author: Titone, J. Jasen, J.

text:
    In the Matter of the Estate of Jessie C. Best, Deceased. Anthony R. Reid, Appellant; David L. McCollum, Respondent.
    Argued September 4, 1985;
    decided October 24, 1985

      POINTS OF COUNSEL

      Devereux Milbum, Richard B. Covey, Dan T. Hastings and R. Demarest Duckworth, III, for appellant.
    I. If a child born out of wedlock is presumed to be "issue” of his natural ancestors, such presumption should not be applied retroactively to defeat a testator’s intent. (Matter of Thall, 18 NY2d 186; Matter of Schwartz, 92 Misc 2d 40; Matter of Underhill, 176 Misc 737; Hiser v Davis, 234 NY 300; Matter of Hoffman, 53 AD2d 55; Matter of Lyden, 96 Misc 2d 920; Matter of Leventritt, 92 Misc 2d 598; Gager v White, 53 NY2d 475.) II. The courts below applied an improper test in weighing the evidence of decedent’s intent. (Dwight v Gibb, 145 App Div 223; Gelston v Shields, 16 Hun 143, 78 NY 275; Matter of Fabbri, 2 NY2d 236.) III. Decedent did not actually intend to include her daughter’s adopted-out son as "issue” in her will. IV. The rule of construction should be that an adopted child whose court adoption records are sealed is presumed to be excluded from the meaning of "issue” of his natural ancestors unless a contrary intent is shown. (Matter of Walker, 64 NY2d 354; Matter of Bissell, 74 Misc 2d 330.)

      David S. J. Neufeld for respondent.
    I. David McCollum is an "issue” of his natural mother notwithstanding that he may have been born out of wedlock. (Matter of Hoagland, 125 Misc 376; Matter of Hoffman, 53 AD2d 55; Levy v Louisiana, 391 US 68.) II. David McCollum’s right to inherit from and through his natural kindred was not affected by his adoption. (Matter of Thorne, 155 NY 140; People ex rel. Sibley v Sheppard, 54 NY2d 320; Matter of Landers, 100 Misc 635; Matter of Gourlay, 173 Misc 930; Matter of Bissell, 74 Misc 2d 330.) III. Where the language in a will is clear and definite extrinsic evidence cannot be considered and the bequest must be enforced. (Matter of Watson, 262 NY 284; Matter of Symonds, 79 AD2d 24; Matter of Blodgett, 168 Misc 898; People ex rel. Sibley v Sheppard, 54 NY2d 320; Matter of Layton v Foster, 61 NY2d 747; Hollis v Drew Theol. Seminary, 95 NY 166.) IV. The interest of David McCollum as beneficiary of the trust created pursuant to paragraph Tenth of the decedent’s will was an issue previously embraced and decided within the executor’s final accounting. (Childs v Childs, 150 App Div 656; Kret v Brookdale Hosp. Med. Center, 93 AD2d 449.)
   OPINION OF THE COURT

Titone, J.

The question presented is whether a child born out of wedlock, who is adopted out of his biological family at birth, is entitled to a share of a trust estate devised by his biological grandmother to her daughter’s issue. The Surrogate’s Court entered a decree in the child’s favor, which has been unanimously affirmed by the Appellate Division. We granted leave to appeal and now reverse.

Jessie C. Best died in 1973, leaving a will which provided for a residuary trust. Her daughter, Ardith Reid, was designated as the income beneficiary. Upon Ardith’s death, the trustees were directed to "divide [the] trust fund into as many shares or parts as there shall be * * * issue * * * and to continue to hold each of such shares or parts in trust during the life of one of said persons.” The remainder is to be paid to the surviving descendants at the latest possible date consistent with the Rule against Perpetuities.

Initially, the executors of the Best will, who are also the trustees of the residuary trust, believed that Ardith had only a single son, appellant Anthony R. Reid, born in 1963. In 1976, however, they were informed that Ardith had given birth to a child out of wedlock in 1952, and that the child had been immediately placed with an agency for adoption. Ardith confirmed that the information was accurate.

Concluding that it was necessary to cite this unknown child in order to complete jurisdiction in a proposed accounting proceeding, the fiduciaries obtained Ardith’s authorization to ascertain the child’s identity and whereabouts. Attorneys contacted the adoption agency, which, though finding the request "unusual,” took the position that, given the apparently large value of the beneficial interest involved, the question of disclosure should be left to the discretion of the adoptive parents. A caseworker was dispatched and the adoptive parents subsequently revealed that the child’s present identity was David Lawson McCollum, and that requisite proof of natural ancestry could be obtained in a sealed file at the Surrogate’s Court, Nassau County.

After Ardith’s death, the trustees commenced this construction proceeding, seeking to determine the proper secondary income beneficiary or beneficiaries, the accounting proceeding having left the question open. On cross motions for summary judgment, the Surrogate’s Court, Westchester County, directed that McCollum be included as an issue of Ardith Reid and, as such, a beneficiary under the trust. The Surrogate declined to apply the common-law presumption that the term issue referred only to descendants born in wedlock, in favor of a rule espoused by the Appellate Division, First Department, which presumes that issue includes descendants born both in and out of wedlock (Matter of Hoffman, 53 AD2d 55). In addition, the Surrogate construed Domestic Relations Law § 117, which describes the consequences attached to an order of adoption, as cutting off only the right to intestate descent and not affecting the right to take a class gift under the will of a biological ancestor. The Surrogate recognized that this holding would create a myriad of practical difficulties and might lead to a breach of the privacy of adoption proceedings, but believed that the solution was legislative. The Appellate Division unanimously affirmed in a Per Curiam opinion, essentially adopting the Surrogate’s reasoning. We now reverse and remit for the entry of a decree in conformity with this opinion (SCPA 2702).

Use of the term issue in a dispositive instrument has always been viewed as ambiguous, with its meaning depending on the intent of the decedent as derived from the content of the entire will (Palmer v Horn, 84 NY 516, 519; 5 American Law of Property §§ 21.49,22.36 [1952 Casner ed]; 2 Simes and Smith, Future Interests § 738 [2d ed]). Shaped by the mores of the day, the common-law courts tended to give the term a restrictive interpretation (Bergin and Haskell, Preface to Estates in Land and Future Interests, at 232 [2d ed]), and viewed a child born out of wedlock as the "child of nobody” (5 American Law of Property § 22.33, at 325 [1952 Casner ed]). Absent a contrary indication in the will, such a child was deemed to be presumptively excluded from taking a class gift to issue (see, e.g., Hiser v Davis, 234 NY 300, 305; Matter of Underhill, 176 Misc 737, 739 [Foley, S.]; 9 Rohan, NY Civ Prac, EPTL ¶ 1-2.10 [3]; Restatement of Property § 286 [1]; § 292).

EPTL 1-2.10, added in 1966, defines "issue” as descendants in any degree from a common ancestor, unless a contrary intention is indicated, and specifically includes children adopted into the family, thus resolving a conflict which had existed in decisional law (see, 2 Simes and Smith, Future Interests § 738, n 40 [2d ed]) in favor of inclusion (9 Rohan, NY Civ Prac, EPTL ¶ 1-2.10 [2]; Note, Adopted Children as Issue — Settlor’s Intent, 27 Brooklyn L Rev 177). Other than that clarification, the Revisors’ Notes indicate that the section merely codifies decisional law (Revisors’ Notes to EPTL 1-2.10, McKinney’s Cons Laws of NY, Book 17B, p 22; see also, 9 Rohan, NY Civ Prac, EPTL ¶ 1-2.10 [1]; Rohan, Practice Commentary, McKinney’s Cons Laws of NY, Book 17B, EPTL 1-2.10, p 20).

Contemporary social mores and constitutional doctrine governing the rights of children born out of wedlock suggest that drafters now view the unmodified term issue to refer to children born both in and out of wedlock (see, Matter of Hoffman, 53 AD2d 55, supra; Matter of Lyden, 96 Misc 2d 920; Matter of Leventritt, 92 Misc 2d 598; Note, In Re Hoffman, 5 Hof L Rev 697, 703-704), and we now hold this to be a rebuttable rule of construction. Respondent, however, who was adopted out of his biological family shortly after birth and has full inheritance rights through his adoptive family (EPTL 1-2.10; Domestic Relations Law § 117), can reap no benefit from this change of constructional rules. Unlike the child born out of wedlock who, but for the abrogation of the common-law presumption of exclusion, would have no right to inherit as the issue of any parent, what respondent, in effect, seeks here is inheritance rights as the issue of both his biological and his adoptive parents.

Powerful policy considerations militate against construing a class gift to include a child adopted out of the family. In detailing adoption procedures (see, Domestic Relations Law art 7), the Legislature clearly intended that the adopted child be severed from the biological family tree and be engrafted upon new parentage (see, Matter of Cook, 187 NY 253, 260; Matter of "Wood” v "Howe”, 15 Misc 2d 1048, 1050). Recognition of a right to inherit class gifts from biological kindred would be inconsistent with the child’s complete assimilation into the adoptive family and thus contrary to legislative intent (see, Binavince, Adoption and the Law of Descent and Distribution: A Comparative Study and a Proposal for Model Legislation, 51 Cornell LQ 152, 165).

Moreover, in order to encourage the adoptive relationship to flourish and solidify without outside interference, the Legislature has directed that the confidentiality of adoption records be maintained (Domestic Relations Law § 114). This secrecy, which we have identified as vital and beneficial to the entire adoption process (Matter of Walker, 64 NY2d 354, 360-361; Matter of Linda F. M., 52 NY2d 236, 239 appeal dismissed sub nom. Mason v Abrams, 454 US 806; see also, Alma Socy. v Mellon, 601 F2d 1225, cert denied 444 US 995), would be easily breached if children who are adopted out of a family are presumed to be takers of class gifts from biological ancestors, as ascertaining whether rights of inheritance exist might well be good cause for access. This case itself is of moment for we can detect the hydraulic pressure faced by the adoption agency in passing on the request for disclosure.

Inclusion of adopted-out children within the ambit of class gifts would also undermine the stability of real property titles as well as other property rights passing under Surrogate’s Court decrees (see, former Surrogate Sobel’s comprehensive analysis in Matter of Flemm, 85 Misc 2d 855, 859, quoted with approval in Lalli v Lalli, 439 US 259, 270). Finality of such decrees could never be achieved because there would always lurk the possibility, no matter how remote, that a secret out-of-wedlock child had been adopted out of the family by a biological parent or ancestor of a class of beneficiaries. No search conducted by a personal representative would ever be complete and there is obviously no way to cite and serve an out-of-wedlock child who is adopted out of the family when the survivors may not even be aware of the person’s existence.

Domestic Relations Law § 117 certainly does not preserve the right to inherit a class gift in such circumstances. That section terminates all rights of intestate succession but does "not affect the right of any child to distribution of property under the will of his natural parents or their natural or adopted kindred” (Domestic Relations Law § 117 [2]). The evident purpose of the statutory provision, as expressed in the reports of the Bennett Commission on the Law of Estates, was "to place the adopted child for inheritance purposes in the bloodstream of his new family just as a natural child, and sever insofar as possible all connection with the natural family” (Second Report of Temporary State Commn on Modernization, Revision and Simplification of Law of Estates, 1963 NY Legis Doc, No. 19, at 25, 147, n; see also, Legislation, New York’s Law of Estates and Distribution: The New York Status of the Adopted Child, 38 St. John’s L Rev 380). Thus, while a child adopted into a family is to be presumed included within the term issue "[ujnless a contrary intention is indicated” (EPTL 1-2.10 [a]; see, Matter of Park, 15 NY2d 413; Note, 15 Buffalo L Rev 209; Note, 11 NYLF 522), a child adopted out of the family is not (see, Binavince, op. cit., 51 Cornell LQ 152, 164-173). Only if a child adopted out of the family is specifically named in a biological ancestor’s will, or the gift is expressly made to issue including those adopted out of the family, can the child take. In short, Domestic Relations Law § 117 does not mandate that such a child receive a gift by implication.

We are aware of the passage of a bill designed to overturn the Appellate Division and Surrogate’s Court holdings in this case as well as its subsequent veto by the Governor. The Governor’s veto rested upon ambiguities in the bill and the lack of consensus within the legal community as to the best approach to the question (Veto Message No. 106, 1984 NY Legis Ann, at 403). The Law Revision Commission, following a study, has recommended a new bill, which it has submitted for legislative consideration (1985 NY Legis Doc, No. 65 [N], 1985 McKinney’s Session Laws of NY, at — [Pamphlet No. 3, June 1985, at A-554]). (Cf. Uniform Adoption Act § 14 [9 ULA Master ed]; Uniform Probate Code § 2-109 [1] [8 ULA Master ed]; Ann., 96 ALR2d 639; Binavince, op. cit, 51 Cornell LQ 152.)

These developments, while of interest, are of no moment. Until this court has resolved an issue of first impression, legislative activity or inactivity does not constitute an endorsement of the result reached by other courts (see, Brooklyn Union Gas Co. v New York State Human Rights Appeal Bd., 41 NY2d 84, 90; cf. City of New York v Saper, 336 US 328, 338-340; Flanagan v Mount Eden Gen. Hosp., 24 NY2d 427, 432-433). Moreover, statutory enactments governing decedents’ estates are generally not given a retrospective operation (McKinney’s Cons Laws of NY, Book 1, Statutes § 56; see, Monroney v Mercantile-Safe Deposit & Trust Co., 291 Md 546, 435 A2d 788). Any legislative solution would thus be incomplete and the damage we perceive would result to public policy would be irreparable.

For the reasons stated, the order of the Appellate Division should be reversed, with costs to all parties filing briefs, payable out of the estate, appellant’s motion for summary judgment granted, respondent’s motion for summary judgment denied, and the matter remitted to Surrogate’s Court, Westchester County, for the entry of a decree in accordance with this opinion.

Jasen, J.

(dissenting). I would hold that statutory law and the unqualified use of the term "issue” in the testatrix’s will compels the conclusion that her adopted-out grandson is entitled to an equal share of the trust fund the testatrix created under her will.

Adoption was unknown to the common law and is solely a creature of statute. (See, Matter of Robert Paul P., 63 NY2d 233, 237; Matter of Thorne, 155 NY 140, 143.) New York’s adoption laws, first enacted in 1873, initially provided that an adopted child had no right of inheritance from the adoptive parents (L 1873, ch 830, § 10). Several years later, adopted children were granted such rights in a statute which did not, however, deny any inheritance rights flowing from the natural parents (L 1887, ch 703). With the enactment of the Domestic Relations Law in 1896, the Legislaturc was explicit in providing that an adopted child’s "rights of inheritance and succession from his natural parents remain[ed] unaffected” (L 1896, ch 272, § 64). This statutory provision was, however, ultimately amended in 1963 when virtually all inheritances to an adopted child from the natural family were terminated (L 1963, ch 406, § 1). The Temporary State Commission on the Law of Estates which recommended the amendment noted that the underlying purpose of the statutory provision was "so far as possible” to place the adopted child within the bloodlines of his new family for inheritance purposes while severing such ties with his natural family. (See, L 1963, ch 406, at 1788, n.) Since that time, Domestic Relations Law § 117 (1) has included a provision that "[t]he rights of an adoptive child to inheritance and succession from and through his natural parents shall terminate upon the making of the order of adoption except as hereinafter provided.”

Because the laws regulating adoption and the rights of adopted children are entirely statutory and in derogation of the common law, the legislative provisions must be strictly construed. (Matter of Robert Paul P., supra, at p 238; Matter of Malpica-Orsini, 36 NY2d 568, 570; Carpenter v Buffalo Gen. Elec. Co., 213 NY 101, 108.) Consequently, the statutory termination of the adopted child’s inheritance rights from his natural family must be read narrowly in light of the common law which permitted no such result. Indeed, in 1966, the Domestic Relations Law was again amended in order explicitly to indicate the limited extent to which inheritance rights were terminated and, thereby, clearly to delimit the extent to which the common law had been altered by the 1963 amendment. Section 117 (2) has since provided that: "This section shall apply only to the intestate descent and distribution of real and personal property and shall not affect the right of any child to distribution of property under the will of his natural parents or their natural or adopted kindred whether such natural parent or kindred shall have died heretofore or shall die hereafter or under any inter vivas instrument heretofore or hereafter executed by such natural parents or his or her kindred.” (Emphasis added; L 1966, ch 14, § 1.) The limited purpose of the 1963 amendment was thus clarified upon the recommendation of the Temporary State Commission. The enactment of section 117 (2), as part of the 1966 "Act to amend the domestic relations law, in relation to intestate inheritance from and through an adopted child” (emphasis added), was expressly intended "to provide specifically that [section 117] does not affect any interest an adopted child might have under the will or inter vivas instrument of any member of his natural family, whether made before or after March 1,1964.” (See, L 1966, ch 14, at 14, n.)

Indeed, this court has recently emphasized, albeit in a different context, that section 117 was not intended to sever all ties between the adopted-out child and the natural family. In People ex rel. Sibley v Sheppard (54 NY2d 320, 325) we particularly noted that "the statute recognizes that [some] contacts may exist and that the natural relatives may desire to perpetuate the sense of family, for example, by bequeathing property to the adopted child (see Domestic Relations Law, §117, subd 2).” (Emphasis added.)1 would not, as the majority does, reconstrue section 117 so as to give an overly expansive reach to the provision in subdivision 1 which limits the adopted-out child’s right of inheritance while, simultaneously, giving little or no effect to subdivision 2 which preserves the right to receive under a will. Rather, inasmuch as section 117 (2) merely preserves a right which could not be alienated by means of adoption at common law, I believe it should be given a fuller application, more consistent with its expressly intended purpose.

The foregoing is particularly true under the facts of this case. The testatrix knew that her daughter gave birth to a nonmarital son who had been placed for adoption. Nevertheless, she included no provision in her will explicitly disinheriting this adopted-out grandson. To the contrary, she employed language which is strongly indicative of the opposite intention. The testamentary disposition in question provided that "[u]pan the death of my daughter” the trust was to continue during the life of "issue her surviving”. (Emphasis added.) The testatrix expressed no qualification limiting the "issue” for whose benefit the testamentary trust was to be created.

As is acknowledged by the majority, the intention of the testatrix is the most fundamental and critical factor in construing her testamentary provisions. (Matter of Cord, 58 NY2d 539, 544; Matter of Jones, 38 NY2d 189, 193; Matter of Watson, 262 NY 284, 293.) Here, the testatrix specifically employed the term "issue” without qualification, and there is no indication whatsoever that she intended, by the use of the word "issue” in the will, anything other than that term’s settled and customary meaning.

The EPTL defines "issue” without any restriction or exception for adopted-out children. The entire definition, as codified in EPTL 1-2.10 both at the present time and when the will was executed, provides that:

"(a) Unless a contrary intention is indicated:

"(1) Issue are the descendants in any degree from a common ancestor.

"(2) The terms 'issue’ and 'descendants’, in subparagraph (1), include adopted children.” (Emphasis added.)

The statutory definition is unambiguous and unqualified, and nothing in testatrix’s will renders it less so. "Issue” includes all descendants, and there is simply no language in the testatrix’s will indicating a "contrary intention”. No distinction is made in either the statutory definition or the testamentary language between adopted-out and all other children. No specific individual is named or explicitly excluded in the will. Despite the testatrix’s awareness of her adopted-out grandson, no provision whatsoever was made to treat him differently than her daughter’s other "issue surviving”. In my view, the testamentary language is sufficiently clear and unequivocal to preclude this court’s substitution of its own restrictive interpretation for a settled statutory meaning. (See, Matter of Watson, supra, at p 293.) Finally, the policy considerations invoked by the majority do not appear relevant under the circumstances presented here. While the confidentiality of adoption records is a genuine concern of both the Legislature and this court (see, Domestic Relations Law § 114; Matter of Walker, 64 NY2d 354, 360-361), the underlying purposes thus sought to be promoted are inapplicable to this case. The parties here have at all relevant times been aware of the identity and consanguinity of the testatrix’s adopted-out grandson. Indeed, he was informed of his relationship to the testatrix by both his natural mother and adoptive parents prior to the commencement of this proceeding. Moreover, he communicated with his natural mother prior to her decease.

The general policy of confidentiality of adoption records ought not to effectuate the denial of a lawful testamentary bequest to an adoptee whose adoption was known to the testatrix and about which the adoptee and all other interested parties are well aware. There is no need here for secrecy to protect the adoptee. Indeed, there is neither need nor request here to unseal adoption records, as the details relative to the adoption have all been stipulated. Inclusion of the testatrix’s adopted-out grandson within the class of her daughter’s "issue” requires absolutely no contravention of the public policy invoked by the majority. Thus, the testatrix’s testamentary language and the governing statutory provisions being clear, and no compromise of a countervailing public policy being required to give them effect, the testamentary disposition ought not to be defeated.

Accordingly, it is my view that the Surrogate’s construction of the term "issue” should not be disturbed, and the testatrix’s adopted-out grandson was correctly held to be a beneficiary of the testamentary trust. The order of the Appellate Division should be affirmed.

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

Order reversed, with costs payable out of the estate to all parties appearing separately and filing separate briefs, appellant’s motion for summary judgment granted, respondent’s motion for summary judgment denied, and matter remitted to Surrogate’s Court, Westchester County, for entry of a decree in" accordance with the opinion herein.

      . Different considerations might apply in hybrid cases, such as where a child is adopted by two descendants in some degree from a biological parent or parents or by one such person and a spouse who is a total stranger to the family. That question is not before us and we express no opinion on it.

      . Without more there is no basis in the dissenters presumption that the testatrix intended to include the respondent, a child adopted out of the family, within a generic class entitled to inherit.

      . The phrase "adoptive child” was substituted for "foster child” in 1970, otherwise this particular provision of section 117 (1) has remained unchanged since 1963 (see, L 1970, ch 570, § 10).

      . Similarly, in 1984 the Law Revision Commission acknowledged that under existing law adopted-out children may inherit under a will providing for dispositions to a class of persons such as "issue”. In a recommendation to the Legislature concerning the inheritance rights of adopted-out children the Commission noted that: "Under present law, an adopted person cannot inherit in intestacy from or through natural kindred, except a natural parent who is married to an adopting step-parent, even though the adoption was by a step-parent or other person related by blood or marriage and the adopted child remained within the natural family unit (DRL § 117). Conversely, under such law, an adopted person may inherit or benefit as a member of a class (i.e., 'children’, ’issue’, 'nieces’, 'nephews’) named as beneficiaries under a will or inter vivas instrument, even when adopted out of the family by persons unknown to natural kindred and after the adoption papers have been sealed (DRL § 117 [subd 2]; Matter of Best, 116 Misc 2d 365 [1982]; Matter of Bissell, 74 Misc 2d 330 [1973]).” (Emphasis added.) (1984 McKinney’s Session Laws of NY, Memorandum of NY Law Rev Commn, at 3050.)

      . We went on to state that: "[t]he bulk of the statute refers to intestacy and succession. Where any mention of other rights and duties is made, it is only in the context of the natural and adoptive parents’ parental duties (see, also, Domestic Relations Law, § 110). Nothing in the statute purports to abrogate the interests of the grandparents, and the child, in continued contacts.” (Id.)

      . The nonmarital birth of the adopted-out grandson provides no grounds for a different conclusion. The requirements of both statutory and constitutional law mandate that individuals born out of wedlock be treated equally with "issue” otherwise similarly situated. (See, e.g., EPTL 3-3.3 [b]; 4-1.2; Levy v Louisiana, 391 US 68, 71.)


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    In the Matter of Frank V. Fossella et al., Respondents-Appellants, v David Dinkins et al., Respondents. Campaign for a Nuclear Navyport Referendum et al., Intervenors-Appellants-Respondents.
    Argued October 28, 1985;
    decided October 30, 1985

      POINTS OF COUNSEL

      Anne E. Simon, Franklin Siegel and Jerry H. Goldfeder for intervenors-appellants-respondents.
    I. The erroneous holding of the court below that the question of the constitutionality of the proposed City Charter amendment is ripe for judicial review is an unprecedented and impermissible judicial encroachment on the legislative process and on individual rights. (Matter of State Indus. Commn., 224 NY 13; New York Public Interest Research Group v Carey, 42 NY2d 527; Matter of McCabe v Voorhis, 243 NY 401; Matter of Board of Educ. v City of New York, 41 NY2d 535; Matter of Cantrell v Hayduk, 45 NY2d 925; Matter of Tierney v Cohen, 268 NY 464; Matter of Reuss v Katz, 43 Misc 2d 921; Matter of Lewis v Klein, 45 NY2d 930.) II. The constitutional issue is not properly before this court. (Matter of Schwartz v Village of Spring Val., 42 Misc 2d 98; Matter of Reuss v Katz, 43 Misc 2d 921, 21 AD2d 968; Matter of Cassese v Katz, 26 AD2d 248, 18 NY2d 694; Matter of Silberman v Katz, 54 Misc 2d 956, 28 AD2d 992; People v Parker, 41 NY2d 21; Thornhill v Alabama, 310 US 88; Singleton v Wulff, 428 US 106; Matter of Urban League v County of Monroe, 49 NY2d 551; Gonzalez v Freeman, 334 F2d 570; ATL, Inc. v United States, 736 F2d 677.) III. Special Term erred in granting summary judgment. (Sillman v Twentieth Century-Fox Corp., 3 NY2d 395; Five Boro Elec. Contrs. Assn. v City of New York, 37 AD2d 807, 33 NY2d 676.) IV. The proposed City Charter amendment, if enacted, would not violate the United States Constitution. (Lighthouse Shores v Town of Islip, 41 NY2d 7; Hirson v United Stores Corp., 263 App Div 646; Childs v Childs, 69 AD2d 406; Euclid v Ambler Co., 272 US 365; Village of Belle Terre v Boraas, 416 US 1; Rice v Williams Co., 458 US 654; Hines v Davidowitz, 312 US 52; Florida Avocado Growers v Paul, 373 US 132; Askew v American Waterways Operators, 411 US 325.) V. The referendum is proper under State statutes. (Matter of Cassese v Katz, 26 AD2d 248, 18 NY2d 694; Matter of Warden [Newburgh Police Dept.], 300 NY 39; Hacker v Common Council, 49 Misc 2d 69; Brooklyn Park Commrs. v Armstrong, 45 NY 234.) VI. The first proceeding herein was not timely filed. (Matter of De Santis v Brown, 37 AD2d 865.)

      Robert Allan Muir, Jr., for Frank V. Fossella, respondent-oppellant.
    I. Special circumstances and compelling reasons exist which make the constitutionality issue "ripe” and which mandate immediate judicial action. (Matter of McCabe v Voorhis, 243 NY 401; New York Public Interest Research Group v Carey, 42 NY2d 527; Matter of Cantrell v Hayduk, 45 NY2d 925; Matter of Tierney v Cohen, 268 NY 464; Matter of Mooney v Cohen, 272 NY 33; Matter of Osborn v Cohen, 272 NY 55; Matter of Stoughton v Cohen, 281 NY 343.) II. Circumstances and facts affecting "ripeness” of the constitutional issue have been altered since Special Term’s ruling of September 6,1985. III. The Federal Government is vested with exclusive jurisdiction to provide for the common defense of the United States. (Hauenstein v Lynham, 100 US 483; Hirabayashi v United States, 320 US 81; In re Yamashita, 327 US 1; United States v MacIntosh, 283 US 605; Taylor v Brown, 137 F2d 654; Fernandez v Wiener, 326 US 340; United States v Belmont, 301 US 324; Weinberger v Catholic Action of Hawaii, 454 US 139; Bertelsen v Cooney, 213 F2d 275, 348 US 890; Curry v Secretary of Army, 595 F2d 873.) IV. This referendum is void since under New York law no referendum may be submitted to the electorate unless authorized by State law, with advisory referendums seeking the opinion of the electorate on a particular issue specifically prohibited. (Matter of Astwood v Cohen, 291 NY 484; Matter of Silberman v Katz, 54 Misc 2d 956, 28 AD2d 992.) V. Special Term correctly ruled interveners had waived any objection to standing of petitioners. (De Lisa v Amica Mut. Ins. Co., 59 AD2d 380.) VI. Special Term erred in its confirmation of the report of the referee. (Matter of Ryan v Sadowski, 71 AD2d 938.) VII. The referee and Special Term erred in permitting intervenors to validate signatures previously held to be invalid by the City Clerk. (Matter of Suarez v Sadowski, 48 NY2d 620; Matter of Hutson v Bass, 54 NY2d 772.) VIII. This court should rule alternatively on the issues of number of valid signatures and constitutionality. (Matter of Kashinsky v Board of Elections, 89 AD2d 951.)

      Frederick A. O. Schwarz, Jr., Corporation Counsel (Leonard Koerner, Thomas C. Crane and Steven H. Mosenson of counsel), for respondents.
    I. These proceedings seek to strike the proposed City Charter amendment from the November ballot. Under such circumstances the constitutional issue concerning the amendment is ripe for judicial determination. (Matter of Cantrell v Hayduk, 45 NY2d 925; New York Public Interest Research Group v Carey, 42 NY2d 527; Matter of McCabe v Voorhis, 243 NY 401; Matter of Tierney v Cohen, 268 NY 464; Matter of Mooney v Cohen, 272 NY 33; Matter of Osborn v Cohen, 272 NY 55; Johnson v Etkin, 279 NY 1; Matter of Stoughton v Cohen, 281 NY 343.) II. The proposed City Charter amendment, which prohibits the Board of Estimate from taking any action to aid in the development of a military base in New York City which is designed to carry or store nuclear weapons, interferes with the Federal Government’s exclusive power to site military installations and is, therefore, unconstitutional. The referendum is an indirect attempt to influence public opinion on defense policy which would be advisory and proscribed. (Matter of Silberman v Katz, 54 Misc 2d 956, 28 AD2d 992; Fidelity Fed. Sav. & Loan Assn. v De La Cuesta, 458 US 141; Hines v Davidowitz, 312 US 52; Pacific Gas & Elec. v Energy Resources Commn., 461 US 190; United States v McGee, 432 F Supp 557, 611 F2d 375; Stewart & Co. v Sadrakula, 309 US 94; Tarble’s Case, 80 US 397; California Commn. v United States, 355 US 534; Holdridge v United States, 282 F2d 302; City of Los Angeles v United States, 355 F Supp 461.) III. The objection filed by petitioners to the City Clerk’s certification of the referendum petition was timely. (Matter of Rochester Gas & Elec. Corp. v Maltbie, 272 App Div 162.)

      John J. Marchi, pro se, David Jaffe and Kathryn K. Rooney for Senator John J. Marchi, amicus curiae.

    I. Special circumstances and compelling reasons exist which make the constitutionality issue "ripe” and which mandate immediate judicial action. (Matter of McCabe v Voorhis, 243 NY 401.) II. The Federal Government is vested with exclusive jurisdiction to provide for the common defense of the United States. (Hauenstein v Lynham, 100 US 483; United States v MacIntosh, 283 US 605; Fernandez v Wiener, 326 US 340; United States v Belmont, 301 US 324; Weinberger v Catholic Action of Hawaii, 454 US 139; United States v McGee, 432 F Supp 557, 611 F2d 375; Stewart & Co. v Sadrakula, 309 US 94; Holdridge v United States, 282 F2d 302; Pauling v McElroy, 278 F2d 252.) III. The Federal Government is vested with exclusive jurisdiction over United States foreign policy. (United States v Belmont, 301 US 324; Holdridge v United States, 282 F2d 302; Matter of Silberman v Katz, 54 Misc 2d 956, 28 AD2d 992.) IV. The proposed charter amendment is unconstitutional pursuant to NY Constitution article XII which mandates that the defense of the United States is the obligation of all persons within this State. V. This referendum is void since under New York law no referendum may be submitted to the electorate unless authorized by State law, with advisory referendums seeking the opinion of the electorate on a particular issue specifically prohibited. (Matter of McCabe v Voorhis, 243 NY 401; Matter of Astwood v Cohen, 291 NY 484; Matter of Silberman v Katz, 54 Misc 2d 956.)

      Arthur Eisenberg and Steven R. Shapiro for New York Civil Liberties Union, amicus curiae.

    The courts below erred in concluding that the proposed referendum would, if adopted, unconstitutionally interfere with the authority of the Federal Government to plan for the national defense. (Paul v United States, 371 US 245; Florida Avocado Growers v Paul, 373 US 132; Southern Pac. Co. v Arizona, 325 US 761; Pacific Gas & Elec. v Energy Resources Commn., 461 US 190; Los Angeles v Lyons, 461 US 95.)
   OPINION OF THE COURT

Per Curiam.

This is a proceeding to have the Board of Elections remove from the ballot a proposed referendum which would amend New York City Charter § 67. Basically the amendment relates to the use of city property and funds in connection with a military installation by the Federal Government any component of which is designed to carry or store nuclear weapons.

The amendment would prohibit the Board of Estimate from approving the sale, lease, exchange, or other disposition of city property for the development of such a facility, and would further prohibit the Board from granting any franchise, permit, license, use, or consent to use city property or streets for such a purpose. The proposed amendment would also prohibit the Board from approving an appropriation of funds which would facilitate the development of this type of military installation.

Special Term found that the proposed amendment would interfere with the Federal Government’s power to provide for the defense of the Nation and thus would be unconstitutional under US Constitution, article I, § 8. The court also found that the amendment called for a citywide opinion poll for which no express authority had been granted by the Legislature.

The Appellate Division unanimously affirmed agreeing with Special Term that the amendment would violate the Federal Constitution. The court also held that the proposed amendment was invalid under State Law § 50 (2).

At the outset we note that this controversy is justiciable. Although it is generally inappropriate for the courts to consider the validity of proposed legislation, they may do so in a case such as this where a proposed referendum sought to be removed from the ballot is in direct conflict with a State statute. Our holding in New York Public Interest Research Group v Carey (42 NY2d 527, 531) was not to the contrary. There we noted (at p 532) that a decision on such a question is not an advisory opinion when "all the expense and human effort involved in the election process would be wasted because of fatal defects in the law”. Here, unlike in the New York Public Interest case the proceedings seek to remove the referendum from the ballot. In such an instance the court may grant the relief sought, the rule being "one of prudence rather than one of power” (Matter of McCabe v Voorhis, 243 NY 401, 412).

On the merits, although we agree with the courts below that the referendum should be stricken from the ballot, we do so solely on State statutory grounds. In our view the statutes and policies of this State are alone sufficient to sustain the decisions reached below. There is no need to reach the Federal constitutional questions or the other issues raised in this proceeding.

The proposed amendment is unquestionably invalid to the extent that it seeks to amend the City Charter to preclude the city from approving "any sale, lease, exchange or other disposition” of city property for a Federal military installation. This is so because State Law § 50 (2) expressly provides, in language nearly identical to the proposed charter amendment that "every * * * city * * * is hereby authorized and empowered to sell, lease, exchange, donate or otherwise dispose of’ city land to the United States for use as a military reservation "notwithstanding the provisions of any charter or any other statute”. Since this portion of the proposed amendment seeks to deprive the city authorities of a right and power which the Legislature has held may not be alienated, by City Charter provisions or otherwise, it is invalid on its face and could have no effect in the event it were enacted. There is no need for us to consider whether any or all of the remaining provisions are valid. The resolution is manifestly invalid in a substantive respect, since the disposition and use of city land is at the core of the controversy. Under those circumstances it would be inappropriate to submit the proposition to the electorate in a redacted and possibly confusing form (see, Matter of McCabe v Voorhis, 243 NY 401, 416, supra).

Finally we note that the intervenors’ challenge to standing was waived because it was not raised as an affirmative defense, or by way of motion to dismiss, at Special Term (CPLR 3018 [b]; 3211 [e]; Dougherty v City of Rye, 63 NY2d 989, 991-992; Matter of Prudco Realty Corp. v Palermo, 60 NY2d 656).

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

Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye, Alexander and Titone concur in Per Curiam opinion.

Appeals taken as of right dismissed, without costs, upon the ground that no substantial constitutional question is directly involved (see, Cohen and Karger, Powers of the New York Court of Appeals § 57, at 258-260 [rev ed]). Oral motion by intervenors-respondents Campaign for a Nuclear Navyport Referendum et al. for leave to appeal granted. Order affirmed, without costs.


author: Jasen, J.

text:
    In the Matter of Cortlandt Nursing Home, Respondent, v David Axelrod, as Commissioner of Health of the State of New York, et al., Appellants. In the Matter of Highland Nursing Home, Inc., Respondent, v David Axelrod, as Commissioner of Health of the State of New York, et al., Appellants, et al., Respondent. In the Matter of King Street Home, Inc., Respondent, v David Axelrod, as Commissioner of Health of the State of New York, et al., Appellants. In the Matter of Broadacres Skilled Nursing Facility, Respondent, v David Axelrod, as Commissioner of Health of the State of New York, et al., Appellants.
    Argued September 5, 1985;
    decided October 17, 1985

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General (Clifford A. Royael, Robert Hermann and Peter H. Schiff of counsel), for appellants in the 'first, second, third and fourth above-entitled proceedings.
    The State should not be prohibited from completing administrative proceedings for recouping Medicaid overpayments merely because of the amount of time needed to complete those administrative proceedings. (Matter of Schumer v Holtzman, 60 NY2d 46; Matter of Public Serv. Commn. v Rochester Tel. Corp., 55 NY2d 320; Matter of Hacker v State Liq. Auth., 19 NY2d 177; Matter of O’Keefe v Murphy, 38 NY2d 563; La Rocca v Lane, 37 NY2d 575, 424 US 968; Matter of Rainka v Whalen, 73 AD2d 731, 51 NY2d 973; Matter of Geary v Commissioner of Motor Vehicles, 59 NY2d 950; Federal Trade Commn. v J. Weingarten, Inc., 336 F2d 687, 380 US 908; Matter of White Plains Nursing Home v Whalen, 42 NY2d 838; Clove Lakes Nursing Home v Whalen, 45 NY2d 873.)

      Cornelius D. Murray, Thomas F. Gleason and Salvatore D. Ferlazzo for respondents in the first, second and third above-entitled proceedings.
    I. Courts have the power under State Administrative Procedure Act § 301 (1) to curb administrative abuse and delay in holding hearings. (People v Harrison, 57 NY2d 470; Andre v

      Pomeroy, 35 NY2d 361; Matter of Geary v Commissioner of Motor Vehicles, 59 NY2d 950.) II. Appellants’ posture in the cases at bar directly contradicts their own position successfully taken five years ago in Solnick v Whalen (49 NY2d 224 [1980]). (Mundy v Nassau County Civ. Serv. Commn., 44 NY2d 352.) III. The prejudice resulting from appellants’ procrastination is obvious. (Matter of Beekman-Downtown Hosp. v Whalen, 44 NY2d 124; Matter of Utica Cheese v Barber, 49 NY 2d 1028.) IV. The delay in this case was unilaterally caused by the State. (Matter of Utica Cheese v Barber, 49 NY2d 1028.) V. The doctrine of exhaustion of administrative remedies does not apply. VI. Petitioners were not required to commence an article 78 proceeding to compel a hearing. (Clove Lakes Nursing Home v Whalen, 45 NY2d 873; Matter of Small v Moss, 277 NY 501; Matter of Fehlhaber Corp. v O’Hara, 53 AD2d 746; Grace Line v United States, 255 F2d 810; United States v Isthmian S. S. Co., 359 US 314.) VII. Appellants are trying to accomplish administratively what they could not achieve in a court of law. (People v Duggan, 30 AD2d 736; Nichols v Regent Props., 49 AD2d 847; Dubin v Muchnick, 108 Misc 2d 1042; New York Public Interest Research Group v Levitt, 90 Misc 2d 670, 62 AD2d 1074, 46 NY2d 849; Matter of Fiedelman v New York State Dept. of Health, 58 NY2d 80; Solnick v Whalen, 49 NY2d 224; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Erie R. R. Co. v Tompkins, 304 US 64; Walker v Armco Steel Corp., 446 US 740; Ragan v Merchants Transfer Co., 337 US 530.)

      Cornelius D. Murray and Thomas F. Gleason for respondent in the fourth above-entitled proceeding.
    Appellants are barred by lapse of time from readjusting the Medicaid rates in issue and from recouping the sums allegedly due out of current Medicaid reimbursement. (Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30; Solnick v Whalen, 49 NY2d 224; State of New York Higher Educ. Servs. Corp. v Zamore, 59 NY2d 933; Matter of O’Keefe v Murphy, 38 NY2d 563; Matter of Newbrand v City of Yonkers, 285 NY 164; Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52; Usen v Sipprell, 41 AD2d 251; Matter of Posner v Levitt, 37 AD2d 331; Schmidt v Merchants Desp. Transp. Co., 270 NY 287; Matter of Geary v Commissioner of Motor Vehicles, 59 NY2d 950.)

      Edward J. Kuriansky, Deputy Attorney-General (Arthur A. Munisteri and Elizabeth T. Bogren of counsel), for Medicaid Fraud Control, amicus curiae in the first, second and third above-entitled proceedings.
   OPINION OF THE COURT

Jasen, J.

The critical issue common to these appeals is whether administrative delay in adjudicating the final rate of Medicaid reimbursement violated the directive of the State Administrative Procedure Act that hearings be conducted within a reasonable time.

Petitioners are residential health care facilities licensed by the Commissioner of Health pursuant to Public Health Law article 28. At the times relevant to these proceedings, petitioners participated in the joint Federal-State Medicaid program. (Social Security Act, tit XIX, 42 USC § 1396 et seq.; Social Services Law § 363 et seq.) The facilities were compensated for services provided to eligible Medicaid recipients by local Social Services districts, at rates established by the Commissioner of Health and approved by the Director of the Budget. The rate-making methodology of the Department of Health, a cost-based prospective reimbursement system, required each facility to submit an annual report of actual costs to the Department of Health. The reported costs for the base period were audited by the Department to determine which costs were allowable under Department regulations. The allow-' able reported costs, adjusted to account for inflation, were then used to establish a facility’s rate for the following rate year.

Upon completion of the audit, each residential health care facility is afforded a closing conference, at which time the facility may produce additional documentation in support of its stated position. (10 NYCRR 86-2.7 [d].) A facility may initiate a bureau review of the audit to challenge specific items of the audit report. (10 NYCRR 86-2.7 [e].) Within 30 days of receipt of the determination of the bureau review, a facility may initiate a hearing to refute those items of the audit report adverse to the interests of the residential health care facility. (10 NYCRR 86-2.7 [f].)

CORTLANDT NURSING HOME

The Cortlandt Nursing Home (Cortlandt) filed cost reports with the Department of Health (Department) for the years 1969 and 1970, which, respectively, were used to calculate the facility’s Medicaid reimbursement rates for the periods July 1, 1970 through June 30,1971, and July 1,1971 through June 30,1972. On or about March 30,1976, the Department advised Cortlandt that it had completed the audit of its 1969 and 1970 reported costs and that based upon the audit, it was disallowing certain expenses that the facility had claimed during 1969 and 1970, and for which Cortlandt had been reimbursed for rate period ending June 30, 1972. Cortlandt thereafter administratively appealed the Department’s determination, and the Department issued a notice of hearing on May 1,1979. The administrative hearing was commenced on June 25, 1979, and continued intermittently through July 1,1980. The administrative law judge issued his report on August 28,1981, and the Commissioner of Health issued his order on January 26,1982. The Commissioner’s order upheld many of the disallowances set forth in the audit, and directed that a Medicaid rate be promulgated for the facility reflecting the retroactive adjustments set forth therein.

Cortlandt then commenced this article 78 proceeding seeking a judgment declaring the order of the Commissioner of Health dated January 26, 1982 null and void and prohibiting respondents from recouping or attempting to recoup overpayments established by the Commissioner’s order of January 26,1982. The gravamen of Cortlandt’s petition was that respondents’ efforts to recoup Medicaid overpayments were time-barred under the doctrine of loches and the Statute of Limitations. Supreme Court, Albany County, granted Cortlandt’s petition and permanently enjoined respondents from undertaking any further action to recover Medicaid overpayments. The Appellate Division, Third Department, modified the judgment of Supreme Court by reversing the determination declaring the actions of respondents illegal, but affirmed the permanent injunction against any recoupment of Medicaid overpayments. This court granted leave to appeal.

HIGHLAND NURSING HOME

The Highland Nursing Home (Highland) filed cost reports with the Department for the years 1970, 1971 and 1972, which were utilized to calculate its Medicaid reimbursement rate for the periods beginning July 1,1972 and ending December 31,1974. On or about June 2,1976, the Department advised Highland that it had completed an audit of its 1970,1971 and 1972 reported costs and that based upon the audit, adjustments would be made in the facility’s Medicaid reimbursement rates for the periods beginning July 1,1972 and ending December 31,1974. Thereafter, Highland initiated an article 78 proceeding to enjoin any attempted retroactive revision in rates without affording the facility a hearing. Supreme Court, Albany County, on March 9,1977, enjoined any recoupment without a hearing. The Appellate Division, Third Department, modified the judgment of Supreme Court on November 2, 1978 and ordered the matter to be remanded to the Commissioner of Health for the purpose of affording Highland a full administrative hearing. (Portnick v Whalen, 65 AD2d 827.)

The Commissioner of Health mailed a notice of hearing to Highland in June of 1980. Although no hearing has been held, it has been noted by respondents, and has not been rebutted by petitioners, that any failure to conduct a hearing in accordance with the order of the Appellate Division has been upon the mutual consent of the involved parties. On or about January 25,1982, Highland was advised by respondent, Commissioner of Social Services of St. Lawrence County, that recoupment of Medicaid overpayments, a sum of $83,319.33, would be commenced. Contending that recoupment would be time-barred, Highland commenced this article 78 proceeding to prevent respondents from effectuating recoupment of Medicaid overpayments as proposed in the January 25, 1982 letter of respondent. Supreme Court, Albany County, granted Highland’s petition, thus enjoining recoupment. This judgment was modified by the Appellate Division, Third Department, by reversing so much of Supreme Court’s judgment as held respondents’ actions illegal, and affirmed the permanent injunction upon recoupment by respondents of Medicaid overpayments. Leave to appeal was granted by this court.

KING STREET HOME

The King Street Home (King Street) filed cost reports with the Department for the years 1970,1971,1972 and 1973, which were used, respectively, to calculate King Street’s Medicaid reimbursement rates for the periods July 1, 1971 through June 30, 1972, July 1,1972 through December 31,1973, and the calendar years 1974 and 1975. Thereafter, the Department completed an audit of the foregoing cost reports and determined that certain reported expenses should be disallowed. By letter dated March 21, 1977, King Street received an audit report and revised rate computation sheet relating to its 1970 cost reports. By letter dated April 19,1978, King Street received another audit report and revised rate computations sheet relating to its 1971,1972 and 1973 cost reports. King Street requested a bureau review (10 NYCRR 86-2.7 [e]), and was notified by the Department of the results of the review by letter dated January 21, 1980. Thereafter, the King Street facility requested an administrative hearing (10 NYCRR 86-2.7 [f]). On or about May 4,1982, the Department served a notice of hearing upon King Street, scheduling a hearing to commence on June 2, 1982 to address whether the Department correctly disallowed certain expenses in its audit. King Street, asserting that recoupment was barred under the doctrine of loches and the Statute of Limitations, commenced this article 78 proceeding to preclude respondents from recouping Medicaid over-payments. As in the Cortlandt and Highland proceedings, Supreme Court, Albany County, granted King Street’s petition, the Appellate Division, Third Department, modified the judgment of Supreme Court, yet upheld the permanent injunction, and leave to appeal was granted by this court.

BROADACRES SKILLED NURSING FACILITY

The Broadacres Skilled Nursing Facility (Broadacres) filed cost reports with the Department for the years 1971,1972,1973 and 1974, which, respectively, were used to calculate the facility’s Medicaid reimbursement rates for the periods July 1, 1972 through December 31,1973, the calendar year 1974, the calendar year 1975, and January 1,1976 through March 31,1977. In 1981, the Department advised Broadacres that it had completed the audit of the facility’s reported costs for the years 1971-1974, and that based upon the audit, it was disallowing certain reported costs. Broadacres requested a bureau review to assess the audit findings. By letter dated September 9, 1981, the Department informed Broadacres of the results of the bureau review and the rate adjustments for the period July 1,1972 through December 31,1977. Broadacres then requested an administrative hearing, and on or about September 16, 1982, the Department served a notice of hearing upon Broadacres, scheduling a hearing for October 28, 1982. By mutual consent of the parties, the hearing was adjourned until December 16, 1982, and again adjourned until February 1983.

On or about January 24,1983, Broadacres commenced this article 78 proceeding in Supreme Court, Oneida County, seeking, inter alla, a judgment preventing retroactive adjustment of its Medicaid reimbursement rates, and preventing the Department from recouping past overpayments. Supreme Court, by judgment entered May 11, 1983, granted Broadacres’ petition and enjoined the retroactive adjustment of rates. Upon reargument, Supreme Court adhered to its original determination denying the motion to dismiss the petition. By order dated November 7,1984, the Appellate Division, Fourth Department, adopted the reasoning of Matter of Cortlandt Nursing Home v Axelrod (99 AD2d 105, 106) and unanimously affirmed the order of Supreme Court. The Appellate Division, thereafter, certified the following question to this court: "Was the order of this court entered November 7,1984 properly made?”

For the reasons that follow, we now reverse the order of the Appellate Division, Third Department, relating to the proceeding in Cortlandt, modify the orders of the Appellate Division, Third Department, relating to the proceedings in Highland and King Street, and we affirm the order of the Appellate Division, Fourth Department, entered in the Broadacres proceeding and answer the certified question in the affirmative.

After years of study, the State Administrative Procedure Act was adopted in 1975 to guarantee that the actions of administrative agencies conform to uniform, sound and equitable standards. (State Administrative Procedure Act § 100, L 1975, ch 167; Gifford, The New York State Administrative Procedure Act: Some Reflections Upon Its Structure and Legislative History, 26 Buffalo L Rev 589.) State Administrative Procedure Act § 301 (1) provides that "[i]n an adjudicatory proceeding, all parties shall be afforded an opportunity for hearing within reasonable time”. This section places an affirmative duty upon the State to conduct adjudicatory proceedings within "reasonable time”, thus abrogating the common-law view that loches may not be interposed as a defense against the State when acting in a governmental capacity and the public interest. The Third and Fourth Departments, construing this statute in the context of the instant appeals, have held that a 10-year delay in reaching a final rate determination by an administrative agency is unreasonable as a matter of law, and the Department of Health should permanently be enjoined from recoupment of Medicaid overpayments. This view should be rejected. The passage of time, standing alone, does not, under the circumstances presented by these appeals, serve as a basis for judicial intervention, with peremptory effect, into the administrative process. (Matter of Sarkisian Bros. v State Div. of Human Rights, 48 NY2d 816, 818; Heckler v Day, 467 US 104; INS v Miranda, 459 US 14, 18.) In determining whether a period of delay is reasonable within the meaning of State Administrative Procedure Act § 301 (1) , an administrative body in the first instance, and the judiciary sitting in review, must weigh certain factors, including (1) the nature of the private interest allegedly compromised by the delay; (2) the actual prejudice to the private party; (3) the causal connection between the conduct of the parties and the delay; and (4) the underlying public policy advanced by governmental regulation.

To analyze the nature of petitioners’ right to retain possession of Medicaid overpayments, it is first necessary to review the regulatory conditions under which such payments were made by the State and accepted by petitioners. Pursuant to regulations governing the audit of residential health care facilities receiving State reimbursement for costs incurred, petitioners are charged with the knowledge that any rate of payment will be construed to represent a provisional rate until an audit is performed and completed and that the required fiscal and statistical reports filed with the Department are subject to audit for a period of six years from the date of their filing. It is undisputed that the Department conducted the audits of petitioners’ reported costs within the six-year provision of limitations. (10 NYCRR 86-2.7.)

This is not a case in which petitioners have lost any legal right, either vested or contingent. (See, Heckler v Community Health Servs., 467 US 51, 104 S Ct 2218, 2225.) Petitioners knew, or should have known, that any payment certified by the Department was wholly inchoate until such time as the audit of cost reports, upon which the reimbursement rates were based, was performed and completed. The interest sought to be protected by the instant proceedings is the retention of public moneys which petitioners never should have received in the first place. (Heckler v Community Health Servs., supra.) Recognizing that the cost reports were subject to audit within six years from the filing date or date due, and were, in fact, so audited, the nature of petitioners’ right to initial overpayments is provisional, not proprietary.

Concomitant with the fact that petitioners had no entitlement to Medicaid payments until audits were performed and completed, petitioners had no right to a full administrative hearing until subsequent to the audit, or the bureau review, if requested. State Administrative Procedure Act § 301 (1) requires an agency to commence a hearing within reasonable time of the date of the commencement of the adjudicatory proceeding. Under governing regulation, the onus was upon petitioners to request an administrative hearing. (10 NYCRR 86-2.7 [f].) Thus, the relevant inquiry, when considering the reasonableness of the administrative delay in question, focuses upon the period between the date the hearing was requested and the date the hearing was conducted or scheduled.

In Cortlandt, the Department issued the audit on March 30, 1976, and, shortly thereafter, Cortlandt requested a hearing which was commenced on June 25,1979. The properly computed period of administrative delay was approximately three years. In Highland, the Department issued the audit on June 2,1976, and, shortly thereafter, without requesting a hearing before the Department, Highland initiated an article 78 proceeding. The Appellate Division, Third Department (sub nom. Portnick v Whalen, 65 AD2d 827, supra), remanded the matter for a hearing and, accordingly, a notice of hearing was issued by the Department in June 1980. No hearing has been held upon mutual consent of the parties. Since a hearing was not requested prior to initiating the article 78 proceeding, there was no cognizable administrative delay. In King Street, the audit was issued on March 21,1977, the bureau review results were issued on January 21,1980, and the administrative hearing scheduled for June 2,1982. Prior to the scheduled hearing date, King Street commenced this proceeding. The approximate period of delay in scheduling a hearing was two and one-half years. In Broadacres, the audit was issued in 1981, the bureau review findings were issued on September 9,1981, and administrative hearing scheduled for October 28,1982. No hearing has been concluded, by mutual consent of the parties. The approximate period of administrative delay was one year. Neither petitioners’ assertion that the delay at issue is 12 years (brief for petitioners Cortlandt, Highland and King Street, at 9) nor the Appellate Division’s view that the administrative delay has been 10 years (Matter of Cortlandt Nursing Home v Axelrod, 99 AD2d 105, 109, supra) comports with the record.

Preliminarily, it should be noted that, absent extraordinary circumstances, a court may not intervene in an administrative proceeding, for reason of adjudicatory delay, until a hearing has been held and an official order rendered. (Note, Judicial Acceleration of the Administrative Process: The Right to Relief From Unduly Protracted Proceedings, 72 Yale LJ 574, 577-578.) It is within the province of the administrative agency, in the first instance, to determine upon a plenary hearing the cause of the delay, the interests implicated in the proceeding, and whether substantial prejudice to the facility has resulted from the administrative delay. (Goodman & Co. v New York Tel. Co., 309 NY 258, 267.) Judicial intervention prior to the rendition of a final administrative order is contraindicated by considerations of separation of powers (O’Brien, APA and the Judiciary, 7 Harv J of L & Pub Pol 443) and ripeness (New York State Inspection, Sec. & Law Enforcement Employees v Cuomo, 64 NY2d 233, 240; Siegel, NYS Law Digest, No. 305, May 1985, at 1-2). There can be no determination by this court as to the reasonableness of the administrative delay in Highland and King Street, wherein no hearing has been conducted and we are limited to granting mandamus to compel hearings. In Broadacres, we are even further limited by the certified question to a determination whether an article 78 proceeding lies. Cortlandt has proceeded to a final administrative determination and we are thereby empowered to determine the reasonableness of the administrative delay.

In determining whether the period of administrative delay of approximately three years in Cortlandt was reasonable within the meaning of State Administrative Procedure Act § 301 (1), certain factors, in addition to the nature of petitioners’ interests, must be considered. Critical to an assessment of the reasonableness of administrative delay is whether the private party has incurred substantial prejudice by reason of the delay. Where administrative delay has significantly and irreparably handicapped a private party in mounting a defense in an adversary administrative proceeding, the agency, or court reviewing a final administrative order, is authorized to dismiss the proceeding. (See, Occidental Life Ins. Co. v EEOC, 432 US 355, 373; Equal Employment Opportunity Commn. v Liberty Loan Corp., 584 F2d 853, 854-857 [8th Cir 1978]; Goldman, Administrative Delay and Judicial Relief, 66 Mich L Rev 1423, 1453-1454.)

Cortlandt asserts that prejudice from the delay is obvious, and that there comes a point where the extent of the delay speaks for itself and becomes intolerable. Petitioner further suggests, in conclusory form, that the lapse of time hinders witnesses’ ability to recall facts and that recoupment or adjustment threatens the operational and financial viability of the facility. Petitioner does not demonstrate the manner by which administrative delay handicapped its defense efforts at the administrative hearing. Moreover, petitioner does not contend that the administrative delay precluded expansion of services or caused curtailment of existing services. Where a facility operates on a provisional rate of reimbursement which may reflect an unliquidated financial liability, it is aware of the risk of recoupment or adjustment.

The causal relationship between the conduct of the agency and administrative delay is another critical factor to be considered in determining whether said delay was unreasonable under the circumstances. A court should be extremely reluctant to hold agency inaction unreasonable where the delay is attributable to a lack of resources. (Note, Judicial Acceleration of the Administrative Process: The Right to Relief From Unduly Protracted Proceedings, 72 Yale LJ 574, 584; Kaufman, Judicial Review of Agency Action: a Judge’s Unburdening, 45 NYU L Rev 201, 207.) Also, administrative delay may be justifiable when its source lies in the complexity of the issues to be resolved or in the time-consuming nature of the remedy. (Goldman, Administrative Delay and Judicial Relief, 66 Mich L Rev 1423, 1449.) Where, however, agency proceedings are demonstrated to be repetitive, purposeless and oppressive (Deering Milliken v Johnston, 295 F2d 856, 868 [4th Cir]), or where delay obtains by reason of an agency’s departure from its governing procedural regulations (see, In re Larsen, 17 NJ Super 564, 577, 86 A2d 430 [Brennan, J., concurring]), the administrative process may be stripped of the presumption of regularity. In considering the conduct of the Department in Cortlandt, we cannot say, on the record before us, that the administrative delay was unreasonable.

It must further be determined whether the conduct of the private party involved in the adjudicatory proceeding was responsible, in whole or in part, for the administrative delay. (Goldman, Administrative Delay and Judicial Review, 66 Mich L Rev 1423, 1449-1450.) It does not appear upon this record that the Cortlandt facility caused administrative delay; however, Highland, King Street and Broadacres may well be found to be responsible, at least in part, for the administrative delay. Although hearing dates were scheduled in Highland, KingStreet and Broad-acres, the opportunity for a hearing was waived, and said petitioners opted for judicial relief. The responsibility for delay occasioned by resort to the judicial process, where the agency was prepared to adjudicate petitioners’ claims, rests with petitioners. Indeed, in Highland, petitioner immediately sought judicial redress without even requesting an administrative hearing. In Broadacres, as well as Highland, the lack of a final administrative adjudication resulted by mutual consent of the parties. The apportionment of responsibility for the delay, however, is properly a function of the administrative agency, upon a plenary hearing, and should not be resolved by the courts in the first instance.

Also to be considered is whether an important interest, implicating matters of broad public concern, underlies governmental regulation or action. (INS v Miranda, 459 US 14, 19, supra; Goldman, Administrative Delay and Judicial Review, 66 Mich L Rev 1423, 1452-1453.) There exists a strong, defined public policy of this State to recover public funds improperly received. (Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30; People v Journal Co., 213 NY 1, 8; Executive Law § 63-c [1].) The public policy underlying recoupment of Medicaid overpayments, or adjustment of rates based upon past overpayments, must be balanced in conjunction with the nature of the right sought to be protected, prejudice to petitioners, and cause of administrative delay, when assessing whether administrative delay is reasonable. We conclude that in Cortlandt, the important public policy of recovering public funds wrongfully received is directly implicated.

As the foregoing discussion has established, petitioners have not demonstrated a clear legal right to retain Medicaid over-payments. Moreover, administrative delay may not be said to deprive the agency of jurisdiction. (Matter of Geary v Commissioner of Motor Vehicles, 59 NY2d 950; Matter of Sarkisian Bros. v State Div. of Human Rights, 48 NY2d 816, 818, supra.) Thus, petitioners’ article 78 proceedings, in the nature of prohibition, do not lie. (Matter of Schumer v Holtzman, 60 NY2d 46, 51; 2 Cooper, State Administrative Law, at 659-662.) Accordingly, in Cortlandt the proceeding should be converted to an action for declaratory judgment (CPLR 103 [c]; Siegel, NY Prac § 563), and the remaining matters should be treated as proceedings in the nature of mandamus.

The Cortlandt proceeding, wherein an administrative hearing has been conducted and a final order rendered, should be converted to an action for declaratory judgment. Inasmuch as Cortlandt’s interest in the Medicaid overpayments was provisional in nature, Cortlandt has not demonstrated substantial prejudice resulting from the delay in the scheduling of a hearing, and an important public policy underlies the governmental action at issue, the administrative delay of three years was not unreasonable under State Administrative Procedure Act § 301 (1). The proceedings in Highland and King Street, wherein administrative hearings have not been concluded, should be treated as proceedings in the nature of mandamus (2 Cooper, State Administrative Law, at 656-657; Jaffe, Judicial Control of Administrative Action, at 176) to compel the Department to conduct a hearing in accordance with governing regulations (10 NYCRR 86-2.7 et seq.). In Broad-acres, the order affirming the dismissal of a motion to dismiss the petition should be affirmed and the question certified answered in the affirmative inasmuch as the article 78 proceeding in the nature of mandamus lies.

Accordingly, in Matter of Cortlandt, the order of the Appellate Division should be reversed, with costs, the proceeding converted to an action for declaratory judgment and judgment granted declaring that appellants are not precluded from seeking recoupment of Medicaid overpayments made to petitioner. In Matter of Highland and Matter of King Street, the orders of the Appellate Division should be modified, with costs to appellants, by directing respondents to hold hearings in accordance with this opinion and, as so modified, affirmed. In Matter of Broadacres, the order of the Appellate Division should be affirmed, with costs, and the question certified answered in the affirmative.

Judges Meyer, Simons, Kaye, Alexander and Titone concur; Chief J udge Wachtler taking no part.

In Matter of Cortlandt Nursing Home v Axelrod: Order reversed, with costs, proceeding converted to an action for declaratory judgment and judgment granted declaring that appellants are not precluded from seeking recoupment of Medicaid overpayments made to petitioner.

In Matter of Highland Nursing Home v Axelrod and Matter of King St. Home v Axelrod: Orders modified, with costs to appellants, in accordance with the opinion herein and, as so modified, affirmed.

In Matter of Broadacres Skilled Nursing Facility v Axelrod: Order affirmed, with costs, and question certified answered in the affirmative.

      . The rates of reimbursement are established pursuant to regulations promulgated by the New York State Hospital Review and Planning Council and approved by the Commissioner of Health. (Public Health Law § 2803 [2].) The Department’s rate-making methodology was formerly embodied in 10 NYCRR part 86, and today is embodied in 10 NYCRR subpart 86-2.

      .  It is settled that the equitable doctrine of loches may not be interposed as a defense against the State when acting in a governmental capacity to enforce a public right or protect a public interest. (People v Van Rensselaer, 8 Barb 189, 197; Matter of Levey [Catherwood], 33 AD2d 1066, 1067 [Cooke, J,]; New York State Water Resources Commn. v Liberman, 37 AD2d 484, appeal dismissed 30 NY2d 516; Utah Power & Light Co. v United States, 243 US 389, 409; United States v Kirkpatrick, 9 Wheat [22 US] 720, 735 [Story, J.].) Utilization of loches, based upon an administrative agency’s delay, is precluded in a majority of jurisdictions. (Goldman, Administrative Delay and Judicial Relief, 66 Mich L Rev 1423, 1444, n 50; Precious Metals Assoc. v Commodity Futures Trading Commn., 620 F2d 900, 909-910.) This view stems from considerations of sovereign immunity, protection of the public fisc and separation of powers. (Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30, 34.) The defense of loches, specifically interposed by Cortlandt and King Street in their verified petitions to enjoin recoupment of Medicaid overpayments, is unavailing.

      . 10 NYCRR section 86-2.7 (a) provides: "All fiscal and statistical records and reports shall be subject to audit. All underlying books, records and documentation which formed the basis for the fiscal and statistical reports, filed by the residential health care facility with the department, shall be kept and maintained by the facility for a period of time not less than six years from the date of filing, or the date upon which the fiscal and statistical records were to be filed, whichever is the later date. In this respect, any rate of payment certified by the State Commissioner of Health based on the initial submission of base year data and reports will be construed to represent a provisional rate until such audit is performed and completed, at which time such rate or adjusted rate will be construed to represent the audited rate.” (Emphasis added.) (See also, former 10 NYCRR §§ 86.8, 86.16.)

      . 10 NYCRR section 86-2.7 (c) provides: "The required fiscal and statistical reports shall be subject to audit for a period of six years from the date of their filing with the department or from the date when due, whichever is later. This limitation shall not apply to situations in which fraud may be involved or where the provider or an agent thereof prevents or obstructs the commissioner from performing an audit pursuant to this section.” (See also, former 10 NYCRR § 86.8.)

      . Compare Matter of Utica Cheese v Barber (49 NY2d 1028), wherein the administrative delay of the Commissioner of the Department of Agriculture and Markets, in acting upon an application for a milk dealer’s license, precluded petitioner from engaging in economic activity.