author: Chief Judge Cooke.

text:
    Park West Management Corp., Appellant, v Arthur Mitchell et al., Respondents.
    Argued May 2, 1979;
    decided June 7, 1979

      POINTS OF COUNSEL

      Eugene J. Morris and Michael J. De Zorett for appellant.
    I. The conditions resulting from the Local 32-B strike at Park West Village did not render the tenants’ apartments uninhabitable and "dangerous, hazardous or detrimental” to "life, health or safety”. (O'Brien v Capwell, 59 Barb 497; Daly v

      Wise, 132 NY 306; Morgenthau v Ehrich, 77 Misc 139; Boreel v Lawton, 90 NY 293; Herstein Co. v Columbia Pictures Corp., 4 NY2d 117; Javins v First Nat. Realty Corp., 428 F2d 1071, 400 US 925; Amanuensis, Ltd. v Brown, 65 Misc 2d 15; Morbeth Realty Corp. v Rosenshine, 67 Misc 2d 325; Tonetti v Penati, 48 AD2d 25; Groner v Lakeview Mgt. Corp., 83 Misc 2d 932.) II. Park West’s performance is excused under clause 28 of the lease where it has been prevented from rendering certain services by reason of causes beyond its control and particularly where the performance has been inhibited by a strike. (Groner v Lakeview Mgt. Corp., 83 Misc 2d 932; 57 E. 54 Realty Corp. v Gay Nineties Realty Corp., 71 Misc 2d 353; Atwater & Co. v Panama R. R. Co., 255 NY 496; Normandie Shirt Co. v J. H. & C. K. Eagle, Inc., 238 NY 218; Weiler v Dry Dock Sav. Inst., 258 App Div 581, 284 NY 630; Cox v First Nat. Realty & Constr. Corp., 50 AD2d 535, 39 NY2d 708.) III. Section 235-b of the Real Property Law may not be applied retroactively to leases executed prior to August 1, 1975. (Weiler v Dry Dock Sav. Inst., 258 App Div 581, 284 NY 630; Bernard Katz, Inc. v East 30th St. Corp., 172 Misc 873, 259 App Div 707; Francais v Cusa Bros. Enterprises, 53 AD2d 24; Kaplan v Coulston, 85 Misc 2d 745; Committee for Preservation of Fresh Meadows v Fresh Meadows Assoc., 93 Misc 2d 529; Tonetti v Penati, 48 AD2d 25; Board of Educ. v Miles, 15 NY2d 364; Cooper v Commercial Ins. Co., 14 AD2d 55, 11 NY2d 818; Weiler v Dry Dock Sav. Inst., 258 App Div 581; Matter of Wa-Wa-Yanda, Inc. v Dickerson, 18 AD2d 251.) IV. The Housing Court does not have jurisdiction to determine reduced rental values. (Barbee v 2639 Corp., 284 App Div 298; Whitmarsh v Farnell, 298 NY 336; 8200 Realty Corp. v Lindsay, 27 NY2d 124, 400 US 962; Committee for Preservation of Fresh Meadows v Fresh Meadows Assoc., 93 Misc 2d 529.) V. Tenants suffered no compensable damages as a result of the strike. (Steinberg v Carreras, 77 Misc 2d 774; Kekllas v Saddy, 88 Misc 2d 1042.)

      Kent Karlsson for respondents.
    I. When landlord fails to provide essential services to tenants, it breaches its warranty of habitability. (Tonetti v Penati, 48 AD2d 25; Amanuensis, Ltd. v Brown, 65 Misc 2d 15; Morbeth Realty Corp. v Velez, 73 Misc 2d 996; Javins v First Nat. Realty Corp., 428 F2d 1071; 57 E. 54 Realty Corp. v Gay Nineties Realty Corp., 71 Misc 2d 353; Matter of Bozart Realty Corp. v City of New York, 39 AD2d 906; Altz v Leiberson, 233 NY 16; Dolman v United

      States Trust Co., 2 NY2d 110.) A. Landlord failed to perform obligations imposed upon it by the law as it existed both prior to and after the enactment of section 235-b of the Real Property Law. B. Since no retroactive effect was given to section 235 of the Real Property Law, consideration as to its retroactive application is unnecessary. C. The warranty of habitability is implied in all leases, written or oral, including leases pursuant to the Rent Stabilization Law. (Mehlman Mgt. Corp. v Meyers, 51 AD2d 949.) D. When landlord failed to provide janitorial services, garbage removal services and normal maintenance for 17 days, landlord has breached its warranty of habitability. E. Landlord is not exempted from liability by operation of any lease waiver, nor by alleged impossibility of performance. (Withattan Realty Co. v H. Abraham, Inc., 18 Misc 2d 239; Steinberg v Carreras, 74 Misc 2d 32, 77 Misc 2d 774; Klipack v Raymar Novelties, 273 App Div 54; Dunbar Assoc. v Mulzac, 93 Misc 2d 870; Cohen v Werner, 82 Misc 2d 295.) F. Application of the warranty of habitability to a labor strike of landlord’s building employees is not pre-empted by Federal law. (Labor Bd. v Jones & Laughlin, 301 US 1; Alleghany Ludlum Steel Corp. v Kelley, 269 App Div 805, 295 NY 607, revd on other grounds sub nom. Bethlehem Co. v State Bd., 330 US 767.) II. The record amply supports the modest award of 10% of one month’s rent as damages. (Wakeman v Wheeler & Wilson Mfg. Co., 101 NY 205; West, Weir & Bartel v Carter Paint Co., 25 AD2d 81; Teerpenning v Corn Exch. Ins. Co., 43 NY 279; Clark v Baird, 9 NY 183; Mercer v Vose, 67 NY 56; Freund v Washington Sq. Press, 34 NY2d 379.)

      Robert Abrams, Attorney-General (Samuel A. Hirshowitz and Shirley Adelson Siegel of counsel), in his statutory capacity under section 71 of the Executive Law.
    I. The implied warranty of habitability law (Real Property Law, § 235-b) is a police power measure. Its provisions may apply to existing leases without violating the contract clause. (Health Dept. of City of N. Y. v Rector of Trinity Church in City of N. Y., 145 NY 32; Tenement House Dept. of City of N. Y. v Moeschen, 179 NY 325; Queenside Hills Co. v Saxl, 328 US 80; Matter of Farrell v Drew, 19 NY2d 486; Matter of New York City Housing Auth. v Muller, 270 NY 333; Matter of Department of Bldgs. of City of N. Y. [Philco Realty Corp.], 14 NY2d 291; Matter of Subway-Surface Supervisors Assn. v New York City Tr. Auth., 44 NY2d 101; Home Bldg. & Loan Assn. v Blaisdell,
      290 US 398; People ex rel. Durham Realty Corp. v La Fetra, 230 NY 429; Veix v Sixth Ward Assn., 310 US 32.) II. The implied warranty of habitability law may constitutionally apply to rent stabilized apartments. (Montgomery v Daniels, 38 NY2d 41; Matter of Van Berkel v Power, 16 NY2d 37; Matter of Malpica-Orsini, 36 NY2d 568.)

      Robert Sugerman for Ad Hoc Committee to Defend the Warranty of Habitability Law, amicus curiae.

    I. Section 235-b of the Real Property Law is not simply a restatement of landlords’ existing statutory obligations, but gives effect to tenants’ true understanding of their rental agreements. (Tonetti v Penati, 48 AD2d 25; Morbeth Realty Corp. v Velez, 73 Misc 2d 996; Steinberg v Carreras, 74 Misc 2d 32, 77 Misc 2d 774; Javins v First Nat. Realty Corp., 428 F2d 1071, 400 US 925.) II. Section 235-b of the Real Property Law is a valid expression of public policy and may not be waived. (East N. Y. Bank v Hahn, 326 US 230; Goldblatt v Hempstead, 369 US 590; Twentieth Century Assoc. v Waldman, 294 NY 571; Matter of Mlodozeniec v Worthington Corp., 9 AD2d 21, 8 NY2d 918, 364 US 628; People ex rel. Pells v Board of Supervisors Ulster County, 65 NY 300; Matter of Lefkowitz v Parker, 38 NY2d 743; Greenspan v East 33rd St. Realty Corp., 169 Misc 353, 256 App Div 565; Matter of O’Neil v Brooklyn Sav. Bank, 293 NY 666, 324 US 697; Allen-Bradley Local v Board, 315 US 740; Lascaris v Wyman, 31 NY2d 386.) III. Rent laws do not provide complete or pre-emptive remedies for injuries under the "Warranty of Habitability Law”. (Matter of Carl G., 78 Misc 2d 453; People v Pease, 67 Misc 2d 359.) IV. Courts should be afforded great latitude in assessing damages in order to effectuate the law’s objectives. (Haughey v Belmont Quadrangle Drilling Corp., 284 NY 134; Spitz v Lesser, 302 NY 490; Dunkel v McDonald, 272 App Div 267, 298 NY 586.)

      Abraham M. Lindenbaum for Rent Stabilization Association of New York City, Inc., amicus curiae.

    To the extent that the building service employees strike made the maintenance of services impossible section 235-b of the Real Property Law is inoperative. (Epman v Cox, 234 NY 641.)

      Louis B. York and Peter M. Wendt for Manhattan Legal Services Corporation and another, amici curiae.

    I. The warranty of habitability as enacted by the Legislature applies to rental agreements for all residential premises, including apartments with controlled or stabilized rents. (People v Olah, 300 NY 96; Matter of Knapp v Syracuse Univ., 308 NY 274; Bright Homes v Wright, 8 NY2d 157; Davis v Supreme Lodge, Knights of Honor, 165 NY 159; Matter of Erikson v Helfand, 1 AD2d 59, 1 NY2d 775; Matter of Brooklyn, Queens County & Suburban R. R. Co., 185 NY 171; Matter of Tiffany, 179 NY 455; Locust Club of Rochester v City of Rochester, 29 AD2d 134, 22 NY2d 809, 393 US 481; Barbee v 2639 Corp., 284 App Div 298; Tonetti v Penati, 48 AD2d 25.) II. Any residential tenant may raise the landlord’s breach of the warranty of habitability in a court proceeding, including a nonpayment proceeding commenced by the landlord in the Housing Part of the Civil Court. (Park West Mgt. Corp. v Mitchell, 62 AD2d 291; Mehlman Mgt. Corp. v Meyers, 51 AD2d 949, 40 NY2d 807; Covington v McKeiver, 88 Misc 2d 1000.) III. The flexible approach adopted by the court below to the problem of proving damages merits the approval of this court. (Garcia v Freeland Realty, 63 Misc 2d 937; Mannie Joseph, Inc. v Stewart, 71 Misc 2d 160; Groner v Lakeview Mgt. Corp., 83 Misc 2d 932; Yantic Grain & Prods. Co. v Bullet Hole Farms, 29 AD2d 764; Odysseys Unlimited v Astral Travel Serv., 77 Misc 2d 502.) IV. Opinion evidence as to the value of real and personal property and personal services by anyone with a reasonable basis for the opinion is admissible. (Hangen v Hochmeister, 114 NY 566; Mercer v Vose, 67 NY 56; Robertson v Knapp, 35 NY 90; Edgecomb v Buckout, 146 NY 332; Keenen v Getsinger, 1 App Div 172; Robbins v Cooper Assoc., 14 NY2d 913, 979, 980; Gilroy v American Broadcasting Co., 47 AD2d 728; Glickstein & Turner v Sheffield Glass Bottle Co., 214 App Div 626; Cutler-Hammer, Inc. v Troy, 283 App Div 123; Matter of Bo Mfg. Co., 90 F Supp 388.)

      Howard Lichtenstein, Marvin Dicker and Abraham Borenstein for Realty Advisory Board on Labor Relations, Incorpo-
    rated, amicus curiae.

    I. Federal-labor policy requires that management and labor engage in unfettered collective bargaining. (Teamsters Union v Morton, 377 US 252; Porter Co. v NLRB, 397 US 99; American Ship Bldg. v Labor Bd., 380 US 300; Labor Bd. v Insurance Agents, 361 US 477; Machinists v Wisconsin Employment Relations Comm., 427 US 132; Garner v Teamsters Union, 346 US 485.) II. The decision below infringes upon the congressionally mandated policy of free collective bargaining and violates State policy of neutrality in labor disputes. (Cab Operating Corp. v City of New York, 243 F Supp 550; Unions v Garmon, 359 US 236; Matter of Heitzenrater [Hooker Chem. Corp. — Catherwood], 19 NY2d 1; Matter of Burger [Corsi], 277 App Div 234, 303 NY 654; Kauffman & Sons Saddlery Co. v Miller, 298 NY 38; People v Bell, 306 NY 110.)

      Kalman Finkel, John E. Kirklin, Susan S. Seel, Morton B. Dicker and Gary R. Connor for the Legal Aid Society of New York City, amicus curiae.

    I. The lower courts correctly concluded in this case that the landlord is liable for breach of the warranty of habitability. (Javins v First Nat. Realty Corp., 428 F2d 1071; Morbeth Realty Corp. v Velez, 73 Misc 2d 996; Matter of Concord Realty Co. v City of New York, 30 NY2d 308; Blackstock v New York & Erie R. R. Co., 20 NY 48; McGovern v City of New York, 234 NY 377; Normandie Shirt Co. v J. H. & C. K. Eagle, Inc., 238 NY 218; Lefrak v Lambert, 89 Misc 2d 197; Kaplan v Coulston, 85 Misc 2d 745; Covington v McKeiver, 88 Misc 2d 1000; Garcia v Freeland Realty, 63 Misc 2d 937.) II. The award of damages is supported by the evidence in the record. (McFadden v Thompson-Starrett Co., 116 App Div 285, 192 NY 550; Gillespie v Brooklyn Hgts. R. R. Co., 178 NY 347; Bly v Edison Elec. Illuminating Co. of N. Y., 172 NY 1; Dixon v New York Trap Rock Corp., 293 NY 509; Kline v 1500 Mass. Ave. Apt. Corp., 439 F2d 477; Miller v Baltimore & Ohio R. R., Co., 89 App Div 457; Aplington v Pullman Co., 110 App Div 250; Odysseys Unlimited v Astral Travel Serv., 77 Misc 2d 502; Cohen v Varig Airlines, S. A. Empresa De Viacao Aerea Rio Grandense, 85 Misc 2d 653; Owens v Italia Societa Per Azione Di Navigazione-Genova, 70 Misc 2d 719, 75 Misc 2d 104.)
   OPINION OF THE COURT

Chief Judge Cooke.

Under the traditional common-law principles governing the landlord-tenant relationship, a lease was regarded as a conveyance of an estate for a specified term and thus as a transfer of real property. Consequently, the duty the law imposed upon the lessor was satisfied when the legal right of possession was delivered to the lessee. The lessor impliedly warranted only the continued quiet enjoyment of the premises by the lessee. This covenant of quiet enjoyment was the only obligation imposed upon the landlord which was interdependent with the lessee’s covenant to pay rent. As long as the undisturbed right to possession of the premises remained in the tenant, regardless of the condition of the premises, the duty to pay rent remained unaffected.

Because the common law of leasehold interests developed in rural, agrarian England, the right to possession of the land itself was considered the essential part of the bargain; structures upon the land were deemed incidental. Thus, notwithstanding that the building may have constituted the substantial part of the tenant’s consideration for entering into the lease, its destruction did not suspend his duty to pay the entire rent or afford him the right to rescind the lease (see 2 Powell, Real Property, par 233 et seq.). Indeed, even if the landlord had expressly covenanted to repair structures on the demised premises, that promise was considered ancillary to the tenant’s obligation to pay rent. Hence, the failure of the lessor to perform the obligations imposed by his promise to repair gave the lessee only the right to maintain an action for damages; it did not vest in him a defense to an action grounded upon nonperformance of his covenant to pay rent (1 American Law of Property [Casner ed], § 3.79).

As society slowly moved away from an agrarian economy, the needs and expectations of tenants underwent a marked change. No longer was the right of bare possession the vital part of the parties’ bargain. The urban tenant seeks shelter and the services necessarily appurtenant thereto — heat, light, water, sanitation and maintenance. Unfortunately, the early attempts of the common law to adapt to the changes encompassed by this societal transition and to mitigate the severity of the rule holding that the tenant’s covenant to pay rent was independent of all but the most basic of the landlord’s obligations proved less than satisfactory.

The harshness of the common-law rule was mitigated to a degree by decisions holding that performance of a tenant’s covenant to pay rent was excused when the premises were destroyed through no fault of his own (e.g., Graves v Berdan, 26 NY 498, 501). Subsequent judicial holdings expanded the scope of the landlord’s covenant of quiet enjoyment to include a duty to refrain from any act or omission which would render the premises unusable by the tenant (e.g., Tallman v Murphy, 120 NY 345, 351-352). Again, however, development of this theory of constructive eviction did not meet the needs of tenants in a society rapidly undergoing urbanization and, as a practical matter, was of no aid in helping them obtain essential services. It simply afforded the tenant the option to abandon the premises and cease paying rent if the failure of services was sufficiently severe. While the constructive eviction principle mollified the rigors of the common law to some extent, it was fraught with uncertainty, for the reasonableness of the tenant’s action was subject to the vicissitudes of judicial review in an action by the landlord. If the condition of the dwelling was later determined not to have justified vacation of the premises, the tenant remained liable for unpaid rent. Further, rescission of the lease and abandonment of the premises did not spur landlords into making necessary repairs in locales in which the demand for housing greatly exceeded its supply and compelled tenants living in uninhabitable premises to undergo the expense of locating new premises and moving their belongings. Thus, since the common law imposed no implied service obligations on the landlord, maintenance and other essential services often were never performed, especially in low-income neighborhoods.

These early attempts presaged a distinct trend among courts and legislatures toward characterizing a lease of residential property as a contract containing an implied warranty of habitability interdependent with the covenant to pay rent (e.g., Pines v Perssion, 14 Wis 2d 590; Brown v Southall Realty Co., 237 A2d 834 [DC]). A number of factors mandated departure from the antiquated common-law rules governing the modern landlord-tenant relationship. The modern-day tenant, unlike his medieval counterpart, is primarily interested in shelter and shelter-related services. He is usually not competent to perform maintenance chores, even assuming ability to gain access to the necessary equipment and to areas within the exclusive control of the landlord (see Javins v First Nat. Realty Corp., 428 F2d 1071, 1077-1078, cert den 400 US 925). Since a lease is more akin to a purchase of shelter and services rather than a conveyance of an estate, the law of sales, with its implied warranty of fitness (Uniform Commercial Code, § 2-314) provides a ready analogy that is better suited than the outdated law of property to determine the respective obligations of landlord and tenant (Green v Superior Ct., 10 Cal 3d 616, 626-627).

The transformation of the nature of the housing market occasioned by rapid urbanization and population growth was further impetus for the change. Well-documented shortages of low- and middle-income housing in many of our urban centers has placed landlords in a vastly superior bargaining position, leaving tenants virtually powerless to compel the performance of essential services. Because there is but a minimal threat of vacancies, the landlord has little incentive to voluntarily make repairs or ensure the performance of essential services (see Boston Housing Auth. v Hemingway, 363 Mass 184, 197-198; Javins v First Nat. Realty Corp., 428 F2d 1071, 1079-1081, supra). While it is true that many municipalities have enacted housing codes setting minimum safety and sanitation standards, historically those codes could be enforced only by municipal authorities (Davar Holdings v Cohen, 280 NY 828, but see L 1977, ch 849, § 13).

In short, until development of the warranty of habitability in residential leases, the contemporary tenant possessed few private remedies and little real power, under either the common law or modern housing codes, to compel his landlord to make necessary repairs or provide essential services. Initially by judicial decision (e.g., Tonetti v Penati, 48 AD2d 25; Jackson v Rivera, 65 Misc 2d 468; Morbeth Realty Corp. v Velez, 73 Misc 2d 996; Steinberg v Carreras, 74 Misc 2d 32) and ultimately by legislative enactment in August, 1975, the obsolete doctrine of the lease as a conveyance of land was discarded. Codifying existing case law, the enactment of section 235-b of the Real Property Law (L 1975, ch 597, as amd), placed "the tenant in parity legally with the landlord” (1975 Sen J 7766-7776 [remarks of Senator Barclay]). A residential lease is now effectively deemed a sale of shelter and services by the landlord who impliedly warrants: first, that the premises are fit for human habitation; second, that the condition of the premises is in accord with the uses reasonably intended by the parties; and, third, that the tenants are not subjected to any conditions endangering or detrimental to their life, health or safety.

Petitioner is the owner of Park West Village, an apartment complex comprised of seven highrise buildings on the Upper West Side of Manhattan. For a 17-day period in May, 1976, petitioner’s entire maintenance and janitorial staff did not report to work due to a strike by members of Employees’ Union Local 32-B. As a result of the strike, the tenants of Park West Village suffered extensive service interruptions which prompted some of them to withhold rent for the period encompassed by the strike.

Petitioner commenced this summary nonpayment proceeding in the Civil Court of the City of New York. Respondent raised the affirmative defense that, as a result of the strike, petitioner had not provided essential services and had allowed conditions dangerous to the health of tenants to exist on the premises, constituting a breach of its implied warranty of habitability. By stipulation, the parties agreed that the decision rendered in the instant proceeding would bind some 400 tenants of Park West Village similarly situated. The parties further stipulated that in lieu of calling witnesses, they would submit written statements describing the extent and effect of the service interruptions caused by the strike. Hence, there is presented only the legal question of whether the conditions existing at Park West Village throughout the duration of the strike constituted a breach of the implied warranty of habitability.

During the strike, the entire complement of porters and handymen at the complex — some two thirds of the entire work force — did not report to work. All of the incinerators were wired shut, compelling tenants to dispose of refuse at the curbs in paper bags supplied by the landlord. Because employees of the New York Sanitation Department refused to cross the striking employees’ picket lines, uncollected trash piled up to the height of the first floor windows. Exposure of the accumulated garbage to the elements caused it to fester and exude noxious odors, eventually necessitating the declaration of health emergency at the complex by the New York City Department of Health. Regular exterminating service was not performed which, together with the accumulated garbage, created conditions in which rats, roaches and vermin flourished. Routine maintenance service was not performed, common areas remained uncleaned and sporadic interruptions of other services plagued the development. Civil Court determined that the conditions at the complex constituted a breach of the implied warranty of habitability and found that the loss in rental value of the apartments sustained by the tenants justified a reduction of 10% in their June rent bill. Both the Appellate Term and the Appellate Division affirmed, the latter court granting petitioner leave to appeal to this court.

Petitioner maintains, and rightfully so, that a landlord is not a guarantor of every amenity customarily rendered in the landlord-tenant relationship. The warranty of habitability was not legislatively engrafted into residential leases for the purpose of rendering landlords absolute insurers of services which do not affect habitability. Rather section 235-b of the Real Property Law was designed to give rise to an implied promise on the part of the landlord that both the demised premises and the areas within the landlord’s control are fit for human occupation at the inception of the tenancy and that they will remain so throughout the lease term.

The scope of the warranty includes, of course, conditions caused by both latent and patent defects existing at the inception of and throughout the tenancy. However, as the statute places an unqualified obligation on the landlord to keep the premises habitable, conditions occasioned by ordinary deterioration, work stoppages by employees, acts of third parties or natural disaster are within the scope of the warranty as well (cf. Uniform Residential Landlord and Tenant Act, § 2.104). Inasmuch as the landlord is vested with the ultimate control and responsibility for the building, it is he who has a corresponding nondelegable and nonwaivable duty to maintain it. The obligation of the tenant to pay rent is dependent upon the landlord’s satisfactory maintenance of the premises in habitable condition.

Naturally, it is a patent impossibility to attempt to document every instance in which the warranty of habitability could be breached. Each case must, of course, turn on its own peculiar facts. However, the standards of habitability set forth in local housing codes will often be of help in resolution of this question. Substantial violation of a housing, building or sanitation code provides a bright-line standard capable of uniform application and, accordingly, constitutes prima facie evidence that the premises are not in habitable condition. However, a simple finding that conditions on the lease premises are in violation of an applicable housing code does not necessarily constitute automatic breach of the warranty. In some instances, it may be that the code violation is de minimis or has no impact upon habitability. Thus, once a code violation has been shown, the parties must come forward with evidence concerning the extensiveness of the breach, the manner in which it impacted upon the health, safety or welfare of the tenants and the measures taken by- the landlord to alleviate the violation (see Javins v First Nat. Realty Co., 428 F2d 1071, 1082, supra; Jack Spring, Inc. v Little, 50 Ill 2d 351, 366; King v Moorehead, 495 SW2d 65, 76 [Mo]; cf. Mease v Fox, 200 NW2d 791, 796-797 [Iowa]).

But, while certainly a factor in the measurement of the landlord’s obligation, violation of a housing code or sanitary regulation is not the exclusive determinant of whether there has been a breach. Housing codes do not provide a complete delineation of the landlord’s obligation, but rather serve as a starting point in that determination by establishing minimal standards that all housing must meet (see Boston Housing Auth. v Hemingway, 363 Mass 184, 200-201, n 16, supra). In some localities, comprehensive housing, building or sanitation codes may not have been enacted; in others, their provisions may not address the particular condition claimed to render the premises uninhabitable. Threats to the health and safety of the tenant — not merely violations of the codes — determines the reach of the warranty of habitability.

A residential lease is essentially a sale of shelter and necessarily encompasses those services which render the premises suitable for the purpose for which they are leased. To be sure, absent an express agreement to the contrary, a landlord is not required to ensure that the premises are in perfect or even aesthetically pleasing condition; he does warrant, however, that there are no conditions that materially affect the health and safety of tenants. For example, no one will dispute that health and safety are adversely affected by insect or rodent infestation, insufficient heat and plumbing facilities, significantly dangerous electrical outlets or wiring, inadequate sanitation facilities or similar services which constitute the essence of the modern dwelling unit. If, in the eyes of a reasonable person, defects in the dwelling deprive the tenant of those essential functions which a residence is expected to provide, a breach of the implied warrant of habitability has occurred.

Under the facts presented here, respondents have proven that petitioner breached its implied warranty of habitability. As a result of the strike, essential services bearing directly on the health and safety of the tenants were curtailed, if not eliminated. Not only were there numerous violations of housing and sanitation codes (e.g., Administrative Code of City of New York, §§ D26-11.01, D26-11.03, D26-11.05, D26-13.03, D2614.03, D26-22.03), but conditions of the premises were serious enough to necessitate the declaration of a health emergency. In light of these factors, it ill behooves petitioner to maintain that the tenants suffered only a trifling inconvenience. Rather, the failure of petitioner to provide adequate sanitation removal, janitorial and maintenance services materially impacted upon the health and safety of the tenants and permitted them an abatement in their contracted-for rent.

Problematical in these cases is the method of ascertaining damages occasioned by the landlord’s breach. That damages are not susceptible to precise determination does not insulate the landlord from liability (Green v Superior Ct., 10 Cal 3d 616, 638-639, supra; see Matter of Rothko, 43 NY2d 305, 322-323; Wakeman v Wheeler & Wilson Mfg. Co., 101 NY 205, 209). Inasmuch as the duty of the tenant to pay rent is coextensive with the landlord’s duty to maintain the premises in habitable condition, the proper measure of damages for breach of the warranty is the difference between the fair market value of the premises if they had been as warranted, as measured by the rent reserved under the lease, and the value of the premises during the period of the breach. The award may take the form of a sum of money awarded the tenant in a plenary action or a percentage reduction of the contracted-for rent as a setoff in summary nonpayment proceeding in which the tenant counterclaims or pleads as a defense breach by the landlord of his duty to maintain the premises in habitable condition. We do not comment upon the availability of other remedies not implicated under the facts presented here.

In ascertaining damages, the finder of fact must weigh the severity of the violation and duration of the conditions giving rise to the breach as well as the effectiveness of steps taken by the landlord to abate those conditions. Since both sides will ordinarily be intimately familiar with the conditions of the premises both before and after the breach, they are competent to give their opinion as to the diminution in value occasioned by the breach (Teerpenning v Corn Exch. Ins. Co., 43 NY 279, 282; Richardson, Evidence [10th ed], § 364, subd n). Indeed, the Legislature has instructed that in ascertaining the diminished market value of these dwellings, expert testimony is not required (Real Property Law, § 235-b, subd 3).

The record here amply supports the 10% reduction in rent ordered by Civil Court. Given the severity of the conditions existing on the premises during the strike and the feeble attempts by petitioner to alleviate the dangers to the health and safety of the tenants, there is no basis for disturbing the award.

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

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

Order affirmed.

      . The statute provides:
      "1. In every written or oral lease or rental agreement for residential premises the landlord or lessor shall be deemed to covenant and warrant that the premises so leased or rented and all areas used in connection therewith in common with other tenants or residents are fit for human habitation and for the uses reasonably intended by the parties and that the occupants of such premises shall not be subjected to any conditions which would be dangerous, hazardous or detrimental to their life, health or safety. When any such condition has been caused by the misconduct of the tenant or lessee or persons under his direction or control, it shall not constitute a breach of such covenants and warranties.
      "2. Any agreement by a lessee or tenant of a dwelling waiving or modifying his rights as set forth in this section shall be void as contrary to public policy.

        "3. In determining the amount of damages sustained by a tenant as a result of a breach of the warranty set forth in this section, the court need not require any expert testimony.”

      . It is noted that the statute we construe today speaks only of residential property used for such a purpose.


source: Caselaw Access Project

author: Jones, J.

license: Public Domain

text:
    In the Matter of Jewish Memorial Hospital et al., Appellants, v Robert P. Whalen, as Commissioner of Health of the State of New York, et al., Respondents.
    Argued April 30, 1979;
    decided June 7, 1979

      POINTS OF COUNSEL

      Franklin S. Bonem, Robert M. Kaufman, Bruce E. Fader and Frederick K. Mehlman for appellants.
    I. The 100% ceiling regulation violates the statutory standard for hospital reimbursement. (Matter of Affiliated Distillers Brands Corp. v State Liq. Auth., 24 NY2d 31; Matter of Bates v Toia, 45 NY2d 460; Erie County v Whalen, 57 AD2d 281, 44 NY2d 817; Matter of Fairfield Nursing Home v Whalen, 64 AD2d 802; Matter of Sturman v Ingraham, 52 AD2d 882; Fusari v Steinberg, 419 US 379; Ward v Village of Monroeville, 409 US 57; Tumey v Ohio, 273 US 510; Goldberg v Kelly, 397 US 254.) II. The interns and residents disallowance is invalid. (Matter of Fairfield Nursing Home v Whalen, 64 AD2d 802; Matter of Swalbach v State Liq. Auth. of State of N. Y., 7 NY2d 518.) III. The amendment altering the computation of allowable base-year costs is also invalid. IV. The amended regulations and reimbursement rates may not be retroactively applied. (People v Woman’s Christian Assn. of Jamestown, 44 NY2d 466; Matter of Beekman-Downtown Hosp. v Whalen, 44 NY2d 124; Matter of Presbyterian Hosp. in City of N. Y. v Ingraham, 48 AD2d 491, 39 NY2d 867; Hurlbut v Whalen, 58 AD2d 311, 43 NY2d 643; Matter of Kaye v Whalen, 44 NY2d 754; Matter of Bell v Waterfront Comm. of N. Y. Harbor, 20 NY2d 54; Matter of White Plains Nursing Home v Whalen, 53 AD2d 926, 42 NY2d 838; Matter of Bradley v Whalen, 58 AD2d 664; Health Ins. Assn. of Amer. v Harnett, 44 NY2d 302.) V. Respondents should be directed to compute new rates pursuant to the formulas issued January 1, 1975 for the indeterminate succeeding period.

      Robert Abrams, Attorney-General (George C. Mantzoros and Shirley Adelson Siegel of counsel), for Robert P. Whalen and another, respondents.
    I. Petitioners’ challenge, prefaced by the word "retroactive”, only refers to the time element when the commissioner made the new 1976 rates — in an adjustment of the "interim” rates — effective on January 1, 1976 without any allegation or proof of taking or impairing vested rights under interim rates. The commissioner’s action was not a retroactive one. Hence, the commissioner’s action does not violate constitutional due process or section 2807 (subds 3, 4) of the Public Health Law or regulations 86-1.15 and 86-1.16. (Rooney v City of Long Beach, 42 AD2d 34, 33 NY2d 897; Hochster v City Bank Farmers Trust Co., 260 App Div 712; Ronald Co. v Marshall Mtge. Corp., 265 App Div 622; Ohlinger v United States, 135 F Supp 40; Matter of Kaye v Whalen, 56 AD2d 111, 44 NY2d 754; Matter of White Plains Nursing Home v Whalen, 53 AD2d 926, 42 NY2d 838; Matter of Bradley v Whalen, 58 AD2d 664; Usery v Turner Elkhorn Min. Co., 428 US 1; Springdale Convalescent Center v Mathews, 545 F2d 943; Adams Nursing Home of Williamstown v Mathews, 548 F2d 1077.) II. The Commissioner of Health’s hospital administrative regulations (10 NYCRR 86-1) under sections 2800 and 2803 of the Public Health Law are presumed valid and constitutional. Petitioners fail to rebut this presumption. (People ex rel. Knoblauch v Warden, 216 NY 154; Matter of Meenagh v Dewey, 286 NY 292; Matter of County of Cayuga v McHugh, 4 NY2d 609; Urowsky v Board of Regents of Univ. of State of N. Y., 76 Misc 2d 187, 38 NY2d 364; Grossman v Baumgartner, 17 NY2d 345.) III. A declaration of invalidity barring the 1976 regulations and rates substituting by an extraordinary mandatory injunction to fill the gap by the repealed "Blue Cross formulas effective January 1, 1975” would be detrimental and oppressive adversely affecting Blue Cross budgets and millions of subscribers’ insurance premiums. Such relief is unwarranted. (Schulwolf v Cerro Corp., 86 Misc 2d 292; Nielsen v Corbo, 35 AD2d 580.) IV. Petitioners’ action in 1977 to nullify the May 28, 1976 hospital regulations is barred by laches and the four-month Statute of Limitations (CPLR 217). (Matter of Posner v Rockefeller, 33 AD2d 314, 26 NY2d 970.)

      Donald B. da Parma for Blue Cross Plans, respondents.
    I. The lower courts did not err in holding that the 1976 Blue Cross methodology has a rational basis. (Matter of Affiliated Distillers Brands Corp. v State Liq. Auth., 24 NY2d 31; Matter of Posner v Rockefeller, 62 Misc 2d 28, 33 AD2d 314, 26 NY2d 970.) II. The hospitals’ challenge to the procedure followed by the commissioner in establishing the 1976 Blue Cross reimbursement rates is factually and legally unfounded. (Matter of Kaye v Whalen, 56 AD2d 111, 44 NY2d 754.) III. Appellants’ challenge to the commissioner’s regulations and his decision that 1976 reimbursement rates would be effective as of January 1, 1976 is barred as untimely. (Greenfield v Denner, 6 AD2d 263, 6 NY2d 867.)
   OPINION OF THE COURT

Jones, J.

The regulations governing the formulas and rates of reimbursement by Blue Cross for hospital care and services adopted by the Commissioner of Health on May 28, 1976 (and the individual reimbursement rates thereafter promulgated thereunder) were validly made applicable to all care and services rendered after January 1, 1976. Additionally no warrant has been shown to set aside in particular the specific regulation that imposed a limit on the individual hospital’s base-year expenses (used for computing reimbursement rate) of 100% of the average base-year expenses of all the hospitals in the same grouping. We conclude, however, at variance with the courts below, that no adequate predicate has been shown for the adoption of the regulation directing elimination for reimbursement purposes of 10% of the compensation of interns and residents as attributable to their educational costs. Accordingly, we declare this particular regulation invalid. Finally, we agree that the present proceeding by the petitioning hospitals is not barred by the four-month Statute of Limitations of CPLR 217.

In conformity with the Public Health Law, rates at which hospitals are reimbursed by Blue Cross for services rendered to its subscribers are determined in the following manner. Respondent Commissioner of the Department of Health issues regulations defining the characteristics of reimbursement formulas, two of which must ultimately be implemented — one for the metropolitan New York Blue Cross-Blue Shield Plan (the downstate formula), the other for the remaining seven Blue Cross-Blue Shield Plans in the State (the upstate formula). Based on those regulations (Part 86 of title 10 of the New York Code of Rules and Regulations; 10 NYCRR Part 86), Blue Cross submits proposed reimbursement formulas and individual rate schedules to the Commissioner of Health, who thereafter is required to certify to the Superintendent of Insurance rate schedules which he finds to be reasonably related to the cost of efficient production of hospital services. After the schedules so certified have been approved by the Superintendent of Insurance, each individual hospital is advised of the rate of reimbursement applicable to it.

In early fall, 1975 the Blue Cross Plans submitted to the Commissioner of Health proposed reimbursement formulas for 1976. Conscious of the growing concern over escalating hospital costs and anticipating legislation and revision of the regulations governing reimbursement rates, the commissioner did not certify the formulas submitted but instead notified the Superintendent of Insurance on October 28, 1975 that the calculation of new rates, i.e., for 1976, would have to await the revised regulations and that the 1975 rates would be continued on an interim basis. The hospital industry was notified of this action. On December 4, 1975 the Superintendent of Insurance approved the continued use of the 1975 rates pending promulgation of the final rates for 1976.

New regulations effecting significant changes in reimbursement formulas were thereafter adopted by the commissioner and promulgated by him on May 28, 1976, and on June 1, 1976 he directed the Blue Cross Plans to prepare new reimbursement formulas in accordance with the revised regulations, such formulas to be effective as of January 1, 1976 and to control reimbursement with respect to care and services rendered after that date. After the proposals had been received from the plans, in the fall of 1976 the commissioner certified reimbursement formulas and rates and the Superintendent of Insurance granted his approval in late October and November. Commencing in mid-November individual hospitals were advised of their respective reimbursement rates which would be effective for services rendered on and after January 1 of that year.

On February 25, 1977 petitioners* voluntary hospitals who claim that their 1976 reimbursement rates are lower than the 1975 rates, instituted this article 78 proceeding as a class action on behalf of themselves and all other hospitals similarly situated for a judgment enjoining the Commissioner of the Department of Health, the Superintendent of Insurance and Blue Cross Plans throughout the State from applying the revised Part 86 regulations and the reimbursement rates certified and approved in accordance therewith in fixing reimbursements to hospitals by Blue Cross Plans for services provided in 1976. Following the Appellate Division’s reversal of an order of Special Term which had dismissed the proceeding as barred by the four-month Statute of Limitations of CPLR 217, the matter was remitted to Special Term for further proceedings (60 AD2d 804). Thereafter, petitioners’ motion for partial summary judgment was denied and the petition was dismissed on the merits. That determination was unanimously affirmed by the Appellate Division, which granted leave to appeal to our court. The order of affirmance should be modified.

In addition to attacks on the substantive provisions of the regulations which describe the characteristics of the reimbursement formulas, petitioners assert that the regulations, promulgated in May, 1976, and the resulting formulas and rates, assigned in November, 1976, could not be made retroactive to January 1, 1976, with the result, it is argued, that 1975 reimbursement rates must be regarded as having continued to prevail during 1976. Because this challenge, if successful, would be determinative of the appeal in petitioners’ favor, we turn first to this aspect of the litigation.

For their assault on retroactivity petitioners rely on two statutory provisions (Public Health Law, § 2807, subds 3, 4), two regulations of the Department of Health (10 NYCRR 86-1.15 [a], 86-1.16) and an assertion of a denial of due process. Insofar as reliance is placed on subdivision 3 of section 2807 of the Public Health Law, they point to no language in that subdivision, however, that requires prospective approval of reimbursement rates for the year 1976, given the legislative intent that may be inferred from what transpired at the 1976 legislative session with respect to subdivision 4 of section 2807, the other statutory provision on which they rely.

At the outset it should be observed that the legislative expression with respect to prospectivity is found in subdivision 4 of section 2807 of the Public Health Law and that there have been two subdivisions numbered 4 pertinent to our present considerations. The first of these, which indeed contemplated only prospective rate-fixing, was enacted effective September 1, 1974 by chapter 682 of the Laws of 1974 and directed the Commissioner of Health to notify each hospital of its approved reimbursement rate at least 60 days prior to the "fiscal year” for which the rate was to become effective. However, chapter 76 of the Laws of 1976 provided that this subdivision 4 of section 2807 of the Public Health Law was to be suspended as of November 1, 1975 for the period through March 31, 1977, thus relieving the commissioner of observance of its command at least with respect to 1976 reimbursement rates. The same chapter enacted an alternative subdivision 4, to be effective from March 30, 1976 through March 31, 1977, covering only a portion of the period of suspension of the original subdivision 4 — a portion which commenced well after the calendar year 1976 had begun. This second subdivision 4 required hospital notification of rate approval 60 days prior to the beginning of an "established rate period” for which the rate was to become effective.

The consequence of the foregoing legislative action relative to the two subdivisions 4 of section 2807 of the Public Health Law was that the prior notice requirement (which might be read to foreclose retroactivity) of neither subdivision was applicable to rates for the period beginning January 1, 1976— not the original subdivision 4 because it had been suspended from November 1, 1975 through March 31, 1977 and not the alternative subdivision 4 because, with an effective date of March 30, 1976, it could not impose a 60-day prior notice requirement on rates for an established rate period which period had begun three months before the subdivision went into effect. With no rates having yet been determined for 1976 and 1975 rates having been continued on only an interim basis at the time when chapter 76 of the Laws of 1976 was adopted, the conclusion fairly to be drawn is that the statutory bar to retroactive rate-fixing was intentionally and temporarily raised to permit subsequent promulgation of reimbursement rates based on forthcoming, revised Part 86 regulations to take effect retroactively for the entire year 1976. On this analysis of the applicable statutory provisions, there was no proscription against retrospective rate-fixing for the year 1976. Indeed it appears in the circumstances that the Legislature had acted precisely to permit such retroactivity with respect to 1976.

We turn then to the regulations relied on by petitioners as preclusive of retroactive rate-fixing — regulations 86-1.15 (a) and 86-1.16. The first of these contains an express statement that payment rates shall be established on a prospective basis. Issued in 1970, the year following the legislative amendment of section 2807 of the Public Health Law looking to prospective approval of hospital reimbursement rates embodied in the Cost Control Act of 1969 (L 1969, ch 957), the regulation is properly regarded as directory implementation of the initial statutory intent. So regarded, its failure of application for the 1976 rate period — for which prospective treatment was legislatively suspended as previously discussed — is entirely consistent with the statutory direction with which the administrative regulation must comport. We do not attach determinative significance to the failure of the commissioner to keep his regulations up to date.

Regulation 86-1.16 (no longer extant) by its terms barred retroactive adjustments only with respect to final reimbursement rates. Inasmuch as only interim — not final — rates (those carried over from 1975) had been set and were adjusted in this instance, that regulation had no application.

With respect to petitioners’ claim of infringement of their right to due process by the promulgation in November, 1976 of rates for the preceding months of 1976, it need only be observed that no vested property rights under any particular rates had come into being prior to that time. When notice was given by the Department of Health on October 31, 1975 that only interim rates were then being promulgated for 1976 it was announced that final rates subsequently to be promulgated might reflect “either upward or downward revisions”. Thus, no contract rights were infringed by the retroactive determination of reimbursement rates late in 1976 (cf. Matter of Kaye v Whalen, 44 NY2d 754, 755, mot for rearg den 44 NY2d 949).

Concluding for the reasons stated that petitioners’ challenge to the retroactive establishment of rates must fail, we turn then to the particulars of the governing regulations to which objection is made. First, petitioners attack regulation 86-1.14 (b) which, as revised in June, 1976, initially limited a hospital’s base-year expenses (used for computing reimbursement rate) to a figure no greater than 100% of the average base-year expenses of hospitals that, by reason of similar characteristics, were included in the same group as the subject hospital.

The objective of the Cost Control Act of 1969 (L 1969, ch 957) was to impose effective cost control of rising hospital costs and to restrict reimbursement to that "reasonably related to the costs of efficient production of such service”. (Public Health Law, § 2807, subd 3.) We agree with both courts below that it cannot be concluded that there was not a rational basis for the commissioner’s determination to impose the so-called 100% ceiling in computing basic rates. The statute mandates that "geographical differentials in the elements of cost considered, economic factors in the area in which the hospital or agency is located, the rate of increase or decrease of the economy in the area in which the hospital or agency is located, [and] costs of hospitals or agencies of comparable size” shall be taken into consideration. It cannot be said to be irrational in an effort to contain hospital costs to relate reimbursement computations to the weighted average cost experienced by all the hospitals in the same grouping, in particular to limit allowable base-year expenditures in each hospital to the average base-year expenditures in similar hospitals. The prior tolerance of 10% to 15% above average costs of similar hospitals was deemed to be inherently inflationary, as providing insufficient incentive to cut and to control costs. The abolition of that so-called "plus factor” cannot be held to be irrational. Judicial "review ends when a rational basis is found for the agency determination” (Matter of Sullivan County Harness Racing Assn. v Glasser, 30 NY2d 269, 277).

The second regulation which draws petitioners’ fire is section 86-1.26 which provided: "Educational activities. The costs of educational activities less tuition and supporting grants shall be included in the calculation of the basic rate provided such activities are directly related to patient care services. In computing allowance costs related to salaries and fringe benefits for interns and residents for purposes of reimbursement during the period January 1, 1976 through March 31, 1977, 10 percent of such costs will be eliminated from rate computations on the basis that this elimination represents the minimum amount properly chargeable to education activities not directly related to patient services.” This regulation is attacked on two grounds, and we agree with petitioners as to the merit of both.

Subdivision 2 of section 2803 of the Public Health Law explicitly provides that the State Hospital Review and Planning Council shall adopt rules and regulations, subject to the approval of the Commissioner of Health, to effectuate the provisions and purposes of article 28 of that statute. The commissioner is empowered to propose rules and regulations and amendments thereto for consideration by the council. Nowhere, however, does the commissioner point to, nor do we find, any authority granted to the commissioner to adopt regulations without action by the council. Such authority is not to be implied from the broad language of section 2800 which, in general terms, vests in the Department of Health "the central, comprehensive responsibility for the development and administration of the state’s policy with respect to hospital and related services”.

Indeed, in response to the commissioner’s request therefor, the Attorney-General advised the commissioner by formal opinion dated October 30, 1975 that "Rules and regulations relative to Medicaid and Blue Cross reimbursement rates in health facilities are to be adopted by the State Hospital Review and Planning Council subject to the approval of the Commissioner of Health”. (1975 Opns Atty Gen 61.) The commissioner himself may be said to have recognized the necessity for council action. We are informed that all other pertinent provisions of the revised regulations of May 28, 1976 received approval of the council; this regulation was twice submitted to the council by the commissioner but on each occasion the council declined to give its approval.

It follows, therefore, that section 86-1.26 of the revised regulations never became legally effective.

In addition, while the statute expressly authorizes the commissioner in determining rate schedules to exclude "those parts of the costs for educational salaries which the commissioner shall determine to be not directly related to hospital service” (§ 2807, subd 3), there is no evidentiary basis in the present record for the choice of 10% as reflecting the portion of such salaries not directly related to hospital services. The commissioner conceded that neither he nor the Department of Health had ever made a study on the basis of which to fix 10% as the proper percentage to be excluded. Absent a predicate in the proof to be found in the record, the unsupported determination by the commissioner must also be set aside as without rational basis and wholly arbitrary. (Matter of Hawley v Cuomo, 46 NY2d 990; cf. Hospital Assn. of N. Y. State v Toia, 473 F Supp 917, 938-940.)

Finally, we reject, as did the Appellate Division, the contentions of the commissioner and the Blue Cross Plans that the four-month Statute of Limitations for article 78 proceedings under CPLR 217 began to run on the promulgation of the revised Part 86 regulations on May 28, 1976. At that date no individual hospital could know whether it would be prejudiced by the provisions of the new regulations. The application of the regulations remained to be made; no one could then predict what the actual reimbursement rates would prove to be. Blue Cross was required to prepare and submit reimbursement formulas, which it did only after consultation with hospital representatives, and those formulas had in turn to be approved by both the Commissioner of Health and the Superintendent of Insurance before they acquired vitality and individual rates could be projected. It would be unreasonable to conclude that the determinations of the Commissioner of Health were binding and final as to the petitioning hospitals before the administrative procedures had been completed, the impact thereof could accurately be assessed, and petitioners could know whether they were aggrieved. (Cf. Matter of Martin v Ronan, 44 NY2d 374; Mundy v Nassau County Civ. Serv. Comm., 44 NY2d 352.)

Accordingly, for the reasons stated, the order of the Appellate Division should be modified, without costs, the judgment of dismissal vacated in part, and the case remitted to Supreme Court for entry of a judgment granting petitioners’ motion for partial summary judgment to the extent of declaring section 86-1.26 of the commissioner’s regulations invalid, and, as so modified, affirmed.

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

Order modified, without costs, judgment of dismissal vacated in part, and the matter remitted to Supreme Court, New York County, for entry of a judgment in accordance with the opinion herein and, as so modified, affirmed.

      . Presently there are four subdivisions of section 2807 of the Public Health Law numbered 4 set out in Book 44 of McKinney’s Consolidated Laws of New York Annotated and Book 25 of New York Consolidated Laws Service.

      . Computation of reimbursement rates for a particular year begins with a determination of actual per diem in-patient costs — divided into routine costs and ancillary costs — for the base year (the year two years prior to the year for which rates are being fixed). The costs so determined are combined for hospitals within the group of similar institutions and an average is arrived at which, when adjusted or trended upward by a factor determined by the Commissioner of Health to compensate for inflation, produces an adjusted average, commonly referred to as the ceiling. For year 1975 reimbursement rate schedules had limited individual hospital’s recoverable costs to figures varying from a 110% ceiling on routine costs alone to a 115% ceiling on combined routine and ancillary costs, depending on whether the hospital was subject to the upstate or downstate formula.

      . We note that under section 86-1.17 (subd [a], par [7]) individual hospitals may request relief from the ceiling provisions of subdivision (b) of section 86-1.14. The briefs of the parties have devoted considerable attention to this provision, and extended arguments are addressed to its significance in practice. We do not, however, predicate our rejection of the petitioning hospitals’ challenge to the 86-1.14 (b) ceiling on the availability of this avenue for seeking relief.

      . On April 8, 1976 and again on June 17, 1976. The commissioner had also earlier sought, without success, both to obtain legislative enactment of the 10% figure and to abolish the council’s rule-making authority. (Senate-Assembly Bill, §§ 7287, 9257, §§ 6, 10, Jan. 20, 1976.)


author: Gabkielli, J. Jones, J.

text:
    In the Matter of Ames Volkswagen, Ltd., et al., Appellants, v State Tax Commission, Respondent.
    Submitted May 29, 1979;
    decided June 12, 1979

      POINTS OF COUNSEL

      J. Paul Troue for appellants.
    I. The legal incidence of the sales tax imposed pursuant to article 28 of the New York Tax Law falls upon the purchaser, and not on the vendor. (United States v Mississippi Tax Comm., 421 US 599; Agricultural Bank v Tax Comm., 392 US 339; Diamond Nat. v State Equalization Bd., 425 US 268; National Geographical v California Equalization Bd., 430 US 551; McGoldrick v Berwind-White Co., 309 US 33; Matter of Grant Co. v Joseph, 2 NY2d 196, 355 US 869; Matter of American Cyanamid & Chem. Corp. v Joseph, 308 NY 259; Matter of Fifth Ave. Bldg. Co. v Joseph, 297 NY 278; Matter of Sears, Roebuck & Co. v McGoldrick, 279 NY 184; Matter of Kesbec, Inc. v McGoldrick, 278 NY 293.) II. No obligation exists or occurs with respect to the tax imposed by article 28 of the New York Tax Law, without the prior occurrence of a taxable event. (Thomas v United States, 192 US 363; Harvester Co. v Department of Treasury, 322 US 340; Steward Mach. Co. v Davis, 301 US 548; Atlantic & Pacific Tea Co. v Grosjean, 301 US 412.) III. Section 1137-A of the New York Tax Law is unconstitutional in imposing upon a vendor, upon whom the legal incidence of the tax imposed by article 28 of the Tax Law does not fall, the obligation of paying an estimated tax prior to the occurrence of the taxable event of a retail sale. (American Locker Co. v City of New York, 308 NY 264; American Oil Co. v Neill, 380 US 451; Wein v State of New York, 39 NY2d 136; Matter of RAC Corp. v Gallman, 39 AD2d 57; Matter of Nehi Bottling Co. v Gallman, 39 AD2d 256, 34 NY2d 808; Defiance Milk Prods. Co. v

      Du Mond, 309 NY 537; Salamar Bldrs. Corp. v Tuttle, 29 NY2d 221; Central Sav. Bank in City of N. Y. v City of New York, 279 NY 266; Flushing Nat. Bank v Municipal Assistance Corp. for City of N. Y., 40 NY2d 731.) IV. Under the facts of this case the petitioners-appellants, as vendors, are not taxpayers within the scope of article 28 of the New York Tax Law, or section 1137-A thereof. (Matter of Fifth Ave. Bldg. Co. v Joseph, 297 NY 278; City of New York v Feiring, 313 US 283; Matter of Brown Print. Co., 285 NY 47; Matter of American Cyanamid & Chem. Corp. v Joseph, 308 NY 259; Matter of Grant Co. v Joseph, 2 NY2d 196; Matter of RAC Corp. v Gallman, 39 AD2d 57; Matter of Nehi Bottling Co. v Gallman, 39 AD2d 256, 34 NY2d 808.) V. Petitioners hold the sales tax collected in trust for the State and their liability cannot exceed the corpus of the trust plus any amount the vendor should have, but failed to, collect. (Matter of Van Hosen Drapery Consultants [In re United States of Amer.— Maas], 22 AD2d 465; Dudley v United States, 285 F Supp 979, 428 F2d 1196.) VI. The payment of the estimated income tax is distinguishable from the payment of the estimated sales tax. (Erwin v Cranquist, 253 F2d 26; Beacham v Commissioner of Internal Revenue, 255 F2d 103.) VII. The payment of the estimated sales tax is oppressive.

      Robert Abrams, Attorney-General (Michael F. Colligan and William J. Kogan of counsel), for respondent.
    Chapter 89 of the Laws of 1976, which accelerates sales tax payments by large sale vendors making payments due on March 20 for the period between March 20 through March 31, is constitutional and valid and is not a confiscation of petitioners’ property. (Shapiro v City of New York, 32 NY2d 96, 414 US 804, 1087; Salomon v State Tax Comm., 278 US 484; Bass, Ltd. v Tax Comm., 232 NY 42, 266 US 271; Travis v Yale & Towne Mfg. Co., 252 US 60; Allen v Regents, 304 US 439; Willmett Park Dist. v Campbell, 338 US 411; Beacham v Commissioner of Internal Revenue, 255 F2d 103; Erwin v Cranquist, 253 F2d 26; Matter of Lacidem Realty Corp. v Graves, 288 NY 354.)
   OPINION OF THE COURT

Gabkielli, J.

We hold that the Legislature validly and constitutionally imposed upon vendors, who have already collected sales taxes upon their sales made between March 1 and March 20, the statutory obligation to accelerate their sales tax payments which become due on March 20 by estimating their sales and resultant taxes thereon for the balance of that month, in order to pay their full monthly tax liability prior to the close of the State’s fiscal year on March 31.

Upon the heels of the financial crisis confronting the State, and in order to establish a more sound fiscal operating policy to coincide with the close of each fiscal year, the 1975 Extraordinary Session of the Legislature enacted chapter 894 of the Laws of 1975 (superseded by L 1976, ch 89), all of which became section 1137-A of the Tax Law, effective March 1, 1976. The announced purpose therefor was to serve as a revenue raising measure to truly balance the State budget at the close of the fiscal year each March 31. The statute requires vendors to pay on March 20 their estimated sales tax liability for the entire month of March, although the vendors have, of course, not yet collected any taxes on sales they expect to make between March 20 and March 31. Adjustments reflecting actual sales taxes collected during this period are to be made in the vendor’s April monthly return, with the required additional payments or refunds, whichever may be appropriate.

Petitioners, large automobile dealers, who are affected by the statute, brought an article 78 proceeding seeking a declaration that section 1137-A of the Tax Law is unconstitutional. The proceeding was properly converted into an action for a declaratory judgment by Supreme Court, Albany County (Hughes, J.), all necessary parties having appeared and answered (CPLR 103, subd [c]). An article 78 proceeding, as such, does not lie to challenge the constitutionality of a legislative enactment (New York Public Interest Research Group v Steingut, 40 NY2d 250; Matter of Kovarsky v Housing & Dev. Admin. of City of N. Y., 31 NY2d 184). Having converted the action, as it is empowered to so do, Supreme Court entered a judgment declaring that the challenged statute was valid and constitutional. The Appellate Division, with one Justice dissenting, affirmed, and the petitioners appeal to this court as of right (CPLR 5601, subd [a]).

Measures enacted in the exercise of the taxing power for the purpose of raising revenues violate the due process clause " 'only if the act be so arbitrary as to compel the conclusion that it does not involve an exertion of the taxing power, but constitutes, in substance and effect, the direct exertion of a different and forbidden power, as, for example, the confiscation of property.’ (Magnano Co. v. Hamilton, 292 U. S. 40, 44)” (Shapiro v City of New York, 32 NY2d 96, 102, app dsmd 414 US 804; see, also, United States v Smith, 484 F2d 8, cert den 415 US 978). The Legislature has nearly unconstrained authority in the design of taxing measures unless they are utterly unreasonable or arbitrary (Matter of Long Is. Light. Co. v State Tax Comm., 45 NY2d 529; Gautier v Ditmar, 204 NY 20).

Measured against this standard, it is clear that taxes on sales or uses are constitutional and within the power of governments to levy. Petitioners, recognizing this, do not challenge the State’s authority to tax sales, their only argument being that the State has no power to impose a tax on sales before they are actually consummated.

We are quick to point out, however, that advance taxation has been consistently sustained in other areas, both by our court and the United States Supreme Court. In People ex rel. Bass, Ratcliff & Gretton v State Tax Comm. (232 NY 42, affd sub nom. Bass, Ratcliff & Gretton v Tax Comm., 266 US 271) we sustained a statute requiring prepayment of an annual corporate franchise tax levied on the privilege of doing business in this State, and in Salomon v State Tax Comm. (278 US 484) the requirement that taxpayers post security for a deferred payment of future taxes was likewise upheld. In Phillips v Commissioner (283 US 589) the requirement that stockholders remit unpaid Federal taxes on the income and profits of their corporation before any hearing is held to determine their actual liability was also found not to violate the due process clause (accord Commonwealth Dev. Assn. of Pa. v United States, 365 F Supp 792, affd 503 F2d 1398).

The advance payment of taxes on income not yet earned is neither new, novel nor improper, and is a fact of life for millions of taxpayers in New York State and the United States. Both jurisdictions provide for installment payments of estimated income tax including, inter alia, the requirement that the taxpayer pay, in installments each year on June 15 and September 15, the taxes due on estimated income through the end of each month, including, of course, June and September (US Code, tit 26, § 6153; Tax Law, § 656). Such a method of paying and collecting the tax has been upheld — and for good, legal and logical reasons (see, e.g., Beacham v Commissioner of Internal Revenue, 255 F2d 103; Erwin v Cranquist, 253 F2d 26, cert den 356 US 960). In Erwin, the statute required the taxpayer to estimate his income for the whole of the taxable year and to pay the estimate in four equal payments, in advance. The taxpayer argued that the statute was unconstitutional, because it required that a tax return be filed when there had been no discernible or measurable income and, also required the taxpayer to "guess” what his income will be and pay a tax thereon. Precisely the same argument is made by the petitioners in this case, and, like the Federal courts, we reject it.

The only feature to distinguish the tax here under consideration from those involved in the above-cited cases is that sales taxes are generally said to be paid by the purchaser to the vendor, and the vendor is required to collect the tax due from the purchaser and hold it as trustee for the State (Tax Law, § 1132, subd [a]). Thus, petitioners argue, the vendor is not liable for anything until a sale is made and, it is claimed, a statute requiring advance payment is a deprivation of property without due process of law.

This very argument has been rejected by this court in a sales tax case involving the liability for and collection of New York City sales taxes. There, we noted that the obligation imposed upon the vendor is described as "in the nature of a tax. He must file a return of his receipts from sales. * * * The duty of payment to the city is laid upon the vendor, not the purchaser. His liability is not measured by the amount actually collected from the purchaser but by the receipts required to be included in such return. * * * He must pay the tax even if failure to collect is due to no fault of his own” (Matter of Atlas Tel. Co., 273 NY 51, 57). Our holding that there is no due process violation is in complete accord with the decisions of our sister States as well (see, e.g., Stevens Enterprises v State Comm. of Revenue & Taxation, 179 Kan 696; Piedmont Canteen Serv. v Johnson, 256 NC 155; Calvert v Canteen Co., 371 SW2d 556 [Tex]; Robert H. Hinckley, Inc. v State Tax Comm., 17 Utah 2d 70; White v State, 49 Wn 2d 716).

We cannot adopt appellants’ theory that as anticipatory vendors they may not be cast in liability since they are mere potential vendors, and nothing more. As to their status as vendors in a tax collection capacity, we take note of the trustee relationship with which appellants have no quarrel. On the question of their "status” we can state it no more clearly than did this court in (Matter of Grant Co. v Joseph (2 NY2d 196, 203, mot to amend remittitur granted 2 NY2d 992, cert den 355 US 869) where the court stated that "[t]here is no doubt that the sales tax law imposes upon the vendor the obligation of a taxpayer in addition to that of a collecting trustee. In plain and unequivocal language, it declares that the tax 'shall be paid by the purchaser to the vendor as trustee for and on account of the city and the vendor shall be liable for the collection thereof and for the tax’ (Administrative Code, § N41-2.0, subd. e). While the incidence of the tax is, in the first instance, placed on the consumer, this court has flatly held that 'vendors * * * are to be deemed taxpayers under this legislation’ (Matter of Fifth Ave. Bldg. Co. v. Joseph, 297 N. Y. 278, 283), that the obligation imposed on the vendor is in the nature of a tax’ ” (see, also, Matter of Atlas Tel. Co., supra; Matter of Merchants Refrig. Co. v Taylor, 275 NY 113, 118).

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

Jones, J.

(dissenting). I cannot agree with the majority. I would hold that vendors may not constitutionally be required to pay estimated sales taxes in advance.

I recognize that we have classified vendors as taxpayers of the sales tax for some purposes (e.g., Matter of Atlas Tel. Co., 273 NY 51). The label, however appropriate and useful it is in some contexts, cannot determine the substantive aspects of the role played by the vendors in the collection of the taxes. The economic burden of the sales tax falls on the purchaser; the vendor is simply the collecting and remitting agent. My difficulty with the conclusion reached by the majority is that, however demanding may be the obligation of the vendor to see to the collection and remittal of taxes, the vendor cannot constitutionally be obliged to advance its own funds for prepayment with respect to taxes which are not yet due because the incidence of the tax — the sale to the purchaser — has not yet occurred and may never occur.

It is one thing, for convenience and advantage in the administration and collection of taxes, to require the economic taxpayer to make advance payments in installments on account of a tax, the due date for which has not yet arrived but the taxable incidence of which has already occurred. Thus, we are familiar with the constitutionally permissible withholding of taxes from current compensation and required filing of declarations of estimated taxes and payment of quarterly installments thereunder. But even when it is the ultimate taxpayer from whose compensation there is to be a withholding or who is obliged to make the quarterly payments from his own funds, such withholding and payments are attributable to income already earned or received. It is precisely on this economic analysis that challenges to withholding and prepayment have been rejected. (E.g., Erwin v Cranquist, 253 F2d 26, 27, cert den 356 US 960 — "We know of no reason why Congress may not require those who are in the process of earning or deriving income to file informational returns, or to pay currently installments of tax based on those returns.”) Indeed, the popular explanation and economic justification for the inauguration of such procedures accurately employed the slogan, "Pay as You Go”. The essence of that principle is that the taxpayer pays out his own money for income taxes as he earns or receives it.

With sales taxes, unlike income taxes, there is no accumulation factor with a graduated rate of tax. The incidence of the tax is a series of discrete taxable transactions; each sale separately is the taxable event. Indeed, the identity of the individuals — the economic taxpayers — who will become the purchasers liable for the sales taxes during the second half of the month cannot possibly be known on the 15th.

As I analyze the realities of the vendor’s position, I must conclude that the vendor-collector-"taxpayer” cannot constitutionally be compelled to advance its own funds with respect to sales taxes on taxable transactions which have not yet occurred. It makes no legal difference that the estimate is to be made by the vendor and may be based on its own experience as to taxable transactions reasonably to be anticipated, thus predicting a tax liability to a high degree of probability. Nor do the evident advantages to the public revenue of prepayment by large volume vendors justify departure from constitutional principle (cf. Flushing Nat. Bank v Municipal Assistance Corp. for City of N. Y., 40 NY2d 731).

Accordingly, I would reverse the order of the Appellate Division and declare section 1137-A of the Tax Law unconstitutional.

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

Order affirmed.

       These Federal and State enactments require the filing of advance declarations of estimated tax on annual income and a payment of a tax on income yet unearned. In each jurisdiction, the first payment is due April 15, covering the full months of January, February, and March; the second is due June 15, covering April, May and all of the month of June; the third is due September 15, covering July, August and all of the month of September; and the fourth is due January 15, covering the previous months of October, November and December.

      . The majority correctly points out that with respect to payments on declarations of estimated taxes, payment of the installments due on June 15 and September 15 are to cover income to be received through the end of each of those months. It does not appear that the constitutionality of this particular aspect of declaration of estimated tax program has ever been addressed. Even here, however, the payment can be said to be attributable to income received as of the 15th of the month. In economic analysis this may result in initial taxation at an interim rate higher than will finally prove to be applicable. On any analysis the June 15 and September 15 prepayments would not be confiscatory unless the effective rate of the tax were 100%, or the total amount of income received prior to the 15th were less than the amount of the tax installment then payable; only then would the taxpayer have to advance funds in excess of all income received to the date of the prepayment.

      . Not one of the cases cited in the majority opinion has addressed factual circumstances comparable to those we confront in this case, and none has upheld the advance exaction from a vendor-collecting agent out of its own funds of estimated sales taxes with respect to transactions which have not yet taken place.


author: Jasen, J.

text:
    In the Matter of Ralph Purdy, Respondent, v Barry Kreisberg et al., Constituting the Board of Police Commissioners of the Town of Greenburgh, et al., Appellants.
    Argued April 27, 1979;
    decided June 12, 1979

      POINTS OF COUNSEL

      Joel H. Sachs, Town Attorney, for appellants.
    I. The court below improperly substituted its judgment for that of appellant Board of Police Commissioners in that there was substantial evidence to support the determination of appellant Board that respondent’s conduct and activities violated chapter 9.5.14 of the Rules and Regulations of the Town of Green-burgh Police Department. (Matter of Sowa v Looney, 23 NY2d 329; Matter of Mounting & Finishing Co. v McGoldrick, 294 NY 104; Matter of Marsh v Hanley, 50 AD2d 687; Matter of De Salvatore v City of Oneonta, Bd. of Public Safety, 48 AD2d 961; Matter of Mack v Cramer, 285 App Div 925; Matter of Hannon v Wagner, 273 App Div 819, 297 NY 958; Matter of Matuljak v Cornelius, 19 AD2d 921; Matter of Walker v Murphy, 15 NY2d 650; Matter of Olivo v Kirwan, 37 AD2d 665; Matter of Napolitano v Murphy, 28 AD2d 852; Matter of Lewis v Cornelius, 20 AD2d 937, 14 NY2d 488.) II. The decision of the court below is in conflict with recent decisions of the United States Supreme Court, the courts of this State and the legislative policy of the State of New York. (Matter of Lecci v Looney, 33 AD2d 916, 26 NY2d 612; Boyle v Kirwin, 39 AD2d 993; McAvoy v Press Pub. Co., 114 App Div 540; People ex rel. Clifford v Scannell, 74 App Div 406, 173 NY 606; CSC v Letter Carriers, 413 US 548; Broadrick v Oklahoma, 413 US 601; Evans v Carey, 53 AD2d 109, 40 NY2d 1008; Perry v St. Pierre, 518 F2d 184 Kelley v Johnson, 425 US 238; Belle v Town Bd. of Town of Onondaga, 61 AD2d 352.) III. The penalty imposed on respondent conforms with standards set forth by this court and was proper. (Matter of Pell v Board of Educ., 34 NY2d 222; Matter of Sheils v Murphy, 20 AD2d 927, 27 NY2d 858; Matter of McDermott v Murphy, 15 AD2d 479, 12 NY2d 780; Matter of Alfieri v Murphy, 47 AD2d 820, 38 NY2d 976; Matter of Ahsaf v Nyquist, 37 NY2d 182; Matter of O’Shea v Martin, 34 Misc 2d 987; Matter of Bal v Murphy, 55 AD2d 26, 43 NY2d 762; Matter of Geary, 80 Misc 2d 963; Matter of Slominski v Codd, 52 AD2d 762, 41 NY2d 1086; Matter of Barone v City of Dunkirk, 57 AD2d 1040.)

      Paul M. Rosen for respondent.
    I. The court below was correct when it unanimously reversed petitioner’s conviction for violations of chapter 9.5.14 of the rules and regulations of the Town of Greeenburgh Police Department. II. No constitutional issue is presented to this court for review. (Matter of Lecci v Looney, 33 AD2d 916, 26 NY2d 612; Boyle v Kirwin,
      39 AD2d 993.) III. The punishment in this instance is greatly disproportionate to the alleged illegal act committed. (Matter of Pell v Board of Educ., 34 NY2d 222.) IV. The president of an association who performs acts in that capacity for the association is not personally liable for those acts.
   OPINION OF THE COURT

Jasen, J.

In this CPLR article 78 proceeding, we are called upon to decide whether the determination of the respondent Board of Police Commissioners of the Town of Greenburgh dismissing petitioner Purdy from the police department is supported by substantial evidence.

Petitioner, a veteran of the Town of Greenburgh police force, was charged with violating various departmental rules and regulations. After a hearing at which petitioner was represented by counsel and extensive testimony was adduced, petitioner was found guilty of violating chapter 9.5.14 of the applicable departmental rules which provides that "[m]embers shall not use nor threaten to use their official power or authority in any manner, directly or indirectly, in aid of or against any political party or organization, association or society.” The Board of Police Commissioners (hereinafter "Board”), concluding that "the charges and the findings seriously affect [petitioner’s] character, fitness and efficiency as a police officer”, directed that petitioner be immediately dismissed.

Petitioner then instituted the present proceeding seeking to annul, or in the alternative modify, the Board’s determination. The Appellate Division annulled the Board’s determination, holding that petitioner "was not guilty of the charged violation in that he did not 'use nor threaten to use’ his 'official power or authority’ in a politically partisan manner”, and directed that petitioner be restored to his prior position. We now reverse and reinstate the Board’s determination.

Upon judicial review of a determination rendered by an administrative body after a hearing, the issue presented for the court’s consideration is limited to whether that determination is supported by substantial evidence upon the entire record. (CPLR 7803, subd 4; see 300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176, 181; Matter of Pell v Board of Educ., 34 NY2d 222, 230-232; Matter of Holland v Edwards, 307 NY 38, 44; Matter of Stork Rest. v Boland, 282 NY 256, 266-267.) A reviewing court in passing upon this question of law may not substitute its own judgment of the evidence for that of the administrative agency, but should review the whole record to determine whether there exists a rational basis to support the findings upon which the agency’s determination is predicated. (See Matter of Pell v Board of Educ., 34 NY2d, at p 231, supra.)

Our study of the record reveals that petitioner, then president of the Greenburgh Police Association — an organization comprised of members of the police force and formed to promote the interests of its members — initiated a campaign to oppose the re-election of Anthony Veteran, the town supervisor, by distributing a letter, dated October 20, 1975, to his fellow officers. This correspondence contained the following language: "I think it is about time that we flexed our muscles and became politically involved. We have 14 days in which to mount a campaign. If you support the following recommendations [to become politically involved], I ask you and your wife and your family to join hands and work together in the common goal of defeating, at the polls in the Town of Green-burgh on November 4th, Anthony Veteran, Supervisor.”

One day thereafter, on October 21, petitioner sent out a letter informing his fellow officers that "70% of you gave a clear cut mandate to get involved to oppose Supervisor Anthony Veteran.” This letter went on to state: "We will be reaching out to you within the next few days to work together for the defeat of Anthony Veteran. Let the Greenburgh community hear our voice. Let them know we exist.”

Petitioner’s personal stake in the effort to displace Veteran became readily apparent at a general meeting of the police association held on October 23. The minutes reveal that ,in response to a motion that the association not expend any further sums to support or oppose any political candidate, petitioner stated that "he felt strongly about this issue and if necessary * * * would waive his $4,000 retirement benefit from the association and donate it for this action.”

Sometime after the October 23 meeting, with the impending election only a few days off, a four-page letter, signed by petitioner as president of the police association, was mailed to the residents of the Town of Greenburgh. This letter, printed on police association stationery with the shield of the association prominently displayed, is in the form of a series of statements delineated as "facts”, and reference is continually made to police officers of the Town of Greenburgh. It charges Veteran with conducting "slur campaigns” against Green-burgh police officers ("corruption, malfeasance, and misconduct by public officials and police are [Veteran’s] campaign slogans”), and states, as fact, that Veteran’s "political interference in the police department operation caused crime to rise 47% in the first quarter of 1975”. This letter further charges Veteran with padding the payroll with political appointments to the detriment of the police department and with attempting "to destroy the Town of Greenburgh, its people and its police”, and concludes, "[w]e must rid our Town of this cancer [Veteran].”

In light of this evidence, we think it abundantly clear that there was indeed a rational basis to support the Board’s findings that the petitioner was the moving force behind the decision of the police association "to become involved in 'political activity’ ” and, also, that the correspondence distributed by petitioner "showed the use of his official power as a police officer directly in aid of, or against, a candidate for political office, and that [petitioner] became a partisan against a candidate, and that ordinary persons exercising ordinary common sense would clearly understand the import and the implication of his acts.” By printing the letter distributed to the town residents on police association stationery with the shield of the association prominently displayed and by labeling the same as "An Important Message from your Police Association”, it is the inescapable conclusion that such letter, signed by petitioner, both embodied and reflected the full strength and power of police authority. It is exactly this type of conduct, namely utilizing one’s status as a police officer as the vehicle through which to disseminate partisan political views, which chapter 9.5.14 of the departmental regulations was obviously intended to proscribe.

It is petitioner’s contention, however, that even if the Board’s determination is supported by substantial evidence, which we now hold it is, the penalty of dismissal must be set aside as unduly harsh given the violation involved. We disagree.

Once it is determined that there is substantial evidence to support an administrative body’s determination, the sanction imposed by that body will not be set aside unless the measure of punishment is "' "so disproportionate to the offense, in light of all the circumstances, as to be shocking to one’s sense of fairness.” ’ ” (Matter of Pell v Board of Educ., 34 NY2d 222, 233, supra.) While the genesis of this "test” can be explained by the limited scope of review accorded courts in administrative matters (id., at pp 230-235; CPLR 7803, subd 3), there exists a practical, but nonetheless compelling, reason for courts to exercise restraint before intervening into matters involving internal discipline for, as we have recognized, "[i]n such matters the administrative official or agency is assumed to possess not only a special proficiency and experience which are not always to be found in the courts, but also an alertness to and a comprehension of the complexity and sensitiveness of personnel administration in continuing intraorganizational relationships”. (Matter of Ahsaf v Nyquist, 37 NY2d 182, 184-185.)

Here, the record confirms the finding of the Board that the "substantial credible evidence shows that [petitioner] was the planner, the architect and the great influencing factor in the position taken by the Police Association”. Given the calculated nature of the campaign to oppose the election of Anthony Veteran and the dangers inherent in allowing police officers — holders of a most sensitive and unique role in our communities — to use their official power when engaging in partisan politics, we cannot say, as a matter of law, that petitioner’s dismissal is so disproportionate to the offense as to be "shocking to one’s sense of fairness”.

One remaining issue requires brief comment. Although petitioner steadfastly maintains that the constitutionality of chapter 9.5.14 of the departmental rules is not at issue in this case, but, rather, "a smoke screen issue which should be ignored by this Court”, insofar as we now reinstate the Board’s determination, this issue must be reached.

Almost 90 years ago, Judge Oliver Wendell Holmes articulated the rationale employed to uphold the constitutionality of a police regulation prohibiting officers from "soliciting] money or any aid, on any pretense, for any political purpose whatever” as follows: "[T]here is nothing in the Constitution * * * to prevent the city from attaching obedience to this rule as a condition to the office of policeman, and making it part of the good conduct required. The petitioner may have a constitutional right to talk politics, but he has no constitutional right to be a policeman.” (McAuliffe v Mayor of New Bedford, 155 Mass 216, 220.) As has been consistently recognized, a rule which prohibits a police officer from participating in the political arena, whether it be by soliciting votes or financial aid or by influencing any voter at an election, "comports with [the] sound administration policy that the removal of police personnel from active politics and from active participation in any movement for the nomination or election of candidates for political or public office is conducive to the effective maintenance of discipline and the preservation and promotion of the integrity and efficiency of the Police Department and its personnel.” (Matter of Lecci v Looney, 33 AD2d 916, 917, mot for lv to app den 26 NY2d 612; see Perry v St. Pierre, 518 F2d 184; Boyle v Kirwin, 39 AD2d 993; cf. Belle v Town Bd. of Town of Onondaga, 61 AD2d 352, 358-359.) Likewise, the authority of the Federal and State Governments to prohibit their officers and employees from engaging in specified political activities has been consistently sanctioned. (CSC v Letter Carriers, 413 US 548; Broadrick v Oklahoma, 413 US 601; United Public Workers v Mitchell, 330 US 75.)

Here, chapter 9.5.14 of rules and regulations of the Green-burgh Police Department proscribes the use or threatened use of the policeman’s "official power or authority in any manner, directly or indirectly, in aid of or against any political party or organization, association or society.” Stated a bit differently, this rule prohibits a policeman from utilizing his status and authority as a law enforcement officer as the means to aid or to hinder a political entity. It does so in an evenhanded manner without differentiation as to political cause or otherwise, and does not prevent a police officer, as a private citizen, from expressing his or her political views. The rule, the clear import of which proscribes the use of police authority in the political spectrum — certainly a legitimate and worthwhile objective — must be sustained as constitutional.

In sum, we sustain the constitutionality of chapter 9.5.14 of the rules and regulations of the Greenburgh Police Department, and hold that the Board’s determination is supported by substantial evidence and that the penalty of dismissal is not so disproportionate to the offense as to mandate modification.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the determination of the Board of Police Commissioners reinstated.

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

Order reversed, etc.

       Chapter 9.5.14 of the rules and regulations of the Greenburgh Police Department mirrors, in essence, subdivision 1 of section 17-110 of the Election Law (formerly Election Law, § 426), which provides:
      "Any person who, being a police commissioner or any officer or member of any police force in this state:
      "1. Uses or threatens or attempts to use his official power or authority, in any manner, directly or indirectly, in aid of or against any political party, organization, association or society, or to control, affect, influence, reward or punish, the political adherence, affiliation, action, expression or opinion of any citizen * * * is guilty of a misdemeanor.”