author: Jasen, J. Gabrielli, J.

text:
    Sisters of Saint Joseph, Respondent, v City of New York et al., Appellants, et al., Defendant.
    Argued January 8, 1980;
    decided February 14, 1980

      POINTS OF COUNSEL

      Allen G. Schwartz, Corporation Counsel (Linda K. Nealon and Leonard Olarsch of counsel), for appellants.
    I. The lower courts’ failure to recognize that section 421 of the Real Property Tax Law prohibits exemption when a gain above the costs of carrying, maintenance and depreciation is realized on the leasing of a property, constitutes error. (People ex rel. Mizpah Lodge No. 518 of Ind. Order of Odd Fellows v Burke, 228 NY 245; People ex rel. Unity Cong. Soc. of City of N. Y. v Mills, 189 Misc 774; People ex rel. Frick Collection v Chambers, 196 Misc 1026, 276 App Div 891.) II. The Tax Commission properly denied the exemption although the property is owned and used for exempt purposes by exempt entities because plaintiff failed to prove that there would be no profit received for the use of the property above carrying, maintenance and depreciation charges as it was required to show under subdivision 2 of section 421 of the Real Property Tax Law. (Matter of New York Cardiac Center v Kondzielaski, 53 AD2d 671; Matter of American Bible Soc. v Lewisohn, 48 AD2d 308, 40 NY2d 78; Matter of Town Hall v Tax Comm. of City of N. Y., 18 AD2d 629; Matter of St. Francis Preparatory School v Kaplan, 61 AD2d 1050.) III. Plaintiffs assertion that section 421 of the Real Property Tax Law violated the New York State Constitution, which was not reached by the courts below, is without merit in that section 1 of article XVI of the New York State Constitution, passed in 1938, prohibits the alteration or repeal of religious, charitable or educational exemptions, as defined by law, and the Legislature defined that law to broaden the definition of what is an exempt use of property to include nonowner use thereof. (Matter of Association of Bar of City of N. Y. v Lewisohn, 34 NY2d 143; Matter of American Bible Soc. v Lewisohn, 40 NY2d 78; People ex rel. Unity Cong. Soc. of City of N. Y. v Mills, 189 Misc 774; People ex rel. Frick Collection v Chambers, 196 Misc 1026, 276 App Div 891; People ex rel. Young Men’s Assn. for Mut. Improvement in City of Albany v Sayles, 32 App Div 197, 157 NY 677; Walz v Tax Comm., 397 US 664.)

      John H. Kearney, Denis M. Hurley, Richard J. Cea and Kevin M. Kearney for respondent.
    I. The courts below were correct in holding that plaintiff was entitled to tax exemption under paragraph (a) of subdivision 1 of section 421 of the Real Property Tax Law and that subdivision 2 of section 421 did not apply to this case. (People ex rel. Frick Collection v Chambers, 196 Misc 1026, 276 App Div 891; Matter of Pace Coll. v Boyland, 4 NY2d 528; People ex rel. Watchtower Bible & Tract Soc. v Haring, 8 NY2d 350; Mohonk Trust v Board of Assessors of Town of Gardiner, 47 NY2d 476; People ex rel. Doctor’s Hosp. v Sexton, 267 App Div 736, 295 NY 553.) II. The application of subdivision 2 of section 421 of the Real Property Tax Law urged by the city violates the New York State Constitution and the Constitution of the United States. (Mohonk Trust v Board of Assessors of Town of Gardiner, 47 NY2d 476; Matter of Watchtower Bible & Tract Soc. v Lewisohn, 35 NY2d 92; American Press v Lewisohn, 74 Misc 2d 562, 48 AD2d 798; Matter of Domestic & Foreign Missionary Soc. of Protestant Episcopal Church in U. S. of Amer. v Lewisohn, 38 NY2d 708; Matter of Association of Bar of City of N. Y. v Lewisohn, 34 NY2d 143; Walz v Tax Comm., 397 US 664.) III. No triable issue of fact was raised in plaintiff’s motion for summary judgment; a question of law only was presented which was correctly resolved by the courts below. IV. A "profit” realized by Catholic Charities on its lease to builders would not deprive plaintiff of its tax exemption. (Gospel Volunteers v Village of Speculator, 33 AD2d 407, 29 NY2d 622; Matter of St. Francis Preparatory School v Kaplan, 61 AD2d 1050.) V. The arguments of amicus and of the city appellant are based upon assumptions not justified by the facts before this court. (Gospel Volunteers v Village of Speculator, 29 NY2d 622.)

      Robert Abrams, Attorney-General (Shirley Adelson Siegel, Bernard Toomin and Sharon Cuff Slater of counsel), in his statutory capacity under section 71 of the Executive Law.
    Section 421 of the Real Property Tax Law is a constitutionally reasonable and proper exercise of the power of the Legislature to define and limit tax exemptions. (Matter of Association of Bar of City of N. Y. v Lewisohn, 34 NY2d 143; Matter of Watchtower Bible & Tract Soc. v Lewisohn, 35 NY2d 92; Rescue Army v Municipal Ct., 331 US 549; Matter of Peters v New York City Housing Auth., 307 NY 519; New York v O’Neill, 359 US 1; United States v Jin Fuey Moy, 241 US 394; Buttfield v Stranahan, 192 US 470; Easley v New York State Thruway Auth., 1 NY2d 374; Matter of Spielvogel v Ford, 1 NY2d 558; Matter of Davis v Board of Elections of City of N. Y., 5 NY2d 66.)

      Robert L. Beebe and Stephen J. Harrison for State Board of Equalization and Assessment, amicus curiae.

    I. The courts below misinterpreted the meaning of subdivision 2 of section 421 of the Real Property Tax Law. (People ex rel. Young Men’s Assn. for Mut. Improvement in City of Albany v Sayles, 32 App Div 197, 157 NY 677; People ex rel. Unity Cong. Soc. of City of N. Y. v Mills, 189 Misc 774; People ex rel. Frick

      Collection v Chambers, 196 Misc 1026, 276 App Div 891; Matter of Pace Coll. v Boyland, 4 NY2d 528.) II. The provisions of subdivision 2 of section 421 of the Real Property Tax Law are constitutional. (Matter of Association of Bar of City of N. Y. v Lewisohn, 34 NY2d 143; People ex rel. Frick Collection v Chambers, 196 Misc 1026, 276 App Div 891; People ex rel. Unity Cong. Soc. of City of N. Y. v Mills, 189 Misc. 774.)
   OPINION OF THE COURT

Jasen, J.

In this declaratory judgment action, the question posed for our consideration is whether property owned by a religious and charitable organization and leased to another charitable organization is subject to taxation if the rental income derived from such property exceeds the carrying, maintenance and depreciation charges thereon, even if the property is used exclusively for tax-exempt purposes by the lessee thereof. To resolve this issue, we are required to construe the statutory language embodied in subdivision 2 of section 421 of the Real Property Tax Law.

Plaintiff Sisters of Saint Joseph, a Roman Catholic order of nuns, owns certain property located on St. Marks Avenue in Brooklyn, New York. The property is improved by a three-story brick building and was used by plaintiff as a convent until 1973. While used as a convent, the property was granted tax-exempt status.

In August of 1973, plaintiff leased the subject premises to Catholic Charities of the Diocese of Brooklyn for a period of five years. The lease provided that the premises were to be used as a senior citizens’ center, that Catholic Charities was not obligated to pay rent, and that any improvements to the building were to become the property of plaintiff. Catholic Charities, like plaintiff, is a nonprofit corporation engaged in charitable activities.

Thereafter, in February, 1974, Catholic Charities sublet the property, with minor exceptions, to the Builders for the Family and Youth of the Diocese of Brooklyn (Builders), a tax-exempt corporation funded through various governmental agencies, for a five-year term, with an option for an additional five-year period. The sublease required that Catholic Charities convert the building into a senior citizens’ center, and, further, provided for an annual rental of $24,000 to be paid by Builders to Catholic Charities. These rental payments did not, however, inure to the benefit of plaintiff Sisters of St. Joseph.

The subject property, which had been fully exempt from real property taxation through the 1974-1975 tax year, was restored to the real property tax roll of the City of New York for the tax years commencing with 1975-1976. Plaintiff then applied to defendant City of New York Tax Commission (Commission) for an exemption. Following a hearing, the Commission, although stating that it was satisfied that plaintiff, Catholic Charities, and Builders are all religious and charitable organizations within the meaning of section 421 (subd 1, par [a]) of the Real Property Tax Law and that the property is being used for religious and charitable purposes, nevertheless denied plaintiff’s application for an exemption. It reasoned that pursuant to subdivision 2 of section 421 of the Real Property Tax Law, property leased by one exempt organization to another remains exempt only so long as the rental proceeds do not exceed the carrying, maintenance and depreciation charges of the property. Although plaintiff had submitted a statement of expenses indicating that such expenses approached or exceeded the rental proceeds, the Commission determined that certain of the expenses were improperly included or inflated. Finding that the moneys received by Catholic Charities did, in fact, exceed the actual costs permitted by statute and, thus, constituted a pecuniary gain, the Commission held that the property was properly taxable.

Thereafter, plaintiff instituted the instant action seeking a declaration that the taxes assessed and levied against the property are null and void. Plaintiff challenged both the Commission’s computation of allowable expenses and the construction afforded subdivision 2 of section 421 of the Real Property Tax Law by that agency.

Special Term granted plaintiff’s motion for summary judgment, declaring that the qualification embodied in subdivision 2 of section 421 — that rental income shall not exceed the expenses — is totally inapplicable in a case where, as here, the premises are being used by a tax-exempt organization for concededly tax-exempt purposes. In light of its disposition, Special Term did not reach plaintiff’s other contention, to wit: that its account of expenses was proper and that the expenses exceeded the rental income.

On appeal, a unanimous Appellate Division affirmed, stating that "[t]he Tax Commission’s determination that the organizations involved with the property 'are all religious and charitable organizations as contemplated by Section 421(l)(a) of the Real Property Tax Law [and] that the property in question is being used for carrying out thereupon such religious and charitable purposes’, rules out the applicability of subdivision 2 of section 421 of the Real Property Tax Law.” (66 AD2d, at p 886.) Leave to appeal was granted by this court. We now reverse, in part, and remit this matter to Supreme Court, Kings County, for a hearing on the issue whether the carrying, maintenance and depreciation charges of the property exceeded the rental income.

To resolve the issue presented — namely, whether property owned by one charitable organization and leased to another charitable organization is subject to real property taxation if the rental income derived from such property exceeds the carrying, maintenance and depreciation charges thereon — it is helpful to trace the historical evolution of the statutes granting tax-exempt status to charitable organizations.

It has long been the public policy of this State to exempt property owned by religious and charitable organizations from taxation. As early as 1799, the law providing for the assessment and collection of taxes upon real and personal property contained the following exemption: "That no house or land belonging to the United States, or to the people of this State, nor any church or place of public worship, or any personal property belonging to any ordained minister of the gospel, nor any college or incorporated academy, nor any school house, court house, gaol, alms house or property belonging to any incorporated library, shall be taxed by virtue of this act.” (L 1799, ch 72.) This exemption remained substantially intact in subsequent legislative enactments (see L 1801, ch 179; L 1823, ch 262) and survived the amalgamation of these statutes. (Rev Stat of NY [1829], vol 1, ch 13, tit 1, § 4.)

In 1893, the statutory exemptions relating to property owned by a charitable organization and used for charitable purposes began to take a form similar to that now found in section 421 of the Real Property Tax Law. Chapter 498 of the Laws of 1893 provided, in pertinent part: "The real property of a corporation or association organized exclusively for the moral and mental improvement of men and women or for religious, charitable, missionary, hospital, educational, patriotic, historical or cemetery purposes, or for two or more of such purposes, and used exclusively for carrying out thereupon one or more of such purposes shall be exempt from taxation. * * * The real property of any such corporation not so used exclusively for carrying out thereupon one or more of such purposes, but leased or otherwise used for other purposes shall not be so exempt”. This language remained substantially unchanged when the Tax Law was codified (L 1896, ch 908) and was set forth in subdivision 7 of section 4 of that law.

Although this statutory section was amended on many subsequent occasions and subdivision 7 was renumbered as subdivision 6 in 1933 (L 1933, ch 470), the relevant language of this statutory provision remained virtually unchanged until 1948. During that period, the courts of this State construed the qualifying phrase "leased or otherwise used for other purposes” to mean "used for purposes other than, specifically, those of the owning corporation.” Thus, an exemption was denied where a religious or educational corporation leased its property to another religious or educational corporation, even if the property was being used by the lessee thereof for an exempt purpose and the rent was being applied to further the objectives of the owner-lessor. (See, e.g., People ex rel. Unity Cong. Soc. of City of N. Y. v Mills, 189 Misc 774; People ex rel. Frick Collection v Chambers, 196 Misc 1026, affd 276 App Div 891.)

In obvious response to this judicial interpretation (see NY Legis Ann, 1948, pp 291-293), an amendment was proposed and adopted to permit a tax-exempt organization to lease its property to another tax-exempt corporation and still retain the exemption. (L 1948, ch 622.) As far as is pertinent to this case, the amendment added the following language to subdivision 6 of section 4 of the Tax Law: "[Pjrovided, however, that the real property of any such corporation shall be fully exempt, whether such property is used by the corporation itself for the purpose or purposes for which it was organized, or whether such property is used by another exempt corporation for purposes which are exempt under this subdivision, as long as the property is devoted to exempt uses and as long as any moneys paid to the owning corporation by the using corporation do not exceed the amount of the carrying, maintenance and depreciation charges of the property”. (Id.) This qualification was explained in a memorandum submitted in support of the then proposed amendment as follows: "The limitation requiring the owning corporation not to receive more than its carrying, maintenance and depreciation charges is intended to assure that the statute cannot in any way be used to provide a profit even for tax exempt corporations.” (See NY Legis Ann, 1948, p 293.)

Thus, it appears clear that this statutory qualification that proceeds received from the property should not exceed specified charges on the property was intended to apply where, as in this case, tax-exempt organizations leased their property to other exempt organizations. The courts of this State construed the above-cited language as such. (See Masters School v Town of Greenburgh, 140 NYS2d 399; cf. Matter of Pace Coll. v Boyland, 4 NY2d 528, 532 ["subdivision 6 of section 4 of the Tax Law withholds exemption from * * * benevolent corporations to the extent that their properties are leased for other purposes (except under certain circumstances to a similarly exempt corporation)” (emphasis supplied)].)

Former subdivision 6 of section 4 of the Tax Law, for purposes relevant here, remained virtually unchanged until 1958, at which time the Real Property Tax Law was enacted. (L 1958, ch 959.) However, the qualification concerning leases of property owned by a tax-exempt corporation was retained and included in subdivision 2 of section 420 of the new law, and is identical to that now embodied in subdivision 2 of section 421 of the Real Property Tax Law.

Despite the difference in wording between former section 4 of the Tax Law and article 4 of the Real Property Tax Law, it is clear that no substantive change was intended. As stated by then Governor Harriman at the time of the recodification: "The new code is the product of years of effort on the part of the legal staff of the State Board of Equalization and Assessment and of an Assessment Advisory Committee to that Board. * * * It is hoped that the new code will serve as an impetus for reform in the substantive provisions governing real property taxation. The Board of Equalization and Assessment has contended itself with recodiñcation and the making of some procedural changes in existing laws.” (NY Legis Ann, 1958, p 496 [emphasis supplied]; see Real Property Tax Law, § 2002, subd 6 ["(t)he repeal by this chapter of section four of the tax law * * * and the re-enactment of the provisions thereof in article four of this chapter (is) intended to effectuate a continuation and restatement, without change in substance or effect, of the provisions of such laws.”].)

Accordingly, we conclude that the Legislature intended the provision in subdivision 2 of section 421 of the Real Property Tax Law — requiring that rental income not exceed specified expenses of the property — to be applicable in a situation where one tax-exempt corporation leases its property to another, even though the latter organization uses the property for what could be deemed charitable purposes. As demonstrated, subdivision 6 of section 4 of the Tax Law was so judicially interpreted, and inasmuch as the applicable provision of the Real Property Tax Law represents a codification of previously existing law, we find no reason to deviate from that prior construction. Indeed, the qualifying phrase "so long as any moneys paid for such use do not exceed the amount of the carrying, maintenance and depreciation charges of the property” as now contained in subdivision 2 of section 421 of the Real Property Tax Law has been so construed. (See Matter of St. Michael’s Protestant Episcopal Church v Kaplan, NYLJ, Feb. 17, 1977, p 10, cols 4-5 [Supreme Ct, NY County]; see, also, Curtiss, Tax Exemption of Educational Property in New York, 52 Cornell LQ 551, 566.)

Moreover, even without the benefit of this legislative history, we would construe the very language of subdivision 2 of section 421 of the Real Property Tax Law as being specifically applicable where one tax-exempt organization leases its property to another. This section begins with the following language: "If any portion of such real property is not so used exclusively [by the owner-organization] to carry out thereupon one or more of such [tax-exempt] purposes but is leased or otherwise used for other purposes, such portion shall be subject to taxation and the remaining portion only shall be exempt.” (Emphasis supplied.) It must be stressed that this opening language is phrased in the disjunctive; thus, two occurrences could possibly serve as the grounds for disqualification: (a) that the property is leased; or (b) that the property is used by the owner-organization for other than tax-exempt purposes.

The courts below, however, construed this introductory language as making the entire subdivision inapplicable where one tax-exempt organization leases its premises to another such organization and the property is used by the lessee thereof for tax-exempt purposes. Such an interpretation not only ignores the plain wording of the statute, but, in addition, renders meaningless the balance of the subdivision which contains provisions specifically exempting leased property where it is used "for purposes which are exempt pursuant to this section [Real Property Tax Law, § 421] * * * by another [tax-exempt] corporation * * * provided * * * that such real property shall be exempt from taxation only * * * so long as any moneys paid for such use do not exceed the amount of the carrying, maintenance and depreciation charges of the property”. Clearly, the Legislature could not have intended such a result.

Plaintiff maintains, however, that even if this court concludes, as we now do, that subdivision 2 of section 421 of the Real Property Tax Law is specifically applicable to a situation where one tax-exempt organization leases its property to another for use by the latter for tax-exempt purposes, and, thus, rental income may not exceed the amount of the carrying, maintenance and depreciation charges of the property in order to qualify for an exemption, it is nevertheless entitled to an exemption because Catholic Charities, and not plaintiff, is the recipient of the rental payments. We cannot agree.

While it may appear harsh to hold an owner liable for real property taxes when it derives no pecuniary benefits from the demised premises, this result is mandated in this case, for a contrary holding would allow a tax-exempt organization in the future to lease its property to another tax-exempt organization with the expectancy that such organization would sublease the property and obtain a profit from the rental proceeds. This court will not construe subdivision 2 of section 421 of the Real Property Tax Law in such a manner as to establish a tax loophole, for the Legislature could not have intended its express mandate to be so easily circumvented.

This is not to say, or even intimate, that plaintiff harbored an intent to escape tax liability by employing such tactical maneuvers, for a review of the record supports a contrary conclusion. However, this court simply cannot consider this a factor in our decision, for submission to what one may consider an appealing factual situation often results in the establishment of an unsound rule of law. In addition, it should be noted that the lease between plaintiff and Catholic Charities expressly provided that the latter “shall not assign or sublet the demised premises, or any part thereof, without the written consent of [plaintiff].” Thus, plaintiff retained control over the premises, and could have refused to give its consent to the subletting of the property given the proposed terms of the lease, thereby maintaining the tax-exempt status of the property.

One further point requires comment. Plaintiff contends that if subdivision 2 of section 421 of the Real Property Tax Law is construed as imposing upon it tax liability, the statute, as applied, should be declared unconstitutional. Plaintiff maintains that the statute would violate its right to exercise freely its religion (US Const, 1st Amdt; NY Const, art I, § 3), and also would run counter to the express constitutional mandate that tax “[e]xemptions may be altered or repealed except those exempting real or personal property used exclusively for religious, educational or charitable purposes as defined by law and owned by any corporation or association organized or conducted exclusively for one or more of such purposes and not operating for profit.” (NY Const, art XVI, § 1.) We find these arguments unpersuasive.

The imposition of real property taxes, under the circumstances of this case, simply does not infringe upon plaintiff’s right to practice freely its religion. Plaintiff does not now contend, nor could it, that the taxation of its real property, leased to another, in any way prevents plaintiff from freely and openly exercising its religious beliefs. Indeed, the very existence of the lease itself militates against a finding that the property in question was to be used for the practice of plaintiff’s religion.

Plaintiff’s remaining contention — that subdivision 2 of section 421 of the Real Property Tax Law works to repeal a tax exemption to which plaintiff is constitutionally entitled (NY Const, art XVI, § 1) — cannot withstand analysis. As previously noted, when section 1 of article XVI of the New York Constitution became effective in January of 1939, the applicable tax statutes as interpreted by the courts of this State did not allow for an exemption where a tax-exempt organization leased its property to another such organization. Thus, subdivision 2 of section 421 of the Real Property Tax Law works to bestow upon tax-exempt organizations an additional benefit which is not constitutionally mandated. Therefore, it is inconceivable that the Legislature, having granted an additional benefit, is without the power to restrict that benefit without offending the State Constitution.

For the reasons stated, the order of the Appellate Division should be modified, and the case remitted to Supreme Court, Kings County, for a hearing in accordance with this opinion, and, as so modified, is affirmed.

Gabrielli, J.

(dissenting). I respectfully dissent. This is an action brought by the Sisters of St. Joseph, a religious and charitable organization, seeking a declaration that certain real property owned by the order and used for charitable purposes by another charitable organization is entitled to an exemption from real property taxation pursuant to section 421 of the Real Property Tax Law. The property was leased to Catholic Charities of the Diocese of Brooklyn, another charitable organization, for use as a senior citizens’ center, plainly a charitable use. No rent is charged Catholic Charities by the Sisters of St. Joseph. Catholic Charities, in turn, has leased the property to Builders for the Family and Youth of the Diocese of Brooklyn, which is also a charitable organization and which is to actually operate the senior citizens’ center. That lease requires Catholic Charities to make certain modifications to the building so as to make it suitable for use as a senior citizens’ center. In return, Builders is required to pay Catholic Charities a rental intended to reimburse Catholic Charities for the cost of the renovations and for leasehold amortization. Today, the majority of this court holds that this payment renders the property subject to taxation. I disagree and vote to sustain the determination made by both the Appellate Division and Supreme Court that the property is exempt.

Section 421 (subd 1, par [a]) of the Real Property Tax Law provides in pertinent part as follows: "Real property owned by a corporation or association organized or conducted exclusively for religious [or] charitable * * * purposes, or for two or more such purposes, and used exclusively for carrying out thereupon one or more of such purposes either by the owning corporation or association or by another such corporation or association as hereinafter provided shall be exempt from taxation as provided in this section” (emphasis added). The other subdivisions of section 421 establish certain additional criteria for determining whether a particular piece of property is exempt from taxation. The property which is the subject of the instant litigation clearly meets all requirements for an exemption except, according to a majority of this court, those provided by subdivision 2 of section 421. Subdivision 2 begins by declaring that "[i]f any portion of such real property is not so used exclusively to carry out thereupon one or more of such purposes but is leased or otherwise used for other purposes, such portion shall be subject to taxation” (emphasis added). The subdivision then goes on to list certain situations in which even property which is so used may be exempt from taxation. The courts below have concluded that subdivision 2 is inapplicable to this property since it is used by a charitable organization for charitable purposes, and is neither leased for other purposes nor otherwise used for other purposes. For obvious and eminently sound legal reasons, I agree. Dispositive of this case is the phrase "leased or otherwise used for other purposes”, since property which may not be so described is entitled to an exemption pursuant to subdivision 1 if it meets the other statutory requirements, as does this property. It is only property which is "leased or otherwise used for other purposes” which may not be entitled to the exemption if it falls within the ambit of subdivision 1 (emphasis added). The majority of this court would interpret that phrase as if it excluded property which is "leased for any purpose, including an exempt purpose, or otherwise used for other purposes”. I cannot concur in the decision to add to the statutory language a concept which has not been placed therein by the Legislature. As it is, the statute refers to land which is leased for some other (i.e., nonexempt) purpose or which is otherwise used for some other (i.e., nonexempt) purpose. Such is the plain meaning of the statutory language, and I deem it an improper exercise of judicial authority to go beyond that clear language. Since this property is not leased for a nonexempt purpose, but rather is leased to an exempt organization for an exempt purpose, I agree with both courts below that it is entitled to an exemption.

Nor do I find the authority cited by the majority to be relevant to the interpretation of this statute. The cases cited by the majority refer to an earlier version of the statute which contained quite different language. Thus, the statute interpreted in both People ex rel. Unity Cong. Soc. of City of N. Y. v Mills (189 Misc 774) and People ex rel. Frick Collection v Chambers (196 Misc 1026, affd 276 App Div 891), unlike section 421, provided no exemption whatsoever for leased property. Hence, those cases can shed no light upon the present statutory language. Especially is this so since the present language is so very unambiguous. Similarly, I find the majority’s references to legislative history somewhat puzzling, both because such a tool of statutory interpretation is useful only when the statutory language is unclear and because the legislative history does not speak specifically to the type of situation we are confronted with today.

There exists, moreover, an alternative rationale for concluding that this property is exempted from real property taxation by section 421. Even were I to agree that subdivision 2 precludes an exemption for property rented at a profit by the exempt owner of that property to another exempt organization for an exempt purpose, that subdivision would still be inapplicable in the instant case since here the owner of the property, the Sisters of St. Joseph, does not receive any rental for the use of the property, much less a rental that exceeds "the carrying, maintenance and depreciation charges of the property” (Real Property Tax Law, § 421, subd 2). Rather, any profit, if indeed any profit is contained in this rental, is to be received not by the owner of the property and the association now subject to taxation, but rather by Catholic Charities, the sublessor. Clearly, the language of the statute simply does not bar an exemption unless a profitable rent is received by the owner-lessor of the property, even assuming that the majority’s interpretation of the first clause of subdivision 2 is correct. The majority seeks to avoid this result by characterizing it as a loophole (p 441), but in so doing is itself rewriting the statute to plug up what it believes to be a loophole. I do not find this reasoning persuasive, since it is quite reasonable to assume that even if the Legislature desired to tax the charitable owner of property who actually receives a profit because of the rental of that property to another charitable organization for a charitable purpose, it did not wish to so tax an owner who in fact receives no profit from the rental. Since such an interpretation is supported by the clear language of the statute, the subdivision should be so applied by the court.

Quite apart from the legal infirmity of the holding by the majority in this case, the decision reached today does grave injustice to the plaintiff organization which has devoted its resources and energies solely for charitable purposes, as have the two other charitable organizations herein involved. It is most unfortunate that the consequences of the majority’s determination may well portend serious inroads on the status justifiably enjoyed by charitable and religious organizations of all faiths.

Accordingly, I vote to affirm the order appealed from.

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

Order modified, with costs to appellants, and the case remitted to Supreme Court, Kings County, for a hearing in accordance with the opinion herein and, as so modified, affirmed.

      . The sublease was later amended by agreement to commence on April 1, 1974, and to run for a five-year period therefrom.

      . Section 421 (subd 1, par [a]) of the Real Property Tax Law provides: "Real property owned by a corporation or association organized or conducted exclusively for religious, charitable, hospital, educational, moral or mental improvement of men, women or children or cemetery purposes, or for two or more such purposes, and used exclusively for carrying out thereupon one or more of such purposes either by the owning corporation or association or by another such corporation or association as hereinafter provided shall be exempt from taxation as provided in this section.”

      . Section 421 (subd 2) of the Real Property Tax Law states: "If any portion of such real property is not so used exclusively to carry out thereupon one or more of such purposes but is leased or otherwise used for other purposes, such portion shall be subject to taxation and the remaining portion only shall be exempt; provided, however, that such real property shall be fully exempt from taxation although it or a portion thereof is used (a) for purposes which are exempt pursuant to this section or sections four hundred twenty-two, four hundred twenty-four, four hundred twenty-six, four hundred twenty-eight [footnote omitted] four hundred thirty or four hundred fifty of this chapter by another corporation which owns real property exempt from taxation pursuant to such sections or whose real property if it owned any would be exempt from taxation pursuant to such sections, (b) for purposes which are exempt pursuant to section four hundred eight of this chapter by a corporation which owns real property exempt from taxation pursuant to such section or if it owned any would be exempt from taxation pursuant to such section, (c) for purposes which are exempt pursuant to section four hundred sixteen of this chapter by an organization which owns real property exempt from taxation pursuant to such section or whose real property if it owned any would be exempt from taxation pursuant to such section or (d) for purposes relating to civil defense pursuant to the New York state defense emergency act, including but not limited to activities in preparation for anticipated attack, during attack, or following attack or false warning thereof, or in connection with drill or test ordered or directed by civil defense authorities; and provided further that such real property shall be exempt from taxation only so long as it or a portion thereof, as the case may be, is devoted to such exempt purposes and so long as any moneys paid for such use do not exceed the amount of the carrying, maintenance and depreciation charges of the property or portion thereof, as the case may be.”

      . The Tax Department of the City of New York also construed the law as requiring that the exempt corporation itself use the premises in order to qualify for an exemption. (See NY Legis Ann, 1948, p 291.)


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    In the Matter of Paul O’Dwyer, Appellant, v New York City Employees’ Retirement System, Respondent.
    Argued January 11, 1980;
    decided February 20, 1980

      POINTS OF COUNSEL

      Thomas J. Hughes, Jr., for appellant.
    The imposition of new statutory preconditions on retirement, effectively depriving petitioner of all service-retirement rights to which he was entitled when he joined the New York City Employees’ Retirement System, diminishes and radically impairs those rights and violates the Constitution’s protection of retirement system membership as plainly established by the decisions of this court. (Birnbaum v New York State Teachers Retirement System, 5 NY2d 1; Kranker v Levitt, 30 NY2d 574; Sgaglione v Levitt, 37 NY2d 507; Matter of Donner v New York City Employees’ Retirement System, 33 NY2d 413; Mutterperl v Levitt, 41 NY2d 956.)

      Allen G. Schwartz, Corporation Counsel (Alexander J. Wul

      wick and Carolyn E. Demarest of counsel), for respondent.
    When petitioner remained out of city-service more than five years without having retired, he ceased to be a member of the retirement system, nor was he a beneficiary thereof. Consequently, when he rejoined the system he became subject to article 11 of the Retirement and Social Security Law which had gone into effect prior to his rejoining the system. (Matter of Donner v New York City Employees’ Retirement System, 33 NY2d 413; Mutterperl v Levitt, 89 Misc 2d 428, 41 NY2d 956; Matter of Robinson v New York State Employees’ Retirement System, 46 NY2d 747; Kranker v Levitt, 30 NY2d 574.)
   OPINION OF THE COURT

Per Curiam.

A former member of the New York City Employees’ Retirement System who at the time his membership was terminated had no statutory right in consequence of his having been a former employee of the city to rejoin that system but who later returned to city-service and again became a member of the retirement system is not entitled to the benefits of the system in effect at the time of his original membership.

Appellant became a member of the New York City Council on January 1, 1964 and first entered the New York City Employees’ Retirement System on February 22, 1964. He left city-service on December 31, 1965. His membership in the system terminated on December 31, 1970 pursuant to subdivision 1 of section B3-31.0 of the Administrative Code which provided for termination of membership "[w]hen the time out of city-service * * * of any member who has resigned or been separated from the service through no fault of his own * * * shall aggregate more than five years in any period not exceeding ten consecutive years since he last became a member”.

In 1973 article 11 was added to the State Retirement and Social Security Law, establishing new limitations applicable to entrants into any public retirement system of the State or of any municipality thereof (L 1973, ch 382, § 47). This article, expressly made applicable to members who rejoined the system as well as to new entrants (§ 441, subd a), provided insofar as presently pertinent: "No member of a retirement system who is subject to the provisions of this article shall be eligible to retire until he has rendered a minimum of five years of credited service after July first, nineteen hundred seventy-three”.

On January 1, 1974 appellant again entered city-service as President of the City Council and rejoined the retirement system on January 22, 1974. Toward the latter part of his term as Council President he applied for retirement effective January 1, 1978. His application was denied for his failure to have rendered five years of city-service after July 1, 1973 as mandated by the new article 11.

The present CPLR article 78 proceeding ensued, and appellant appeals, on constitutional grounds, from the denial of his application for retirement benefits by both courts below. We now affirm.

Appellant’s contention is that the nonimpairment clause of our State Constitution (art V, § 7) precludes application to him of the limitations on eligibility for retirement contained in article 11 of the Retirement and Social Security Law enacted in 1973. The infirmity of his argument stems from the fact that his membership in the system had terminated and that on rejoining the system in 1974 he did so as a new entrant. Appellant’s position is quite different from that of the petitioner in Matter of Donner v New York City Employees’ Retirement System (33 NY2d 413) on which he places reliance. In that case the petitioner was a retiree receiving benefits from the system at the time he returned to city-service who by virtue of that status enjoyed the right to reenter the system under section B3-47.0 of the Administrative Code. We there held that the statutory right of re-entry carried with it the right to re-enter under the terms and conditions to which the former member had previously been entitled. Appellant however can claim the benefit of no statutory or contractual right to "re-enter” the system arising out of his previous membership or status; he had only the right to enter the system a second time as a new member. Consequently he has no claim to continued entitlement to prior terms and conditions. Donner had the right to rejoin the system in its configuration at the time he left it; appellant had only the right to enter the system in 1974 in the configuration then existing. Thus the application of the article 11 limitation to appellant does not diminish or impair his retirement benefits.

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

Chief Judge Cooke and Judges Jasen, Gabrielli, Jones, Wachtler, Fuchsberg and Meyer concur in Per Curiam opinion.

Order affirmed.


author:
Jasen, J.
      Gabrielli, J.

text:
    Otto Kurcsics, Appellant, v Merchants Mutual Insurance Company, Respondent.
    Argued January 2,1980;
    decided February 20, 1980

      POINTS OF COUNSEL

      Willard M. Pottle, Jr., for appellant.
    I. The maximum first-party benefits for loss of earnings under the no-fault law is $1,000 per month. (Matter of Adams [Government Employees Ins. Co.], 52 AD2d 118.) II. The judgment denying attorney’s fees and interest under section 675 of the Insurance Law should be reversed.

      Lawrence H. Wagner and J. Scott Marshall for respondent.
    I. The maximum entitlement to first-party benefits for loss of earnings from work under the no-fault law is $800 per month. (Strain v Kechbaum, 83 Misc 2d 1066; Montgomery v Daniels, 38 NY2d 41; Lawrence Constr. Corp. v State of New York, 293 NY 634; Matter of Albany Calcium Light Co. v State Tax Comm., 55 AD2d 502.) II. The decision at Special Term is inconsistent with and contrary to the public interpretations of the New York State Insurance Department to the effect that the maximum entitlement to first-party benefits attributable to lost wages is $800 per month. (Breen v Cunard Lines S. S. Co., 33 NY2d 508; Ostrer v Schenck, 41 NY2d 782; Matter of Meenagh v Dewey, 286 NY 292; Matter of Sigety v Ingraham, 29 NY2d 110.) III. The courts below properly declined to award to plaintiff attorney’s fees and interest under section 675 of the Insurance Law.

      Robert Abrams, Attorney-General (Rosalind Fink of counsel), for Superintendent of Insurance, amicus curiae.

    I. A straightforward reading of the statute compels the conclusion of the court below that the maximum amount of first-party benefits payable to a covered person for lost earnings is $800 per month. (Montgomery v Daniels, 38 NY2d 41.) II. Legislative history also supports the interpretation of the court below. (Strain v Kechbaum, 83 Misc 2d 1066; Montgomery v Daniels, 38 NY2d 41.) III. The court below correctly gave great weight to the superintendent’s regulation. (Ostrer v Schenck, 41NY2d 782.)
   OPINION OF THE COURT

Jasen, J.

This appeal raises a question of first impression in this court concerning the construction of the phrase "first party benefits” as used in article 18 of the Insurance Law (§§ 670-678), New York’s Comprehensive Automobile Insurance Reparations Act, which provides no-fault insurance protection to "covered persons”. Specifically, we are asked to decide whether a covered person who has sustained lost earnings in excess of $1,000 per month is entitled to recover as first-party benefits 80% of actual lost earnings with a maximum limitation of $1,000 per month, or, whether, such person’s recovery is limited to only $800 per month as first-party benefits, such figure representing 80% of actual earnings "up to one thousand dollars per month.”

The facts are undisputed and may be simply stated. On April 1, 1977, plaintiff Otto Kurcsics, while riding a motorcycle, was struck and injured by an automobile driven by one James Gantzer. A policy of automobile liability insurance issued to Gantzer by Merchants Mutual Insurance Co., defendant herein, complied with the requirements of section 672 of the Insurance Law and thus provided for the payment of first-party benefits to various classes of persons.

As a result of the accident and injury suffered, plaintiff submitted claims to defendant for payment of both medical expenses and lost wages. Although plaintiff produced proper documentation of the fact that he had sustained a loss of $1,400 per month in wages since the time of the accident, defendant has paid him only $800 per month, contending that this amount is the maximum to which plaintiff is entitled. In contrast, plaintiff maintains that the statute specifically allows "up to one thousand dollars per month” for lost wages and not the sum of $800 as interpreted by the defendant.

This disagreement as to the amount of loss of earnings plaintiff is entitled to recover as first-party benefits spawned this litigation. By this action, plaintiff seeks a declaratory judgment construing section 671 of the Insurance Law as requiring first-party benefits to be paid for lost wages in the maximum sum of $1,000 per month and not $800 per month. Plaintiff also seeks to require defendant to pay him the remaining $200 per month to which he claims entitlement plus 2% interest thereon, and, in addition, attorney’s fees expended in recovering the same.

Special Term, in an insightful opinion, held that plaintiff is entitled to $1,000 per month in compensation for lost earnings, reasoning that "[a] reading of section 671 (subd 1, par [b]) [of the Insurance Law] plainly indicates that an injured person will be allowed to receive up to a maximum of $1,000 per month from the carrier for lost wages.” (93 Misc 2d, at p 283.) Special Term, however, denied plaintiff’s request for interest and attorney’s fees.

On appeal, a unanimous Appellate Division modified the judgment of Special Term by deleting therefrom "the provisions interpreting section 671 of the Insurance Law as requiring defendant to increase its monthly payments to plaintiff to the sum of $1,000 retroactive to April 1, 1977 and directing defendant to make such payments.” (65 AD2d, at p 197.) The order of the Appellate Division should be reversed, and the case remitted to Special Term for the award of reasonable attorney’s fees and interest.

The controversy in this case centers upon an ambiguity which is perceived to exist in section 671 of the Insurance Law. The term "basic economic loss” is defined to include as one of its components "loss of earnings from work which the injured person would have performed had he not been injured, and reasonable and necessary expenses incurred by such person in obtaining services in lieu of those that he would have performed for income, up to one thousand dollars per month for not more than three years from the date of the accident causing the injury.” (Insurance Law, § 671, subd 1, par [b].) In contrast, the phrase "first party benefits”, as far as is applicable to this appeal, "means payments to reimburse a person for basic economic loss on account of personal injury arising out of the use or operation of a motor vehicle, less: (a) twenty percent of lost earnings pursuant to paragraph (b) of subdivision one of this section.”

Defendant takes the position that inasmuch as its duty to compensate is couched in "first party benefit” terms (see Insurance Law, § 672), its obligation for lost earnings cannot exceed the figure of $800 per month. Defendant arrives at this sum by reasoning that since first-party benefits are defined as basic economic loss less 20% of lost earnings as defined in section 671 (subd 1, par [b]) of the Insurance Law and, further, since loss of earnings as defined in such section have an outer limit of $1,000 per month, the 20% reduction works to limit recovery as first-party benefits for lost earnings to $800 per month.

Plaintiff, on the other hand, contends that since the Legislature has authorized expressly the recovery "up to one thousand dollars per month” for loss of earnings, the 20% reduction should not be interpreted as limiting this figure to read "up to $800” instead of $1,000 as clearly stated in the statute. Rather, plaintiff forwards as the reasonable and correct interpretation of these statutory provisions that the 20% deduction was intended to be computed against the gross amount of lost earnings claimed. Thus, an individual is entitled to actual lost earnings claimed less 20%, unless such reduced figure exceeds $1,000 per month, in which case such person would be entitled to a maximum of $1,000 due to the outer net limit imposed by section 671 (subd 1, par [b]) of the Insurance Law. We agree with this contention.

There can be little doubt that the 20% deduction was included in the statutory scheme by the Legislature to prevent both windfall recovery to injured persons and financial hardship to insurance carriers. As has been stated: "[T]he 20% credit or deduction was designed to give the insurance carrier a monetary benefit based upon the fact that the lost earnings compensated under this law, are not includable in income for the purposes of federal income taxation and accordingly, since the claimant derives a benefit in that respect, the insurance carrier should share in said benefits through the 20% deduction.” (NY No-Fault Arbitration Reports, NF-1, vol 1, No. 1, Jan., 1977; see, also, Strain v Kechbaum, 83 Misc 2d 1066, 1067; Comment, New York Adopts No-Fault: A Summary and Analysis, 37 Albany L Rev 662, 689-690; Report of Joint Legis Committee on Ins Rates, Regulation and Recodification of Insurance Law, NY Legis Doc, 1973, No. 18, p 10.) Thus, by limiting first-party benefits to 80% of lost earnings, the Legislature has attempted to compensate the accident victim for the earnings he or she would have, in fact, realized, while, at the same time, ensuring that an unjustified financial burden is not thrust upon the insurance companies which would eventually be reflected in higher insurance premiums. In addition, the possible motivation for recovered accident victims to refrain from returning to work, if windfall recovery would be permitted, is minimized, if not entirely eliminated.

While the legislative purpose behind the enactment of the 20% deduction embodied in section 671 (subd 1, par [b]) of the Insurance Law is readily identifiable, the issue to be resolved on this appeal remains whether the 20% deduction was intended to operate so as to limit recovery for loss of earnings to $800 per month, or whether it was meant to reduce only actual lost earnings claimed, thereby allowing a maximum recovery of $1,000 per month as first-party benefits. We believe that the statutory provisions support the latter interpretation.

Section 671 (subd 1, par [b]) of the Insurance Law provides that one of the components of "basic economic loss” is loss of earnings from work and further states, in unequivocal terms, that this amount shall not exceed "one thousand dollars per month for not more than three years from the date of the accident causing the injury.” Thus, it is abundantly clear that this provision contemplates recovery for loss of earnings up to $1,000 per month, and we would be remiss in reading the 20% deduction embodied in section 671 (subd 2, par [a]) of the Insurance Law as rewriting paragraph (b) of subdivision 1 to limit the maximum recovery to $800 per month for loss of earnings. If the Legislature had so intended, section 671 (subd 1, par [b]) would limit recovery to $800 per month and not authorize, as it presently does, recovery "up to one thousand dollars per month” for loss of earnings. The 20% deduction should not be treated as taking away what benefits section 671 (subd 1, par [b]) bestows for "[i]t remains a basic principle of statutory construction that a court will 'not by implication read into a clause of a rule or statute a limitation for which * * * no sound reason [can be found] and which would render the clause futile.’ ” (Matter of Industrial Comr. of State of N. Y. v Five Corners Tavern, 47 NY2d 639, 646-647, quoting Lederer v Wise Shoe Co., 276 NY 459, 465.)

In our opinion, the language of section 671 (subd 2, par [a]) which reads "lost earnings pursuant to paragraph (b) of subdivision one of this section” refers only to so much of paragraph (b) of subdivision 1 which defines lost earnings, to wit: "loss of earnings from work which the injured person would have performed had he not been injured, and reasonable and necessary expenses incurred by such person in obtaining services in lieu of those that he would have performed for income”. The $1,000 per month limitation embodied in section 671 (subd 1, par [b]) is not part and parcel of the definition of lost earnings, but, merely, represents the outer limit of recovery set down by the Legislature in the no-fault automobile insurance scheme. Thus, we hold today that an injured person can recover up to $1,000 per month from the insurance carrier for lost earnings. The statutory scheme envisions nothing less.

We recognize that the Superintendent of Insurance has interpreted the applicable provisions of section 671 of the Insurance Law as limiting recovery for lost earnings to $800 per month. (11 NYCRR 65.6 [n] [2] [xi].) Where the interpretation of a statute or its application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom, the courts regularly defer to the governmental agency charged with the responsibility for administration of the statute. If its interpretation is not irrational or unreasonable, it will be upheld. (Matter of Howard v Wyman, 28 NY2d 434; cf. Ostrer v Schenck, 41 NY2d 782, 786.) Where, however, the question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent, there is little basis to rely on any special competence or expertise of the administrative agency and its interpretive regulations are therefore to be accorded much less weight. And, of course, if the regulation runs counter to the clear wording of a statutory provision, it should not be accorded any weight. (See Matter of Adams [Government Employees Ins. Co.], 52 AD2d 118, 121.)

One final point requires comment. Plaintiff argues that he is entitled not only to the $200 per month which has been improperly withheld from him, but, in addition, should recover 2% interest per month on the overdue amount and the reasonable cost of attorney’s fees in collecting the deficiency. We agree.

Subdivision 1 of section 675 of the Insurance Law expressly provides that "[a]ll overdue payments shall bear interest at the rate of two percent per month. If a valid claim or portion thereof was overdue and such claim was not paid before an attorney was retained with respect to the overdue claim, the claimant shall also be entitled to recover his attorney’s reasonable fee.” In accordance with this statutory mandate, plaintiff is entitled to the interest claimed and reasonable attorney’s fees.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the case remitted to Supreme Court, Special Term, Erie County, to award reasonable attorney’s fees and interest claimed.

Gabrielli, J.

(dissenting). With respect, I must dissent.

The majority first embraces a rather strained interpretation of the statutory definition of first-party no-fault benefits and then proceeds to conclude that the contrary interpretation, which was adopted by the Superintendent of Insurance, is not entitled to the usual deference because it "runs counter to the clear wording of [the] statutory provisions”. Since I am far from convinced that the language of the statute unambiguously supports the majority’s reading of it, I would vote to uphold the interpretation of the superintendent, who is, after all, charged with the responsibility of administering the complex provisions of the Insurance Law (Ostrer v Schenck, 41 NY2d 782, 786).

Indeed, a plain reading of the statutory provisions suggests that the superintendent’s interpretation, which is embodied in Insurance Department regulations (11 NYCRR 65.6 [n] [2] [xi]), is the correct one. Under subdivision 1 of section 672 of the Insurance Law, the insurer is obligated to pay an injured claimant "first party benefits” if certain statutorily defined conditions are met. First-party benefits consist of the injured claimant’s "basic economic loss” (see Insurance Law, § 671, subd 2), which, in turn, includes "loss of earnings from work which the injured person would have performed had he not been injured * * * up to one thousand dollars per month” (Insurance Law, § 671, subd 1, par [b]; emphasis supplied). In order to compute the correct figure for monthly "first party benefits” under the statute, however, it is necessary to reduce the amount attributable to "lost earnings” by 20%. This deduction, as noted by the majority, was included in the statutory scheme as a means of making the "lost earnings” component of first-party benefits, which are not subject to income tax, roughly equivalent to the after-tax income that the claimant would have enjoyed had he not been injured (Report of the Joint Legis Committee on Ins Rates, Regulation and Recodification of the Insurance Law, NY Legis Doc, 1973, No. 18, p 10).

In describing the manner in which the deduction is to be calculated, the Legislature clearly stated that the claimant’s "basic economic loss” must be reduced by "twenty percent of lost earnings pursuant to paragraph (b) of subdivision one of this section [§ 671]” (Insurance Law, § 671, subd 2, par [a]; emphasis supplied). I find the reference to section 671 (subd 1, par [b]) particularly significant because it suggests that the Legislature intended that the term "lost earnings” be construed as a statutory term of art whose meaning is to be ascertained by reference to that subdivision. In other words, it was the Legislature’s intention to incorporate the entire statutory definition of "lost earnings” into section 671 (subd 2, par [a]) and then to apply the 20% reduction to the resulting figure. Since the statutory definition of "lost earnings” is circumscribed by a $1,000 per month maximum, it would seem that the figure against which the 20% reduction is to be applied can never exceed $1,000 per month. Accordingly, as the Superintendent of Insurance has concluded, the amount of first-party benefits that are attributable to "lost earnings” as a component of "basic economic loss” could never exceed $800 per month or $1,000 per month less 20%.

Having found the superintendent’s interpretation of the statute to be an eminently reasonable one, I would carry the inquiry no further. The Legislature has vested in the superintendent the responsibility of overseeing the highly complex, interrelated provisions known collectively as the No-Fault Automobile Insurance Law (Insurance Law, art 18), and, hence, under existing legal principles, the superintendent’s reading of the no-fault provisions is entitled to be accorded great weight (Ostrer v Schenck, 41 NY2d 782, 786, supra; see, also, Breen v Cunard Lines S. S. Co., 33 NY2d 508, 511; cf. Matter of Howard v Wyman, 28 NY2d 434, 438). Moreover, the fact that the Legislature has not found it necessary to correct the superintendent’s long-standing interpretation of section 671 (subd 2, par [a]) lends further support to the contention that this interpretation does not conflict with legislative intent. The Legislature is presumed to have been aware of the superintendent’s interpretation, which was promulgated in the form of an Insurance Department regulation as early as 1974. Surely, if the Legislature had disapproved of the superintendent’s interpretation of the statute, it would have acted to clarify the provision in 1977, when it undertook a major revision of the State’s No-Fault Automobile Insurance Law (L 1977, ch 892). I find this especially persuasive.

In an apparent recognition of the fact that the superintendent’s construction of the statute is at least as reasonable as its own, the majority has found it necessary to announce a new rule for reviewing an administrative agency’s interpretation of its governing statutes. Heretofore, it has been the unquestioned rule that the role of a reviewing court is limited to

determining whether an agency regulation "is so lacking in reason for its promulgation that it is essentially arbitrary” (Matter of Marburg v Cole, 286 NY 202, 212). As we have previously observed, " '[t]he judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body’ ” (Ostrer v Schenck, supra, at p 786, quoting Mississippi Val. Barge Co. v United States, 292 US 282, 286-287; see Matter of Dumbleton v Reed, 40 NY2d 586, 590 [Jones, J., dissenting]; Matter of Howard v Wyman, 28 NY2d 434, 438, supra). Yet, despite the well-established practice of this court to refrain from substituting its judgment for that of the administrative agency charged with enforcing a statute, the majority has blandly asserted without further analysis that "there is little basis to rely on any special competence or expertise of the administrative agency”. With this I cannot agree. Our prior decisions in this area have been premised upon our conviction that the various administrative agencies, which are part of the executive branch of government, are entitled to have a significant role in the interpretation of legislative enactments. This is particularly so where, as here, the Legislature has delegated to the administrative agency the task of implementing complex and highly technical rules whose purpose is not always readily discernible to those who are unfamiliar with their interrelationships and practical application. Where the Legislature has entrusted a department head with the responsibility of carrying out its legislative design, we have always adhered to a policy of judicial restraint and have resisted the temptation to override the department head’s judgment in cases involving questions of statutory interpretation. Indeed, we have intervened only when the department head’s view is obviously irrational or is clearly contrary to the plain language of the enactment in question. This policy of deference, in my view, represents a proper balancing of the respective functions of the judicial and the executive branches of government. I regret that the majority has chosen to upset this balance by drastically altering a well-settled principle of law.

One further point remains to be discussed in this connection. The majority has implied that the superintendent’s reading of section 671 (subd 2, par [a]) should be ignored because it contradicts the clear import of the statutory language. I must confess that I am unable to find any such contradiction. Presumably, the majority’s view is based upon its assumption that the Legislature would have written an $800 per month maximum into the definition of "lost earnings” if it intended the recovery attributable to "lost earnings” to be limited to that amount. An analysis of the entire legislative design, however, belies this assumption. In addition to being used in subdivision 2 of section 671 as a touchstone for measuring "first party benefits”, the term "basic economic loss”, which includes "lost earnings”, is also used in subdivision 1 of section 673 to define the threshold amount of damages which must be sustained in order for an injured claimant to be permitted to maintain a common-law tort action (see Montgomery v Daniels, 38 NY2d 41, 47). This alternate use of "basic economic loss” in the no-fault article, in my view, provides adequate explanation for the Legislature’s decision not to incorporate the $800 per month limitation on recoverable lost earnings directly into the statutory definition of that term. Indeed, contrary to the majority’s assertions, it seems perfectly reasonable to conclude that the Legislature intended the term "lost earnings” to be circumscribed by a $1,000 per month maximum for purposes of section 673 and, at the same time, intended that the $1,000 per month maximum be reduced by 20% for purposes of computing recoverable first-party benefits attributable to lost earnings.

In summary, I would stress that my disagreement with the majority stems not so much from our differing views concerning the proper interpretation of the statute as from the majority’s apparent refusal to acknowledge that the statute is reasonably susceptible of more than one interpretation. In order to overcome the principle that the views of an administrative agency are entitled to great deference in matters of statutory interpretation, the majority has had to drastically curtail the application of that well-settled principle and, in the process, has overridden the superintendent’s highly sensible reading of the statute. Yet, as the foregoing discussion illustrates, the interpretation proffered by the Superintendent of Insurance is amply supported by both the language of the statute and the legislative design. Under such circumstances, our prior case law would seem to require that the court refrain from substituting its views for those of the administrative agency charged with implementing the statute (see Matter of Marburg v Cole, 286 NY 202, 212, supra).

For the foregoing reasons, I would affirm the order of the Appellate Division and uphold the existing Insurance Department regulations.

Chief Judge Cooke and Judges Jones, Wachtler, Fuchs-berg and Meyer concur with Judge Jasen; Judge Gabrielli dissents and votes to affirm in a separate opinion.

Order reversed, with costs, and the case remitted to Supreme Court, Erie County, for further proceedings in accordance with the opinion herein.

      .  As correctly noted by the Appellate Division, an operator of a motorcycle at the time of the accident herein "was equated to a pedestrian or bicyclist, and was a 'covered person’ under subdivision 10 of section 671 of the Insurance Law.” (65 AD2d, at p 193.) However, by amendment effective December 1, 1977, a motorcycle is considered to be a motor vehicle for purposes of the No-Fault Automobile Insurance Law and an injured rider or passenger of the motorcycle must seek compensation from the insurer thereof. (L 1977, ch 892, § 10, adding Insurance Law, § 672, subd 6.)

      . No question as to the medical expenses is raised on this appeal.

      . To recover the maximum of $1,000 per month, a claimant would be required to demonstrate that he or she suffered loss of earnings as defined in section 671 (subd 1, par [b]) in the amount of $1,250 or more. This is so because the 20% deduction would operate so as to reduce the gross loss of earnings claimed. If, for example, an injured person claims $1,100 in lost earnings, the 20% deduction works to reduce the amount recoverable to $880 ($1,100 minus [.20 X $1,100]).

      . While it is true, as the dissenter observes, that the Legislature has not deemed it necessary to correct the superintendent’s interpretation, we would note that at the time the Legislature undertook the revision of the No-Fault Automobile Insurance Law, the question presented here — that this interpretation conflicts with legislative intent — had not been raised to alert the Legislature.


text:
    In the Matter of Norman E. Kuehnel, a Justice of the Village Court of Blasdell and Town Court of Hamburg, Petitioner, v State Commission on Judicial Conduct, Respondent.
    Argued February 4, 1980;
    decided March 18, 1980

      POINTS OF COUNSEL

      William J. Cunningham, Jr., for petitioner.
    I. Respondent’s determination that petitioner should be removed from judicial office should be rejected. (Matter of Kane v Rudich, 256 App Div 586; People ex rel. Munday v Board of Fire Comrs. of City of N. Y., 72 NY 445; Matter of Richter, 42 NY2d [aa]; Matter of Mertens, 56 AD2d 456; Matter of Murtagh v Maglio, 9 AD2d 515; Matter of Waltemade, 37 NY2d [a]; Matter of Pfingst, 33 NY2d [ii]; Matter of Brooklyn Bar Assn. [Hirshfield], 229 App Div 654; Sarisohn v Appellate Div., 2d Dept., Supreme Ct., of State of N. Y., 265 F Supp 455; Matter of Droege, 129 App Div 866, 197 NY 44.) II. Respondent’s investigation and determination should be dismissed upon the failure to establish that it complied with the applicable statutory requirements. (Matter of Nicholson v State Comm. on Judicial Conduct, 68 AD2d 851.)

      Raymond S. Hack, Gerald Stern and Seth Halpern for respondent.
    I. Petitioner’s misconduct warrants removal from office. (Friedman v State of New York, 24 NY2d 528; Matter of Droege, 129 App Div 866, 197 NY 44; Matter of Pfingst, 33 NY2d [ii]; Matter of Schweitzer, 29 NY2d [b]; Matter of Kuehnel, 45 NY2d [f]; Matter of Waltemade, 37 NY2d [nn].) II. Petitioner has failed to establish any basis for dismissal of the formal written complaint. (Matter of Gonzalez v State Liq. Auth., 30 NY2d 108; People v Hochberg, 62 AD2d 239; Matter of Beck [Committee on Professional Stds., 3d Judicial Dept.], 61 AD2d 1117; Matter of Nicholson v State Comm. on Judicial Conduct, 68 AD2d 851; Matter of Waltemade, 37 NY2d [nn]; Matter of Vaccaro, 42 NY2d [a]; Matter of Mertens, 56 AD2d 456; Matter of Filipowicz, 54 AD2d 348.)
   OPINION OF THE COURT

Per Curiam.

Petitioner, a Justice of both the Village Court of Blasdell and the Town Court of Hamburg, brings this proceeding to review a determination of the State Commission on Judicial Conduct ordering his removal from office. The issues raised embrace not only the propriety of the commission’s determination that petitioner be removed, but also the correctness of its findings of fact and conclusions of law (NY Const, art VI, § 22, subds a, d; Judiciary Law, § 44, subd 9; Matter of Spector v State Comm, on Judicial Conduct, 47 NY2d 462, 465-466). Upon our review of the record, we accept the determination of the commission.

In November, 1978 petitioner was served with a formal written complaint containing a single charge of misconduct. At a hearing before a Referee, this factual picture was established.

As petitioner was leaving a tavern on the evening of May 5, 1978, he detained four youths whom he suspected of breaking glass in an adjacent parking lot. When the questioning did not proceed to his satisfaction, petitioner ordered the juveniles into a nearby grocery store for the purpose of calling the police. As he ushered the youths into the store, petitioner struck one of them, age 13, in the back of the head causing the latter to fall forward with such force that his head struck a bulletin board or doorframe. Although petitioner denied the blow, the credible evidence indicates otherwise.

Summoned to the grocery by petitioner, a police officer escorted the youths to the village police station. Prior to transporting them, the patrolman searched the parking lot but could find no evidence of broken glass. Nor was any glass discovered by an employee of the store who had examined the lot previously.

At the station house, petitioner’s conduct was even less restrained. Upon entering the station, petitioner proceeded to upbraid the youths in a most injudicious manner. His language was vulgar and derogatory, his manner taunting and hostile. He uttered particularly demeaning comments concerning an identifiable ethnic group and stated that if he ever saw one of the youths before his court, he would send her to jail. While leaving, petitioner, presumably irritated by the attitude of the four youths, was prompted to vent his displeasure by intentionally, and without any justifiable provocation, striking one of them, age 16, in the face, causing his nose to bleed. Following this assault, petitioner left the police station without apology.

Some two or three weeks later, petitioner met with this boy and his father to discuss the incident. Petitioner explained that the assault had been unintentional, apologized to the youth and offered to allow the boy to strike him. Upon declination of the offer, petitioner proposed the execution of a general release. Ultimately, petitioner paid the youth $100 in return for which he and his father executed a release purportedly relieving petitioner, both individually and in his capacity as Village Justice, from any liability arising out of the incident at the police station.

Without question, petitioner’s conduct was egregious and inexcusable. He does not and indeed could not justify his actions. Instead, he maintains that removal from office would be a Draconian sanction since such conduct was unrelated to his judicial duties. This argument, however, fails to comprehend the basic maxim that a Judge may not so facilely divorce behavior off the Bench from the judicial function. Standards of conduct on a plane much higher than for those of society as a whole, must be observed by judicial officers so that the integrity and independence of the judiciary will be preserved. A Judge must conduct his everyday affairs in a manner beyond reproach. Any conduct, on or off the Bench, inconsistent with proper judicial demeanor subjects the judiciary as a whole to disrespect and impairs the usefulness of the individual Judge to carry out his or her constitutionally mandated function (see Matter of Spector v State Comm. on Judicial Conduct, supra, at pp 468-469; Matter of Pfingst, 33 NY2d [ii], [kk]). As the Referee aptly noted, throughout this entire incident petitioner, "although off the bench remained cloaked figuratively, with his black robe of office devolving upon him standards of conduct more stringent than those acceptable for others.”

Petitioner’s actions transformed what he perceived to be a trivial offense into a grotesque confrontation with four young adolescents. The episode was marked by two frenzied displays of overt physical violence, as well as repeated outbursts involving outrageous verbal abuse and virulent racism. Moreover, his testimony before the Referee was so at variance with that related by disinterested witnesses as to display at the very least a gross lack of candor. These acts, even on the part of a member of the public would have been, at a bare minimum, a flagrant breach of accepted norms. When performed by a Judge, a person required to observe "high standards of conduct so that the integrity * * * of the judiciary may be preserved” (Rules Governing Judicial Conduct, 22 NYCRR 33.1), such conduct is inexcusable. In abusing the youths inside the police station, petitioner failed to exercise even a modicum of sensitivity or self-control so vital to the demands of his position. And in intentionally striking two of them without provocation, petitioner exhibited an unrelenting display of injudicious temperament demeaning to the processes of justice.

It is noted additionally that petitioner has previously been censured by the Court on the Judiciary for improperly granting favored treatment to defendants in traffic cases pending before his courts and requesting similar treatment on behalf of defendants in other Judges’ courts (Matter of Kuehnel, 45 NY2d [y]). This prior censure further supports the finding that petitioner’s future retention of office is inconsistent with the fair and proper administration of justice.

For these reasons, the determined sanction of removal is accepted, without costs.

Chief Judge Cooke and Judges Jasen, Gabrielli, Jones, Wachtler, Fuchsberg and Meyer concur in Per Curiam opinion.

Determined sanction accepted, without costs.