Ibid. So far as the constitutional issue is concerned, 'the power of the State when otherwise justified,’ Marcus Brown Co. v. Feldman, 256 U. S. 170, 198, is not diminished because a private contract may be affected.” (Emphasis added.)

The cases of Worthen Co. v Thomas (292 US 426) and Worthen Co. v Kavanaugh (295 US 56), relied on by the PBA, are not determinative of whether a wage freeze is reasonable and appropriate to the city’s efforts at continuing essential services. It must be stressed that the standard to be applied is not whether the measures taken by the Legislature are sufficiently temporary but, rather, whether such measures are reasonable and appropriate (see Home Bldg. & Loan Assn, v Blaisdell, 290 US 398, 438, supra). Moreover, any notion that only very limited temporary measures are permissible under Blaisdell has been disavowed subsequent to the cases relied on by the PBA (see Veix v Sixth Ward Assn., 310 US 32, 39-41, supra).

The narrow ground upon which Judge Jasen resolves the constitutional issue is not in line with prevailing cases as they have developed. The key to this case is the relationship between the State and all its people and not the relationship between the State and public employees. Under Blaisdell, if the legislation is reasonable and appropriate, it is permissible even if it interferes with the rights of private parties, as well as public employees.

As stated in Blaisdell (290 US, pp 447-448), whether the legislation is wise or unwise as a matter of policy is a question with which we are not concerned. That is not the court’s function.

Without question, the cases are legion, the principles well established, and the wage freeze provision of the act should be declared constitutional.

Accordingly, there should be a reversal.

Chief Judge Breitel and Judges Gabrielli and Jones concur with Judge Wachtler; Judges Jasen and Cooke dissent and vote to reverse in separate dissenting opinions; Judge Fuchsberg taking no part.

Order affirmed, with costs. Question certified answered in the affirmative.

       This section cited by the majority, at page 414, itself states: "The maxim expressio unius est exclusio alterius is not, however, an ironbound rule of law excluding in all cases from the operation of a statute those things which are not enumerated therein. It is merely an aid to be utilized in ascertaining the meaning of a statute when its language is ambiguous, and should be applied to accomplish the legislative intention, not to defeat it. If the language of a statute indicates that other things than those mentioned are intended to be included within its operation, the maxim will not necessarily require their exclusion, but in such case the intention to the contrary must be discernable from the context of the act itself.” (Emphasis added.)


source: Caselaw Access Project

author: Jasen, J. Fuchsberg, J. (dissenting).

license: Public Domain

text:
    Christopher O'Rourke, an Infant, by His Father and Natural Guardian, John J. O'Rourke, et al., Appellants, v Frank E. Long et al., Defendants, and Long Island Daily Press Publishing Company, Inc., Respondent.
    Argued September 7, 1976;
    decided December 28, 1976

      Norman H. Dachs, Mineóla, for appellants.

      A. Paul Goldblum, Forest Hills, for respondent.
   Jasen, J.

This personal injury action arises out of an accident which occurred on June 25, 1970. The infant plaintiff, Christopher O’Rourke who was then 10 years old, had been illegally engaged in delivering the Long Island Press newspaper on the afternoon of that day. He had left his home by bicycle and rode along the local streets, carrying newspapers in the rear basket, pausing occasionally to distribute papers to customers’ residences. He had not yet finished delivering the newspapers when he spied an ice cream truck proceeding towards him on the opposite side of the street. After signaling the operator of the truck to stop, he dismounted his bicycle and crossed the street to buy ice cream. Upon returning from the ice cream truck, he was struck by a passing vehicle.

On October 5, 1970, a claim for workmen’s compensation was filed on behalf of the infant plaintiff with the Workmen’s Compensation Board. Shortly thereafter, a check was sent to Christopher by the newspaper’s workmen’s compensation carrier, but was returned to the carrier by his counsel. Plaintiffs, the boy, and his father who sues derivatively, then instituted a plenary action against the newspaper, the owner and operator of the ice cream truck, and the owner and operator of the motor vehicle which struck the infant plaintiff while the motor vehicle was passing the standing ice cream truck. The action against all of the defendants, except the newspaper, was settled during the trial and discontinued. The complaint against the Long Island Press was dismissed by the court at the close of the plaintiffs case upon the ground that there was insufficient proof to establish a causal relationship between his illegal employment and the accident. The Appellate Division affirmed the judgment, without opinion. Two Justices dissented, taking the view that the question of proximate cause should have been presented to the jury. (47 AD2d 950.) We believe that the complaint was properly dismissed, but for different reasons.

We find that it was error for the courts below to have passed upon the merits of the plaintiffs’ tort claim with respect to the defendant Long Island Press. The "defense” raised by the newspaper was that of workmen’s compensation, an argument which questions the right of plaintiff to present a claim, whatever its merit, in court. It is axiomatic that, as to an employer, where workmen’s compensation provides a remedy, the remedy that it provides, save for the rare case, is exclusive. Where liability is imposed upon an employer to provide workmen’s compensation and compensation is provided, that liability is exclusive and in the stead of any other employer liability whatsoever. The initial question to be resolved whenever a defense of workmen’s compensation is presented is whether the plaintiff has a right to bring a plenary action. If the right to sue the employer has been stripped away by workmen’s compensation coverage, it is an arrogation of jurisdiction to consider a tort complaint on its merits. By considering a complaint on its merits, particularly if the plaintiff is permitted to put in favorable proof at a trial, the employer would be subject to fending off liability in a forum from which the Legislature provided a shield. Here, over thrice repeated objections, the employer was put to lengthy and expensive pretrial and trial proceedings before a tribunal that was without authority to impose tort liability.

The Workmen’s Compensation Law evinces a legislative design to require employers to pay workmen’s compensation benefits where employees sustain injuries or meet their death in the course of specified hazardous employments. (Workmen’s Compensation Law, § 3.) Every employer who is subject to the law must "secure compensation to his employees and pay or provide compensation for their disability or death from injury arising out of and in the course of the employment without regard to fault as a cause of the injury, except that there shall be no liability for compensation under this chapter when the injury has been solely occasioned by intoxication of the injured employee while on duty or by wilful intention of the injured employee to bring about the injury or death of himself or another.” (Workmen’s Compensation Law, § 10.) The liability of the employer to provide compensation is the exclusive liability of the employer unless the employer fails to secure the payment of compensation. (Workmen’s Compensation Law, § 11.) Securing the payment of compensation involves the procurement of one of several forms of insurance, or, alternatively, obtaining authorization to rely upon self-insurance. (Workmen’s Compensation Law, § 50.) In the event that payment of compensation is not secured, the employee, or in the case of death his representatives, may nevertheless elect to claim compensation or, at their option, maintain a plenary action in the courts for damages. (Workmen’s Compensation Law, § 11; see, generally, 2A Larsen, Workmen’s Compensation Law, § 67.22.)

It is well recognized that the compensation statute was designed to provide a swift and sure source of benefits to the injured employee or to the dependents of the deceased employee. The price for these secure benefits is the loss of the common-law tort action in which greater benefits might be obtained. Thus, unless the employee can establish the existence of a limited number of exceptional circumstances, the sole remedy is workmen’s compensation.

In this case, the plaintiffs presented and relied upon two arguments to sustain the availability of the tort action: that the infant was not an employee and that the defendant failed to prove that it had secured the payment of compensation. Both contentions raise questions of law which should have been rejected by the courts below.

Ever since January 1, 1962, the work of newspaper carriers has been defined as hazardous employment for which the employer is liable to pay compensation in the event of injury. (Workmen’s Compensation Law, § 3 [Group 21].) The fact that the employment was illegal is not a circumstance which removes the employer or the employee from the scope of the compensation law. (Noreen v Vogel & Bros., 231 NY 317, 322.) Instead, the sanction against illegal employment provided by the Legislature is the imposition of an award twice the amount ordinarily payable. (Workmen’s Compensation Law, § 14-a.)

For purposes of the Workmen’s Compensation Law only, the term employer was statutorily defined to include "a person, partnership, association, corporation, and the legal representatives of a deceased employer, or the receiver or trustee of a person, partnership, association or corporation who delivers or causes to be delivered newspapers or periodicals for delivering or selling and delivering by a newspaper carrier under the age of eighteen years as defined in section thirty-two hundred twenty-eight of the education law.” (Workmen’s Compensation Law, § 2, subd 3.) The term employee was defined to include newspaper carriers under the age of 18 as defined in the Education Law and the term of employment was stated to include the delivery or sale and delivery of newspapers and periodicals as defined in the Education Law. (Workmen’s Compensation Law, § 2, subds 4, 5.) The Education Law states that a newspaper carrier is a minor between the ages of 12 and 18 who "engages in the occupation of delivering or selling and delivering newspapers or periodicals to customers at their homes or places of business.” (Education Law, § 3228, subd 1.)

In their complaint, plaintiffs alleged that the boy was engaged by the defendant Long Island Press as a "newspaper deliverer” and this was admitted by the defendant. The plaintiffs’ argument is that since the boy was underage he was outside the Education Law definition. However, the Legislature in developing the statutory definition had no need to include minors under 12 within the definition since these children were absolutely prohibited from engaging in such employment. Moreover, the plaintiffs overlook section 14-a of the Workmen’s Compensation Law which states that an employer who knowingly permits or suffers a newspaper carrier to work in violation of the Education Law is liable for a double award. It could scarcely be comprehensible that the Legislature would provide for a double award in cases of employer knowledge of illegality, as it did, when, as plaintiffs contend, compensation was not payable at all. In addition, subdivisions 3 and 4 of section 2 of the Workmen’s Compensation Law provide for coverage of newspaper carriers "under the age of eighteen” without mention of the minimum age of 12. The reference to the Education Law definition may appropriately be viewed as a reference to the definition of the occupation rather than an incorporation of the minimum age provision. It is not without significance that the Education Law grants the Industrial Commissioner the authority to enforce the restrictions upon employment of newspaper carriers, with the sole exception of the issuance and revocation of permits. (Education Law, § 3228, subd 7.) Although usually whether a worker is an employee involves a question of fact to be resolved by the Workmen’s Compensation Board (Matter of Gordon v New York Life Ins. Co., 300 NY 652, 654), the determination of the employment status of this plaintiff involves an issue of statutory construction and presents a pure question of law, which in light of conceded facts, should have been resolved at the earliest opportunity by the courts below. The defendant’s objection was that the plaintiffs failed to state a cause of action since the infant plaintiff was its employee and was covered by workmen’s compensation. Thus, the question of employment status determined the validity of the complaint. Even if the statute had been less explicit in making newspaper carriers "employees” and the resolution of the employment issue hinged on the choice of inferences, the courts below still should not have proceeded with the trial of a civil tort action. Instead, the appropriate course would have been to await a conclusive determination by the Workmen’s Compensation Board. (Cf. Matter of Scatola [Bronx Home News Pub. Co.], 257 App Div 471, affd 282 NY 689.)

As a second ground for the maintenance of the action, plaintiffs argue that the defendant failed to produce sufficient proof that it has obtained compensation insurance coverage for newsboys in general and for the plaintiff in particular. If the defendant did not in fact secure its obligation as required by law, plaintiff would have an election between compensation and plenary suit. However, plaintiff did not allege this second and alternate theory for avoiding the application of workmen’s compensation in his complaint. The sole basis for plaintiff’s plenary action was that there was no employment relationship between the infant plaintiff and the defendant Press. This issue, by virtue of statute (Workmen’s Compensation Law, § 2, subds 3, 4, 5), should have been resolved against the plaintiff. Since plaintiff was an employee, the presence or absence of an insurance policy determines the validity of plaintiff’s complaint. An action at common law is not available to plaintiff if it appears from the complaint, expressly or as a matter of law, that he is an employee, unless it is alleged and established that the requisite security was not obtained. (Kuhn v City of New York, 274 NY 118, 128-129; Finch v Swingly, 42 AD2d 1035; Artonio v Hirsch, 3 AD2d 939; Gardner v Shepard Niles Crane & Hoist Corp., 268 App Div 561, 563-564, affd 296 NY 539; 65 NY Jur, Workmen’s Compensation, § 81, p 450.) This the plaintiffs failed to do. The complaint disclosed a state of facts which, in view of both the Education Law and the Workmen’s Compensation Law provisions, was likely to fall within the exclusive jurisdiction of the Workmen’s Compensation Board. Hence, Paulsen v Kahn (248 App Div 744) and Flatau v Fairchild Camera & Instrument Corp. (40 AD2d 990) are distinguishable, even assuming that these cases were correctly decided. In any event, the full record on this appeal supports a conclusion that the defendant did in fact maintain a compensation insurance policy which covered injuries to all newsboys. Moreover, shortly after a claim for workmen’s compensation was filed on behalf of the infant plaintiff with the Workmen’s Compensation Board, the carrier accepted the claim and a check was sent to the plaintiff claimant but was returned to the carrier by his counsel. Thus, it affirmatively appears that defendant complied with the law. (Kuhn v City of New York, supra.) It should be noted that such coverage was mandated and failure to provide it would be a misdemeanor. (Workmen’s Compensation Law, § 52, subd 1.) The presence or absence of insurance coverage for a particular employee is also a question of law for the court to resolve. In future cases the court may order an immediate hearing on any disputed facts necessary for the resolution of this limited issue. (CPLR 3212, subd [c], eff Sept. 1, 1973.)

The case of Dashinsky v Santjer (32 AD2d 382), relied upon by plaintiffs, is also quite distinguishable. In that case, the defense of workmen’s compensation was not pleaded in the answer to the complaint and was not raised until the appeal of plaintiff’s verdict to the Appellate Division. The Appellate Division recognized that the tort plaintiff carries the burden of disproving compensation coverage and refused to permit a defense of workmen’s compensation to be asserted at a time when plaintiff would be unable to produce the proof necessary to sustain the burden. (32 AD2d, at p 385.) To be more precise, however, the cases establish convincingly that workmen’s compensation is not a "defense” to a tort claim. Rather, the unavailability of workmen’s compensation benefits or insurance for compensation benefits is a matter integral to plaintiff’s cause of action, and, as such, must be alleged and proved by the tort plaintiff. (But see Robbins v Master Diesel Corp., 34 AD2d 1021.) The employer, by way of its answer, may assert the inconsistent arguments that there was no "employment” and that such "employment” was covered by compensation insurance. (George v Sparwood Realty Corp., 34 AD2d 768.) Although it may be first asserted in the answer by way of defense, or affirmative defense, the issue of compensation exclusivity is to be pleaded and proved by the plaintiff and the omission of plaintiff to so plead does not work to shift the burden of pleading or proving.

Although not pleaded or argued by the plaintiffs, there is a third theory which would, if accepted, open up a tort action against the employer. Some members of the court are of the view that the injury sustained by the employee, because of the deviation from newspaper delivery, did not occur in the course of employment. If that were the case, workmen’s compensation would not provide a remedy and workmen’s compensation cannot be an exlclusive remedy if it is no remedy at all. (See 65 NY Jur, Workmen’s Compensation, § 77, p 442.) The compensation liability of an employer is exclusive only if the injuries arose out of and in the course of employment. Of course, if the injuries were not sustained in the course of employment, as some in our court would contend, the likelihood of a tort recovery, based upon common-law principles, would be equally tenuous. An injury sustained outside of the course of employment would, in most conceivable situations, lack the necessary common-law connection to the fault of the employer. However, it is possible that, in the close case, the Workmen’s Compensation Board might find one way (negatively) and a jury, if properly given the issue, another (positively). However, in a tort action, it is scarcely within the usual interest of the plaintiff to argue that his injuries were sustained outside the course of his employment. Similarly, the employer is usually all too willing to concede that the injuries were sustained in the course of employment. In that fashion, he may escape all liability at the expense of his compensation carrier. Thus, in this action, defendant in its answer affirmatively alleged that the injuries sustained by the newsboy plaintiff were sustained in the course of employment. The party with the truly significant interest to disclaim course of employment is the compensation carrier. Such an argument would be raised in a proceeding before the Workmen’s Compensation Board and therein lies the reason why, at this stage, we should not express a view as to the course of employment issue.

The existence of an employer-employee relationship in which an industrial accident has occurred is jurisdictionally vital to the maintenance of a workmen’s compensation proceeding. (Matter of Martin v C. A. Prods. Co., 8 NY2d 226, 230.) A decision of the Workmen’s Compensation Board is final on all questions within its jurisdiction, unless reversed or modified on appeal. (Workmen’s Compensation Law, § 23.) With respect to a board determination that a particular injury was or was not sustained in the course of employment, the judicial appellate function is limited. Where the employee was an outside employee, an employee without a fixed place of employment, the board is given an especially wide latitude. (E.g., Matter of Anadio v Ideal Leather Finishers, 32 AD2d 40, 42 [Cooke, J.], mot for Iv to app den 25 NY2d 737; Matter of Gruntler v Home Reader Serv., 19 AD2d 670, 671.) It is the rare case in which board findings are set aside as a matter of law, and even in those rare cases dissenting voices have been heard. (See Matter of Kaplan v Zodiac Watch Co., 20 NY2d 537, 539; Matter of Pasquel v Coverly, 4 NY2d 28; compare Birdsall v Peters, 46 AD2d 11, and Matter of Flynn v News-day, 28 AD2d 1053 [finding of course of employment sustained where newsboys injured in bicycle falls while en route to pick up the newspapers], with Matter of Taber v Abraham, 3 AD2d 776 [finding of course of employment reversed where newsboy went to Little League practice and was injured in a bicycle fall en route from practice to picking up his newspapers].)

In any event, an adjudication by the board that there was a relationship between accident and employment, unless reversed on a direct appeal, would preclude any recovery in a civil action against the employer. (Matter of Coe v House Inside, 29 NY2d 241, 244.) Moreover, the board has the discretion to process a claim for compensation and render a decision, even though the claimant objects and even though a civil action was pending in the courts. (29 NY2d, at p 245.) "It follows, therefore, that a factual determination by the court [in a civil action] with respect to whether the accident was within the scope of plaintiff’s employment would not be binding on the board * * * whereas the board’s determination with respect to this same factual question would be binding on the court provided that an opportunity is afforded to the employer to be heard (Piggot v. Field [13 AD2d 350] [Botein, J.]; Baker v. Matthews [8 AD2d 585]). The mere contention by defendant’s compensation carrier that the accident occurred outside the scope of plaintiff’s employment in no way prejudices plaintiff’s [civil] cause, for this is a matter that must in the first instance be determined by the board, not by the carrier. Nor does the contrary claim of defendant’s liability insurance carrier to the effect that the accident occurred within the scope of * * * employment prejudice the plaintiff, for in the event the board determines that it was in fact outside the scope of employment, an action against the * * * defendant would lie. In either event plaintiff is adequately protected.” (McMillan v Notre Dame Residence Club, 33 Misc 2d 948, 950-951 [Markowitz, J.], emphasis in original; see, generally, Ann., 84 ALR2d 1036.) Indeed, plaintiff would have six months following the dismissal of the compensation claim to commence a plenary tort action. (CPLR 205, subd [c].) However, where the availability of workmen’s compensation hinges upon the resolution of questions of fact or upon mixed questions of fact and law, the plaintiff may not choose the courts as the forum for the resolution of such questions. The Legislature has placed the responsibility for these determinations with the Workmen’s Compensation Board and there it must remain. Thus, it would be inappropriate for us to express our own views as to whether, as a matter of law, workmen’s compensation benefits are available to plaintiff. While the expression of an opinion might be necessary upon an appeal from a board decision in a disputed compensation proceeding, it appears unlikely that the need would arise in this case since the record indicates that the claim has been accepted by the newspaper’s compensation carrier.

Christopher O’Rourke then must be remitted to the remedies available through workmen’s compensation and the tort action against the Long Island Press was, thus, properly dismissed. His earlier rejection of the initial payment proffered by the defendant’s compensation carrier should not be regarded as a conclusive rejection of such benefits. Counsel was seeking to protect what he perceived to be the rights of his client. Of course, should the compensation claim for some reason be conclusively rejected, the plaintiff would, at that stage, possess a tort action against the publisher cognizable in a judicial forum.

One final matter deserves comment. The existence of a compensation insurance policy was made apparent in the course of extensive disclosure proceedings which involved no less than three separate court orders. None of this information was contained in the appendix filed by the appellants. The first motion to dismiss the complaint is reported not in the filed appendix but in an appendix to the appellants’ brief. The arguments advanced on the motion, as well as the arguments advanced on the two similar motions made during the trial, are not presented at all. This information was not presented at oral argument of this appeal either. As a result of the failure of counsel to report facts essential to a proper disposition, the members of the court have been "compelled to disregard [the appendix] and laboriously discover the facts for themselves by reading the entire record. This involves great labor, which * * * might be avoided by a careful observance of the” CPLR requirements. (Stevens v O’Neill, 169 NY 375, 376-377.) The CPLR requires that the appendix, which is prepared by the appellant, contain "only such parts of the record on appeal as are necessary to consider the questions involved, including those parts the appellant reasonably assumes will be relied upon by the respondent”. (CPLR 5528, subd [a], par 5.) Our own rules require that the appendix consist of relevant judicial or administrative opinions and decisions in the case, as well as "so much only of the testimony, affidavits, and written or photographic exhibits as may be useful to the determination of the questions raised on the appeal”. (Rules of Court of Appeals, 22 NYCRR 500.4, as amd eff Jan. 1, 1977.) We find that the appendix presented to us on this appeal was inadequate since the prior judicial determinations within the action and the arguments presented to the courts were not fully reported and the first summary judgment motion was discussed only in an off-hand manner. Moreover, evidence respecting the vital issue of compensation coverage was completely absent. We have had to search the full record of this case ourselves, thereby "multiplying the time necessary for the proper consideration and disposition of the appeal.” (Lo Gerfo v Lo Gerfo, 30 AD2d 156, 158.) Although the fault primarily lies with the appellants, the respondent too has been derelict since its counsel should have desired "to supply the court with all material necessary to convince it to adopt his client’s position.” (E. P. Reynolds, Inc. v Nager Elec. Co., 17 NY2d 51, 56.) Since counsels’ failure to supply an adequate appendix has caused a substantial and avoidable delay in the disposition of this case and in turn delayed the expeditious resolution of the many other appeals on our calendar, we believe it appropriate to withhold costs from both parties. (CPLR 5528, subd [e].) Accordingly, the order of the Appellate Division should be affirmed, without costs.

Fuchsberg, J. (dissenting).

At the trial of this case, the Trial Judge and counsel for all parties proceeded on the understanding that two of the main issues in dispute were whether the defendant newspaper was liable in negligence for violating the statute which forbids the delivery of newspapers to Christopher O’Rourke, an underage newsboy, and whether Christopher was injured while in the course of his work and therefore relegated to a claim in workmen’s compensation. The complaint was dismissed at the end of the plaintiffs’ case because the trial court was of the opinion, erroneously I believe, that the statutory violation was, as a matter of law, not the proximate cause of the accident; the issue of whether Christopher had been engaged in an employment covered by compensation was never reached. In my view, the proximate cause issue was a question of fact and so was whether Christopher was in the course of his employment. There should, therefore, be a reversal and the case should be remitted for a new trial.

Before Christopher may be found to be covered in compensation, it must appear (1) that there existed a compensation policy (see Kuhn v City of New York, 274 NY 118), (2) that he was an employee of the defendant (see Matter of Flo v General Elec. Co., 7 NY 96; Matter of Gordon v New York Life Ins. Co., 300 NY 652), and (3) that the accident arose "out of and in the course of the employment” (Workmen’s Compensation Law, § 10; see Moon v Finkle, 6 NY2d 831; D’Anofrio v Hatten, 25 Misc 2d 346; Roberts v Gagnon, 1 AD2d 297). Absent any one of these elements, Christopher’s tort claim is viable.

The majority and I are in agreement that the defendant had a compensation policy applicable to Christopher and that he was an "employee” of the defendant by reason of the provisions of the Workmen’s Compensation Law (§ 2, subds 3, 4, 5). That takes care of the first two items. But, the third, that he was "in the course of’ his employment when injured, was never established. Instead, it is an open question of fact to be decided by the jury as to whether Christopher’s brief detour for ice cream took him out of the course of his employment (Matter of Anadio v Ideal Leather Finishers; 32 AD2d 40, 42 [Cooke, J.], mot for Iv to app den 25 NY2d 737). Until it has been determined, it cannot be said that Christopher’s tort claim is precluded.

As I read its opinion, the majority here would hold that jurisdiction to determine whether Christopher’s accident arose "in the course of’ his employment is vested exclusively in the Workmen’s Compensation Board. Though academic here in the light of section 2 of the Workmen’s Compensation Law, the opinion goes so far as to say that even when the status of an injured person as an employee is a question of fact, rather than a statutory matter as here, that determination too must be made by the board and not the courts.

I cannot subscribe to the view that courts otherwise competent to adjudicate tort claims brought before them are ousted of their jurisdiction whenever a question of fact as to whether a plaintiff was in the course of his employment (or was an employee of the defendant) is raised on the pleadings. Indeed, I know of no case in which the courts have been required, as a matter of fundamental jurisdiction, to yield to the board as soon as such a question of fact appears to be involved. The sole instances in which courts have been required to defer to the jurisdiction of the board over such factual compensation issues are those in which a valid board determination of those issues had, by the time of trial on the tort claim, already been made (see Piggott v Field, 10 AD2d 99; Meaney v Keating, 200 Misc 308, affd 279 App Div 1030, affd 305 NY 660) or in which it appeared that the tort plaintiff had accepted compensation payments from the defendant’s carrier (Meaney v Keating, supra). These cases were decided on the theories of res judicata and election of remedies, respectively; it cannot be contended that either theory is applicable here.

In fact, the procedural issue here is very similar to that involved in Matter of Coe v House Inside (29 NY2d 241), where we noted that apparently the board itself usually feels

constrained, in order to avoid an unseemly race for priority of jurisdiction, to defer to the courts by holding compensation claims filed with it open pending the outcome of tort actions. We went on to approve that practice, remitting the plaintiff there, who had inexplicably been denied that deference by the board, to the Appellate Division for a determination as to whether she had thereby been treated arbitrarily and capriciously. Our holding in Coe makes clear that the mere existence in a tort action of factual questions turning on compensation law is not sufficient to deprive our courts of jurisdiction over the action and all the issues involved therein, even where the plaintif has, simultaneously with the commencement of his tort suit, filed a claim with the board as well. (See, also, Matter of Doca v Federal Stevedoring Co., 308 NY 44; Matter of Pierce v Kellert, 34 AD2d 612; cf. Baker v Matthews, 8 AD2d 585, 586.)

Finch v Swingly (42 AD2d 1035), Artonio v Hirsch (3 AD2d 939) and Gardner v Shepard Niles Crane & Hoist Corp. (268 App Div 561, affd 296 NY 539), relied on by the majority, are not to the contrary. In Finch and Artonio, plaintiffs, after alleging that "plaintiff was an employee of defendant * * * and 'engaged in and within the course of his employment’ ” (Finch v Swingly, supra [emphasis added]), attempted to characterize the acts of their employers as intentional rather than merely negligent. Since their complaints failed to set forth any facts supportive of an intentional tort, they were properly dismissed. The plaintiff in Gardner also alleged both that he was an employee and that he was injured in the course of his employment; he sought to circumvent compensation by claiming that the kind of injury he received (total disability due to dust inhalation) was not covered in compensation and was dismissed when it appeared to the court that the statute did encompass such an injury. None of these cases stands, therefore, for the proposition that the question of whether a plaintiff was "in the course of’ his employment may be disregarded in determining whether his tort action is valid; none is addressed to the jurisdiction of courts to decide that issue.

In short, while an injured worker’s remedy is indeed exclusively in compensation if in fact all three of the compensation criteria indicated above are met (see Workmen’s Compensation Law, § 11), that does not mean that his forum for the determination of factual issues raised by those criteria is necessarily predetermined.

I would, therefore, remit this case for a new trial so that a jury might determine, first, whether the infant plaintiff was "in the course of’ his employment when he was struck by the passing car. Of course, if the jury finds that he was, but only then, he must take his case to the board, for, as the majority indicates, his tort action would then be barred. If, however, the jury finds that he was not in the course of his employment when injured, that would not preclude the possibility that the newspaper publisher’s negligence could still be found to be the proximate cause of his injuries, for the test for proximate cause and that for "in the course of the employment” are not the same (see 2 Harper and James, Torts [2d ed], §§ 11.2, 13.2; Small, Effects of Workmen’s Compensation on Tort Concepts, 11 NACCA LJ 19).

Chief Judge Breitel and Judges Gabrielli, Jones, Wachtler and Cooke concur with Judge Jasen; Judge Fuchsberg dissents and votes to reverse in a separate opinion.

Order affirmed.

       Subdivision 5 of section 3228 of the Education Law prohibits minors under the age of 12 from engaging in the occupation of delivering or selling and delivering newspapers.


author: Fuchsberg, J. Jasen, J. (dissenting).

text:
    The People of the State of New York, Appellant, v Gary J. Henderson, Respondent.
    Argued November 24, 1976;
    decided December 28, 1976

      Patrick D. Monserrate, District Attorney (Patrick H. Mathews of counsel), Binghamton, for appellant.

      Louis J. Casella, Public Defender (Alan S. Phillips of counsel), Binghamton, for respondent.
   Fuchsberg, J.

Gary Henderson was tried and convicted by a jury on a single-count indictment charging him with the felony of attempted burglary in the third degree (Penal Law, §§ 110.00, 140.20). The sole issue on this appeal is whether the trial court committed error when it refused a defense request to charge the jury that it might consider the misdemeanor of criminal trespass in the third degree (Penal Law, § 140.10) as a lesser included offense to the crime charged. The Appellate Division, Third Department, held that it was, reversed the conviction and ordered a new trial. We agree.

The trial proof, insofar as pertinent to our purposes, was as follows: Jiri Nechleba, the owner of an automobile dealership and repair facility, testified that one night at 12:30 A.M., when the premises were closed for business, locked and appeared deserted, he was at work alone in a secluded rear office. Attracted by the sound of breaking glass coming from the garage area of the building, he observed the outline of a person punching a hole by hammering on the glass of a rear window through which it would be possible to reach to deactivate a magnetic bell burglar alarm system inside the building. Upon being discovered, the intruder fled on foot, but not before Nechleba was able to observe his general appearance. The immediate discovery in the agency parking area of a strange automobile, its motor still warm and the keys in its ignition, and which Nechleba recognized as one he had, some two months earlier, sold to a former employee, the defendant Gary Henderson, led to the latter’s subsequent apprehension and an indictment which specifically charged him with "attempting] to knowingly enter and remain unlawfully in a building * * * with the intent to commit the crime of larceny therein”.

Defendant, testifying in his own behalf, admitted that he was in the vicinity of the crime on the night in question, but denied being its perpetrator. He claimed that, while driving in the area that evening, he had experienced trouble with his car’s transmission and, because he had once been employed by the complainant and had bought the car there, he had decided to drive it into the agency lot where he could arrange to have it repaired in the morning, attributing to a careless habit his failure to remove the keys from the ignition and deposit them in an "early bird slot” of which he had knowledge.

On these facts, in deciding whether to grant the request that criminal trespass in the third degree also be charged, the Trial Judge was required to be guided by CPL 300.50 (subd 1). That provision authorizes a court to submit an offense inferior to that charged in an indictment for alternative consideration by a jury, provided two conditions prevail. One of these conditions is that the relationship of the alternative crimes to one another must be such that it is "impossible to commit a particular crime without concomitantly committing, by the same conduct, another offense of lesser grade or degree”, the statutory definition of a "lesser included offense” (CPL 1.20, subd 37). The second, summarily stated, is that there must exist a "reasonable view of the evidence” under which it could be found that a defendant committed the lesser included offense but did not commit the greater one (People v Johnson, 39 NY2d 364, 367; People v Shuman, 37 NY2d 302, 304; People v Mussenden, 308 NY 558).

Directing our attention to the first condition, we note that criminal trespass in the third degree qualifies as a "lesser included offense” of burglary in the third degree. Indeed, "[b]urglary, as defined in the Revised Penal Law, is, in essence, nothing more than a form of criminal trespass with two aggravating factors: (1) the premises invaded constitute a building, and (2) the intruder enters or remains with intent to commit a crime thereon” (Hechtman, Practice Commentaries, McKinney’s Cons Laws of NY, Book 39, Penal Law, § 140.20, p 35). It was therefore impossible here, either within the confines of the acts specified in the indictment or on the trial evidence offered to support it, for a burglary to have been committed without the commission of a trespass (cf. People v Hayes, 35 NY2d 907, affg on opn at App Div 43 AD2d 99).

In illustrative contrast, the Trial Judge in the present case correctly rejected a request that he also charge the crime of criminal mischief in the fourth degree. A person commits that crime "when, having no right to do so nor any reasonable ground to believe that he has such right, he: 1. Intentionally damages property of another person, or 2. Recklessly damages property of another person in an amount exceeding two hundred fifty dollars” (Penal Law, § 145.00). Neither intentional nor reckless destruction of property was a necessary element of the attempted burglary charged in the indictment against Henderson and, while he may have committed that crime, he simply was not accused of it in any shape, manner or form (cf. People v Johnson, 39 NY2d 364, 368-369, supra).

Turning now to the second condition, we conclude that criminal trespass here satisfies that criterion too. The test of whether a "lesser included offense” is to be submitted is certainly not that it is probable that the crime was actually committed or even that there is substantial evidence to support such a view. It suffices that it is supportable on a rational basis or, put another way, by logical necessity. To warrant a refusal to submit it "every possible hypothesis” but guilt of the higher crime must be excluded (People v Shuman, 37 NY2d 302, 304, supra; People v Malave, 21 NY2d 26), the evidence for that purpose being required to be considered in the light most favorable to the defendant (People v Battle, 22 NY2d 323) since the jury is free to accept or reject part or all of the defense or prosecution’s evidence (People v Asan, 22 NY2d 526; People v Valle, 15 NY2d 682, revg on dissent at App Div 21 AD2d 765).

The court’s appraisal of the persuasiveness of the evidence indicating guilt of the higher count is irrelevant; the question simply is whether on any reasonable view of the evidence it is possible for the trier of the facts to acquit the defendant on the higher count (People v Shuman, 37 NY2d 302, 304, supra; People v Mussenden, 308 NY 558, 562, supra) and still find him guilty on the lesser one. And it may not be amiss to observe that, at times, in their projection of laymen’s sensitivities to facts, "juries 'may, on almost any excuse, convict of a lower degree of crime although conviction of a higher degree is clearly warranted’ ” (People v Malave, supra, p 29, quoting People v Clemente, 285 App Div 258, 264, affd 309 NY 890).

So tested, it must be concluded that, while on the evidence here, though Henderson did not gain entrance to the building (hence the charge of attempted burglary) and fled when surprised by the owner, the jury nevertheless could have found an intent to commit a larceny based upon circumstantial evidence (see People v Terry, 43 AD2d 875), it could also have found that he lacked the requisite intent at the time he broke the window (cf. People v Strong, 37 NY2d 568, 571; People v Stanfield, 36 NY2d 467, 471). Or the jury could have decided that he never intended to commit a larceny, but rather was motivated by any one of a conceivable number of other purposes such as, for example, an intent to bed down in the premises, to obtain information, or to engage in an act of mischief not larcenous in nature—all purposes, incidently, only somewhat less rational than the one the People had asked the jury to infer from the circumstantial evidence in view of the fact that there was in this case no direct or certain proof of the defendant’s actual purpose.

Accordingly, the order of the Appellate Division should be affirmed.

Jasen, J. (dissenting).

I would reverse the order of the Appellate Division. I believe that there is no reasonable view of the evidence which would support the conclusion that the defendant attempted to break into the repair shop and yet did not intend to commit the crime of larceny. (CPL 300.50; 1.20, subd 37.) The People’s proof established that an intruder broke a window in the garage area of the premises. The sound of breaking glass attracted the attention of the proprietor. The proprietor went to the garage and hollered at the intruder who ran off into the darkness. The owner was, however, able to observe that the intruder had shoulder length hair and was wearing a long brown coat. The police were summoned and the defendant’s car was found in the parking lot, with the keys inside and with the engine still warm from use. At trial, defendant contended that he had not broken the window, but had merely left his car at the shop for repairs. This story was discredited by a patron of a nearby restaurant who testified that on the night in question defendant had given an inconsistent explanation of his conduct. The version was also disproved by police testimony that the defendant’s car, when driven away for purposes of impoundment, was in normal operating order.

The defendant, a former employee of the complainant, never admitted breaking the window. Instead, he attempted to offer a totally different version of events to support his contention that he was not the intruder. There was never any claim, contention or proof that he had an innocent or nonlarcenous purpose and intent for breaking into the shop. Thus, the majority’s thesis that the defendant might have been looking for a place to sleep, along with its other suggested theories, is not based upon any view of the evidence, but upon active imagination. If the jury discredited defendant’s testimony, which it did, it could only find that the breaking into the shop was for the purpose of stealing property from it. The window was broken in a manner designed to avoid the burglar alarm and in a place through which the window could be raised without triggering the alarm. The defendant gave several inconsistent versions of his conduct from which the jury could reasonably infer a consciousness of guilt. Defendant’s car was in the parking lot, with keys inside, ready for a quick getaway. The defendant fled at the sight of the shop owner, a fact which also tends to negative the possibility of innocent purpose. In short, the People presented overwhelming proof that the defendant broke into the store and did so with intent to steal property. Therefore, I dissent.

Chief Judge Breitel and Judges Gabrielli, Jones, Wachtler and Cooke concur with Judge Fuchsberg; Judge Jasen dissents and votes to reverse in a separate opinion.

Order affirmed.

       If the court is authorized to submit that offense to the jury, it must do so if either party requests it (CPL 300.50, subd 2).


author: Jasen, J.

text:
    Esther S. Schneider et al., Respondents, v Alma G. Phelps, Appellant.
    Argued October 21, 1976;
    decided January 13, 1977

      William Griff, White Plains, for appellant.

      Benjamin Rothstein, New York City, for respondents.
   Jasen, J.

The plaintiffs in this action seek to foreclose a second mortgage on defendant’s home given by the defendant Alma G. Phelps as security for her guarantee of a loan made by plaintiffs to her corporation, Mrs. Bradley G. Phelps, Inc. Defendant asserts that the transaction was usurious and the mortgage, therefore, unenforceable under section 5-501 of the General Obligations Law. Plaintiffs counter that the loan was made not to an individual but to a corporation, which by section 5-521 of the same statute is barred from interposing the defense of usury, and point out that the individual guarantor of a corporate obligation is also precluded from asserting that defense. (General Phoenix Corp. v Cabot, 300 NY 87, 95.)

The facts, as gleaned from the affidavits of the various parties, reveal that in 1971 defendant, a 75-year-old widow and licensed real estate broker whose business activities were very limited and whose sole income consisted of Social Security payments, approached Harold Schneider, the husband of one of the plaintiffs, for a loan. Schneider was agreeable, provided that a corporation were organized to serve as borrower. Consequently, Mrs. Bradley G. Phelps, Inc., was formed by an attorney representing Schneider and Admiral Development Corporation. The latter, an organization in which Schneider was a principal stockholder, then made a loan of $7,000 with interest at the annual rate of 18% nominally to the Phelps corporation. The defendant personally guaranteed the corporate loan and secured her guarantee by a second mortgage on her home. Additional loans of $3,000 and $2,000 were made by Admiral in January and May, 1972, also to the Phelps corporation. All of these loans, defendant claims, were necessitated by her own personal debts and the proceeds were applied exclusively to the discharge of such debts, as Schneider knew they would be. Schneider avers, however, that the loans were made on the strength of Mrs. Phelps’ assertion that she had a "number of deals pending”.

In September, 1972, defendant, again in need of funds, obtained a personal loan in the amount of $35,000 from the Fourth Federal Savings and Loan Association of New York— $17,000 of which was used to pay off a prior first mortgage on her home held by another financing institution, and $13,000 of which was used to pay off the obligations of the Phelps corporation to Admiral Development Corporation. The Fourth Federal loan was secured by a new first mortgage on defendant’s residence, title to which remained at all times in her individual name.

Two new loans totaling $4,000 were made in 1973 by one Bernard Wain, ostensibly to the Phelps corporation but guaranteed personally by defendant and used in part, according to her affidavit, to make payments on her debt to Fourth Federal.

The Wain loans did not alleviate defendant’s financial plight and in November, 1973 a loan of $8,000—the predicate for the present action—was made by plaintiffs, again in form to the Phelps corporation, at an annual interest rate of 18%. This corporate loan was personally guaranteed by defendant and was secured by a second mortgage on her home. The proceeds of the loan, according to defendant’s affidavit, were used for the payment of her personal needs and obligations, including the Wain loans. Although the papers indicate that Esther Schneider and Rose Wolf were the lenders, the defendant contends that the loan was in fact advanced by Harold Schneider.

When defendant defaulted on the first mortgage on her home, held by Fourth Federal, plaintiffs, to prevent foreclosure of that mortgage and to protect their second mortgage, made the overdue payments to the bank and, exercising their acceleration privilege under the mortgage held by them, demanded payment of the full amount of $8,068.74 by defendant. When defendant failed to pay, the present foreclosure action was instituted. In her answer, defendant pleaded three affirmative defenses, and, in an affidavit in opposition to plaintiffs’ motion for summary judgment, raised the defense of usury and requested leave to serve an amended answer alleging that defense.

The court granted plaintiffs’ motion for summary judgment and appointed a referee to compute the amount due and report on whether the property could be sold in parcels. The referee reported that the defendant owed $10,719.53, that the property was not divisible, and that sale of the whole premises "is necessary and will be most beneficial to the parties.” A subsequent motion by plaintiffs to vacate the judgment was denied. The judgment of foreclosure and the order denying the motion to vacate have been affirmed by the Appellate Division.

Whether summary judgment should have been granted depends on whether defendant had raised a triable issue of fact, the resolution of which in her favor would permit the defense of usury to be asserted. Defendant avers that Mrs. Bradley G. Phelps, Inc., was a paper corporation which never possessed any assets, bank accounts, or other indicia of corporate activity. The defendant also asserts that the proceeds of the loans were used to pay off her personal debts and obligations and were not used in furtherance of any enterprise, corporate or personal. In short, the claim is that plaintiffs’ loan was in fact made to her, though in form to the corporation. These assertions here, we believe, were sufficient to preclude the grant of summary judgment.

Our decisions have made it clear that in cases like the present one the availability of the defense of usury turns on the resolution of the ultimate question of fact—was the corporate form used to conceal a usurious loan to an individual guarantor? If it was, the defense is available, provided the loan was made to discharge personal debts and obligations of the individual. (Hoffman v Nashem Motors, 20 NY2d 513, 516; 418 Trading Corp. v Oconefsky, 14 NY2d 676; Jenkins v Moyse, 254 NY 319; cf. Leader v Dinkier Mgt. Corp., 20 NY2d 393.) As Judge Lehman wrote in Jenkins v Moyse (supra, at p 324), "[t]he test of whether [a] loan is usurious is whether it was in fact made to the [individual]. Doubtless at times loans are made in fact to an individual though in form they are made to a corportion to hide the fact that the lender has exacted an illegal rate of interest from the real borrower.”

If the loan was made to a corporation, the corporation, by statute, is prohibited from asserting the defense of usury. (General Obligations Law, § 5-521.) Likewise, an individual guarantor of a corporate obligation is also precluded from asserting such a defense. (General Phoenix Corp. v Cabot, 300 NY 87, 95, supra.) But where the loan was in fact, although not in form, made to an individual guarantor to discharge his personal obligations, and not in furtherance of a corporate or personal enterprise, the individual guarantor may interpose the defense of usury. (Buoninfante v Hoffman, 48 AD2d 678; Shapiro v Weissman, 7 AD2d 752.) On the other hand, where an individual borrows money through a shell corporation to further his own business or commercial enterprise, the defense of usury is not available. (Leader v Dinkier Mgt. Corp., 20 NY2d 393, supra.)

These rules developed as a result of the prohibition against the corporate use of the usury defense. It soon became apparent that, in making loans to individuals, the usury laws could be easily avoided by the simple expedient of establishing a corporation and making the loan directly to it instead of to the ultimate individual user of the proceeds. The sole purpose of such "dummy” corporations is to serve as a paper conduit for the transmission of funds from the lender to the true borrower. Typically, such corporations would have no corporate assets and would transact no other business. There generally is no practical reason for these corporations to have any other purpose. Their function is simply to receive funds and to pass them on to the ultimate user. Through this practice, the lenders could demand usurious rates of interest from desperate and unsophisticated borrowers cloaked with a corporate veil. If form were to control, the creation of a corporation would, for all practical purposes, result in a waiver of the right to assert the usury defense. The salutory commercial purpose of the corporation exemption would be a shield for the loan shark.

It should be stated, however, that there is no difficulty in sanctioning the use of a shell corporation to avoid the usury laws provided that the true borrower has a business purpose and the corporation itself is a financing device in furtherance of the profit-oriented enterprise. Indeed, many subsequently thriving commercial enterprises start out with a bare corporate cupboard. The basic foundation of our economy rests on the system of free enterprise, and persons seeking to obtain financing, frequently by resort to paper corporate intermediaries, for business enterprises should expect to pay the market rate for the investment capital that they require. On the other hand, lenders are entitled, if they can, without sham transactions, to obtain the highest rate of interest for their money, (Cf. Jenkins v Moyse, 254 NY 319, 323, supra.) So long as the borrower is aware of the potential risk and acts in the belief that the ultimate profit justifies the risk undertaken, the free market in money operates without friction and there is no need for legislative or judicial interference. If the venture falls through or if the profits do not reach anticipated levels, the businessman will not be relieved from the consequences of his bad bargain, just as the courts will not relieve a promisor from the obligations of an improvident contract.

The difficulty arises when a corporation is organized, not in furtherance of any corporate or personal enterprise, but to strip from an impoverished debtor the benefits of the usury laws. The purpose of usury laws, from time immemorial, has been to protect desperately poor people from the consequences of their own desperation. Law-making authorities in almost all civilizations have recognized that the crush of financial burdens causes people to agree to almost any conditions of the lender and to consent to even the most improvident loans. Lenders, with the money, have all the leverage; borrowers, in dire need of money, have none. In recognizing this problem, the courts have drawn a delicate balance by both enforcing legitimate business obligations and by protecting impoverished debtors from improvident transactions drawn by lenders and brought on by dire personal financial stress.

Turning to the case before us, it will be pertinent, at trial, to show the understanding of the parties with respect to the purpose of the loan and the uses to which the proceeds were to be put—whether to pay personal obligations of the individual or to finance a profit-motivated enterprise. In this connection, the purpose of each of the series of loans should be explored to ascertain whether any or all of the loans were intended to further a profit-making enterprise. On the other hand, it would be most relevant to discover whether the original loans were personal in nature for it may be that the subsequent and predicate loan arose out of an inability to pay the earlier personal loans.

It will also be material to establish the expected source of funds for repayment of the indebtedness; whether from anticipated profits or from the personal resources of the individual (which appear to be limited to defendant’s Social Security benefits). It should be obvious that the precise legal form of the loan will not be determinative of the ultimate question of fact—whether the loan was made to the individual for personal purposes or in furtherance of a profit-making corporate or personal enterprise.

Since the availability of the defense of usury will be dependent on the factual issues discussed above, the defendant should be permitted to serve an amended answer alleging that defense. A proper disposition of the case can be made only after opportunity has been afforded both parties at trial to develop proof relevant to the critical factual issue as to the identity of the real borrower. Summary judgment should have been denied in view of unresolved factual disputes central to the nature of the loan. (E.g., Pincus v W B. Assoc., 54 AD2d 755; Buoninfante v Hoffman, 48 AD2d 678, supra; North Broadway Funding Corp. v Freed, 45 AD2d 759; Shapiro v Weissman, 7 AD2d 752, supra.)

The order of the Appellate Division which affirmed the grant of summary judgment should be reversed, the motion for summary judgment denied, and the defendant granted leave to serve an amended answer within 20 days to include a defense of usury. The appeal from the order of the Appellate Division which affirmed the denial of the motion to vacate and renew should be dismissed on the ground that the order does not finally determine the action within the meaning of the Constitution and, in any event, involves an exercise of discretion of a type not reviewable by the Court of Appeals.

Chief Judge Breitel and Judges Gabrielli, Jones, Wachtler, Fuchsberg and Cooke concur.

Order which affirmed the grant of summary judgment reversed, with costs to abide the event, motion for summary judgment denied and defendant granted leave to serve, within 20 days, an amended answer to include a defense of usury. Appeal from the order which affirmed the denial of defendant's motion to vacate and renew dismissed, without costs.