author: Jones, J. Jasen, J.

text:
    In the Matter of Tuscan Dairy Farms, Inc., Appellant, v J. Roger Barber, as Commissioner of Agriculture and Markets of the State of New York, Respondent.
    Argued June 1, 1978;
    decided July 11, 1978

      POINTS OF COUNSEL

      Milton S. Gould, Michael Lesch and Dale C. Christensen, Jr., for appellant.
    I. The court below erroneously employed a "balancing of interests” test to determine whether the commissioner’s application of section 258-c of the Agriculture and Markets Law violated the commerce clause. Moreover, even under the incorrect "balancing of interests” test, the statute is unconstitutional as applied. (Buck v Kuykendall, 267 US 307; Baldwin v G. A. F. Seelig, 294 US 511; Highland Farms Dairy v Agnew, 300 US 608; Hood & Sons v Du Mond, 336 US 525; Polar Co. v Andrews, 375 US 361; Dean Milk Co. v Madison, 340 US 349; Milk Bd. v Eisenberg Co., 306 US 346; California v Zook, 336 US 725; Pike v Bruce Church, Inc., 397 US 137.) II. The commissioner’s conclusions are not supported by any evidence in the record. (Matter of Brucato v Wickham, 28 AD2d 780; Matter of Echelman v Du Mond, 283 App Div 276; Matter of Dairylea Coop. v Walkley, 79 Misc 2d 707, 48 AD2d 951; Matter of Tomanio v Board of Regents of Univ. of State of N. Y., 43 AD2d 643, 38 NY2d 724; Matter of Mid-Island Hosp. v Wyman, 25 AD2d 765; Matter of Eisenstein v Du Mond, 268 App Div 320; Matter of McCormack v National City Bank of N. Y., 303 NY 5; Matter of Ryan v New York State Liq. Auth., 273 App Div 576.)

      Thomas G. Conway and Joan A. Kehoe for respondent.
    I. The application herein of section 258-c of the Agriculture and Markets Law does not contravene the commerce clause of the United States Constitution. (Cities Serv. Co. v Peerless Co., 340 US 179; California v Zook, 336 US 725; Nebbia v New York, 291 US 502; Hood & Sons v Du Mond, 336 US 525; Highland Farms Dairy v Agnew, 300 US 608; Baldwin v G. A. F. Seelig, 294 US 511; Consumer-Farmer Milk Coop. v Wickham, 25 AD2d 413; Dean Milk Co. v Madison, 340 US 622.) II. The commissioner’s determination is supported by a preponderance of evidence in the record. (Dairylea Coop. v Walkley, 38 NY2d 6; Matter of Friendship Dairies v Du Mond, 284 App Div 147; Matter of Sullivan County Harness Racing Assn. v Glasser, 30 NY2d 269; Matter of Grimsteed v Carey, 1 AD2d 985; Matter of Kotcher v Carey, 3 AD2d 957; Matter of Brucato v Wickham, 28 AD2d 780.)
   OPINION OF THE COURT

Jones, J.

We hold in this case that the denial by the Commissioner of Agriculture and Markets of a license to extend delivery of milk on a wholesale basis into the County of Richmond to a New Jersey dealer already licensed to supply and supplying milk in other counties of the State did not violate the commerce clause of the United States Constitution.

The dealer appeals as of right on constitutional grounds in a proceeding pursuant to CPLR article 78 from a judgment of the Appellate Division which unanimously confirmed the determination by the commissioner, after a hearing, denying petitioner’s application for an extension of its milk dealer’s license into Richmond County and dismissed the petition which sought annulment of the denial.

Petitioner Tuscan, a New Jersey corporation, is a processor and seller of milk and milk products doing business in New Jersey, New York, Delaware, Pennsylvania and Massachusetts. It holds a milk dealer’s license issued by the Department of Agriculture and Markets of the State of New York and for some 20 years has made wholesale deliveries of milk and milk products into Orange and Rockland Counties and deliveries of other dairy products in most of the remaining counties in the State. Its present business in the State is wholesale only, and its customers include supermarkets, institutional outlets serving schools and hospitals, and the so-called "mom and pop stores”.

After Pathmark, one of the supermarket chains to which it delivered its products in New Jersey, had requested it to undertake supplying the chain’s stores on Staten Island (Richmond County), on May 28, 1975 petitioner filed an application for an extension of its milk dealer’s license with the Commissioner of Agriculture and Markets of this State so that it might make deliveries at wholesale in that county. In accordance with section 258-c of the Agriculture and Markets Law, governing the licensing of milk dealers, on July 15, 1975 a hearing was held, at which witnesses and exhibits were presented by petitioner and by the Department of Agriculture and Markets, directed to the questions "whether the issuance of the license extension will tend to a destructive competition in a market already adequately served, or the issuance is in the public interest; and whether the applicant is qualified by character or experience or financial responsibility or equipment properly to conduct the proposed business”.

The department presented nine witnesses, one of whom was a statistician who introduced and explained figures produced by a milk market survey of Richmond County conducted in the year prior to the hearing; the remaining witnesses were officers or employees of milk distributors already licensed to serve and which were serving Richmond County, who testified in detail as to the nature and extent of business each was doing there and as to the competition existing and its consequences, as well as the consequences of the entry of a new distributor into the area. Petitioner offered no testimony on these subjects and produced only three witnesses: an employee of its customer Pathmark, who testified concerning the request made to petitioner to begin distribution in Richmond County; petitioner’s accountant, who attested to the firm’s financial reports; and petitioner’s chairman of its board, who described its operations, licenses and equipment. At the close of the hearing petitioner requested and was granted the right to call additional witnesses at a later session of the hearing; however, petitioner subsequently advised that no further witnesses would be called and the hearing was not resumed. Thereafter respondent commissioner, with the consent of petitioner, acting without a report by the hearing officer (who had transferred from the department) but on the basis of the transcript and exhibits, made a determination denying the license application on finding that granting petitioner’s application for an extension to serve at wholesale in Richmond County "would tend to a destructive competition for milk sales in a market already adequately served and as such would not be in the public interest”. The commissioner further found that it could "not be concluded that applicant’s request for extension of its milk dealer’s license to Richmond County should be denied for reason of character or experience or financial responsibility or equipment properly to conduct the proposed business”.

Petitioner has thus far sought without success to overturn the commissioner’s denial of its application for an extension of license. On its present appeal it sets out two challenges: (1) that the commissioner’s determination is not supported by a preponderance of the evidence before him as required by section 258-c of the Agriculture and Markets Law, and (2) that the commissioner’s application of the statute to petitioner in this case violates the commerce clause of the United States Constitution.

Specifically, the commissioner concluded: "The entry of another substantial processor-distributor of milk to Richmond County with primary interest in serving larger-volume supermarket accounts would under existing circumstances, tend to a destructive competition for sales of milk. It is concluded that there would be considerable pressure exerted by the applicant to establish a foothold in the market. This, along with the likelihood of competitive reaction by established dealers, would have a price-depressing effect on the market with destructive impact upon medium-size and smaller-volume milk dealers. These dealers perform an important function. The public interest requires that a balanced milk distribution structure be maintained in the market, so that service on retail home delivery routes and service to small volume wholesale customers is readily available. This type of service entails much higher unit costs than service to high volume supermarket accounts. There is an inevitable tendency for the larger milk dealers to attempt to skim the profitable supermarket accounts and neglect service to smaller volume accounts. The applicant does not perform any retail home delivery services. The public interest in maintaining a balanced milk distribution structure within Richmond County, adequate to serve all the needs of the market, would not be served by granting the application for extension.” The commissioner then determined "that granting the application of Tuscan Dairy Farms Inc. for extension of its milk dealer’s license to serve at wholesale in Richmond County would tend to a destructive competition for milk sales in a market already adequately served and as such would not be in the public interest”.

We agree with the Appellate Division that this determination is supported by a preponderance of the evidence before the commissioner. Several of the milk distributors summoned by the department who variously serviced small stores, luncheonettes, fruit and vegetable stands and retail home customers, recited statistics which showed a decline in milk distribution business in the preceding two years. The distributor doing the largest volume of business in the area had closed its pasteurizing plant in Richmond County three months before the hearing due to a lack of sufficient volume to operate the plant efficiently. There was ample testimony of intense competition and price wars in the sale of milk in Richmond County and proof that each time a new distributor entered the area a price competition ensued as a result of the entrant’s attempt to build a market for itself by undercutting existing prices followed by the responsive reduction in prices, first by the outlets being serviced by the newcomer, then by competitors of those outlets and their suppliers. A distributor serving "mostly little deli’s and the mom and pop stores”, also engaged in retail delivery of milk, testified that such price competition not only caused the mom and pop stores to suffer badly but that his own business suffered because he had to sell milk more cheaply in order to sell it at all, so that the sale of milk at the time when there was a price war caused by a new supplier was not profitable and "we are just trying to hold our heads above water”. His statement that he was nevertheless going to continue in his business was apparently explained by his remark "I have been lucky. I have managed to pick up a couple of good stores.” Additionally, there was testimony by the manager of the distributor that had recently entered the area and which serviced only small outlets that it was finding the competition "very tough” and had acquired fewer customers than it had anticipated when it had been licensed. He stated that retail home delivery business requires much more mileage on the distributor’s trucks than does store business, which is a direct run.

As previously indicated, petitioner produced no evidence of its own as to the consequences which might be expected to follow the licensing of an additional distributor. It now attempts only to impeach the probative worth of the testimony of the department’s witnesses, emphasizing their position as potential competitors of petitioner whose testimony should be subjected to particular scrutiny by reason of that circumstance.

As a public official with expertise in the area of marketing and distribution of dairy products, the commissioner found that the public interest requires the maintenance of a balanced distribution system, including availability of service to retail home delivery routes and small volume wholesale customers. The direct evidence, together with the inferences reasonably to be drawn therefrom, supports the conclusion that introduction in Richmond County of a new distributor of milk to supermarkets only — with adverse effect on distributors presently serving small retailers and themselves engaged in retail sales — would tend to a competition for milk sales which would be destructive by reason of the potential disturbance of the balanced distribution structure. The licensing of petitioner to enable it to serve its customer Pathmark, a supermarket chain, would do nothing to counteract this disturbance, inasmuch as it was the maintenance of distribution to small outlets and retail sellers that would be jeopardized, and no proof was offered that petitioner would serve those outlets and sellers. Such proof as there was, was to the contrary. Thus, to the extent that petitioner challenges the commissioner’s observation and reliance on the fact that petitioner does not itself render any retail home-delivery services, it is notable that this fact was testified to by one of petitioner’s own witnesses and that petitioner offered no proof whatsoever that it desired or intended to service other than supermarkets in Richmond County. In its brief petitioner even now stresses that its application was limited to sales "at wholesale”.

On the basis of the evidence introduced by the department, taken with the petitioner’s failure to offer any countervailing evidence, we reject petitioner’s argument that the commissioner’s determination was not supported by the preponderance of the evidence before him.

Turning then to petitioner’s claim that the commissioner’s determination violates the commerce clause of the Federal Constitution, we look to the decisions and opinions of the Supreme Court of the United States. We find no decision of that court which is squarely dispositive. The cases which have upheld State regulation of commerce in milk and dairy products against challenges under the commerce clause have presented predominantly issues of local price regulation, and are thus distinguishable from the present case. In Highland Farms Dairy v Agnew (300 US 608) the licensing requirement of a Virginia milk control statute and the milk prices fixed by the commissioner created under the statute were found by provisions of the law itself and by the commissioner’s application thereof to be inapplicable to a challenging interstate milk distributor. In Milk Bd. v Eisenberg Co. (306 US 346) it was held that Pennsylvania’s statutory economic regulation of its local milk industry, including the licensing and bonding of milk dealers and the establishment of prices paid to producers, could constitutionally be applied to milk dealers engaged exclusively in interstate commerce. In State v Pure Vac Dairy Prods. Corp. (251 Miss 457, app dsmd for want of a Federal question sub nom. Pure-Vac Dairy Prods. Corp. v Mississippi ex rel. Patterson, 382 US 14) the application of a Mississippi milk price control statute to a Tennessee producer shipping milk into Mississippi for sale there was approved. In United Dairy Farmers v Milk Control Comm. (404 US 930) the Pennsylvania milk control law was again upheld, this time against claims that it deterred out-of-State producers from shipping milk into Pennsylvania. Similarly, from the opposite view, none of the cases discussed below, in which State regulation of the milk industry has been struck down, has presented a factual context or regulation of a sort comparable to that in the present case.

Petitioner does not dispute that the milk industry within the State is a proper subject for regulation under the State’s police power (e.g., Nebbia v New York, 291 US 502). It contends, however, that, when the purpose of the exercise of the State’s authority is economic regulation, any obstruction of interstate commerce — whether direct or indirect, substantial or incidental — is invalid under the commerce clause. As a consequence, it urges that the Appellate Division erred when petitioner contends, it applied a balancing of interests test— weighing the effect on interstate commerce against local benefit — and upheld the commissioner’s denial of the opportunity to petitioner to distribute milk at wholesale in Richmond County.

There is unquestioned authority, on which petitioner relies, for the proposition that legislation enacted solely for the protection of local economic interests by the restriction of competition from without the State is inherently unconstitutional. Thus, in Baldwin v G. A. F. Seelig (294 US 511) the Supreme Court held invalid a New York regulation which prohibited the sale of milk imported from other States, there Vermont, unless the purchase price paid to the out-of-State farmer was at least equal to that paid to New York farmers. The regulation, which the Supreme Court in a subsequent case described as "an enactment aimed solely at interstate commerce attempting to affect and regulate the price to be paid for milk in a sister state” (Milk Bd. v Eisenberg Co., 306 US 346, 353, supra), was denounced as a tariff barrier hostile to the national economic solidarity.

"The argument is pressed upon us, however, that the end to be served by the Milk Control Act is something more than the economic welfare of the farmers or of any other class or classes. The end to be served is the maintenance of a regular and adequate supply of pure and wholesome milk, the supply being put in jeopardy when the farmers of the state are unable to earn a living income. Nebbia v. New York, supra. Price security, we are told, is only a special form of sanitary security; the economic motive is secondary and subordinate; the state intervenes to make its inhabitants healthy, and not to make them rich. On that assumption we are asked to say that intervention will be upheld as a valid exercise by the state of its internal police power, though there is an incidental obstruction to commerce between one state and another. This would be to eat up the rule under the guise of an exception. Economic welfare is always related to health, for there can be no health if men are starving. Let such an exception be admitted, and all that a state will have to do in times of stress and strain is to say that its farmers and merchants and workmen must be protected against competition from without, lest they go upon the poor relief lists or perish altogether. To give entrance to that excuse would be to invite a speedy end of our national solidarity. The Constitution was framed under the dominion of a political philosophy less parochial in range. It was framed upon the theory that the peoples of the several states must sink or swim together, and that in the long run prosperity and salvation are in union and not division.” (Baldwin v G. A. F. Seelig, 294 US 511, 522-523, supra.)

Fourteen years later Hood & Sons v Du Mond (336 US 525) involved the denial under section 258-c of the Agriculture and Markets Law of a license sought by a Massachusetts corporation for construction in New York of a milk receiving depot at which raw milk would be collected for shipment to Boston. Invalidating the denial of license the Supreme Court found that it had been "for the avowed purpose and with the practical effect of curtailing the volume of interstate commerce to aid local economic interests” (336 US, pp 530-531; emphasis added).

Similarly in A & P Tea Co. v Cottrell (424 US 366) the court struck down the denial of a Louisiana milk producer’s permit to distribute in Mississippi milk products from Louisiana, which denial was predicated on the absence of a reciprocity agreement with respect to sales of milk between the States of Louisiana and Mississippi, action prompted by an evident concern for the economic welfare of milk dealers in the regulating State. Applying a balance of interests test, the court found unconstitutional the total prohibition of entry of foreign milk used as a weapon to force a sister State into a reciprocity agreement.

Each of the cases discussed, as well as others also relied on by petitioner, involved State action that was found to have had as its avowed purpose the exclusion of competition from out of State for the protection of the economic well-being of the milk industry within the State. Additionally, in the Baldwin and A & P Tea Co. cases the challenged action sought to affect, and, thus in a degree significantly to control, the commerce in milk in a State other than the regulating State. In Baldwin, it was New York’s intention to affect commerce in milk in Vermont; in A & P Tea Co. it was Louisiana’s intention to affect commerce in milk in Mississippi.

Quite a different situation is presented by the case now before us. Of cardinal and distinguishing significance, which petitioner would have us overlook, is the fact that the commissioner’s denial of the license sought by petitioner did not have as its objective the economic protection of the milk industry of New York State, or even that of the County of Richmond. The commissioner’s concern in this instance was addressed rather to the maintenance of the existing "balanced milk distribution structure”, and particularly that portion of the present distribution system which provides "service on retail home delivery routes and service to small volume wholesale customers,” the small outlets and the mom and pop stores, which individually and collectively serve consumer needs not met by supermarkets and warehouse-type outlets. "The public interest requires that a balanced milk distribution structure be maintained in the market, so that service on retail home delivery routes and service to small volume wholesale customers is readily available.” Because petitioner’s interest is in distribution only through supermarkets and wholesale outlets, its entry into Richmond County would not contribute to the maintenance of such a balanced distribution system or provide services equivalent to those now available to the consumers. Thus, the denial of license here is not for the benefit of the dealers and distributors presently serving the market, but for the protection of the welfare of the customers, in the public interest. Although it may be assumed that the denial of a license to a new supplier seeking to break into the market area will incidentally provide a measure of economic protection to businesses already operating within the existing system (whether engaged in interstate or intrastate commerce), this intermediate consequence should not serve to abrogate the ultimate, legitimate objective of preserving a distribution system necessary to serve the varied needs of milk consumers in Richmond County, when economic protection of the local industry was not the purpose which the denial sought to accomplish.

The possibility of incidental economic benefit to the present milk industry should not be fatal to the validity of State regulation for consumer protection particularly when, as here, the determination implementing the objective was not dependent on the fact that petitioner’s product, if permitted, would be shipped from an out-of-State source. Thus — and closely related to the absence of a motive to protect local industry— the denial of petitioner’s application was not in pursuit of an exclusion of or discrimination against competition originating without the State (cf. City of Philadelphia v New Jersey, 437 US 617). So far as appears, petitioner’s status as a New Jersey corporation proposing to ship milk from outside the State into the metropolitan New York area was in no way a factor on which the challenged determination was grounded. No prohibition of goods traveling across State borders was sought to be accomplished; the restriction was only against the particular method of distribution of milk in Richmond County, whether the milk came from within or without the State. Nothing suggests that the negative response petitioner’s application received would have been any different had the applicant been a New York wholesaler seeking to distribute milk produced and processed within New York. The fact that the denial of the application resulted in exclusion from the Richmond County market of milk which would have been shipped in interstate commerce was only a happenstance occasioned by the identity of this applicant; it was not the raison d’etre of the commissioner’s action. There was testimony that at least one supplier presently operating in Richmond County is, like petitioner, based in New Jersey. Petitioner itself is licensed and conducts extensive business in New York, engaged as it is in wholesale distribution of milk or milk products in most of the counties of the State. (Cf. Exxon Corp. v Governor of Md., 437 US 117, 129.)

Section 258-c of the Agriculture and Markets Law on its face does not discriminate with respect to the activities of intrastate and out-of-State suppliers as tending to a destructive competition in a market already adequately served, on the basis of which licensing may be withheld. No reference is made in the statute to the source of the competition, whether from within the State or without. That the absence of such a distinction is a significant factor in viewing applications of the statute adverse to an out-of-State dealer, see Panhandle Co. v Michigan Comm. (341 US 329, 337). Moreover, and equally significant, nothing in the record indicates that the commissioner’s application of the statute in this instance or in general has been other than evenhanded in treatment of interstate and intrastate commerce alike.

Finally there is no suggestion — and could be none — that the statute or its application to petitioner represents any attempt at extraterritorial control of trade or commerce. Unlike Baldwin (294 US 511, supra) and A & P Tea Co. (424 US 366, supra) there is here no aspiration to affect or regulate the milk industry outside the boundaries of New York. In Baldwin the intention and consequence of the New York regulation was to maintain the level of prices paid for milk in Vermont. In A & P Tea Co. the intention and consequence of Louisiana’s regulation was to open the markets of Mississippi to Louisiana milk. Unlike Hood, in which the result of New York regulation would have been to interfere with the supply of milk to Boston, there is here no demonstrated impact on a milk market outside the borders of New York State. In the present instance, neither by intention nor by consequence, by exclusionary requirement or by enticement, is there any demonstrated influence on the sale of milk in New Jersey or in any other State. The denial of distributor’s license under section 258-c focuses entirely on the community sought to be served by the applicant and on the protection of the present balanced milk distribution structure for comsumer benefit.

We recognize that the denial of this New Jersey petitioner’s application to distribute milk on a wholesale basis in Richmond County has some incidental effect on interstate commerce. Balancing this incidental impact against the interest of the State of New York in protecting milk comsumers in Richmond County, however, we conclude that where the purpose and goal of the restriction employed is consumer protection and not the economic well-being of the present milk industry, and the means chosen does not involve an attempt to control commerce in another State or otherwise to produce an extraterritorial effect and does not operate to discriminate against or place an embargo on interstate commerce, the obvious local interest at stake outweighs whatever national interest there might be in the prevention of the State restrictions (Cities Serv. Co. v Peerless Co., 340 US 179, 186-187). In the analysis most recently articulated by the Supreme Court in A & P Tea Co. v Cottrell (424 US 366, 371-372, supra), if a court finds that a challenged exercise of local power serves to further a legitimate local interest but simultaneously burdens interstate commerce, it is confronted with a problem of balance. The general rule which then becomes applicable can be phrased as follows (424 US, pp 371-372): "Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. * * * If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities.” (Cf. City of Philadelphia v New Jersey, 437 US 617, supra.) We conclude that the denial of petitioner’s application for an extended license in the present instance passes this test.

One further word should be written with respect to Hood & Sons v Du Mond (336 US 525, supra), a case heavily relied on by petitioner. Examination of the record in that case, and particularly the findings of fact and conclusion of the then Commissioner of Agriculture and Markets, reveals that the concern there was wholly with protection for local milk dealers; there was no aspect of attention to consumer protection, the motivating objective in the present case. The testimony before the commissioner was as to possible shortages of milk supply to the local dealers rather than to consumers. The commissioner concluded that the three milk plants near the site of Hood’s proposed new plant had "the capacity to handle more milk than they are now handling”, and "that one of the factors affecting the economy of operating county milk plants, is the volume of milk handled, * * * 'In each case the volume of milk received at the individual plants was by far the most important factor affecting the cost per 100 pounds.’ ” The summary conclusion was

"If applicant is permitted to equip and operate another milk plant in this territory, and to take on producers now delivering to plants other than those which it operates, it will tend to reduce the volume of milk received at the plants which lose those producers, and will tend to increase the cost of handling milk in those plants.

"If applicant takes producers now delivering milk to local markets such as Troy, it will have a tendency to deprive such markets of a supply needed during the short season.” Thus, the focus of the commissioner’s attention was exclusively on the adverse impact which the erection of a new plant in the area would have on the existing milk plants. Baldwin had previously established that economic disadvantage generally to the milk industry could not be accepted as justification for burdening interstate commerce, even though it could be argued that "the maintenance of a regular and adequate supply of pure and wholesome milk” (294 US, p 523, supra) might thereby be put in jeopardy. Thus, economic protection of milk dealers, the objective of the denial of the license in Hood, would not support the State regulation.

One looks in vain in Hood for any translation of economic disadvantage to dealers into injury to customers. The commissioner’s determination does not mention consumers; the opinions in our court (297 NY 209) and in the Supreme Court (336 US 525) do not mention or address the subject of consequences to consumers or consumer protection. Thus, it is entirely understandable that the Supreme Court there concluded that the restriction was (p 530) "imposed for the avowed purpose and with the practical effect of curtailing the volume of interstate commerce to aid local economic interests.” It is determinative that in the present case, the objective of the commissioner’s action was the maintenance of a balanced milk distribution structure for the protection of the consumer-public, not the erection of parochial barriers to safeguard the economic well-being of local dealers. Additionally, in Hood the denial of the desired license would have had the inevitable extraterritorial effect of interfering with the distribution of milk in the Boston area, a factor of out-of-State impact for which there has been no demonstrated counterpart in the present case.

For the reasons stated, the judgment of the Appellate Division should be affirmed, with costs.

Jasen, J.

(dissenting). I cannot agree with the majority’s conclusion that the commissioner’s denial of a license to permit appellant to serve wholesale milk dealers in Richmond County did not offend the commerce clause of the United States Constitution. (Art I, § 8, subd 3.)

No one will deny the authority of each State to regulate, pursuant to its police power, intrastate business for the protection of its citizens’ health, safety, morals and general welfare, notwithstanding that such regulation effects an incidental burden upon interstate commerce. (Baldwin v G. A. F. Seelig, 294 US 511, 512.) Provided a State statute "regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental”, the Supreme Court has recently observed, "it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.” (A & P Tea Co. v Cottrell, 424 US 366, 371-372, quoting Pike v Bruce Church, Inc., 397 US 137, 142.)

Clearly, however, before the balancing approach advocated by the court in A & P Tea Co. may be employed to determine the constitutionality of a State statute affecting interstate commerce, there must be a showing that the challenged statute effectuates a "legitimate local public interest”. While, as the majority correctly notes, the milk industry is an appropriate subject for regulation under the police power of the State (Nebbia v New York, 291 US 502), distinction has long been made between State legislation designed to foster public health and safety, and legislation intended to insulate local inhabitants from unfavorable economic competition attributable to interstate commerce. (E.g., Hood & Sons v Du Mond, 336 US 525; Milk Bd. v Eisenberg Co., 306 US 346; Baldwin v G. A. F. Seelig, 294 US 511, supra.)

In this regard, the Supreme Court has on a previous occasion, in Hood & Sons v Du Mond (supra), held unconstitutional, as applied, the very same statutory provision at issue today. In so doing, the court made clear that a State may not enact legislation burdening interstate commerce under the guise of a health measure for the true purpose of suppressing competition. (336 US, at p 538, supra.) Yet, the majority seeks to distinguish this case upon the theory that the constitutional infirmity in Hood stemmed from the fact that the commissioner premised his license denial upon a finding that operation of an additional milk receiving plant at the requested location would occasion the reception of a lower volume of milk by existing area plants, resulting in a decrease in operational efficiency — an economic, rather than health-related, interest. In marked contrast, maintains the majority, stands the present case, in which the commissioner premised his license denial not upon fear of the possibly debilitating effect competition might work upon the milk industry, but upon concern for the consumer. This concern for the consumer is alleged to have been brought about by the nature of appellant’s business — the distribution of milk exclusively to supermarkets and wholesale outlets — which, in the commissioner’s judgment, would not contribute to a balanced milk distribution system. For this reason, the majority concludes that the commissioner’s decision was "not for the benefit of the dealers and distributors presently serving the market, but for the protection of the welfare of the consumers, in the public interest” (p 226).

I do not find this distinction persuasive. At the root of the commissioner’s rationale lies the basic fear that appellant’s entrance into the Richmond County milk market might, through competition, jeopardize the continued existence of milk distributors who service small volume wholesale customers, as well as making retail home deliveries necessary for consumer distribution. In my opinion, this reasoning constitutes nothing more than a subtle variant of the bootstrap argument that regulation of competition — an impermissible local interest — will in itself contribute to health — a permissible local interest. Needless to say, the Supreme Court has consistently rejected this argument. (See, e.g., Hood & Sons v Du Mond, 336 US 525, 538, supra; Baldwin v G. A. F. Seelig, 294 US 511, 522-523, supra; Buck v Kuykendall, 267 US 307, 315-316.) Particularly appropriate is Baldwin v G. A. F. Seelig (supra, at pp 522-523), from which the majority quotes the following (at p 224): "The argument is pressed upon us, however, that the end to be served by the Milk Control Act is something more than the economic welfare of the farmers or of any other class or classes. The end to be served is the maintenance of a regular and adequate supply of pure and wholesome milk, the supply being put in jeopardy when the farmers of the state are unable to earn a living income. Nebbia v. New York, supra. Price security, we are told, is only a special form of sanitary security; the economic motive is secondary and subordinate; the state intervenes to make its inhabitants healthy, and not to make them rich. On that assumption we are asked to say that intervention will be upheld as a valid exercise by the state of its- internal police power, though there is an incidental obstruction to commerce between one state and another. This would be to eat up the rule under the guise of an exception.”

In my opinion, this admonition is equally applicable to the present case. To hold section 258-c of the Agriculture and Markets Law constitutional, as applied would be to burden interstate commerce to effectuate a primarily economic objective under the guise of a health measure. For this reason, I would reverse the judgment of the Appellate Division and declare section 258-c of the Agriculture and Markets Law unconstitutional, as applied.

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

Judgment affirmed.

      .(US Const, art I, § 8, subd 3.)

      .Section 258-c of the Agriculture and Markets Law, insofar as relevant, provides: "No license shall be denied to a person not now engaged in business as a milk dealer, or for the continuation of a now existing business, and no license shall be denied to authorize the extension of an existing business by the operation of an additional plant or other new additional facility, unless the commissioner finds by a preponderance of the evidence, after due notice and opportunity of hearing to the applicant or licensee, one or more of the following: (1) that the applicant is not qualified by character or experience or financial responsibility or equipment properly to conduct the proposed business * * * (2) that the issuance of the license will tend to a destructive competition in a market already adequately served; or (3) that the issuance of the license is not in the public interest.”

      .A related conclusion by the commissioner that "the market is already adequately served” is not challenged by petitioner.

      .No contention is advanced by petitioner that the protection the commissioner seeks to accord the milk distribution system in Richmond County could have been promoted by any alternative means having a lesser impact on interstate activities.


source: Caselaw Access Project

author: Chief Judge Breitel.

license: Public Domain

text:
    Mary Simonds, Respondent, v Reva B. Simonds, Individually and as Executrix of Frederick L. Simonds, Deceased, Appellant.
    Argued May 31, 1978;
    decided July 11, 1978

      POINTS OF COUNSEL

      Philip D. O’Donnell for appellant.
    I. A constructive trust may not be imposed upon proceeds of life insurance on husband’s life in hands of beneficiary at instance of former wife, in absence of proof of beneficiary’s wrongdoing. (Sharp v Kosmalski, 40 NY2d 119; Locomotive Engrs. Mut. Life & Acc. Ins. Assn. v Locke, 251 App Div 146, 277 NY 584; Stokes v Equitable Life Assur. Soc. of U. S., 46 AD2d 614; Saulia v Saulia, 31 AD2d 640; Fischer v Wirth, 38 AD2d 611; Moftiz v Moftiz, 50 AD2d 901; Hunnell v Hunnell, 45 AD2d 521.) II. There is no legal justification sufficient to support a finding that the plaintiff has a "vested interest” in any insurance policy which might arise in the future. (Locomotive Engrs. Mut. Life & Acc. Ins. Assn. v Locke, 251 App Div 146, 277 NY 584; Ehrlich v Cohn, 1 AD2d 1004.)

      Carl G. Scalise for respondent.
    I. Plaintiff has a vested interest in proceeds of insurance policies by virtue of separation agreement entered into between plaintiff and decedent. (Stronge v Knights of Pythias, 189 NY 346; Locomotive Engrs. Mut. Life & Acc. Ins. Assn. v Locke, 251 App Div 146; Ehrlich v Cohn, 1 AD2d 1004; Zies v New York Life Ins. Co., 237 App Div 367; Salinas v Salinas, 187 Misc 509, 271 App Div 917.) II. The trial court properly imposed a constructive trust on proceeds on insurance policies where the plaintiff had a vested interest in the policies. (Beatty v Guggenheim Exploration Co., 225 NY 380; Lengel v Lengel, 86 Misc 2d 460; Miller v Schloss, 218 NY 400.)
   OPINION OF THE COURT

Chief Judge Breitel.

Plaintiff Mary Simonds, decedent’s first wife, seeks to impress a constructive trust on proceeds of insurance policies on decedent’s life. The proceeds had been paid to the named beneficiaries, defendants Reva Simonds, decedent’s second wife, and their daughter Gayle. Plaintiff, however, asserts as superior an equitable interest arising out of a provision in her separation agreement with decedent. Special Term granted partial summary judgment to plaintiff and impressed a constructive trust to the extent of $7,000 plus interest against proceeds of a policy naming the second wife as beneficiary, and the Appellate Division affirmed. Defendant Reva Simonds, the second wife, appeals.

The separation agreement required the husband to maintain in effect, with the wife as beneficiary to the extent of $7,000, existing life insurance policies or, if the policies were to be canceled or to lapse, insurance policies of equal value. The issue is whether that provision entitles the first wife to impress a constructive trust on proceeds of insurance policies subsequently issued, despite the husband’s failure to name her as the beneficiary on any substitute policies once the original life insurance policies had lapsed.

There should be an affirmance. The separation agreement vested in the first wife an equitable right in the then existing policies. Decedent’s substitution of policies could not deprive the first wife of her equitable interest, which was then transferred to the new policies. Since the proceeds of the substituted policies have been paid to decedent’s second wife, whose interest in the policies is subordinate to plaintiff’s, a constructive trust may be imposed.

On March 9, 1960, decedent Frederick Simonds and his wife of 14 years, plaintiff Mary Simonds, entered into a separation agreement which, on March 31, 1960, was incorporated into an Illinois divorce decree granted to plaintiff on grounds of desertion. The agreement provided, somewhat inartfully: "The husband agrees that he will keep all of the policies of Insurance now in full force and effect on his life. Said policies now being in the sum of $21,000.00 and the Husband further agrees that the Wife shall be the beneficiary of said policies in an amount not less than $7,000.00 and the Husband further agrees that he shall pay any and all premiums necessary to maintain such policies of Insurance and if for any reason any of them now existing the policies shall be cancelled or be caused to lapse. He shall procure additional insurance in an amount equal to the face value of the policies having been cancelled or caused to lapse.” Thus, the husband was to maintain, somehow, at least $7,000 of life insurance for the benefit of his first wife as a named beneficiary.

On May 26, 1960, less than two months after the divorce, decedent husband married defendant Reva Simonds. Defendant Gayle Simonds was born to the couple shortly thereafter.

Sometime after the separation agreement was signed, the then existing insurance policies were apparently canceled or permitted to lapse. It does not appear from the record why, how, or when this happened, but the policies were not extant at the time of decedent husband’s death on August 1, 1971. In the interim, however, decedent has acquired three other life insurance policies, totaling over $55,000, none of which named plaintiff as a beneficiary. At his death, decedent had one policy in the amount of $16,138.83 originally issued in 1962 by Metropolitan Life Insurance Company, a second policy for $34,000 issued in 1967 through decedent’s employer by Travelers Insurance Company, and a third policy for $5,566 issued in 1962 by the Equitable Life Assurance Society of Iowa. The first two policies named Reva Simonds, defendant’s second wife, as beneficiary, and the third policy named their daughter. Hence, at the time of decedent’s death he had continuously violated the separation agreement by maintaining no life insurance naming the first wife as a beneficiary.

The first wife, on March 11, 1972, brought an action against the second wife for conversion of $7,000 and to recover $13,-600 in back alimony payments. This action was dismissed, essentially on the ground that the causes of action alleged could properly be brought only against decedent’s estate, not against the second wife. The estate, however, is insolvent.

Subsequently, the first wife brought this action against both the second wife and the daughter, seeking to impose a constructive trust on the insurance proceeds to the extent of $7,000. A second cause of action, dealing with alimony arrears, is not involved on this appeal. Special Term granted partial summary judgment to the first wife and imposed a constructive trust on the proceeds in the hands of the second wife. A unanimous Appellate Division affirmed in a thoughtful and scholarly opinion by Mr. Justice Richard D. Simons.

There is no question that decedent breached his obligation to maintain life insurance with his first wife as beneficiary. Consequently, the first wife would of course be entitled to maintain an action for breach against the estate. The estate’s insolvency, however, would make such an action fruitless. Thus, the controversy revolves around plantifFs right, in equity, to recover $7,000 of the insurance proceeds.

Born out of the extreme rigidity of the early common law, equity in its origins drew heavily on Roman law, where equitable notions had long been accepted (see 1 Pomeroy, Equity Jurisprudence [5th ed], §§ 2-29). "Its great underlying principles, which are the constant sources, the never-failing roots, of its particular rules, are unquestionably principles of right, justice, and morality, so far as the same can become the elements of a positive human jurisprudence” (id., § 67, at p 90). Law without principle is not law; law without justice is of limited value. Since adherence to principles of "law” does not invariably produce justice, equity is necessary (Aristotle, Nichomachean Ethics, Book V, ch 9, pp 1019-1020 [McKeon, ed Oxford: Clarendon Press, 1941]). Equity arose to soften the impact of legal formalisms; to evolve formalisms narrowing the broad scope of equity is to defeat its essential purpose.

Whatever the legal rights between insurer and insured, the separation agreement vested in the first wife an equitable interest in the insurance policies then in force. An agreement for sufficient consideration, including a separation agreement, to maintain a claimant as a beneficiary of a life insurance policy vests in the claimant an equitable interest in the policies designated (Stronge v Knights of Pythias, 189 NY 346, esp at pp 351-352 [Hiscock, J.]; Salinas v Salinas, 187 Misc 509, 515 [Shientag, J.], affd 271 App div 917; see Ferro v Bologna, 31 NY2d 30, 35). This interest is superior to that of a named beneficiary who has given no consideration, notwithstanding policy provisions permitting the insured to change the designated beneficiary freely.

This is not to say that an insurance company may not rely on the insured’s designation of a beneficiary. None of this opinion bears on the rights or responsibilities of the insurer in law or in equity.

Obviously, the policies now at issue are not the same polices in existence at the time of the separation agreement. But it has been held that mere substitution of policies, or even substitution of insurance companies, does not defeat the equitable interest of one who has given sufficient consideration for a promise to be maintained as beneficiary under an insurance policy (see Locomotive Engrs. Mut. Life & Acc. Ins. Assn. v Locke, 251 App Div 146, 149 [Lewis, J.], affd 277 NY 584; see, also, Dixon v Dixon, 184 So 2d 478, 481 [Fla], cert den 194 So 2d 897). The persistence of the promisee’s equitable interest is all the more evident where the agreement expressly provides for a change in policies, and in effect provides further that the promisee’s right shall attach to the new policies.

For a certainty, the first wife’s equitable interest would be easier to trace if the new policies were quid pro quo replacements for the original policies. The record does not reveal whether this was so. But inability to trace plaintiff's equitable rights precisely should not require that they not be recognized, much as in the instance of damages difficult to prove (cf., e.g., Randall-Smith v 43rd St. Estates Corp., 17 NY2d 99, 105-106). The separation agreement provides nexus between plaintiff’s rights and the later acquired policies. The later policies were expressly contemplated by the parties, and it was agreed that plaintiff would have an interest in them. No reason in equity appears for denying plaintiff that interest, so long as no one who has given value for the policies or otherwise suffered a detriment is involved. The second wife’s innocence does not offset the wrong by the now deceased husband.

The conclusion is an application of the general rule that equity regards as done that which should have been done (2 Pomeroy, Equity Jurisprudence [5th ed], § 364; see, e.g., Wallace v First Trust Co. of Albany, 251 App Div 253, 256). Thus, if an insured, upon lapse or cancellation of insurance, followed by replacement with new insurance, has a contractual obligation to designate a particular person as beneficiary, equity will consider the obligee as a beneficiary.

In this case, then, the first wife’s interest in the original policies extended as well to the later acquired policies. The husband, upon lapse or cancellation of the earlier policies, had by virtue of the separation agreement an obligation to name her as beneficiary on the later policies, an obligation enforceable in equity despite the husband’s failure to comply with the terms of the separation agreement. Due to the husband’s failure to do what he should have done, the first wife acquired not only a right at law to sue his estate for breach of contract, a right now worthless, but also an equitable right in the policies, a right which, upon the husband’s death, attached to the proceeds (cf. Salinas v Salinas, 187 Misc 509, 515, supra; MacDonald v Conservative Life Ins. Co., 292 Mich 182, 186-188).

And, since the first wife was entitled to $7,000 of the insurance proceeds at the time of the husband’s death, she is no less entitled because the proceeds have already been converted by being paid, erroneously, to the named beneficiaries (see Lengel v Lengel, 86 Misc 2d 460, 465-466; Richards v Richards, 58 Wis 2d 290, 293-294; cf. Hundertmark v Hundertmark, 372 Pa 138, 145-146). Her remedy is imposition of a constructive trust.

In the words of Judge Cardozo, "[a] constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee” (Beatty v Guggenheim Exploration Co., 225 NY 380, 386). Thus, a constructive trust is an equitable remedy. It is perhaps more different from an express trust than it is similar (5 Scott, Trusts [3d ed], § 461). As put so well by Scott and restated at the Appellate Division, "[the constructive trustee] is not compelled to convey the property because he is a constructive trustee; it is because he can be compelled to convey it that he is a constructive trustee” (id., § 462, at p 3413).

More precise definitions of a constructive trust have been termed inadequate because of the failure to recognize the broad scope of constructive trust doctrine (id., at p 3412). As another leading scholar has said of constructive trusts, "[t]he Court does not restrict itself by describing all the specific forms of inequitable holding which will move it to grant relief, but rather reserves freedom to apply this remedy to whatever knavery human ingenuity can invent” (Bogert, Trusts and Trustees [2d ed rev, 1978], § 471, at p 29).

Four factors were posited in Sharp v Kosmalski (40 NY2d 119, 121). Although the factors are useful in many cases contructive trust doctrine is not rigidly limited. For a single example, one who wrongfully prevents a testator from executing a new will eliminating him as beneficiary will be held as a constructive trustee even in the absence of a confidential or fiduciary relation, a promise by the "trustee”, and a transfer in reliance by the testator (see, e.g., Latham v Father Divine, 299 NY 22, 26-27). As then Judge Desmond said in response to the argument that a breach of a promise to the testator was necessary for imposition of a constructive trust (at p 27), "[a] constructive trust will be erected whenever necessary to satisfy the demands of justice * * * [I]ts applicability is limited only by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what should not belong to them”.

It so happens, as an added argument, if it were necessary, that the four factors enumerated in Sharp v Kosmalski are perceptible in this case: a promise, a transfer in reliance on the promise, the fiduciary relation between decedent and his first wife, and the "unjust enrichment” of the second wife. Because decedent and plaintiff were husband and wife, there is a duty of fairness in financial matters extending even past the contemplated separation of the spouses. Hence, a separation agreement based on one party’s misrepresentation of financial condition is voidable (see Riemer v Riemer, 31 AD2d 482, 485, and cases cited affid 31 NY2d 881). A similar rule applies in Illinois, where the instant separation agreement was made (see Bellow v Bellow, 40 Ill App 3d 442, 445-446; cf. Lagen v Lagen, 14 Ill App 3d 74, 79-80; Garmisa v Garmisa, 4 Ill App 3d 411, esp at pp 422-424). Thus, at the time of the separation agreement decedent and plaintiff remained in a confidential or fiduciary relationship.

It is agreed that the purpose of the constructive trust is prevention of unjust enrichment (Sharp v Kosmalski, 40 NY2d 119, 123, supra; Restatement, Restitution, § 160; 5 Scott, Trusts [3d ed], § 462.2).

Unjust enrichment, however, does not require the performance of any wrongful act by the one enriched (Lengel v Lengel, 86 Misc 2d 460, 465-466; supra; Richards v Richards, 58 Wis 2d 290, 293-294, supra; see, generally, 5 Scott, Trusts [3d ed], § 462.2). Innocent parties may frequently be unjustly enriched. What is required, generally, is that a party hold property "under such circumstances that in equity and good conscience he ought not to retain it” (Miller v Schloss, 218 NY 400, 407; see Sharp v Kosmalski, 40 NY2d 119, 123, supra; Sinclair v Purdy, 235 NY 245, 253-254). A bona fide purchaser of property upon which a constructive trust would otherwise be imposed takes free of the constructive trust, but a gratuitous donee, however innocent, does not (see 5 Scott, Trusts [3d ed], §§ 468, 474; Restatement, Restitution, § 172).

The unjust enrichment in this case is manifest. At a time when decedent was, certainly, anxious to remarry, he entered into a separation agreement with his wife of 14 years. As part of the agreement, he promised to maintain $7,000 in life insurance with the first wife as beneficiary. Later he broke his promise, and died with insurance policies naming only the second wife and daughter as beneficiaries. They have collected the proceeds, amounting to more than $55,000, while the first wife has collected nothing. Had the husband kept his promise, the beneficiaries would have collectd $7,000 less in proceeds. To that extent, the beneficiaries have been unjustly enriched, and the proceeds should be subjected to a constructive trust.

Moreover, the second wife’s complaint, if that it be, over the distinction drawn below between her daughter and herself is to no avail. The first wife’s equitable interest attached to all the substituted insurance policies, whether they named the second wife or the daughter as beneficiary. At the time each substituted policy was issued, decedent had an obligation to make the first wife a beneficiary. None of the named beneficiaries can escape the superior equitable interest of the first wife by pointing to other policies. True, plaintiff might also be entitled to impose a constructive trust on the policy naming the daughter as beneficiary. But that provides no cause for prorating the constructive trust. The beneficiaries are jointly and severally liable, if the analogy applicable to express trusts be applied (3 Scott, Trusts [3d ed], §§ 258-258.3). Plaintiff’s choice not to appeal the dismissal against the daughter should not bar her from collecting in full against the second wife, who may have a right of contribution against the daughter, a question not before the court and not passed on (cf. id.).

The issues in this case should not generate significant controversy. The action is in equity, and the equities are clear. True, some courts have decided the issues differently (Rindels v Prudential Life Ins. Co. of Amer., 83 NM 181; Lock v Lock, 8 Ariz App 138, 143; see, also, Larson v Larson, 226 Ga 209, 211). Those cases, however, rely heavily on formalisms and too little on basic equitable principles, long established in Anglo-American law and in this State and especially relevant when family transactions are involved. "A court of equity in decreeing a constructive trust is bound by no unyielding formula. The equity of the transaction must shape the measure of relief’ (Beatty v Guggenheim Exploration Co., 225 NY 380, 389 [Cardozo, J.], supra).

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

Judges Jasen, Gabrielli, Jones, Wachtler, Fuchsberg and Cooke concur.

Order affirmed.

      Special Term dismissed the cause of action against defendant Gayle Simonds. No appeal of that dismissal was taken to the Appellate Division.


author: Wachtler, J.

text:
    The People of the State of New York, Appellant, v Frank Coppa, Respondent.
    Argued May 5, 1978;
    decided July 11, 1978

      POINTS OF COUNSEL

      Eugene Gold, District Attorney (Peter A. Norling of counsel), for appellant.
    I. The court below erred in dismissing the appeal. (People v Rossi, 5 NY2d 396; People v Reed, 276 NY 5; People v Mackell, 40 NY2d 59; People v De Courcy, 8 NY2d 192; People v La Ruffa, 37 NY2d 58, 423 US 917; Matter of Napoli v Supreme Ct. of State of N. Y., 40 AD2d 159, 33 NY2d 980, 417 US 947.) II. The trial court erred in dismissing the indictment for failure of the People to establish a prima facie case in their opening address. (People v Brown, 40 NY2d 381; People v Levine, 297 NY 144; People v McLaughlin, 291 NY 480; People v Romano, 279 NY 392; People ex rel. Hirschberg v Orange County Ct., 271 NY 151; People v Boone, 22 NY2d 476; People v Benham, 160 NY 402; People v Oakley, 10 AD2d 457.)

      Paul E. Lemole for respondent, precluded.
   OPINION OF THE COURT

Wachtler, J.

The People appeal from an order of the Appellate Division which dismissed an appeal taken to that court. The Appellate Division held that the People may not appeal to an intermediate appellate court when the trial court, relying on CPL 210.20, dismisses an indictment on the ground that the prosecutor failed to state a prima facie case during his opening statement to the jury.

In 1974 a Kings County Grand Jury returned an indictment charging the defendant with two counts of grand larceny in the second degree for allegedly selling worthless bonds and for defrauding the purchaser of promissory notes worth $1,500. The case came to trial in June of 1976. After a jury had been selected and sworn both sides made opening statements. During the People’s opening the prosecutor read the indictment and briefly commented on the nature of the People’s case and proof. When both sides had completed their opening statements defense counsel moved to dismiss the indictment claiming that the prosecutor had not stated a prima facie case in his opening to the jury. After hearing argument on the motion the court reserved decision and adjourned the case.

The following morning the prosecutor argued that an order dismissing the indictment on this ground may not be appeal-able and the court held an in camera conference off the record. Later, on the record, the court indicated its intention to dismiss the indictment. The court noted however that this was being done under sections of the law which preserved the People’s right to appeal. The court also noted that defense counsel had agreed to stipulate that the defendant would not "avail” himself of the double jeopardy defense if the order dismissing the indictment is reversed on appeal. After defense counsel and the defendant personally entered the stipulation on the record, the court dismissed the indictment. The order states that the indictment was dismissed "for the failure of the People in their opening address to the jury to state a prima facie case and pursuant to CPL Secs. 210.20 (1) (h) and (i)”.

The prosecutor appealed to the Appellate Division apparently relying on CPL 450.20 (subd 1) which permits the People to appeal an order dismissing an indictment when the order is "entered pursuant to section * * * 210.20”. The Appellate Division (57 AD2d, at p 192), however, dismissed the appeal for lack of jurisdiction, after determining that the provisions of CPL 210.20 "which the court cited in its order as the basis for the dismissal of the indictment, are completely inapplicable to the factual situation with which it was presented.” The People now appeal to this court from the order dismissing the appeal.

Initially we note that the Appellate Division’s order is appealable to this court. Although not authorized under prior law (see, e.g., People v Zerillo, 200 NY 443, 445-446) the CPL now expressly provides that a party may appeal "to the court of appeals from an order of an intermediate appellate court dismissing an appeal thereto” when, as here, a Judge of the Court of Appeals has granted leave (CPL 470.60, subd 3; see, also, People v Brown, 40 NY2d 381, 385, n 4). Thus the special statutory and constitutional limitations on the Court of Appeals jurisdiction are not in issue on this appeal. We are concerned solely with the jurisdiction of an intermediate appellate court.

In addition, only questions of statutory construction are presented. Although the Supreme Court dismissed the indictment after the trial had commenced, we are not confronted with a claim that double jeopardy principles preclude the People from retrying the defendant if the indictment is restored (see, e.g., People v Brown, supra). As noted, the defendant expressly waived his right to assert such a claim at the time the motion was granted (cf. Menna v New York, 423 US 61, 62, n 2; see, also, United States v Scott, 437 US 82). The only question then is whether the CPL permits the People to appeal the trial court’s order to an intermediate appellate court.

CPL 450.20 (subd 1) allows the People to appeal as a matter of right to an intermediate appellate court from "[a]n order dismissing an accusatory instrument or a count thereof, entered pursuant to section 170.30, 170.50 or 210.20”. Here, as noted, the trial court’s order dismissing the indictment was expressly predicated on CPL 210.20 and thus, on its face, is appealable under CPL 450.20 (subd 1). This, in our view, was sufficient to confer jurisdiction on the Appellate Division to determine the appeal on the merits.

It may be, as the Appellate Division indicated, that the trial court’s reliance on the statute was misplaced. But it does not follow from this that the People’s appeal should be dismissed. Obviously the Legislature did not intend to grant the People the right to appeal only in those cases where the dismissal was proper or arguably proper. Nor did the Legislature intend that the People should be denied appellate relief when the dismissal of the indictment was unauthorized by the statute relied upon. Thus any inquiry as to whether the trial court’s reliance on CPL 210.20 was proper should be considered on the merits. It should not affect the People’s right to appeal.

That is not to say that an appellate court may never "look through” an order to see whether it is what it purports to be. In certain cases (see, e.g., People v Williams, 31 NY2d 151; People v Rainey, 27 NY2d 748; People v Woodruff, 27 NY2d 801) although the order was facially appealable we have dismissed criminal appeals, when the lower court’s decision indicated that its determination was based on the facts or an exercise of discretion and was therefore beyond the scope of our review which in criminal cases is constitutionally and statutorily limited to questions of law unless the death penalty has been imposed (NY Const, art VI, § 3; CPL 450.90, subd 2; 470.35).

However the jurisdiction of intermediate appellate courts is broader than the jurisdiction of this court. They are not limited to reviewing errors of law, but may also reverse or modify on the facts and in the exercise of discretion (CPL 470.15, 470.20; see, also, People v Williams, supra, at p 153). In criminal cases limitations on the right to appeal to an intermediate appellate court are principally designed to insure only that trial of the case is not interrupted by interlocutory appeals (see Matter of Santangello v People, 38 NY2d 536, 538; see, also, Practice Commentary to CPL 450.50, McKinney’s Cons Laws of NY, Book 11 A, p 389). Thus the defendant may only appeal after conviction (CPL 450.10). The People, however, may appeal prior to conviction if the trial court’s order terminates the prosecution (CPL 450.20, subds 1, 2, but see People v Brown, 40 NY2d 381, supra) or has the same practical effect (CPL 450.20, subd 8). On occasion a civil proceeding is commenced to obtain collateral review of a determination made in a pending criminal matter (CPL 10.10, subd 7; see, e.g., Matter of Cunningham v Nadjari, 39 NY2d 314; Matter of State of New York v King, 36 NY2d 59; Matter of Nigrone v Murtagh, 36 NY2d 421). In those cases, of course, an intermediate appellate court may look beyond the face of the order, and dismiss, to insure that the restrictions on interlocutory appeals in criminal cases are not breached.

An order granting a motion to dismiss an indictment does not present this type of jurisdictional impediment. No matter what the ground for dismissal it finally determines the People’s case unless reversed on appeal. Indeed prior to the Criminal Procedure Law the People were authorized, in general terms, to appeal to an intermediate appellate court from any order dismissing an indictment on any ground other than insufficiency of the evidence at trial (Code Crim Pro, § 518, subd 3). Subject to constitutional double jeopardy restrictions the CPL permits the People to appeal to an intermediate appellate court from an order dismissing an indictment under a variety of circumstances, including every instance where the defendant is authorized to move for dismissal (CPL 450.20). The CPL provision is more detailed than the prior statute, but essentially it expresses the same concept. There is no indication that, by rewording the statute, the Legislature intended to curtail the People’s right to at least one appeal when a motion to dismiss the indictment is granted on any ground (see Practice Commentary to CPL 450.20, McKinney’s Cons Laws of NY, Book 11 A, p 380; see, also, Matter of Cunningham v Nadjari, supra at p 317; People v Rosenberg, 45 NY2d 251).

Accordingly, the order of the Appellate Division should be reversed and the appeal remitted to that court for further proceedings consistent with this opinion (CPL 470.60, subd 3; People v Brown, 40 NY2d 381, 385, n 4, supra).

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

Order reversed and the case remitted to the Appellate Division, Second Department, for further proceedings consistent with the opinion herein.


author: Gabrielli, J. Fuchsberg, J.

text:
    The People of the State of New York, Appellant, v Theodore Rosenberg, Respondent.
    Argued June 5, 1978;
    decided July 11, 1978

      POINTS OF COUNSEL

      John F. Keenan, Deputy Attorney-General, Special State Prosecutor (Mark M. Baker and Thomas A. Duffy, Jr., of counsel), for appellant.
    I. The Special Prosecutor’s authority to proceed should be measured by the facts appearing during the course of an investigation and not necessarily by those alleged in any resulting indictment. (People v Rallo, 46 AD2d 518, 39 NY2d 217; Matter of Sussman v New York State Organized Crime Task Force, 39 NY2d 227; Matter of Sigety v Hynes, 38 NY2d 260; Mulroy v Carey, 58 AD2d 207, 43 NY2d 819; Matter of Dondi v Jones, 40 NY2d 8; Blair v United States, 250 US 273; Matter of Cunningham v Nadjari, 39 NY2d 314; People v Sam, 49 AD2d 732; People v Bradick, 16 Misc 2d 1080; People v Casalini, 48 AD2d 805.) II. The mere allegation in an indictment of an apparent corrupt act on the part of a public servant, which act relates to the criminal justice system, is sufficient to confer prosecutorial authority upon the Special Prosecutor. (Matter of Dondi v Jones, 40 NY2d 8.)

      Jeffrey D. Ullman for respondent.
    The Special State Prosecutor is jurisdictionally precluded from conducting further proceedings in connection with the indictment now pending against defendant; alternatively, the indictment must be dismissed for the lack of jurisdiction. (Matter of Dondi v Jones, 40 NY2d 8; People v Sam, 49 AD2d 732; People v Rallo, 46 AD2d 518, 39 NY2d 217; Matter of Moritt v Nadjari, 46 AD2d 784.)
   OPINION OF THE COURT

Gabrielli, J.

The People appeal by permission of an Associate Judge of this court from an order of the Appellate Division granting defendant’s motion, purportedly made pursuant to subdivision 2 of section 149 of the Judiciary Law, seeking to prohibit the Special Prosecutor from continuing the prosecution of defendant Rosenberg for attempted grand larceny in the second degree. For the reasons discussed below, there should be a reversal and a denial of the motion.

The investigation which culminated in this prosecution began when the Special Prosecutor received information indicating that a certain woman was claiming that she could assert improper influence within the criminal justice system, and was offering that influence for sale. Investigators obtained certain evidence incriminating the woman, and subsequently convinced her to serve as an informant. She in turn implicated the law secretary of a Supreme Court Justice, and, finally, that law secretary was also persuaded to co-operate with the investigation.

The investigation resulted in the indictment of defendant Rosenberg and one other for attempted bribery, conspiracy to commit bribery, and attempted grand larceny. The first two counts of the indictment related to the People’s claim that defendant, an attorney, had attempted to corrupt a sitting Judge for the purpose of "fixing” a pending criminal proceeding against a client. The third count was based on the alternate theory that there was in fact no actual bribery attempt, but that defendant had sought to obtain some $37,500 from his client under the false pretense that the money would be used to "fix” his case. That indictment was eventually dismissed, with permission to resubmit the matter to the Grand Jury, when it was determined that there had been certain irregularities in the initial Grand Jury proceedings. The Special Prosecutor then presented the matter to another Grand Jury, which returned the indictment now challenged by defendant. That indictment charges defendant with attempted grand larceny in the second degree, based on the allegation that defendant sought to obtain the money from his client by making false promise of a "fix”.

After the second indictment was handed up, defendant obtained permission from a Justice of the Appellate Division to move in that court to "prohibit” the Special Prosecutor from prosecuting the indictment, purportedly pursuant to subdivision 2 of section 149 of the Judiciary Law, on the ground that the Special Prosecutor lacked the requisite jurisdiction. Additionally, defendant requested such other relief as the court deemed appropriate. Both the Appellate Division and the People construed the application as a motion under subdivision 2 of section 149 of the Judiciary Law seeking either a writ of prohibition or dismissal of the indictment. Accepting defendant’s arguments addressed to the Special Prosecutor’s jurisdiction, the Appellate Division granted an order prohibiting the Special Prosecutor from proceeding on the indictment. Rather than dismissing the indictment, however, the court determined to leave the question of whether further action was appropriate to the local District Attorney.

Before discussing the merits of defendant’s arguments, it is necessary to dispose of a possible challenge to the jurisdiction of this court to entertain this appeal. It is now clear, if it were ever in question, that the People, upon a grant of permission, may appeal to this court from an order of the Appellate Division dismissing an indictment pursuant to a motion made in accordance with subdivision 2 of section 149 of the Judiciary Law, where such an appeal would be permissible from an order of the Appellate Division affirming a dismissal of an indictment by the Supreme Court (see People v Di Falco, 44 NY2d 482; People v Hattemer, 3 NY2d 939). It had been suggested that no appeal lies from an order granting a motion to dismiss brought in the Appellate Division rather than the Supreme Court pursuant to subdivision 2 of section 149, because of a claimed absence of statutory authority for such an appeal. That suggestion is untenable, for it would require this court to give subdivision 2 of section 149 a significance far greater than that intended by the Legislature.

Subdivision 2 of section 149 was enacted solely to remedy what was perceived as the possibility of abuse inherent in the prior law which permitted a defendant who had been indicted by a Grand Jury at an Extraordinary Trial or Special Term of Supreme Court to challenge that indictment at any regular term of the Supreme Court. The effect of the statute was to require any such motion to be made either at the Extraordinary Trial or Special Term from whence the indictment issued or, if permission could be obtained from a Justice of the appropriate Appellate Division, directly in the Appellate Division. It is beyond cavil that if a defendant successfully challenges an indictment at Supreme Court, the People may appeal that dismissal as of right to the Appellate Division (CPL 450.20). If the dismissal is affirmed, the People may then seek permission to appeal that determination to this court (CPL 450.90). The defendant may not deprive the People of their opportunity to appeal to this court from the dismissal of an indictment by the simple stratagem of initially making the motion to dismiss in the Appellate Division rather than at Supreme Court.

It should be noted, however, that a defendant may not seek to appeal to this court from the denial of a motion to dismiss made in the Appellate Division pursuant to subdivision 2 of section 149 of the Judiciary Law (People v Rinaldi, 34 NY2d 846; see Matter of Nigrone v Murtagh, 36 NY2d 421, 425-426; cf. People v Rinaldi, 34 NY2d 843). This is so because a defendant could not have appealed to the Appellate Division from the denial of a motion to dismiss originally made in Supreme Court, there being no statutory authorization for such an appeal. In essence, the mere availability of an opportunity to move for dismissal directly in the Appellate Division does not alter the appealability of the resulting order.

If the present case involved a typical motion to dismiss granted by the Appellate Division pursuant to subdivision 2 of section 149, there would thus be no doubt as to its appealability. However, defendant improperly sought to utilize the device of a subdivision 2 of section 149 motion at the Appellate Division to obtain a remedy which may not be obtained through such a motion. Even more unfortunate is the fact that the Appellate Division granted the improper remedy of prohibition. Subdivision 2 of section 149 of the Judiciary Law speaks only to motions which could have been made in an existing criminal proceeding directly at the Extraordinary Trial or Special Term of Supreme Court. The extraordinary writ of prohibition, however, may not be obtained by motion made in the course of a criminal proceeding. Prohibition is a civil remedy, available only via a civil proceeding brought pursuant to CPLR article 78. Simply stated, a writ of prohibition is not a remedy available by a subdivision 2 of section 149 motion.

That defendant sought and obtained an improper remedy, however, does not defeat the jurisdiction of this court. Such a conclusion would be irrational, for to adopt it would be to allow error compounded to become error invincible. To retain jurisdiction, we need only treat this so-called order of prohibition as what in fact it should have been, an order of dismissal. Since the defendant, in his moving papers, sought either prohibition or any other appropriate remedy, including, of course, dismissal, it cannot be said that the motion was improperly brought, for at least a part of the relief sought was the type available by a subdivision 2 of section 149 motion. The problem, therefore, lies in the fact that the Appellate Division exceeded its powers by purporting to grant relief which it lacked the authority to provide in the particular proceeding before it. Such an error in the form of relief given will not serve to preclude review by this court of an order which will result in termination of prosecution.

Were we to conclude that the Appellate Division were correct in determining that the Special Prosecutor lacked jurisdiction to prosecute this indictment, we would modify the order appealed from to provide for dismissal of the indictment, and remit the case to the Appellate Division for that court to determine whether to exercise its discretionary authority to transfer the matter, albeit not the indictment, to the local District Attorney (see People v Di Falco, 44 NY2d 482, 488, supra). As it is, however, a simple reversal and denial of the motion is appropriate, for the Special Prosecutor does indeed have the authority to prosecute this indictment.

The Special Prosecutor derives his authority from Executive Order No. 58 (9 NYCRR 1.58), which gives him jurisdiction to conduct prosecutions resulting from, inter alia, "any and all acts and omissions * * * by any person * * * in violation of any provision of state or local law and arising out of, relating to or in any way connected with corrupt acts or omissions by a public servant * * * arising out of, relating to or in any way connected with the enforcement of law or administration of criminal justice in the City of New York”.

The instant investigation, indictment, and prosecution, unlike the proceedings challenged in Matter of Dondi v Jones (40 NY2d 8), clearly fall within the ambit of this jurisdictional grant. Defendant contends that he may not be prosecuted by the Special Prosecutor because he is not accused of actually corrupting or attempting to corrupt a public official involved in the administration of the criminal justice system. He would dismiss the involvement of the law secretary in his scheme by suggesting that the law secretary acted only as a conduit of money, as a private individual, and not in his capacity as a public official involved in the administration of the criminal justice system. Defendant argues that in Dondi we held that the crime charged must constitute an actual corruption of the criminal justice system, not merely the appearance of corruption, and that the involvement of a law enforcement official in a scheme connected to the corruption of the criminal justice system will not serve to support an assertion of jurisdiction by the Special Prosecutor to prosecute an indictment which does not charge an actual corruption of that system. So narrow an interpretation of the Special Prosecutor’s jurisdiction has never been suggested by this court, and defendant’s reliance on Dondi is totally misplaced.

In Dondi, we held that the Special Prosecutor lacked jurisdiction to prosecute an attorney who had allegedly offered a police officer a bribe to give perjured testimony at the trial of a civil action. We rejected the theory propounded by the Special Prosecutor that jurisdiction could be founded solely on the fact that the person to be bribed was a public servant involved in the law enforcement system. Rather, we required that the particular act charged as well as a person involved in that act, be sufficiently connected to the administration of criminal justice. In the instant case, there exists a sufficient nexus between the criminal justice system and the crime charged in the indictment to support jurisdiction.

The scheme which defendant is alleged to have participated in reeks of the very type of corruption which led to the appointment of the Special Prosecutor. The use of a law secretary to a Judge to collect money supposedly intended to corrupt the administration of criminal justice is certainly "an act * * * connected with corrupt acts * * * by a public servant * * * arising out of, relating to or in any way connected with the enforcement of law or administration of criminal justice” (9 NYCRR 1.58). Upon this unassailable view, for the Special Prosecutor to retain jurisdiction, it is not necessary that the crime charged must itself constitute a corruption of the public official involved in the criminal justice system. Finally we note that the prosecution of this indictment arising from a crime allegedly committed in 1973 has been scandalously delayed, in part because of the defendant’s procedural maneuvers. The prosecution should be expedited.

Accordingly, the order of the Appellate Division should be reversed and the motion denied.

Fuchsberg, J.

(concurring). We are called upon to determine whether the Attorney-General, acting through a deputy appointed by him as Special Prosecutor by virtue of the authority vested by Executive Order No. 58 (9 NYCRR 1.58), may prosecute an indictment obtained against a lawyer, who, while representing a defendant in a criminal case, is charged with having attempted, with the apparent aid of a law secretary to a Supreme Court Justice, to obtain a sum of money from his client by falsely representing that he could corruptly influence the outcome of the case.

The Appellate Division, Second Department, entertaining defendant’s motion pursuant to subdivision 2 of section 149 of the Judiciary Law, "prohibited” the Special Prosecutor "from taking any further proceedings with respect to the * * * indictment” (58 AD2d 819). Leave to appeal was granted to the Special Prosecutor by a Judge of this court (42 NY2d 1094, 1097).

The threshold question is whether the Appellate Division’s order is appealable. Unlike Matter of Dondi v Jones (40 NY2d 8), where the Special Prosecutor was prohibited from proceeding under an indictment by means of an article 78 proceeding in the nature of prohibition, the defendant here has moved in the pending criminal action.

In noncapital criminal cases, the right of appeal is strictly statutory (NY Const, art VI, § 3, subd b; Matter of Santangello v People, 38 NY2d 536); no appeal lies from any determination in such a case unless there is express statutory authority (Matter of Alphonso C., 38 NY2d 923; People v Reed, 276 NY 5, 10; People v Zerillo, 200 NY 443). But, while we are therefore powerless to fill a void in our appellate statutes (People v Gersewitz, 294 NY 163, 169; cf. People v Mackell, 40 NY2d 59), we are not confined to a "mechanical, literal” reading of the applicable statute (People v Brooks, 34 NY2d 475, 477-478; cf. New York State Bankers Assn. v Albright, 38 NY2d 430, 436-437).

Thus, although the literal language of the Criminal Procedure Law allows an appeal to this court from an order of the Appellate Division only if it was "entered upon an appeal taken to such intermediate appellate court” (CPL 450.90, subd 1), we have held that an order entered by the Appellate Division acting as a court of original instance under subdivision 2 of section 149 of the Judiciary Law is appealable to this court if it would have been appealable had it issued after an appeal to the Appellate Division (People v Di Falco, 44 NY2d 482, 485; People v Rinaldi, 34 NY2d 846; People v Hattemer, 3 NY2d 939). In so deciding, we were impelled by the dictates of history and logic to eschew a formalistic reading of the statute.

That history tells us that prior to 1953 a motion to dismiss an indictment returned at an Extraordinary Term of the Supreme Court could be brought before a regular term of that court anywhere in the State (see, e.g., People v Harris, 182 Misc 787, revd 268 App Div 731, revd 294 NY 424). The opportunity thus presented to engage in forum shopping to obtain dilatory or other tactical advantage had apparently been abused to a point where the State Crime Commission and the Governor recommended the adoption of what was to become subdivision 2 of section 149 of the Executive Law (Third Report of New York State Crime Commission, NY Legis Doc, 1953, No. 68, p 14; NY Legis Ann, 1953, pp 479-480). Enacted at a special session of the Legislature, it provides that such a motion can be made only at either the Extraordinary Term or, at the option of the moving party, before the Appellate Division, by permission of a Justice thereof, in the department in which the Extraordinary Term has been convened (L 1953, ch 890).

Unquestionably, until then the People could appeal a dismissal of an indictment as of right to the Appellate Division and, upon that court’s affirmance, if leave were granted, could then appeal to this court (former Code Crim Pro, § 519); accordingly, the litigation did not necessarily terminate at the Appellate Division level. The Appellate Division was henceforth to replace the other terms as an alternative forum before which the motion could be returnable. That is the only change the amendment was to effect. Certainly, neither the report of the commission nor the Governor’s message gave the slightest hint that the new legislation they were sponsoring was intended to empower a defendant, simply by choosing to move in the first instance in the Appellate Division, to thereby deprive the People of their right to appeal. Such a reading would have confounded the purpose behind subdivision 2 by, counterproductively and unrelatedly, restricting the People’s recognized right of appeal when the announced design of the statutory change was to move in just the opposite direction — to eliminate a ready avenue by which defendants could too easily engage in maneuvers to frustrate the expeditious handling of special prosecutions.

Di Falco, Rinaldi and Hattemer, in resolving any possible outstanding doubt on this question, do not, however, completely dispose of the appealability issue. Each of these cases involved an order dismissing an indictment, from which appeal to an intermediate appellate court is directly authorized by CPL 450.20 (subd 1). In the case before us now, neither the relief sought nor that which was granted expressly included dismissal. Instead, what was explicitly demanded and obtained was an order barring the Special Prosecutor from proceeding. But, while the Criminal Procedure Law makes no provision for appeal from an order precluding a particular prosecutor from acting under a specific indictment, since, in the present case, insofar as the Special Prosecutor is concerned it terminates the prosecution, for purposes of our jurisdiction we treat the disposition below as the functional equivalent of a dismissal of the indictment (cf. People v Coppa, 45 NY2d 244).

However, this is not to say from a substantive point of view, that, the relief granted by the Appellate Division was available by motion in the pending criminal action. It was not. Nothing in the Criminal Procedure Law authorizes a court to oust a prosecutor from conducting proceedings on a particular indictment. It follows that, if the Special Prosecutor lacks authority to appear before the Grand Jury, the only remedy available under the Criminal Procedure Law is dismissal of the indictment (see People v Di Falco, 44 NY2d 482, supra).

Furthermore, if an indictment is validly obtained, a subsequent conviction will not be reversed on appeal solely because a prosecutor improperly acted ultra vires in prosecuting the case (see People v Van Sickle, 13 NY2d 61; People v Kramer, 33 Misc 209, 220; cf. People v Citadel Mgt. Co., 78 Misc 2d 626, revd on other grounds 80 Misc 2d 668; contra, People v Vlasto, 78 Misc 2d 419). The only method by which such official may be disqualified ab initio is via an article 78 proceeding in the nature of prohibition, in which the issuance of a writ lies in the discretion of the court (Matter of Dondi v Jones, 40 NY2d 8, 15, supra).

In any event, even if the defendant had pursued one of the two indicated procedural paths open to him — a motion to dismiss or an article 78 proceeding — under the facts here his contention that the Special Prosecutor was without authority would be unavailing.

Defendant’s prosecution may be said to have had its genesis in an indictment of one Giovanni Reyes for the attempted murder of two women. Reyes, who had learned through his work as a registered informer for the Department of Investigation of the City of New York that a woman named Loretta Errico claimed to be in a position to influence the outcome of matters pending in that city’s criminal courts, successfully solicited her help. Errico then, in turn, enlisted the aid of Frank Giudice, law secretary to a Supreme Court Justice in Kings County, where the case was pending. In the course of carrying out their undertaking, Errico and Giudice recommended that Reyes retain the defendant as his lawyer. Before this, however, first Reyes and later Errico, presumably to serve their own purposes, had agreed to co-operate clandestinely with the office of the Special Prosecutor in this affair. Subsequently, upon being confronted with electronic and wiretap evidence against him, the law secretary also decided to throw in his lot with the investigating forces.

The investigation originally led to an indictment charging the defendant and one of his law partners with conspiracy to commit bribery, attempted bribery and attempted grand larceny. That indictment was dismissed because of various irregularities, including, notedly, that the Special Prosecutor’s predecessor in office had failed to reveal to the Grand Jury that a key prosecutorial witness (the law secretary) had been granted immunity. Leave to represent the case to another Grand Jury was granted, and the new indictment with which we are now concerned followed. It alleges only the crime of attempted grand larceny and that solely against the defendant, with the unindicted law secretary named as a participant. The minutes of the Grand Jury reveal that, whatever representations the defendant and Giudice may have made to Reyes, there is no evidence that any attempt was in fact made to exert influence on court personnel in his behalf.

It is defendant’s position, therefore, that prosecution of the offense as currently charged is beyond the ambit of the Special Prosecutor’s authority. Defendant concedes that, at the outset, the investigation could reasonably have been expected to produce evidence bearing on specific acts of corruption in the criminal justice system. Nonetheless, he argues that, since the case as it has now emerged is not one in which he is accused of bribery or of any other specific act of corruption, but is essentially one for defrauding his client by falsely pretending that he could corruptly influence the attempted murder prosecution, the pendency of the client’s criminal case was no more than the occasion for the larceny. He further asserts that the role the law secretary played in the transacr tion was not qua law secretary, but was in the private capacity of intermediary between the defendant and Reyes. From all this, he would have us conclude that there was here no alleged act or omission "relating to or in any way connected with the * * * administration of criminal justice” (Executive Order No. 58, 9 NYCRR 1.58 [emphasis added]). We cannot agree with that analysis.

While a Special Prosecutor, acting pursuant to an order issued under subdivision 2 of section 63 of the Executive Law may not operate beyond the grant of authority (Matter of Dondi v Jones, 40 NY2d 8, 19, supra), only a sterile reading of Order No. 58 would fail to place the new indictment within its parameters, both because of the way in which the defendant’s alleged scheme was implemented and because of the effect which, by its inherent nature, that scheme could be expected to have on the appearance of corruption in the administration of criminal justice (see Matter of Dondi v Jones, supra, p 16).

It is irrelevant that neither the law secretary nor the defendant engaged in a specifically determinable act of corruption. The false representation appears to have had an equally efficient potential for inducing payment. More important, in the context of this case, the mantle of the secretary’s office could not be so conveniently discarded as the defendant might wish. Indeed, it is to be doubted that the client, once guided to the secretary and then to the lawyer in order to have his case "fixed”, would have taken a disclaimer as more than mere pretense; the very fact that the courier who delivered the $50,000 in cash which constituted the consideration for the alleged act of corruption held the position of secretary to a Justice of the Supreme Court had to lend an aura of credibility to the impressions and representations on which the client would rely. Less dramatic episodes also figured in the imagery; for instance, the defendant had the secretary keep him posted on the court’s schedule, not so much to help him "maneuver” the case as to have it appear that he could. In all, there were created permissible, if not compelling, inferences that the defendant assigned these tasks to the secretary because he perceived that the exploitation of Giudice’s official status would bolster the pretense of corruption.

More broadly, the permeating influence of conduct which undermines the appearance of the freedom from corruption which is so essential to a viable criminal justice system may indeed be more pernicious in its effect than would a discrete, and therefore perhaps confined, act of corruption itself. In institutions, as with men and women, a good name is the "immediate jewel of their souls” (Shakespeare, Othello, act III, scene 3, line 155).

For the reasons stated, the order of the Appellate Division should be reversed and the motion denied.

Chief Judge Breitel and Judges Jones and Wachtler concur with Judge Gabrielli; Judge Fuchsberg concurs in a separate opinion in which Judges Jasen and Cooke concur.

Order reversed, etc.

      .The Executive Order, in pertinent part, requires the Attorney-General by his assistants or deputies to attend before an Extraordinary Special and Trial Term of the Supreme Court in the County of Kings and its drawn Grand Juries,
      "for the purpose of managing and conducting in said court and before said grand jury and said other grand juries any and all proceedings, examinations and inquiries and any and all criminal actions and proceedings which may be had or taken by or before said grand jury and grand juries concerning or relating to:
      "(a) any and all corrupt acts and omissions by a public servant or former public servant occurring heretofore or hereafter in the County of Kings in violation of any provision of state or local law and arising out of, relating to or in any way connected with the enforcement of law or administration of criminal justice in the City of New York;
      "(b) any and all acts and omissions and alleged acts and omissions by any person occurring heretofore or hereafter in the County of Kings in violation of any provision of state or local law and arising out of, relating to, or in any way connected with corrupt acts or omissions by a public servant or former public servant arising out of, relating to or in any way connected with the enforcement of law or administration of criminal justice in the City of New York”.

      .Section 149 of the Judiciary Law authorizes the appointment of Extraordinary Special or Trial Terms by the Governor. Subdivision 2 provides: "A motion involving a matter pending before such extraordinary special or trial term shall be made returnable at such term, except that, in the exercise of discretion, a justice of the appellate division of the supreme court in the department in which such extraordinary special or trial term is being held may grant permission for such motion to be heard at a term of such appellate division.”

      .The Appellate Division’s memorandum describes the motion as one to "prohibit the Special Prosecutor from conducting any further proceedings on this indictment or, alternatively, for dismissal of the indictment”. But the moving papers, aside from a broad request for omnibus relief, specifically ask merely that the Special Prosecutor be barred from further prosecution of the indictment.

      . An article 78 proceeding, even though it seeks relief in relation to a criminal proceeding, is classified as civil. Appeals therein are governed by the broad provisions of CPLR 5601 and 5602. (See Cohen and Karger, Powers of the New York Court of Appeals, § 189, subd [d], p 711.)

      . The record shows that the defendant told the secretary to keep $12,500 for himself.