author: Chief Judge Cooke. Meyer, J.

text:
    In the Matter of the Estate of Clark W. Wilson, Deceased. Key Bank et al., Respondents; State of New York et al., Appellants. In the Matter of the Estate of Edwin I. Johnson, Deceased. Robert Abrams, as Attorney-General of the State of New York, Respondent; Jonathan G. Blattmachr, Appellant.
    Argued June 2, 1983;
    decided July 12, 1983

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General (Lawrence S. Kahn, Peter H. Schiff and Deborah Bachrach of counsel), for ultimate charitable beneficiaries, appellant in the first above-entitled proceeding.
    I. The order of the court below modifying the Wilson Trust in order to effectuate its discriminatory terms was unconstitutional State action. (Shelley v Kraemer, 334 US 1; Commonwealth of Pennsylvania v Brown, 392 F2d 120, 391 US 921; Matter of Hoffman, 53 AD2d 55; Pennsylvania v Board of Trusts, 353 US 230; United States v Hughes Mem. Home, 396 US F Supp 544; Sweet Briar Inst. v Button, 280 F Supp 312; Guillory v Administrators of Tulane Univ. of La., 212 F Supp 674; Wachovia Bank & Trust Co. v Buchanan, 346 F Supp 665, 487 F2d 1214; Railway Employees’ Dept. v Hanson, 351 US 225; Gresham Park Community Organization v Howell, 652 F2d 1227.) II. In exercising its powers of cy pres, the court below erred by striking the trust’s certification requirement, rather than its gender restriction. (Matter of Scott, 8 NY2d 419; Sherman v Richmond Hose Co. No. 2, 230 NY 462; Matter of Potter, 307 NY 504; Evans v Abney, 396 US 435; Matter of Syracuse Univ. [Heffron], 3 NY2d 665; Matter of Syracuse Univ. [Hendricks], 1 Misc 2d 904; Matter of Hawley, 32 Misc 2d 624; Sweet Briar Inst. v Button, 280 F Supp 312; Matter of Edwards, 86 AD2d 702; Matter of United States Trust Co. of N. Y., 110 Misc 2d 1068.)

      Abigail A. Jones, Annette L. Nazareth, Lenore W. Tucker, Marsha Levick and Anne E. Simon for NOW Legal Defense and Education Fund, appellant in the first above-entitled proceeding.
    I. The court has jurisdiction to hear this appeal pursuant to CPLR 5601 (subd [b]) because a substantial constitutional question is presented. (Shelley v Kraemer, 334 US 1; Wein v Comptroller of State of N. Y., 46 NY2d 394; Matter of Tuscan Dairy Farms v Barber, 45 NY2d 215; People ex rel. Lobell v McDonnell, 296 NY 109; Valz v Sheepshead Bay Bungalow Corp., 249 NY 122; City of Albany v Yaras, 5 NY2d 859; Bogart v County of Westchester, 295 NY 934.) II. The lower court’s order enforcing the trust’s discriminatory provisions was State action under the United States and New York Constitutions. (Moose Lodge No. 107 v Irvis, 407 US 163; Barrows v Jackson, 346 US 249; Shelley v Kraemer, 334 US 1; Adickes v Kress & Co., 398 US 144; Griffin v Maryland, 378 US 130; United States v Hughes Mem. Home, 396 F Supp 544; Sweet Briar Inst. v Button, 280 F Supp 312; Guillory v Administrators of Tulane Univ. of La., 212 F Supp 674; Matter of Hoffman, 53 AD2d 55; Commonwealth of Pennsylvania v Brown, 392 F2d 120, 391 US 921.) III. The State’s selection of scholarship recipients on the basis of gender violates the equal protection clauses of the Federal and State Constitutions. (Craig v Boren, 429 US 190; People v Whidden, 51 NY2d 457; Bradwell v State, 16 Wall [83 US] 130; Stanton v

      Stanton, 421 US 7.) IV. The testator’s intent and public policy require deletion of the gender restriction pursuant to the court’s cy pres powers. (Evans v Abney, 396 US 435; Matter of Scott, 8 NY2d 419; Matter of Hawley, 32 Misc 2d 624; Commonwealth of Pennsylvania v Brown, 392 F2d 120, 391 US 921; Wachovia Bank & Trust Co. v Buchanan, 346 F Supp 665, 487 F2d 1214; Brooklyn Union Gas Co. v New York State Human Rights Appeal Bd., 41 NY2d 84; State Div. of Human Rights v Board of Educ., 46 AD2d 483; Matter of Stuart, 183 Misc 20; Matter of Hoffman, 53 AD2d 55.)

      Michael Seagriff and Thomas C. McCobb for Key Bank, respondent in the first above-entitled proceeding.
    I. The court does not have subject matter jurisdiction to hear this appeal pursuant to CPLR 5601 (subd [b], par 1). (Matter of Kaney v New York State Civ. Serv. Comm., 298 NY 570; Matter of Levy, 255 NY 223; Powers v Porcelain Insulator Corp., 285 NY 54; Matter of Davega-City Radio v State Labor Relations Bd., 281 NY 13; Shelley v Kraemer, 334 US 1; Burton v Wilmington Parking Auth., 365 US 715; Moose Lodge No. 107 v Irvis, 407 US 163; Reitman v Mulkey, 387 US 369; Evans v Abney, 396 US 435; Matter of MacDowell, 217 NY 454.) II. The lower court’s reformation of the trust did not constitute State action. (Sherman v Richmond Hose Co. No. 2, 230 NY 462; Matter of MacDowell, 217 NY 454; Shelley v Kraemer, 334 US 1; Burton v Wilmington Parking Auth., 365 US 715; Evans v Newton, 382 US 296; Jackson v Metropolitan Edison Co., 419 US 345; Adickes v Kress & Co., 398 US 144; Moose Lodge No. 107 v Irvis, 407 US 163; Reitman v Mulkey, 387 US 369; Lugar v Edmondson Oil Co., 457 US 922.) III. In exercising its cy pres powers, the court below was obligated to effectuate the clear and unambiguous intent of the testator, namely to provide scholarships to young men. (Matter of Neher, 279 NY 370; Matter of Hawley, 32 Misc 2d 624; Matter of MacDowell, 217 NY 454; Matter of Fabbri, 2 NY2d 236; Sherman v Richmond Hose Co. No. 2, 230 NY 462; Snyder v Snyder, 182 App Div 65; Matter of Schlussel [Central Hanover Bank & Trust Co.], 195 Misc 1008; Matter of Stuart, 183 Misc 20; Matter of Hoffman, 53 AD2d 55;
      Evans v Abney, 396 US 435; Matter of United States Trust Co. of N. Y., 110 Misc 2d 1068.)

      Biagio J. Di Stefano, as guardian ad litem for the unnamed male beneficiaries, respondent in the first above-entitled proceeding.
    I. Administration of the trust established under paragraph eleventh of Clark Wilson’s last will and testament is not illegal. (Moose Lodge No. 107 v Irvis, 407 US 163; Burton v Wilmington Parking Auth., 365 US 715; Adickes v Kress & Co., 398 US 144; Shelley v Kraemer, 334 US 1; Jackson v Statler Foundation, 496 F2d 623, 420 US 927; Evans v Newton, 382 US 296; Jackson v Metropolitan Edison Co., 419 US 345; Flagg Bros. v Brooks, 436 US 149; Marsh v Alabama, 326 US 501.) II. The lower court’s application of its cy pres powers was proper in that it effectuated the unambiguous intent of Clark Wilson. (Matter of Neher, 279 NY 370; Matter of Hawley, 32 Misc 2d 624; Butterworth v Keeler, 219 NY 446; Matter of Dillenback, 189 Misc 538, 273 App Div 1051; Matter of Koons, 206 Misc 856; Sherman v Richmond Hose Co. No. 2, 230 NY 462; Matter of MacDowell, 217 NY 454; Matter of Jones, 38 NY2d 189; Matter of Bump, 234 NY 60; Matter of Tuozzolo, 141 Misc 251.)

      Jonathan G. Blattmachr, in person, and Steven Richard Swanson for Jonathan G. Blattmachr, as guardian ad litem for unknown male trust beneficiaries, appellant in the second above-entitled proceeding.
    I. The court below erred in reforming the trust to deleting the gender restriction rather than allowing the appointment of a new trustee so that Mr. Johnson’s charitable purpose could be carried out. (Matter of Jones, 27 Misc 2d 569; City Bank Farmers Trust Co. v Arnold, 268 NY 297; Matter of Rupprecht, 271 App Div 376, 297 NY 462; Matter of Lawless, 194 Misc 844, 277 App Div 1045; Matter of Watson, 262 NY 284; Lutheran Hosp. of Manhattan v Goldstein, 182 Misc 913; Matter of Niven, 180 Misc 767; Matter of Michaels, 7 Misc 2d 439; Matter of Kelley, 225 App Div 29, 251 NY 529; Pennsylvania v Board of Trusts, 353 US 230.) II. The court below erred in finding that the Surrogate’s order violated the Constitution of the United States. (Holy Spirit Assn. for Unification of World Christianity v New York State Congress of Parents & Teachers, 95 Misc 2d 548; Civil Rights

      Cases, 109 US 3; Evans v Newton, 382 US 296; Shelley v Kraemer, 334 US 1; New York City Jaycees v United States Jaycees, 377 F Supp 481; Jackson v Statler Foundation, 496 F2d 623, 420 US 927; Matter of Wilson, 87 AD2d 98; Commonwealth of Pennsylvania v Brown, 270 F Supp 782, 392 F2d 120, 391 US 921; Lugar v Edmondson Oil Co., 457 US 922; Reitman v Mulkey, 387 US 369.)

      Robert Abrams, Attorney-General (Deborah Bachrach, Peter H. Schiff and Lawrence S. Kahn of counsel), for respondent in the second above-entitled proceeding.
    I. The Johnson Trust, as written, is impossible to effectuate. (Pennsylvania v Board of Trusts, 353 US 230; People v Whidden, 51 NY2d 457; Wengler v Druggists Mut. Ins. Co., 446 US 142; Orr v Orr, 440 US 268; Califano v Westcott, 443 US 76; Craig v Boren, 429 US 190; Kirchberg v Feenstra, 450 US 455; Stanton v Stanton, 421 US 7.) II. The order of the court below striking the gender restriction in the Johnson Trust should be affirmed. (Matter of Syracuse Univ. [Heffron], 3 NY2d 665; Matter of Syracuse Univ. [Hendricks], 1 Misc 2d 904, 3 AD2d 890, 4 NY2d 744; Matter of Shatford, 18 Misc 2d 953; Matter of Scott, 8 NY2d 419; Sherman v Richmond Hose Co. No. 2, 230 NY 462; Shelley v Kraemer, 334 US 1; Commonwealth of Pennsylvania v Brown, 392 F2d 120, 391 US 921; Matter of Hoffman, 53 AD2d 55; Pennsylvania v Board of Trusts, 353 US 230.)

      Wirth H. Koenig as guardian ad litem for unknown distributees in the second above-entitled proceeding.

      Abigail A. Jones, Annette L. Nazareth, Lenore W. Tucker, Marsha Levick and Anne E. Simon for New York State National Organization for Women and another, amici curiae in the second above-entitled proceeding.
    I. The court below was correct in holding that the Surrogate’s enforcement of the gender restriction in the Johnson scholarships was State action. (Shelley v Kraemer, 334 US 1; United States v Hughes Mem. Home, 396 F Supp 544; Guillory v Administrators of Tulane Univ. of La., 212 F Supp 674; Matter of Hoffman, 53 AD2d 55; Commonwealth of Pennsylvania v Brown, 392 F2d 120, 391 US 921; Sweet Briar Inst. v Button, 280 F Supp 312; New York Times Co. v Sullivan, 376 US 254; Railway Employees’ Dept. v Hanson, 351 US 225; Gresham Park Community Organization v

      Howell, 652 F2d 1227.) II. The State’s selection of scholarship recipients on the basis of gender violates the equal protection clauses of the Federal and State Constitutions. (Craig v Boren, 429 US 190; People v Whidden, 51 NY2d 457; Kirchberg v Feenstra, 450 US 455; Wengler v Druggists Mut. Ins. Co., 446 US 142; Califano v Wescott, 443 US 268; Califano v Goldfarb, 430 US 199; Weinberger v Wiesenfeld, 420 US 636; Frontiero v Richardson, 411 US 677.) III. The court below’s deletion of the gender restriction best furthers the testator’s general intent. (Evans v Abney, 316 US 435; Matter of Hawley, 32 Misc 2d 624; Matter of Stuart, 183 Misc 20; Bradwell v State, 16 Wall [83 US] 130; Stanton v Stanton, 421 US 7; Orr v Orr, 440 US 268; People v Whidden, 51 NY2d 457; Brooklyn Union Gas Co. v New York State Human Rights Appeal Bd., 41 NY2d 84; General Elec. Co. v Gilbert, 429 US 125; State Div of Human Rights v Board of Educ., 46 AD2d 483.)
   OPINION OF THE COURT

Chief Judge Cooke.

These appeals present the question whether the equal protection clause of the Fourteenth Amendment is violated when a court permits the administration of private charitable trusts according to the testators’ intent to finance the education of male students and not female students. When a court applies trust law that neither encourages, nor affirmatively promotes, nor compels private discrimination but allows parties to engage in private selection in the devise or bequest of their property, that choice will not be attributable to the State and subjected to the Fourteenth Amendment’s strictures.

_L

The factual patterns in each of these matters are different, but the underlying legal issues are the same. In each there is imposed a decedent’s intention to create a testamentary trust under which the class of beneficiaries are members of one sex.

In Matter of Wilson, article eleventh of Clark W. Wilson’s will provided that the residuary of his estate be held in trust (Wilson Trust) and that the income “be applied to defraying the education and other expenses of the first year at college of five (5) young men who shall have graduated from the Canastota High School, three (3) of whom shall have attained the highest grades in the study of science and two (2) of whom shall have attained the highest grades in the study of chemistry, as may be certified to by the then Superintendent of Schools for the Canastota Central School District.” Wilson died in June, 1969 and for the next 11 years the Wilson Trust was administered according to its terms.

In early 1981, the Civil Rights Office of the United States Department of Education received a complaint alleging that the superintendent’s acts in connection with the Wilson Trust violated title IX of the Education Amendments of 1972 (US Code, tit 20, § 1681 et seq.), which prohibits gender discrimination in Federally financed education programs. The Department of Education informed the Canastota Central School District that the complaint would be investigated. Before the investigation was completed, the school district agreed to refrain from again providing names of students to the trustee. The trustee, Key Bank of Central New York, initiated this proceeding for a determination of the effect and validity of the trust provision of the will.

The Surrogate’s Court held that the school superintendent’s co-operation with the trustee violated no Federal statute or regulation prohibiting sexual discrimination, nor did it implicate the equal protection clause of the Fourteenth Amendment. The court ordered the trustee to continue administering the trust.

A unanimous Appellate Division, Third Department, modified the Surrogate’s decree. The court affirmed the Surrogate’s finding that the testator intended the trust to benefit male students only and, noting that the school was under no legal obligation to provide the names of qualified male candidates, found “administration of the trust according to its literal terms is impossible.” (87 AD2d, p 101.) The court then exercised its cy pres power to reform the trust by striking the clause in the will providing for the school superintendent’s certification of the names of qualified candidates for the scholarships. The candidates were permitted to apply directly to the trustee.

Matter of Johnson also involves a call for judicial construction of a testamentary trust created for the exclusive benefit of male students. By a will dated December 13, 1975, Edwin Irving Johnson left his residuary estate in trust (Johnson Trust). Article sixth of the will provided that the income of the trust was to “be used and applied, each year to the extent available, for scholarships or grants for bright and deserving young men who have graduated from the High School of [the Croton-Harmon Union Free] School District, and whose parents are financially unable to send them to college, and who shall be selected by the Board of Education of such School District with the assistance of the Principal of such High School.”

Johnson died in 1978. In accordance with the terms of the trust, the board of education, acting as trustee, announced that applications from male students would be accepted on or before May 1,1979. Before any scholarships were awarded, however, the National Organization for Women, filed a complaint with the Civil Rights Office of the United States Department of Education. This complaint alleged that the school district’s involvement in the Johnson Trust constituted illegal gender-based discrimination.

During the pendency of the Department of Education’s investigation, a stipulation was entered into between the executrix of the will, the president of the board of education, and the Attorney-General. The parties sought “to avoid administering the educational bequest set forth in Article Sixth in a manner which is in conflict with the law and public policy prohibiting discrimination based on sex”. The stipulation provided that “all interested parties agree to the deletion of the word ‘men’ in Article Sixth of the Will and the insertion of the word ‘persons’ in its place.” The Attorney-General then brought this proceeding by petition to the Surrogate’s Court to construe article sixth of the will.

The Surrogate found that the trustee’s unwillingness to administer the trust according to its terms rendered administration of the trust impossible. The court, however, declined to reform the trust by giving effect to the stipulation. Rather, it reasoned that the testator’s primary intent to benefit “deserving young men” would be most closely effected by replacing the school district with a private trustee.

A divided Appellate Division, Second Department, reversed, holding that under the equal protection clause of the Fourteenth Amendment, a court cannot reform a trust that, by its own terms, would deny equal protection of law. The court reasoned that inasmuch as an agent of the State had been appointed trustee, the trust, if administered, would violate the equal protection clause. Judicial reformation of the trust by substituting trustees would, in that court’s view, itself constitute State action in violation of the Fourteenth Amendment. The court determined that administration of the trust was impossible and, in an exercise of its cy pres power, reformed the trust by eliminating the gender restriction.

JL

On these appeals, this court is called upon to consider the testators’ intent in establishing these trusts, evaluate the public policy implications of gender restrictive trusts generally, and determine whether the judicial reformation of these trusts violates the equal protection clause of the Fourteenth Amendment.

There can be no question that these trusts, established for the promotion of education, are for a charitable purpose within the meaning of the law (see EPTL 8-1.1; see, also, Russell v Allen, 107 US 163, 172; Butterworth v Keeler, 219 NY 446; see, generally, Bogert, Trusts and Trustees [rev 2d ed], § 375; 4 Scott, Trusts [3d ed], § 370). Charitable trusts are encouraged and favored by the law (see Bogert, op. cit., § 361), and may serve any of a variety of benevolent purposes (see EPTL 8-1.1). Among the advantages the law extends to charitable trusts are their exemption from the rules against perpetuities (see EPTL 9-1.1; Matter of MacDowell, 217 NY 454) and accumulations (EPTL 8-1.7) and their favorable tax treatment (see Bogert, Trusts and Trustees [rev 2d ed], § 264.25; 9B Rohan, NY Civ Prac, pars 8-1.7[3] — 8-1.7[6]). Moreover, unlike other trusts, a charitable trust will not necessarily fail when the settlor’s specific charitable purpose or direction can no longer be accomplished.

When a court determines that changed circumstances have rendered the administration of a charitable trust according to its literal terms either “impracticable or impossible”, the court may exercise its cy pres power to reform the trust in a matter that “will most effectively accomplish its general purposes” (EPTL 8-1.1, subd [c]). In reforming trusts pursuant to this power, care must be taken to evaluate the precise purpose or direction of the testator, so that when the court directs the trust towards another charitable end, it will “give effect insofar as practicable to the full design of the testator as manifested by his will and codicil” (Matter of Scott, 8 NY2d 419, 427; see Bogert, Trusts and Trustees [rev 2d ed], § 442).

The court, of course, cannot invoke its cy pres power without first determining that the testator’s specific charitable purpose is no longer capable of being performed by the trust (see, e.g., Matter of Scott, supra; Matter of Swan, 237 App Div 454, affd sub nom. Matter of St. Johns Church of Mt. Morris, 263 NY 638; Matter of Fairchild, 15 Misc 2d 272). In establishing these trusts, the testators expressly and unequivocally intended that they provide for the educational expenses of male students. It cannot be said that the accomplishment of the testators’ specific expression of charitable intent is “impossible or impracticable.” So long as the subject high schools graduate boys with the requisite qualifications, the testators’ specific charitable intent can be fulfilled.

Nor are the trusts’ particular limitation of beneficiaries by gender invalid and incapable of being accomplished as violative of public policy. It is true that the eradication in this State of gender-based discrimination is an important public policy. Indeed, the Legislature has barred gender-based discrimination in education (see Education Law, § 3201-a), employment (see Labor Law, §§ 194, 197, 220-e; General Business Law, § 187), housing, credit, and many other areas (see Executive Law, § 296). As a result, women, once viewed as able to assume only restricted roles in our society (see Bradwell v State, 16 Wall [83 US] 130, 141), now project significant numbers “in business, in the professions, in government and, indeed, in all walks of life where education is a desirable, if not-always a necessary, antecedent” (Stanton v Stanton, 421 US 7, 15). The restrictions in these trusts run contrary to this policy favoring equal opportunity and treatment of men and women. A provision in a charitable trust, however, that is central to the testator’s or settlor’s charitable purpose, and is not illegal, should not be invalidated on public policy grounds unless that provision, if given effect, would substantially mitigate the general charitable effect of the gift (see 4 Scott, Trusts [3d ed], § 399.4).

Proscribing the enforcement of gender restrictions in private charitable trusts would operate with equal force towards trusts whose benefits are bestowed exclusively on women. “Reduction of the disparity in economic condition between men and women caused by the long history of discrimination against women has been recognized as * * * an important governmental objective” (Califano v Webster, 430 US 313, 317). There can be little doubt that important efforts in effecting this type of social change can be and are performed through private philanthropy (see, generally, Commission on Private Philanthropy and Public Needs, Giving in America: Toward a Stronger Voluntary Section [1975]). And, the private funding of programs for the advancement of women is substantial and growing (see Bernstein, Funding for Women’s Higher Education: Looking Backward and Ahead, Grant Magazine, vol 4, No. 4, pp 225-229; Ford Foundation, Financial Support of Women’s Programs in the 1970’s [1979]; Yarrow, Feminist Philanthropy Comes Into Its Own, NY Times, May 21, 1983, p 7, col 2). Indeed, one compilation of financial assistance offered primarily or exclusively to women lists 854 sources of funding (see Schlacter, Directory of Financial Aids for Women [2d ed, 1981]; see, also, Note, Sex Restricted Scholarships and the Charitable Trust, 59 Iowa L Rev 1000, 1000-1001, & nn 10, 11). Current thinking in private philanthropic institutions advocates that funding offered by such institutions and the opportunities within the institutions themselves be directly responsive to the needs of particular groups (see Ford Foundation, op cit., at pp 41-44; Fleming, Foundations and Affirmative Action, 4 Foundation News No. 4, at pp 14-17; Griffen, Funding for Women’s Programs, 6 Grantsmanship Center News, No. 2, at pp 34-45). It is evident, therefore, that the focusing of private philanthropy on certain classes within society may be consistent with public policy. Consequently, that the restrictions in the trusts before this court may run contrary to public efforts promoting equality of opportunity for women does not justify imposing a per se rule that gender restrictions in private charitable trusts violate public policy.

Finally, this is not an instance in which the restriction of the trusts serves to frustrate a paramount charitable purpose. In Howard Sav. Inst. v Peep (34 NJ 494), for example, the testator made a charitable bequest to Amherst College to be placed in trust and to provide scholarships for “deserving American born, Protestant, Gentile boys of good moral repute, not given to gambling, smoking, drinking or similar acts.” Due to the religious restrictions, the college declined to accept the bequest as contrary to its charter. The court found that the college was the principal beneficiary of the trust, so that removing the religious restriction and thereby allowing the college to accept the gift would permit administration of the trust in a manner most closely effectuating the testator’s intent (see, also, Matter of Hawley, 32 Misc 2d 624; Coffee v Rice Univ., 408 SW2d 269 [Tex]).

In contrast, the trusts subject to these appeals were not intended to directly benefit the school districts. Although the testators sought the school districts’ participation, this was incidental to their primary intent of financing part of the college education of boys who attended the schools. Consequently, severance of the school districts’ role in the trusts’ administration will not frustrate any part of the testators’ charitable purposes. Inasmuch as the specific charitable intent of the testators is not inherently “impossible or impracticable” of being achieved by the trusts, there is no occasion to exercise cy pres power.

Although not inherently so, these trusts are currently incapable of being administered as originally intended because of the school districts’ unwillingness to co-operate. These impediments, however, may be remedied by an exercise of a court’s general equitable power over all trusts to permit a deviation from the administrative terms of a trust and to appoint a successor trustee.

A testamentary trust will not fail for want of a trustee (see EPTL 8-1.1; see, also, Matter of Thomas, 254 NY 292) and, in the event a trustee is unwilling or unable to act, a court may replace the trustee with another (see EPTL 7-2.6; SCPA 1502; see, also, Matter of Andrews, 233 App Div 547; 2 Scott, Trusts [3d ed], § 108.1). Accordingly, the proper means of continuing the Johnson Trust would be to replace the school district with someone able and willing to administer the trust according to its terms.

When an impasse is reached in the administration of a trust due to an incidental requirement of its terms, a court may effect, or permit the trustee to effect, a deviation from the trust’s literal terms (see 9A Rohan, NY Civ Prac, pars 7-2.4[3] — 7-2.4[4]). This power differs from a court’s cy pres power in that “[tihrough exercise of its deviation power the court alters or amends administrative provisions in the trust instrument but does not alter the purpose of the charitable trust, or change its dispositive provisions” (Bogert, Trusts and Trustees [rev 2d ed], § 394, p 249; see, e.g., Trustees of Sailors’ Snug Harbor v Carmody, 211 NY 286; Matter of Bruen, 83 NYS2d 197; Matter of Godfrey, 36 NYS2d 414, affd no opn 264 App Div 885). The Wilson Trust provision that the school district certify a list of students is an incidental part of the trust’s administrative requirements, which no longer can be satisfied in light of the district’s refusal to co-operate. The same result intended by the testator may be accomplished by permitting the students to apply directly to the trustee. Therefore, a deviation from the Wilson Trust’s administrative terms by eliminating the certification requirement would be the appropriate method of continuing that trust’s administration.

Ill

It is argued before this court that the judicial facilitation of the continued administration of gender-restrictive charitable trusts violates the equal protection clause of the Fourteenth Amendment (see US Const, 14th Amdt, § 1). The strictures of the equal protection clause are invoked when the State engages in invidious discrimination (see Moose Lodge No. 107 v Irvis, 407 US 163, 173, 176-177; Burton v Wilmington Parking Auth., 365 US 715, 721; Civil Rights Cases, 109 US 3). Indeed, the State itself cannot, consistent with the Fourteenth Amendment, award scholarships that are gender restrictive (see Mississippi Univ. for Women v Hogan, 458 US 718; Kirchberg v Feenstra, 450 US 455; Stanton v Stanton, 421 US 7, supra).

The Fourteenth Amendment, however, “erects no shield against merely private conduct, however discriminatory or wrongful.” (Shelley v Kraemer, 334 US 1, 13; see Blum v Yaretski, 457 US 991, 1002; Jackson v Metropolitan Edison Co., 419 US 345, 349; Moose Lodge No. 107 v Irvis, 407 US 163, 171-179, supra; Evans v Abney, 396 US 435, 445). Private discrimination may violate equal protection of the law when accompanied by State participation in, facilitation of, and, in some cases, acquiescence in the discrimination (see, e.g., Burton v Wilmington Parking Auth., 365 US 715, supra; Reitman v Mulkey, 387 US 369; Shelley v Kraemer, 334 US 1, supra). Although there is no conclusive test to determine when State involvement in private discrimination will violate the Fourteenth Amendment (see Reitman v Mulkey, supra, at p 378), the general standard that has evolved is whether “the conduct allegedly causing the deprivation of a federal right [is] fairly attributable to the state” (Lugar v Edmondson Oil Co., 457 US 922, 937). Therefore, it is a question of “state responsibility” and “[o]nly by sifting facts and weighing circumstances can the * * * involvement of the State in private conduct be attributed its true significance” (Burton v Wilmington Parking Auth., 365 US 715, 722, supra).

The Supreme Court has identified various situations in which the State may be deemed responsible for discriminatory conduct with private origins. For example, one such instance appears when the State delegates one of its inherent functions to private parties and those parties engage in discrimination (see Lloyd Corp. v Tanner, 407 US 551; Food Employees v Logan Plaza, 391 US 308; Evans v Newton, 382 US 296; Terry v Adams, 345 US 461; Marsh v Alabama, 326 US 501). Another arises when the State does not directly enforce or abet the private discrimination, but substantially facilitates and profits from it (Burton v Wilmington Parking Auth., 365 US 715, supra).

“The Court has never held, of course, that discrimination by an otherwise private entity would be violative of the Equal Protection Clause if the private entity receives any sort of benefit or service at all from the State, or if it is subject to State regulation in any degree whatever” (Moose Lodge No. 107 v Irvis, 407 US 163, 173, supra). Rather, “the State must have ‘significantly involved itself with invidious discriminations’ * * * in order for the discriminatory action to fall within the ambit of the constitutional prohibition” (id.; see, also, Rendell-Baker v Kohn, 457 US 830; Gilmore v City of Montgomery, 417 US 556).

The State generally may not be held responsible for private discrimination solely on the basis that it permits the discrimination to occur (see Flagg Bros. v Brooks, 436 US 149, 164; Jackson v Metropolitan Edison Co., 419 US 345, 357, supra; Moose Lodge No. 107 v Irvis, 407 US 163, 176, supra; Evans v Abney, 396 US 435, supra). Nor is the State under an affirmative obligation to prevent purely private discrimination (see Reitman v Mulkey, 387 US 369, 376, 377, supra). Therefore, when the State regulates private dealings it may be responsible for private discrimination occurring in the regulated field only when enforcement of its regulation has the effect of compelling the private discrimination (see Flagg Bros. v Brooks, supra; Moose Lodge No. 107 v Irvis, supra; Shelley v Kraemer, 334 US 1, supra; cf. Adickes v Kress & Co., 398 US 144, 170).

In Shelley v Kraemer (supra), for example, the Supreme Court held that the equal protection clause was violated by judicial enforcement of a private covenant that prohibited the sale of affected properties to “people of Negro or Mongolian Race.” When one of the properties was sold to a black family, the other property owners sought to enforce the covenant in State court and the family was ordered to move from the property. The Supreme Court noted “that the restrictive agreements standing alone cannot be regarded as violative of any rights guaranteed to petitioners by the Fourteenth Amendment. So long as the purposes of those agreements are effectuated by voluntary adherence to their terms, it would appear clear that there has been no action by the State and the provisions of the Amendment have not been violated” (334 US, at p 13). The court held, however, that it did have before it cases “in which the States have merely abstained from action leaving private individuals free to impose such discriminations as they see fit. Rather, these are cases in which the States have made available to such individuals the full coercive power of the government to deny petitioners, on the grounds of race or color, the enjoyment of property rights” (id., at p 19). It was not the neutral regulation of contracts permitting parties to enter discriminatory agreements that caused the discrimination to be attributable to the State. Instead, it was that the State court’s exercise of its judicial power directly effected a discriminatory act.

In Barrows v Jackson, (346 US 249, supra), the court applied the same reasoning when it held that a court’s awarding damages against a party who has breached a racially restrictive covenant also violates the equal protection clause. The court reiterated that “voluntary adherence [to the covenant] would constitute individual action only” (id., at p 253). But, “[t]o compel respondent to respond in damages would be for the State to punish her for failure to perform her covenant to continue to discriminate against non-Caucasians in the use of her property * * * Thus, it becomes not respondent’s voluntary choice but the State’s choice that she observe her covenant or suffer damages” (id., at p 254).

More recently, the Supreme Court considered whether a State’s regulation of private clubs licensed to serve liquor caused a club’s restrictive membership policy to be attributable to the State (see Moose Lodge No. 107 v Irvis, 407 US 163, supra). The court held that although the State extensively regulated these private clubs, it was not responsible for the private discrimination simply because the regulation permitted the discrimination to occur. The court stated that “[hjowever detailed this type of regulation may be in some particulars, it cannot be said to in any way foster or encourage * * * discrimination” (407 US, at pp 176-177). The court distinguished the regulatory scheme’s general neutral effect on the discrimination from a situation in which that scheme could be used to compel discrimination. One of the regulations provided that “ ‘[e]very club licensee shall adhere to all of the provisions of its Constitution and By-Laws’ ” (id., at p 177). The court acknowledged that if this regulation were used (at p 178) “to place state sanctions behind [the licensee’s] discriminatory membership rules,” the Fourteenth Amendment would be implicated. Accordingly, the court enjoined enforcement of the regulation.

A court’s application of its equitable power to permit the continued administration of the trusts involved in these appeals falls outside the ambit of the Fourteenth Amendment. Although the field of trusts is regulated by the State, the Legislature’s failure to forbid private discriminatory trusts does not cause such trusts, when they arise, to be attributable to the State (see Flagg Bros. v Brooks, 436 US 149, 165, supra; see, also, Evans v Abney, 396 US 435, 458 [Brennan, J., dissenting], supra). It naturally follows that, when a court applies this trust law and determines that it permits the continued existence of private discriminatory trusts, the Fourteenth Amendment is not implicated.

In the present appeals, the coercive power of the State has never been enlisted to enforce private discrimination. Upon finding that requisite formalities of creating a trust had been met, the courts below determined the testator’s intent, and applied the relevant law permitting those intentions to be privately carried out. The court’s power compelled no discrimination. That discrimination had been sealed in the private execution of the wills. Recourse to the courts was had here only for the purpose of facilitating the administration of the trusts, not for enforcement of their discriminatory dispositive provisions.

This is not to say that a court’s exercise of its power over trusts can never invoke the scrutiny of the Fourteenth Amendment. This court holds only that a trust’s discriminatory terms are not fairly attributable to the State when a court applies trust principles that permit private discrimination but do not encourage, affirmatively promote, or compel it.

The testators’ intention to involve the State in the administration of these trusts does not alter this result, notwithstanding that the effect of the courts’ action respecting the trusts was to eliminate this involvement. The courts’ power to replace a trustee who is unwilling to act as in Johnson or to permit a deviation from an incidental administrative term in the trust as in Wilson is a part of the law permitting this private conduct and extends to all trusts regardless of their purposes. It compels no discrimination. Moreover, the minimal State participation in the trusts’ administration prior to the time that they reached the courts for the constructions under review did not cause the trusts to take on an indelible public character (see Evans v Newton, 382 US 296, 301; Commonwealth of Pennsylvania v Brown, 392 F2d 120).

In sum, the Fourteenth Amendment does not require the State to exercise the full extent of its power to eradicate private discrimination. It is only when the State itself discriminates, compels another to discriminate, or allows another to assume one of its functions and discriminate that such discrimination will implicate the amendment.

Accordingly, in Matter of Wilson, the order of the Appellate Division should be affirmed, with costs payable out of the estate to all parties appearing separately and filing separate briefs.

In Matter of Johnson, the order of the Appellate Division should be reversed, with costs payable out of the estate to all parties appearing separately and filing separate briefs and the decree of the Surrogate’s Court, Westchester County, reinstated.

Meyer, J.

(concurring in Matter of Wilson and dissenting in Matter of Johnson). I would affirm in both cases. Although the Constitution does not proscribe private bias, it does proscribe affirmative State action in furtherance of bias.

In Matter of Wilson the trust is private and the only involvement of a public official (the superintendent of schools) is his certification of a student’s class standing, information which is, in any event, available to any student applying to the trustee for a scholarship. There is, therefore, no State action.

In Matter of Johnson, however, the trustee is the board of education, a public body. The establishment of a public trust for a discriminatory purpose is constitutionally improper, as Presiding Justice Mollen has fully spelled out in his opinion. For the State to legitimize that impropriety by replacement of the trustee is unconstitutional State action. The only permissible corrective court action is, as the Appellate Division held, excision of the discriminatory limitation.

In Matter of Wilson:

Judges Jasen, Jones, Wachtler, Meyer and Simons concur with Chief Judge Cooke; Judge Meyer concurs in a memorandum.

Order affirmed, etc.

In Matter of Johnson:

Judges Jasen, Jones, Wachtler and Simons concur with Chief Judge Cooke; Judge Meyer dissents and votes to affirm in a memorandum.

Order reversed, etc.


source: Caselaw Access Project

author: Jasen, J.

license: Public Domain

text:
    Reinah Development Corp., Respondent, v Kaaterskill Hotel Corp. et al., Appellants.
    Argued June 2, 1983;
    decided July 12, 1983

      POINTS OF COUNSEL

      Michael R. Gottlieb for appellants.
    I. Since there was no proof of damages, the trial motions to dismiss the complaint should have been granted. (Dress Shirt Sales v Hotel Martinique Assoc., 12 NY2d 339; Hanlon v Macfadden Pub., 302 NY 502; Urtz v New York Cent. & Hudson Riv. R. R. Co., 202 NY 170; Ochs v Woods, 221 NY 335; Sager v Friedman, 270 NY 472; Arthur v Griswold, 55 NY 400; Reno v Bull, 226 NY 546; Terris v Cummiskey, 11 AD2d 259; Goldman v Garofalo, 59 AD2d 933.) II. The standards for allowing punitive damages in a fraud case were incorrectly stated and erroneously applied by the court below. (Walker v Sheldon, 10 NY2d 401; Borkowski v Borkowski, 39 NY2d 982; J. G. S., Inc. v Lifetime Cutlery Corp., 87 AD2d 810; James v Powell, 19 NY2d 249; Prince v Gurvitz, 57 AD2d 860, 45 NY2d 901; Greiss v Royal Nat. Bank, 31 NY2d 1003; Vinlis Constr. Co. v Roreck, 27 NY2d 687.) III. The court below based its reversal on facts not in this case. (Walker v Sheldon, 10 NY2d 401; Prince v Gurvitz, 57 AD2d 860, 45 NY2d 901.) IV. The award of punitive damages was grossly excessive and contrary to law. (Faulk v Aware, Inc., 19 AD2d 464, 14 NY2d 899; Walker v Sheldon, 10 NY2d 401; Nardelli v Stamberg, 44 NY2d 500; Toomey v Farley, 2 NY2d 71; Reynolds v Pegler, 123 F Supp 36, 223 F2d 429; J. G. S., Inc. v Lifetime Cutlery Corp., 87 AD2d 810.)

      David Halperin and Evelyn F. Cohn for respondent.
    I. Appellants’ abandonment of their cross appeal precluded them from raising new issues before the court below and precludes them from resurrecting said appeal now. II. The propriety of the court below’s reinstatement of the jury verdict is beyond the scope of review of the Court of Appeals. (Gutin v Mascali & Sons, 11 NY2d 97; Rochester Tel. Corp. v Green Is. Constr. Corp., 51 NY2d 788; Goehle v Town of Smithtown, 55 NY2d 995; Holland v Blake, 31 NY2d 734; Borgia v City of New York, 12 NY2d 151.) III. Appellants’ first five proposed questions are not reviewable by this court and must be disregarded. (Ryan v State of New York, 39 AD2d 830, 831; Plaza Hotel Assoc. v Wellington Assoc., 37 NY2d 273; Shapiro v State of New York, 61 AD2d 852; Reynolds v Pegler, 123 F Supp 36, 223 F2d 429, 350 US 846; Kent v City of Buffalo, 61 Misc 2d 142, 36 AD2d 85, 29 NY2d 818; Nitti v Credit Bur. of Rochester, 84 Misc 2d 277; Nardelli v Stamberg, 44 NY2d 500; Robert v Ford Motor Co., 100 Misc 2d 646, 73 AD2d 1025; Clark v Variety, Inc., 189 App Div 462; Spitz v Lesser, 302 NY 490.) IV. The jury and the court below properly concluded that appellants’ actions were morally reprehensible and in wanton disregard of respondent’s rights and supported the award of punitive damages. V. The award of punitive damages by the jury was not excessive as a matter of law. (Reynolds v Pegler, 123 F Supp 36; Robert v Ford Motor Co., 100 Misc 2d 646; Chase Manhattan Bank v Perla, 65 AD2d 207; Toomey v Farley, 2 NY2d 71; Nardelli v Stamberg, 44 NY2d 500.)
   OPINION OF THE COURT

Jasen, J.

This appeal requires us to determine whether the evidence presented in this fraud action was sufficient to justify an award of punitive or exemplary damages.

The underlying transaction involved in this action related to the sale of real property, including a hotel, located in Liberty, New York. The purchaser of the property, plaintiff Reinah Development Corp. (Reinah), intended to develop it into condominium units. When plaintiff experienced difficulty arranging financing, defendant Kaaterskill Hotel Corp. (Kaaterskill), the holder of a purchase-money second mortgage, loaned plaintiff additional funds to enable it to pay back real estate taxes. As security for that loan and to insure that payments would be made on the first mortgage, not held by Kaaterskill, plaintiff delivered to Kaaterskill a deed to the property which was to be held in escrow until August 15, 1970. It was agreed in writing that in the event the plaintiff failed to repay the loan by the specified date or to pay the interest and amortization due on the first mortgage on or before August 20, 1970, defendant Kaaterskill was authorized to record the deed. Plaintiff defaulted in repayment to Kaaterskill of the loan and in payment of the amortization and interest due on the first mortgage. However, Kaaterskill extended the time to meet these obligations. The new deadline fixed is a point of contention between the parties. Defendants, believing September 15 to be the last date for plaintiff to make the necessary payments, demanded payment, and when none was received recorded the deed on September 22, which deed bore the caption, “This Deed is Given in Lieu of Foreclosure”. Plaintiff asserted that the extended date to repay the loan was September 30 and that defendant Kaaterskill had no right to record the deed when it did. '

The recorded deed, however, was insufficient to pass marketable title, as it did not have the required consents of the stockholders and the board of directors of plaintiff corporation. (Business Corporation Law, § 909.) Therefore, plaintiff asserts, defendants Kaaterskill and Alan Port-nick, as president and principal of Kaaterskill, induced plaintiff to forbear from suing Kaaterskill for the breach of their agreement, and defendants in turn agreed that, upon a sale of the property to a third party, plaintiff would be reimbursed, out of the proceeds of the sale, for the actual cash investment made by it in its original purchase of the property. Plaintiff delivered the necessary certificate certifying that the shareholders and directors of the corporation had approved the delivery of the deed to defendant Kaaterskill.

Subsequently, defendant Kaaterskill completed the sale of the hotel to a third party. When plaintiff demanded payment in the amount of his investment, defendants refused and an action for compensatory and punitive damages was commenced. Two of the eight causes of actions alleged, all sounding in fraud, were charged to the jury; the remaining six were dismissed.

The jury was instructed that “under the law and under the June 10th and 15th agreements [related to the loan from defendant] the plaintiff was obligated and required to provide the stockholder consent once the defendant recorded the deed on September 22nd”. There was no objection to this portion of the charge, nor to the court’s later instruction that punitive damages could only be allowed if they determined that the conduct of the defendant’s president constituted fraud and was malicious and reckless in its nature. Accordingly, the court’s charge on these issues is the law governing this case. (Bichler v Lilly & Co., 55 NY2d 571, 581, 584.)

The jury returned a verdict awarding plaintiff nominal compensatory damages and $225,000 in punitive damages, apparently having determined that defendant’s president, Alan Portnick, had acted fraudulently in this transaction. Defendants moved to set aside the verdict as to both compensatory and punitive damages. The motion was denied as to compensatory damages, but was granted as to punitive damages. In deciding the motion, the Trial Judge stated that the evidence was insufficient for the jury to conclude, as the charge required them to, that Portnick’s behavior was “malicious, vindictive or morally reprehensible [demonstrating the] intent of wanton and reckless behavior.” The Appellate Division unanimously reversed, on the law, the facts and in the exercise of discretion, and reinstated the jury verdict. For the reasons which follow, we conclude that the result reached by the trial court should be upheld.

We hold that the jury, as charged, could not have found that Portnick’s conduct, even if fraudulent was malicious and vindictive to justify awarding punitive damages or that his conduct was wanton and reckless.

No fraudulent or morally culpable conduct could have been found to exist on the basis of the court’s, instruction to the jury, without exception, that the giving of the stockholders’ consent certificate to the defendant “is not a factor to be considered by you as to whether or not the plaintiff justifiably relied on [defendants’] promise of money because under the law and under the June 10th and 15th agreements, the plaintiff was obligated and required to provide the stockholder consent once the defendant recorded the deed on September 22nd” and that plaintiff may “not now justifiably claim that he was induced to give the stockholder consent to the defendant in reliance on defendant’s promise for money.” The court went on to charge that “the testimony with respect to the stockholders’ consent, although not a factor to be considered on the issue of fraud as such, it may be taken into consideration by you as effecting the credibility of the parties.”

The further conduct complained of that defendants fraudulently induced the plaintiff to forbear from suing the defendants for the breach of their agreement to extend the time for the plaintiff to repay its loan to the defendant Kaaterskill and to refrain from pursuing an action against the defendants to set aside the deed improperly recorded in violation of their agreement, while perhaps constituting a breach of contract, does not demonstrate a malicious, vindictive or reckless act to support an award of punitive damages.

While promises made to settle a dispute prior to litigation should be honestly made and honored, there was no proof presented, as required by the charge, that defendant acted “maliciously” or “recklessly” at the time he promised to reimburse plaintiff for his losses. All that has been shown is that defendant breached his agreement. Thus, the jury’s determination that defendant should be punished by assessing punitive damages is not supported by the record and that portion of the verdict should be set aside.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the judgment of Supreme Court, New York County, setting aside the jury verdict should be reinstated.

Chief Judge Cooke and Judges Jones, Wachtler, Meyer and Simons concur.

Order reversed, with costs, and the judgment of Supreme Court, New York County, reinstated.

      . No actual compensatory damages were awarded. The jury had been charged that it was to assess the nominal amount of $1 if it determined that fraud had been committed, but damages could not be fixed because insufficient proof of pecuniary losses had been offered. The jury failed to assess the nominal damages as instructed, but inasmuch as the determination of the punitive damages depended on a finding of fraudulent conduct, the Judge assessed the $1 nominal damages.

      . This appeal was limited by the parties to the question of the propriety of the punitive damages award. Plaintiff did not appeal from the award of nominal compensatory damages.


text:
    In the Matter of Joseph Miller, Respondent, v Thomas A. Coughlin, III, as Commissioner of the New York State Department of Correctional Services, et al., Appellants.
    Argued June 3, 1983;
    decided July 12, 1983

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General (Arlene Silverman and Peter H. Schiff of counsel), for appellants.
    Petitioner voluntarily and knowingly accepted the settlement of the disciplinary grievance against him and was legally terminated from State service without a hearing pursuant to that settlement. (Matter of Feinerman v Board of Coop. Educational Servs. of Nassau County, 48 NY2d 491; Abramovich v Board of Educ., 46 NY2d 450, 444 US 845; Matter of Juul v Board of Educ., 76 AD2d 837, 55 NY2d 648; Antinore v State of New York, 49 AD2d 6, 40 NY2d 921.)

      Howard J. Gardner and David B. Lubash for respondent.
    I. Petitioner was unlawfully dismissed from his employment in violation of procedural due process and in violation of the terms of the contract between the union and the Department of Correctional Services. (Antinore v State of New York, 49 AD2d 6; Board of Regents v Roth, 408 US 564.) II. There was no open, formal, voluntary and binding waiver made or executed by petitioner of his procedural rights to due process. (Board of Regents v Roth, 408 US 564; Abramovich v Board of Educ., 46 NY2d 450; Matter of Juul v Board of Educ., 76 AD2d 837, 55 NY2d 648; Matter

      of Feinerman v Board of Coop. Educational Servs. of Nassau County, 48 NY2d 491; Matter of Dolgin Eldert Corp., 31 NY2d 1.)
   OPINION OF THE COURT

Jasen, J.

In this article 78 proceeding, we are asked to decide whether petitioner was unlawfully dismissed from his employment in violation of procedural due process and in violation of the terms of the collective bargaining agreement between the union and the Department of Correctional Services.

Petitioner, a correction officer employed by the New York State Department of Correctional Services (Department) assigned to the Bedford Hills Correctional Facility, was served with a notice of discipline dated January 23, 1979 in which it was proposed that he be dismissed from service for various acts of misconduct. In response, petitioner filed a grievance pursuant to article 8 of the collective bargaining agreement entered into between the State of New York and Security Unit Employees Council 82, the union which represents correction officers. Pending arbitration of the dispute, petitioner selected a union employee to represent him during settlement negotiations and, if necessary, at the arbitration hearing.

A settlement was proposed whereby petitioner would serve a 12-month disciplinary evaluation period during which his services could be terminated if unsatisfactory. In return, all charges against him would be withdrawn. The proposed settlement was explained to petitioner by his union representative and petitioner verbally agreed thereto. Afterwards, a confirming letter, dated April 12, 1979, was sent by the Department to the executive director of petitioner’s union. It is undisputed that petitioner neither received a copy of this letter nor signed a written agreement containing the terms of the settlement.

Petitioner continued in his employment until he was informed, by letter dated January 8, 1980, that he was being dismissed for unsatisfactory work performance. Since the dismissal was unappealable under the terms of the settlement, petitioner commenced this article 78 proceeding seeking reinstatement to his former position as a correction officer with the New York State Department of Correctional Services.

Section 8.3 of the collective bargaining agreement provides that a disciplinary grievance settlement must be reduced to writing and that the subject employee be given an opportunity to consult an attorney or a union representative before executing it. It. is further required that the employee’s union representative be provided with a copy of the settlement at least one day before it is executed.

It is the petitioner’s claim that his termination without administrative recourse was improper because he never agreed to the afore-mentioned settlement. He argues, in the alternative, that even if he verbally agreed to the settlement, such verbal consent is ineffective because section 8.3 of the collective bargaining agreement requires written consent. We find no merit to petitioner’s claims.

Preliminarily, we note that there is substantial evidence in the record to support the determination that petitioner had knowledge of the settlement agreement and that he verbally agreed thereto. Petitioner’s claim that he was denied procedural due process is, therefore, without merit.

With respect to petitioner’s alternative argument that section 8.3 of the collective bargaining agreement requires his written consent to the settlement, we do not believe that the agreement, as interpreted by both the Department and the union, imposes such a requirement. The agreement requires that the terms of the settlement be reduced to writing. There is no dispute that the Department’s letter to petitioner’s union, dated April 12, 1979, satisfied this requirement. In addition, the agreement requires that petitioner “be offered a reasonable opportunity to have his attorney or a Union representative present before he is required to execute it.” This provision of the agreement merely requires that petitioner be afforded the right to “counsel” in any disciplinary settlement before the settlement reached is put into effect. Petitioner’s right to “counsel” was not abridged in any way as evidenced by the fact that it was petitioner’s union representative who explained the terms of the proposed settlement to him.

Moreover, the requirement that petitioner execute the agreement does not mandate that the settlement of the grievance against the petitioner be signed by him personally in order that it be binding upon him. Whatever the term “to execute” the settlement agreement means in another context, the record in this case clearly shows that under the collective bargaining agreement, the Department and the union had long taken the view and followed the practice of not requiring that settlements negotiated by the Department and the employee’s union representative be delivered in writing to the employee for his signature. Written confirmation of such a settlement when sent by the Department’s Bureau of Labor Relations to the union’s executive director has been mutually agreed to be sufficient compliance with section 8.3. Since the terms of the collective bargaining agreement, as interpreted and implemented by the Department and petitioner’s union, were complied with in all respects, petitioner cannot be heard to complain that he was unlawfully dismissed from his employment in violation of the terms of that agreement.

Accordingly, the judgment appealed from and the order of the Appellate Division brought up for review should be reversed, with costs, and the petition dismissed.

Chief Judge Cooke and Judges Jones, Wachtler, Meyer and Simons concur.

Judgment appealed from and order of the Appellate Division brought up for review reversed, etc.

       Section 8.3 provides, in full, as follows:
      “8.3 Settlements
      “A disciplinary grievance may be settled at any time following the service of a notice of discipline. The terms of the settlement shall be reduced to writing. An employee offered such a settlement shall be offered a reasonable opportunity to have his attorney or a Union representative present before he is required to execute it. The Union grievance representative at the appropriate level shall be provided with a copy of any settlement within 24 hours of its execution.”


author: Chief Judge Cooke.

text:
    The People of the State of New York, Respondent, v Michael Joseph, Appellant.
    Argued June 1, 1983;
    decided July 12, 1983

      POINTS OF COUNSEL

      John D. B. Lewis and William E. Hellerstein for appellant.
    The Trial Judge violated appellant’s constitutional and statutory rights to a public trial when he ordered the courtroom closed to appellant’s family solely because the complaining witness might “experience difficulty” testifying to a sexual attack. (Matter of Oliver, 333 US 257; Tanksley v United States, 145 F2d 58; United States v Kobli, 172 F2d 919; People v Jones, 82 AD2d 674, 55 NY2d 751; Geise v United States, 262 F2d 151, 361 US 842; United States ex rel. Laws v Yeager, 448 F2d 74, 405 US 976; People v Hall, 51 App Div 57; People v Jones, 47 NY2d 409, 444 US 946.)

      Elizabeth Holtzman, District Attorney (Anthea H. Bruffee and Barbara D. Underwood of counsel), for respondent.
    The Trial Judge appropriately excluded the public, including defendant’s family, from the courtroom during the young sodomy victim’s testimony. This exclusion did not violate defendant’s right to a public trial. (Gannett Co. v De Pasquale, 43 NY2d 370, 443 US 368; Estes v Texas, 381 US 532; Globe Newspaper Co. v Superior Ct. for County of Suffolk, 454 US 1051; United States ex rel. Lloyd v Vincent, 520 F2d 1272, 423 US 937; People v Jones, 82 AD2d 674, 55 NY2d 751; People v Hagan, 24 NY2d 395, 396 US 886; People v Jelke, 308 NY 56; United States ex rel. Bruno v Herold, 408 F2d 125, 397 US 957; United States ex rel. Orlando v Fay, 350 F2d 967, cert den sub nom. Orlando v Follette, 384 US 1008.)
   OPINION OF THE COURT

Chief Judge Cooke.

The right to a public trial does not preclude a Presiding Judge from excluding all spectators, including a defendant’s family and friends, during a particular witness’s testimony when the circumstances warrant such action to foster the truth-discovery process.

Defendant was convicted of robbery in the first degree and sodomy in the first degree. The charges arose out of a 1977 incident in which defendant and another man accosted and robbed a young couple, and sodomized the woman, who was 19 years old at the time.

At the 1979 trial, after opening statements, the Assistant District Attorney requested that the courtroom be cleared while the complainant testified, given the sensitive and embarrassing nature of her evidence. Defense counsel objected, stating that the only persons present were defendant’s wife, sister, mother, and “other people who are concerned about him.” The Trial Judge conferred on the record in the robing room with counsel and the complainant. After hearing the victim state her concern about testifying and noting that the charge involved particularly “demeaning” acts, the Judge granted the prosecutor’s request. The rest of the trial was open to all, and defendant’s family was present during the remainder of the People’s case and throughout the presentation of the defense.

We disagree with defendant’s contention that the court closure during the victim’s testimony denied him his right to a public trial. A defendant is generally guaranteed a public trial (US Const, 6th Amdt; Civil Rights Law, § 12), but the court has discretion in certain trials, including those for rape or sodomy, to “exclude therefrom all persons who are not directly interested therein, excepting jurors, witnesses, and officers of the court” (Judiciary Law, § 4). Seizing on dicta in Matter of Oliver (333 US 257, 271-272), defendant asserts a constitutional right to have his relatives and friends present throughout all stages of the trial. That case, however, involved a situation where the entire trial was conducted without public access. In contrast, the trial here was closed only during the testimony of the victim who had declared that she was tense and would be more comfortable testifying if all unnecessary persons were excluded. It has been recognized that closing the courtroom under such limited circumstances is not improper (see, e.g., People v Jones, 82 AD2d 674, mot for Iv to app den 55 NY2d 751; United States ex rel. Latimore v Sielaff, 561 F2d 691, cert den 434 US 1076).

The citizens of our Nation have long enjoyed the guarantee of a public trial. This right serves several purposes (see, generally, People v Jones, 47 NY2d 409). It encourages the process of discovering the truth, the essence of a trial, by subjecting to public scrutiny those who participate in the trial, whether as arbiter, advocate, or witness. The excesses and persecutions of secret proceedings, such as the infamous Court of Star Chamber, are avoided. And, by inviting the public to observe how the judicial system operates, it fosters confidence in the courts. These purposes were not defeated when family and friends were excluded during this one witness’s testimony, even if that witness was the complainant. Moreover, although defendant had no obligation to do so, it is worth noting that he advanced no specific reason why his family’s presence was compelled other than to refer to their concern. In sum, closing the courtroom to all spectators, including defendant’s family and friends, during a distraught sodomy victim’s testimony does not offend notions of fairness and justice.

The order of the Appellate Division should be affirmed.

Judges Jasen, Jones, Wachtler, Meyer and Simons concur.

Order affirmed.


author: Chief Judge Cooke. Jasen, J.

text:
    Max M. Farash, Appellant, v Sykes Datatronics, Inc., Respondent.
    Argued May 31, 1983;
    decided July 12, 1983

      POINTS OF COUNSEL

      Edward H. Fox and Edward P. Wright for appellant.
    I. Notwithstanding the Statute of Frauds, plaintiff is entitled to recover the money expended for the benefit of defendant and in anticipation of defendant becoming a tenant. (Baldwin v Palmer, 10 NY 232; Dung v Parker, 52 NY 494; Moody v Smith, 70 NY 598; Wilson v La Van, 22 NY2d 131; Tibbetts Contr. Corp. v O & E Contr. Co., 21 AD2d 915, 15 NY2d 324; Allegheny Coll. v National Chautauqua Bank of Jamestown, 246 NY 369.) II. Notwithstanding the Statute of Frauds, plaintiff is entitled to the payments due under the lease agreement. (McKinley v Hessen, 202 NY 24.) III. The completeness of the oral agreement and the degree of partial performance are issues of fact precluding the granting of summary judgment to defendant. (Club Chain of Manhattan v Christopher & Seventh Gourmet, 74 AD2d 277.) IV. Plaintiff’s partial performance is unequivocally referrable to the oral lease which is therefore enforceable notwithstanding the Statute of Frauds. (Burns v McCormick, 233 NY 230; Neverman v Neverman, 254 NY 496; Grade Sq. Realty Corp. v Choice Realty Corp., 305 NY 271; Wilson v La Van, 22 NY2d 131; Jonestown Place Corp. v 153 West 33rd St. Corp., 53 NY2d 847; Walter v Hoffman, 267 NY 365.)

      John M. Wilson, II, for respondent.
    I. Upon the undisputed facts, or appellant’s version of those that are controverted, the parties to the abortive lease negotiations failed to reach even oral agreement upon all terms and conditions of a rental agreement. Even absent the Statute of Frauds, this fundamental failure to agree precludes suit. (Aceste v Wiebusch, 74 AD2d 810; Willmott v Giarraputo, 5 NY2d 250; Brause v Goldman, 10 AD2d 328, 9 NY2d 620; Yorktown Sq. Assoc. v Union Dime Sav. Bank, 79 AD2d 1040; S.S.I. Investors v Korea Tungsten Min. Co., 80 AD2d 155, 55 NY2d 934; Martin Delicatessen v Schumacher, 52 NY2d 105; Read v Henzel, 67 AD2d 186; 219 Broadway Corp. v Alexander's, Inc., 46 NY2d 506; Matter of Meledandri, 108 Misc 2d 972.) II. The Statute of Frauds is a complete bar to the action. (Burns v McCormick, 233 NY 230; Neverman v Neverman, 254 NY 496; Grade Sq. Realty Corp. v Choice Realty Corp., 305 NY 271; Wilson v La Van, 22 NY2d 131; Geraci v Jenrette, 41 NY2d 660; Jonestown Place Corp. v 153 West 33rd St. Corp., 53 NY2d 847; King v Bowdy, 77 AD2d 726; Genesee Mgt. v Del Bello, 60 AD2d 779; Pollard v Meyer, 61 AD2d 766; Haskins v Loeb Rhoades & Co., 76 AD2d 751, 52 NY2d 523.) III. Appellant cannot maintain an action to recover money damages for breach of an oral contract which is within the Statute of Frauds. (Milhalko v Blood, 86 AD2d 723; Raoul v Olde Vil. Hall, 76 AD2d 319; Baldwin v Palmer, 10 NY 232; Longo v Shaker Hgts. Dev., 11 Misc 2d 278, 10 AD2d 784; Rice v Dylan, 39 AD2d 809; Matter of Ditson, 177 Misc 648; McKinley v Hessen, 202 NY 24.) IV. If appellant’s action upon the oral agreement is barred by the Statute of Frauds, he may not circumvent that statute by alleging alternative causes of action. (Dung v Parker, 52 NY 494; Club Chain of Manhattan v Christopher & Seventh Gourmet, 74 AD2d 277, 53 NY2d 703; Redlark Realty Corp. v Minkin, 306 NY 762; Roberts v Champion Int., 52 AD2d 773, 40 NY2d 918; Subirana v Munds, 257 App Div 956, 282 NY 726; Intercontinental Planning v Daystrom, Inc., 30 AD2d 519, 24 NY2d 372; Rogoff v San Juan Racing Assn., 77 AD2d 831, 54 NY2d 883; Breed v Insurance Co. of North Amer., 81 AD2d 675, 54 NY2d 604; Tibbetts Contr. Corp. v O & E Contr. Co., 21 AD2d 915, 15 NY2d 324; Wilson v La Van, 22 NY2d 131.)
   OPINION OF THE COURT

Chief Judge Cooke.

Plaintiff claims that he and defendant entered an agreement whereby defendant would lease a building owned by plaintiff, who was to complete its renovation and make certain modifications on an expedited basis. Defendant, however, never signed any contract and never occupied the building. Plaintiff commenced this litigation, and defendant unsuccessfully moved to dismiss for failure to state a cause of action. On appeal, the Appellate Division reversed, with two Justices dissenting in part. For the reasons that follow, we now modify.

Plaintiff pleaded three causes of action in his complaint. The first was to enforce an oral lease for a term longer than one year. This is clearly barred by the Statute of Frauds (General Obligations Law, § 5-703, subd 2). The third cause of action is premised on the theory that the parties contracted by exchanging promises that plaintiff would perform certain work in his building and defendant would enter into a lease for a term longer than one year. This is nothing more than a contract to enter into a lease; it is also subject to the Statute of Frauds (see Geraci v Jenrette, 41 NY2d 660, 664). Hence, the third cause of action was properly dismissed.

Plaintiff’s second cause of action, however, is not barred by the Statute of Frauds. It merely seeks to recover for the value of the work performed by plaintiff in reliance on statements by and at the request of defendant. This is not an attempt to enforce an oral lease or an oral agreement to enter a lease, but is in disaffirmance of the void contract and so may be maintained (see Baldwin v Palmer, 10 NY 232, 235). That defendant did not benefit from plaintiff’s efforts does not require dismissal; plaintiff may recover for those efforts that were to his detriment and that thereby placed him in a worse position (see Kearns v Andree, 107 Conn 181; 5 Corbin, Contracts, § 1107; 12 Williston, Contracts [3d ed], § 1480). “The contract being void and incapable of enforcement in a court of law, the party * * * rendering the services in pursuance thereof, may treat it as a nullity, and recover * * * the value of the services” (Erben v Lorillard, 19 NY 299, 302; accord Day v New York Cent. R. R. Co., 51 NY 583, 590).

The dissent’s primary argument is that the second cause of action is equivalent to the third, and so is also barred by the Statute of Frauds. It is true that plaintiff attempts to take the contract outside the statute’s scope and render it enforceable by arguing that the work done was unequivocally referable to the oral agreement. This should not operate to prevent recovery under a theory of quasi contract as a contract implied by law, which “is not a contract at all but an obligation imposed by law to do justice even though it is clear that no promise was ever made or intended” (Calamari and Perillo, Contracts [2d ed], § 1-12, p 19). Obviously, the party who seeks both to enforce the contract that is unenforceable by virtue of the Statute of Frauds and to recover under a contract implied in law will present contradictory characterizations. This, however, is proper in our courts where pleading alternative theories of relief is accepted. Moreover, the existence of any real promise is unnecessary; plaintiff’s attempt to make his acts directly referable to the unenforceable contract simply is irrelevant.

The authorities all recognize that a promisee should be able to recover in the present situation. “[I]f the improvements made by the plaintiff are on land that is not owned by the defendant and in no respect add to his wealth, the plaintiff will not be given judgment for restitution of their value, even though he may have made such improvements in reliance upon the contract that the defendant has broken. For such expenditures as these in reliance on a contract, the plaintiff can get judgment only in the form of damages for consequential injury” (5 Corbin, Contracts, p 578 [n omitted]). Thus, plaintiff may recover for those expenditures he made in reliance on defendant’s representations (see id., §§ 998, 1011) and that he otherwise would not have made. The Restatement provides that an injured party who has not conferred a benefit may not obtain restitution, but he or she may “have an action for damages, including one for recovery based on * * * reliance” (Restatement, Contracts 2d, § 370, Comment a). “[T]he injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed” (Restatement, Contracts 2d, § 349). The Restatement recognizes an action such as is involved here (see Restatement, Contracts 2d, §§ 139, 349, Comment b).

The dissent relies on Bradkin v Leverton (26 NY2d 192) and Miller v Schloss (218 NY 400) for the proposition that plaintiff can recover only if there is an actual benefit to the defendant. Those cases do not state that there can be no recovery for work performed in the absence of any real benefit to defendant. As stated by Professor Williston (12 Williston, Contracts [3d ed], pp 282-284, 286-287 [nn omitted]):

“Again, even though the defendant’s liability is imposed by law irrespective of the agreement of the parties, and may, therefore, be called quasi contractual, where the defendant is a wrongdoer the plaintiff may well be preferred, and if a complete restoration of the status quo or its equivalent is impossible the plaintiff should at least be replaced in as good a position as he originally was in, although the defendant is thereby compelled to pay more than the amount which the plaintiff’s performance has benefited him.

***

“That is, the law should impose on the wrongdoing defendant a duty to restore the plaintiff’s former status, not merely to surrender any enrichment or benefit that he may unjustly hold or have received; although if the market value or, in the absence of a market value, the benefit to the defendant of what has been furnished exceeds the cost or value to the plaintiff, there is no reason why recovery of this excess should not be allowed.

“These different possible situations, as has been said, have often been confused with one another, because the form of action in each of them was identical at common law — general assumpsit on a quantum meruit or quantum valebat count; and this tended to induce courts and others to inquire what is the rule of damages under such counts — a question not susceptible of a single answer.”

A lesson in this area can be taken from Professors Calamari and Perillo: “The basic aim of restitution is to place the plaintiff in the same economic position as he enjoyed prior to contracting. Thus, unless specific restitution is obtained in Equity, the plaintiff’s recovery is for the reasonable value of services rendered, goods delivered, or property conveyed less the reasonable value of any counter-performance received by him. The plaintiff recovers the reasonable value of his performance whether or not the defendant in any economic sense benefitted from the performance. The quasi-contractual concept of benefit continues to be recognized by the rule that the defendant must have received the plaintiff’s performance; acts merely preparatory to performance will not justify an action for restitution. ‘Receipt,’ however, is a legal concept rather than a description of physical fact. If what the plaintiff has done is part of the agreed exchange, it is deemed to be ‘received’ by the defendant.” (Calamari and Perillo, Contracts [2d ed], § 15-4, p 574 [nn omitted]; see, also, id., § 19-44; Perillo, Restitution in a Contractual Context, 73 Col L Rev 1208, 1219-1225).

We should not be distracted by the manner in which a theory of recovery is titled. On careful consideration, it becomes clear that the commentators do not disagree in result, but only in nomenclature. Whether denominated “acting in reliance” or “restitution,” all concur that a promisee who partially performs (e.g., by doing work in a building or at an accelerated pace) at a promisor’s request should be allowed to recover the fair and reasonable value of the performance rendered, regardless of the enforceability of the original agreement.

Accordingly, the order of the Appellate Division should be modified, with costs to appellant, by reinstating plaintiff’s second cause of action and, as so modified, affirmed.

Jasen, J.

(dissenting). Plaintiff’s second cause of action alleges that “[p]laintiff, in reliance on statements made [by] the defendant and at its request, performed work, provided labor and material to the defendant” and that “[defendant has failed to compensate the plaintiff for monies and other expenses incurred by the plaintiff in preparing the property at 49 East Avenue to the defendants’ needs”, causing damage to the defendant in the amount of $400,000.

The majority hold that this cause of action is not barred by the Statute of Frauds as it “merely seeks to recover for the value of the work performed by plaintiff in reliance on statements by and at the request of defendant” and does not “attempt to enforce an oral lease or an oral agreement to enter [into] a lease.” Inasmuch as the record before us on this motion for summary judgment clearly demonstrates that this cause of action is barred by the Statute of Frauds, I must dissent.

Plaintiff alleges that “in reliance on statements made [by] the defendant”, he performed certain work and provided labor and material to the defendant. In his affidavit in support of this claim, he sets forth the substance of those statements — “Timing is critical and we would like to have you go ahead with the work. Don’t worry about the lease, it will be signed and the work should not wait for the actual signing of the lease” and “We need two floors for immediate occupancy on June 1. We will pay rent for the entire building as soon as we move in and then you can proceed with the other floors after the first two floors are ready.” Plaintiff’s own affidavits, therefore, conclusively establish that the work he performed was done in reliance on defendant’s oral agreement to enter into a lease and not in reliance on defendant’s promise, express or implied, to compensate plaintiff monetarily for the work performed separate and apart from entering into a leasehold. Nowhere, in any of the exhibits and affidavits offered by plaintiff in opposition to defendant’s motion for summary judgment does plaintiff even allege that defendant agreed to pay for plaintiff’s renovation work or that plaintiff expected any such compensation. Indeed, in summing up the contents of his own evidentiary support, plaintiff states that “[c]learly our performance of the obligation to renovate the Neisner Building is unequivocally referable to the oral agreement entered into on March 16, 1981 [whereby defendant allegedly agreed to lease the building for two years]”. It is abundantly clear, therefore, that plaintiff, in asserting a right to recover damages under his second cause of action, based solely upon defendant’s failure to honor its oral promise to enter into a two-year lease, is merely engaging in a blatant attempt to circumvent the proscriptions .of the Statute of Frauds. The only claim plaintiff has alleged and supported with evidentiary facts is that he performed work in reliance on defendant’s alleged promise to enter into a two-year lease of the Neisner Building and suffered damages when defendant subsequently refused to rent the premises. However his claim is worded, it should be beyond dispute that plaintiff is seeking damages for defendant’s breach of an oral contract to enter into a two-year lease. Since this type of contract is barred by the Statute of Frauds, plaintiff should not be allowed to do indirectly what he cannot do directly.. (See Dung v Parker, 52 NY 494, 497; Roberts v Champion Int., 52 AD2d 773, mot for lv to app dsmd 40 NY2d 918.)

It is noteworthy that the amount of damages sought in plaintiff’s second cause of action is identical to that sought in his third cause of action, indicating that the same theory of recovery is asserted in both. Since as the majority concedes, the third cause of action alleges nothing more than a contract to enter into a lease and must, therefore, be dismissed, there is no reason why the second cause of action should not be treated similarly. Furthermore, the amount of damages sought, $400,000, happens to be the annual rental price allegedly agreed upon by the defendant, which further demonstrates that plaintiff is seeking relief solely on the theory that defendant wrongfully refused to lease the premises. It is also noteworthy that, prior to the issue being raised by the dissent at the Appellate Division, plaintiff did not argue in his brief or orally before that court that he expected monetary compensation from the defendant or that the defendant expressly or impliedly agreed to pay same. Indeed, it seems clear that the plaintiff himself never intended his complaint to be construed as the majority does today. From all of this, there should be little doubt that plaintiff’s second cause of action was intended to and does merely seek damages for defendant’s alleged breach of an oral contract to enter into a two-year lease and cannot, therefore, be maintained.

Assuming, arguendo, that the majority is correct in holding that plaintiff’s second cause of action alleges his entitlement to monetary compensation and that his affidavits support his allegations, the plaintiff, would, nevertheless, not be entitled to relief.

The majority fails to specify the theory of recovery upon which it bases its conclusion that “plaintiff may recover for those efforts that were to his detriment and that thereby placed him in a worse position”. Insofar as this conclusion is based upon quasi contract, it is incorrect for the well-established rule in this State is that in order for a plaintiff to recover under such a cause of action, he must demonstrate 'that the defendant was unjustly enriched by his efforts. The rule has been clearly set forth by this court and consistently followed: “ ‘[a] quasi or constructive contract rests upon the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another. In truth it is not a contract or promise at all. It is an obligation which the law creates, in the absence of any agreement, when and because the acts of the parties or others have placed in the possession of one person money, or its equivalent, under such circumstances that in equity and good conscience he ought not to retain it, and which ex aequo et bono belongs to another.’ ” (Bradkin v Leverton, 26 NY2d 192, 197, quoting Miller v Schloss, 218 NY 400, 407.) (See, also, Shapira v United Med. Servs., 15 NY2d 200, 216; Pink v Title Guar. & Trust Co., 274 NY 167, 173; D’Angelo v Hastings Oldsmobile, 89 AD2d 785, 786, affd 59 NY2d 773; Matter of James v State of New York, 90 AD3d 342, 346-347; 50 NY Jur, Restitution and Implied Contracts, § 74, p 339; cf. Smith v Kirkpatrick, 305 NY 66, 72, 73.) Since, as the majority correctly points out, defendant did not benefit from plaintiff’s efforts, no recovery under quasi contract may be had. (See 5 Corbin, Contracts, § 1107, p 578.)

The “lesson” provided by Professors Calamari and Perillo, cited by the majority, is inapposite to the case before us because section 15-4 of their text deals exclusively with actions based on breach while plaintiff does not allege in his second cause of action that defendant breached any agreement. Additionally, I note that insofar as this statement would allow recovery by the plaintiff under a theory of restitution, even though the defendant has not been benefited by any of plaintiff’s efforts, such is not the law in New York. (See Bradkin v Leverton, 26 NY2d 192, 197, supra.) The majority itself concedes this point in stating, “an injured party who has not conferred a benefit may not obtain restitution” (at p 504). Moreover, assuming arguendo the accuracy of the legal principle stated by Calamari and Perillo, this principle does not accord relief to the plaintiff in the instant appeal. As the two professors correctly note, “the defendant must have received the plaintiff’s performance; acts merely preparatory to performance will not justify an action for restitution.” First, defendant received nothing from the plaintiff, as the majority accurately points out. Second, plaintiff’s acts in renovating his building were “merely preparatory to performance” of the alleged oral contract whereby plaintiff and defendant agreed to enter into a two-year lease. Thus, even if section 15-4 were applicable, plaintiff would not be entitled to the relief which the majority is offering.

I also fail to see how sections 998 and 1011 of Corbin’s treatise and sections 349 and 370 of the Restatement of Contracts, Second, support the majority’s position. Corbin’s discussion of reliance damages in sections 998 and 1011 (like Calamari and Perillo’s) is concerned solely with a remedy available to a plaintiff injured by a defendant who has breached a contract. Since there was no such contract entered into by the parties here, and accordingly no breach thereof, those sections of Corbin’s text do not even address the issue involved here.

Similarly, the Restatement lends no support to the majority’s view. While it is true that section 370 would allow a party to maintain “an action for damages, including one for recovery based on * * * reliance”, a reading of the entire section, including its cite to section 349 as the sole authority for this proposition, makes clear that such an action is based strictly on a theory of promissory estoppel, a theory which, as is discussed more fully below, has never been asserted by the parties and which this court has heretofore declined to adopt.

The majority also mistakenly relies on a quote from section 349 of the Restatement of Contracts, Second — “[T]he injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed” (emphasis supplied) (at p 504). This passage, by its very terms, deals solely with remedies available where a party has breached an existing contract. Plaintiff, however, does not allege in his second cause of action the existence of any contract. Nor does he allege that defendant committed any breach. In the majority’s view, plaintiff’s second cause of action is not based upon breach of contract, but, rather, “is in disaffirmance of the void contract”. (At p 503.) Thus, section 349 of the Restatement does not address the situation presented on this appeal and, accordingly, provides no support for the majority’s position.

It appears that the majority, in holding that plaintiff can recover the value of his efforts expended in reliance on defendant’s alleged statements, is recognizing a cause of action sounding in promissory estoppel. This is implicit in its reference to the Restatement of Contracts, Second, section 139 and section 349, Comment b, as support for its conclusion that “[t]he Restatement recognizes an action such as is involved here”. Section 139 is quite simply one of the estoppel sections of the Restatement. (See Restatement, Contracts 2d, § 139, Comment a.) Moreover, Comment b to section 349 sets forth the instances in which damages may be based on plaintiff’s reliance interest. Those instances are spelled out in sections 87 (option contract), 89 (modification of executory contract), 90 (promissory estoppel) and 139 (promissory estoppel). Since this appeal does not involve option or executory contracts, the ineluctable conclusion to be drawn is that the majority has recognized, sub silentio, a cause of action in promissory estoppel.

While the doctrine of promissory estoppel has been recognized and applied in certain cases, to do so here, where the issue has not been pleaded or addressed in the parties’ affidavits and has neither been argued nor briefed, is ill-advised. Moreover, it is difficult to understand why the majority, in discussing plaintiff’s reliance damages, ignores the fact made abundantly clear by plaintiff’s own affidavits and his conduct during the early stages of his litigation, that plaintiff has merely alleged, in all three causes of action, that he is entitled to monetary damages from defendant because he relied on defendant’s alleged promise to enter into a two-year lease — a promise unenforceable under the Statute of Frauds. This is all the more puzzling because we are not presented here with an inexperienced or unsophisticated plaintiff who is unable to protect his own financial interests. To the contrary, Max Farash is a “prominent and successful [real estate] developer” (see Farash v Smith, 59 NY2d 952, 955) who owns thousands of residential housing units in Monroe County and at least eight commercial buildings in downtown Rochester. In light of this, it is incredible that the majority would construe plaintiff’s complaint and affidavits in a way that even the plaintiff never intended and then adopt a novel legal doctrine solely for the purpose of extending equitable relief to the plaintiff where it would previously have been unavailable. Surely a sophisticated businessman such as Max Farash knew that he could have easily insured that defendant would pay for the extensive renovation work plaintiff performed on his own building merely by obtaining defendant’s promise to that effect. Plaintiff’s failure to obtain such a promise leads inevitably to the conclusion that defendant never intended to pay for such renovation and, thus, never agreed to do so. Nevertheless, the majority unnecessarily provides plaintiff with an opportunity to go before a jury and request that the defendant, who received nothing from the plaintiff, be ordered to pay for the improvements made on plaintiff’s own building. Nothing in logic or existing law supports such a result.

In the absence of either a contract requiring defendant to pay for plaintiff’s renovation or some evidence that defendant was unjustly enriched, thus allowing plaintiff to recover under a cause of action sounding in quasi contract, defendant should not be held potentially liable to plaintiff for such renovation costs. Accordingly, I would affirm the order of the Appellate Division.

Judges Jones, Wachtler and Meyer concur with Chief Judge Cooke; Judge Jasen dissents and votes to affirm in a separate opinion in which Judge Simons concurs.

Order modified, with costs to appellant, in accordance with the opinion herein and, as so modified, affirmed.