text:
    The People of the State of New York, Appellant, v Charles W. Shortridge, Jr., Respondent.
    Argued May 2, 1985;
    decided June 11, 1985
    POINTS OF COUNSEL

      Barry M. Donalty, District Attorney (Steven R. Fortnam of counsel), for appellant.
    I. The statements made by the declarant were not corroborated by competent independent evidence. (People v Settles, 46 NY2d 154; People v Brown, 26 NY2d 88; People v Harding, 37 NY2d 130.) II. Defendant was the only person that could corroborate the declarant’s statements. III. The declarant had a compelling motive to falsify his statements. (People v Maerling, 46 NY2d 289; People v Geoghegan, 51 NY2d 45; People v Settles, 46 NY2d 154; Lowery v State of Maryland, 401 F Supp 604; Donnelly v United States, 228 US 243; Chambers v Mississippi, 410 US 284; Dutton v Evans, 400 US 74; United States v Guillette, 547 F2d 743, 434 US 839; United States v Dovico, 380 F2d 325.) IV. The declarant’s claim of competent knowledge is not supported by his statements. V. The trial court Judge properly excluded the declarations of Charles Shortridge, Sr. (United States v Dovico, 380 F2d 325; United States v Guillette, 547 F2d 743; United States v MacDonald, 688 F2d 224, 459 US 1103; United States v Brandenfels, 522 F2d 1259, 423 US 1033.)

      John N. Kalil for respondent.
    I. The statements made by the declarant were corroborated by competent independent evidence. (People v Settles, 46 NY2d 154.) II. Corroboration of declarant’s statement could be made by means other than defendant’s testimony. (People v Maerling, 46 NY2d 289.) III. The declarant did not have a compelling motive to falsify his statement. (People v Geoghegan, 51 NY2d 45; People v Riccardi, 73 Misc 2d 19; United States v Dovico, 380 F2d 325.) IV. The declarant’s claim is supported by his statements. V. The decision of the court below to place the declarations before the jury was proper. (People v Settles, 46 NY2d 154.)
   OPINION OF THE COURT

Jasen, J.

The issue presented on this appeal is whether certain letters and conversations sought to be introduced at trial by defendant constituted declarations against penal interest which should have been admitted into evidence as exceptions to the rule against hearsay. Defendant was convicted of manslaughter in the first degree in Oneida County Court after a jury trial in which letters and conversations of his father inculpating himself and tending to exculpate defendant were refused admittance into evidence. The Appellate Division, Fourth Department, reversed the judgment below and granted a new trial on the ground that the father’s declarations against penal interest should not have been excluded. The People were granted leave to appeal by a judge of this court. We now reverse and reinstate the conviction.

On September 13, 1981, the badly decomposed remains of a human body were found in a wooded and sparsely populated area in the City of Rome. A skull was discovered in one location while the remainder of the body was found in the gully below. Two days thereafter, defendant called the police and said that he wished to speak about his activities with the decedent who, by that time, had been identified. When defendant arrived at police headquarters, he was advised of his constitutional rights, indicated his understanding, waived his rights and chose to speak. After initially telling the investigator that he had purchased a motorcycle from the decedent on August 7,1981, he explained in gruesome detail what had subsequently occurred.

Defendant said that he and the decedent drove the motorcycle to the area in which decedent’s remains were found. After drinking some beer and smoking marihuana, the decedent made a homosexual advance toward defendant. When decedent persisted despite defendant’s rejection, defendant began striking and kicking him repeatedly in the head, the face and the stomach until decedent was unconscious. Defendant moved decedent into a recess in the ground. When defendant noticed that his own shirt was covered with blood, he removed it and hid it with decedent’s body. He then drove away.

According to defendant, he returned four or five days later and attempted to create the appearance of an accident. He said that he stabbed the decedent in the back with a stick which he then removed, and that he took a wallet and other small items from decedent’s person, which he later discarded. Defendant said that he left the scene but returned again another four or five days thereafter. At that time, he removed the decedent’s corpse from the recess in order better to conceal it elsewhere. While dragging the corpse by the shoes, the skull separated from the remainder of decedent’s body. Defendant buried the skull in a hole he had dug, and covered the body in a gully below with sticks, branches and pine needles. These admissions were consistent with police findings at the scene where decedent’s body was discovered.

Defendant was indicted on two counts of murder in the second degree. At trial, defendant sought to introduce certain letters and conversations in which his father claimed responsibility for decedent’s death. In four letters, dated May 1 through May 3, 1982, nine months subsequent to decedent’s death, the father stated that he had learned in January, from defendant’s attorney, that a knife may have been used to kill decedent, that he later came to believe that he might earlier have assaulted someone at his trailer with a knife, and that the individual must have been decedent. Defendant’s father related in the letters that he did not want his son to be imprisoned for life for what he himself had done and, moreover, that he would take care of himself to insure that he did not spend his own life in prison either. Defendant’s father was found dead, a few days later, having apparently committed suicide.

County Court refused to admit either the letters or the testimony of defense witnesses about conversations they had with defendant’s father. The court summarized the requirements for declarations against penal interest, noted that the father’s statements did not conform to other testimony adduced at trial and that the father’s recollection of his involvement was rather belated, and held that the absence of independent supporting circumstances precluded admission of the father’s declarations.

On appeal to the Appellate Division following the jury verdict and judgment of conviction of manslaughter in the first degree, that court held that it was error to exclude the father’s out-of-court declarations. The Appellate Division reasoned that the father’s statement that he had used a knife, being “consistent with the medical evidence [and] inconsistent with defendant’s statement” (105 AD2d, at p 1129), supplied the requisite showing of trustworthiness and reliability necessary for admission into evidence under this court’s decision in People v Settles (46 NY2d 154, 167). We disagree.

This court first held in People v Brown (26 NY2d 88, 94) that a declaration against penal interest, without any concomitant risk of pecuniary or proprietary loss, is admissible into evidence as an exception to the rule against hearsay. Since that time, we have enumerated several criteria which must be demonstrated by the party offering the declaration before it may be introduced. Though somewhat variously expressed, four basic prerequisites have been repeatedly identified: (1) the declarant is unavailable to give testimony by reason of absence from the jurisdiction, refusal to testify on constitutional grounds, or death; (2) the declarant was aware at the time of its making that the statement was contrary to his penal interest; (3) the declarant had such knowledge of the facts recited in his declaration as would be required to permit him to testify to them; and (4) there exist sufficient indicia of the declaration’s trustworthiness to insure its reliability. (See, e.g., People v Settles, supra, at p 167; People v Geoghegan, 51 NY2d 45, 50 [Jasen, J., dissenting]; People v Maerling, 46 NY2d 289, 295-296; People v Harding, 37 NY2d 130, 135 [Cooke, J., concurring]; Richardson, Evidence §§ 255-263 [Prince 10th ed].) While the declarations in this case surely satisfy the first criterion, we need only address the fourth which is dispositive of this appeal.

Of that prerequisite, this court has noted that “[t]he crucial inquiry focuses on the intrinsic trustworthiness of the statement as confirmed by competent evidence independent of the declaration itself.” (People v Settles, supra, at p 169.) While the admissibility of declarations against penal interest is predicated upon the theory that their reliability can generally be presumed because a person does not ordinarily reveal facts which jeopardize his interests (see, Richardson, Evidence § 256 [Prince 10th ed]; People v Maerling, supra, at p 295; People v Settles, supra, at p 168), nevertheless, that generalization must be tempered with a recognition of the limitations upon its validity under particular circumstances. Indeed, certain considerations may be fatal to the reliability of a declaration and thereby render the out-of-court statement inadmissible.

These considerations include the declarant’s motivation — e.g., whether the statement was designed to exculpate a loved one or inculpate an enemy. Important also is the declarant’s personality — e.g., whether he suffers psychological or emotional instability or whether he is a chronic or pathological liar. Additionally, the declarant’s spontaneity or hesitancy, promptness or tardiness in making the statement may shed light on its authenticity. Likewise, the internal consistency and coherence of the declaration, or its lack thereof, may reflect on its bona fides. Most critical in some cases, is the availability of supporting evidence — that is, some proof, independent of the declaration itself, which tends to confirm the truth of the facts asserted therein. Regardless of how self-incriminatory a particular declaration against penal interest might be, all or any of the foregoing may affect its reliability. (See, People v Geoghegan, supra, at pp 49-50; People v Maerling, supra, at pp 299-301; People v Settles, supra, at pp 168-169; cf. Chambers v Mississippi, 410 US 284, 299-301.)

While these and other relevant considerations should all be weighed, whenever applicable, by the trial court in the exercise of its sound discretion, the presence of a strong motivation to fabricate or the absence of supporting evidence can, without more, be sufficient to render a declaration inadmissible as a matter of law. (People v Geoghegan, supra, at p 50; People v Settles, supra, at pp 168-169; cf. Cover v Cohen, 61 NY2d 261, 274.) Here, the declaration in question suffers from both fatal defects.

If anything is clear from the letters sought to be introduced into evidence, it is that defendant’s father was distressed that his son might spend a lifetime in prison and that he wished to do what he could to prevent that from happening. That this motivation was particularly strong is obvious, not solely from the father-son relationship involved, but also from the content of the letters themselves. The father ostensibly struggled, but ultimately failed, to recall the actual nature of his involvement, if any at all, with decedent. Indeed, the letters evince the father’s considerable difficulty in providing some possible explanation for decedent’s death. The only thing that emerges clearly from the ambiguity and uncertainty of the letters is that the father was intent upon exculpating his son.

There is more, here, than the “distinct possibility”, as we referred to it in Settles (supra, at p 168), that the declarant had a motive to prevaricate. Indeed, it is apparent that, even without an intelligible understanding of his own role and that of his son in decedent’s death, the father had a strong ulterior'motive, to exculpate his son entirely. Such an incentive, even where independent supporting evidence was adduced, has been deemed by this court, without more, to be a bar to the admission of a declaration against penal interest. (See, People v Geoghegan, supra.)

In this case, the grounds for precluding admission are even stronger as there is no competent supporting evidence. Contrary to the holding of the Appellate Division and the contention of defendant, the testimony of the medical examiner that decedent was probably stabbed with a knife does not provide the requisite independent confirmation. Rather, as stated in one of the letters itself, the father had learned from his son’s attorney that a knife was likely used. The father stated that he had been told in mid-January 1982, which was four months after decedent’s remains were discovered and subsequent to medical examination of the remains and release of the report. Moreover, the letter itself, dated May 1, 1982, was apparently not written until several months after that, at which time, presumably, the medical findings were known to defendant’s family. It can hardly be said with any measure of confidence that the father’s statement and the medical evidence concerning the use of a knife were independent of each other.

This conclusion is mandated, a fortiori, by other statements in the father’s same letter of May 1,1982. The father stated that at first he “thought that if [decedent] was beat to death maybe I used the snow shovel that they picked up with the search.” It was only after “time passed” and he was told “a knife might have been used”, that “this put me to thinking again”. He added that at the time of his alleged involvement in the incident, he had been “tired from lack of sleep. Also I had drank beer that night. I don’t think very much but in my physical and mental condition and the stories [a friend] had told, anything could have happened”. Such remarks vitiate whatever corroborative value might have otherwise been derived from the probable use of a knife and, moreover, preclude any attribution of trustworthiness to the father’s declarations. Defendant’s failure to mention a knife in his statements can in no way save the father’s declarations from these internal defects.

Finally, while the foregoing is sufficient to render the declarations inadmissible as a matter of law, it ought also to be noted that other factors cast serious doubts upon their reliability. The father’s statements were rather late in the making and, then, only upon a suspect recollection instigated by and predicated upon information supplied by another. Additionally, the father’s mental and emotional stability were rather dubious, not the least by reason of his own admission, his apparent inability to recollect serious events coherently, and his committing suicide within days of his writing the letters. Indeed, under the facts of this case, the father’s suicide provides no indicia of reliability. When all these factors are considered — i.e., the incentive to falsify, the absence of independent supporting evidence, the tardiness and lack of spontaneity, and the evidence of instability — there can be no doubt that admission of the father’s letters, and other conversations, as declarations against penal interest would have constituted an abuse of discretion on the part of the trial court. (See, People v Maerling, supra, at pp 300-301.)

Accordingly, the order of the Appellate Division should be reversed, the conviction reinstated, and the case remitted to the Appellate Division for further consideration of the facts and of other issues, if any, not previously reached by that court.

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

Order reversed, conviction reinstated and case remitted to the Appellate Division, Fourth Department, for further proceedings in accordance with the opinion herein.


source: Caselaw Access Project

author: Alexander, J.

license: Public Domain

text:
    Hyde Park Products Corporation et al., Respondents, v Maximilian Lerner Corporation et al., Appellants.
    Argued January 7, 1985;
    decided June 11, 1985

      POINTS OF COUNSEL

      Warren B. Silberkleit for appellants.
    I. The award of substantial damages is precluded by the trial court’s finding of fact that respondents failed to prove they sustained any damage as a result of appellants’ activities. (Mohawk Maintenance Co. v Kessler, 52 NY2d 276; Borne Chem. Co. v Dictrow, 85 AD2d 646; Ronson Art Metal Works v Gibson Lighter Mfg. Co., 3 AD2d 227; McRoberts Protective Agency v Lansdell Protective Agency, 61 AD2d 652; Michel Cosmetics v Tsirkas, 282 NY 195.) II. The preclusion of evidence by the referee denied appellants a fair trial and due process. III. The referee’s ruling which precluded appellant Lerner from testifying constitutes reversible error. IV. The sale by appellant Lerner of his 50% interest in respondent corporation constitutes, as a matter of law, an involuntary, forced judicial sale, as in invitum, and appellants are under no legal obligation restricting competition in the slightest degree with respondents. (Von Bremen v MacMonnies, 200 NY 41; Buffalo Oyster Co. v Nenno, 132 Misc 213; Matter of Brown, 242 NY 1; Van Dyk Co. v Reilly Co., 73 Misc 87; Mutual Life Ins. Co. v Menin, 115 F2d 975.) V. Respondents’ customer list does not qualify as a trade secret, barring solicitation and warranting injunctive relief and damages. (Columbia Ribbon & Carbon Mfg. Co. v A-1-A Corp., 42 NY2d 496; Reed, Roberts Assoc. v Strauman, 40 NY2d 303; Leo Silfen, Inc. v Cream, 29 NY2d 387; Mayer-Beaton Corp. v SCL Enters., 95 AD2d 684; Epic Chems. v Gordon, 95 AD2d 820.)

      Martin I. Kaminsky and Edward T. McDermott for respondents.
    I. The trial court properly directed Lerner to account. (Von Bremen v MacMonnies, 200 NY 41; Gast Furriers Supplies v Winter, 247 App Div 135; Thal v Polumbaum, 196 Mise 897, 277 App Div 1115, 303 NY 686; Mohawk Maintenance Co. v Kessler, 52 NY2d 276; Ingredient Technology Corp. v Nay, 532 F Supp 627; Hamilton Shoe Co. v Wolf Bros. & Co., 240 US 251; Blue Bell Co. v Frontier Refining Co., 213 F2d 354; Winifred Warren, Inc. v Turner’s Gowns, 285 NY 62; Marshak v Green, 505 F Supp 1054; Admiral Corp. v Price Vacuum Stores, 141 F Supp 796.) II. The evidentiary ruling by the damages referee did not deny Lerner due process. III. The referee did not make an erroneous evidentiary ruling regarding Lerner’s testimony. (Matter of Maxfield v Tofany, 60 Misc 2d 916, 34 AD2d 869; Oreck Corp. v Whirlpool Corp., 639 F2d 75.) IV. This transaction was not within the so-called “involuntary sale” exception. (Planet Mfg. Corp. v Goldstein, 54 AD2d 896; Von Bremen v MacMonnies, 200 NY 41; Buffalo Oyster Co. v Nenno, 132 Misc 213.) V. Hyde Park’s goodwill is entitled to protection. (Mohawk Maintenance Co. v Kessler, 52 NY2d 276.) VI. The decision denying plaintiffs’ motion for a preliminary injunction is of no effect here. (Walker Mem. Baptist Church v Saunders, 285 NY 462; Mohawk Maintenance Co. v Kessler, 74 AD2d 511, 52 NY2d 276; “Dominick” v “Dominick”, 26 NY2d 344.)
   OPINION OF THE COURT

Alexander, J.

Plaintiffs, Hyde Park Products Corp. and its president Edmund J. Lang, seek injunctive relief, an accounting and damages resulting from alleged “business torts” committed by defendants, Maximilian Lerner Corp. and its president Maximilian Lerner. They charge defendants with breach of fiduciary duty, unfair competition and breach of the implied covenant to refrain from impairing or recapturing the “good will” of Hyde Park that had been transferred to Lang upon the sale of Lerner’s interest in the business.

We are called upon on this appeal to determine the appropriateness of the relief granted by Supreme Court.

For approximately 20 years prior to 1970, plaintiff Lang developed and operated Hyde Park, a sole proprietorship engaged primarily in the purchase and resale of peat moss in the eastern United States. During this period, Lang employed Lerner as a salesman on a salary and commission basis. In June 1970, Lang restructured the business to make Lerner a 50% stockholder and an officer and director. Personal differences arose between them some years later and Lerner commenced a proceeding to dissolve Hyde Park. The dispute ultimately was submitted to an arbitrator and an award made under which Lang would make a cash offer to purchase Lerner’s 50% interest, and Lerner could elect either to accept Lang’s offer or to make a counteroffer to purchase Lang’s interest for the same price plus $75,000. Lerner chose to accept Lang’s offer of $525,000 and the sale was consummated in March 1978. The trial court found that this purchase price exceeded the value of the tangible assets of the business by more than $200,000, and that this excess was paid for Hyde Park’s goodwill.

Immediately upon the sale of his interest in Hyde Park to Lang, Lerner established Maximilian Lerner Corp., and proceeded to engage in the peat moss and gardening products business. Lerner affirmatively solicited Hyde Park customers in an effort to wean them away from Hyde Park, and in doing so, he systematically used Hyde Park’s customer lists and records that he had copied while he was Hyde Park’s sales manager. Hyde Park commenced this action in 1979 seeking injunctive relief, damages and an accounting.

Following a trial on liability, the court found that Lerner’s conduct was “in violation of the covenant which the law implies upon the sale of a business together with its good will — a covenant which enjoins the covert recapture by the seller of that which he has already sold (Mohawk Maintenance Co. v Kessler, 52 NY2d 276; Planet Mfg. Corp. v Goldstein, 54 AD2d 896)” and issued a permanent injunction barring defendants from soliciting and selling to “Hyde Park customers”, who were defined by the court as (1) any customer who bought from Hyde Park during any three of five enumerated periods, with certain exceptions, and (2) any customer who bought both in 1976 and 1977 and also in 1978 prior to August 1, 1978. A schedule listing these customers was annexed to the injunction.

The court also determined that damages should be awarded, but was of the view that the theories advanced by plaintiff upon which damages should be measured “may well have a speculative character”. These theories included the diminution of Hyde Park’s profit rates and loss of “growth opportunities” which the court thought may be attributable to general business conditions or other economic developments in the industry itself, unrelated to Lerner’s improper competition. Citing Ronson Art Metal Works v Gibson Lighter Mfg. Co. (205 Misc 155, 164, mod 283 App Div 937), the court nonetheless determined that defendants should not escape scot-free from their wrongdoing, and held that “the proper measure of damages would appear to be the profits that defendants made upon the sales they improperly made to Hyde Park customers from March 24, 1978 to the hearing date.” Defendants were directed to account for such profits and a reference was ordered to determine their amount and the entry of judgment therefor.

At the hearing before the referee only evidence as to defendants’ profits from sales to Hyde Park customers listed on the schedule attached to the injunction was received. The referee refused to allow evidence that some of the sales by defendants to the listed Hyde Park customers did not result from improper solicitation by Lemer or that the purchasers were no longer “customers” of Hyde Park at the time of any such sale or that some purchasers were “mega-purchasers”, whom the court had expressly excluded from the strictures of the injunction. The referee determined that defendants’ profits on sales to Hyde Park customers were $98,801.74, and judgment was entered in plaintiffs’ favor for that amount plus interest. The Appellate Division affirmed, without opinion, and this court granted defendants leave to appeal (62 NY2d 605).

On this appeal defendants argue, inter alia, that because the court found that plaintiffs had failed to prove any loss resulting from the solicitation of Hyde Park customers, only nominal damages were properly recoverable; that the injunction is overly broad in that it bars all future “sales” to Hyde Park “customers”, including “mega-purchasers”, instead of only enjoining improper solicitation; that in computing defendants’ profits as the measure of plaintiffs’ damages, the referee improperly excluded proffered evidence that some of defendants’ sales to Hyde Park customers were not the result of improper solicitation, that some of the listed businesses were no longer Hyde Park customers at the time of the sales and that some of the “customers” listed on the schedule attached to the injunction were “mega-purchasers”.

It is the settled law of this State that one who sells a business to another has a legal duty to refrain from acting to impair the “good will” transferred to the purchaser in exchange for part of the purchase price (Mohawk Maintenance Co. v Kessler, 52 NY2d 276; Von Bremen v MacMonnies, 200 NY 41; Planet Mfg. Corp. v Goldstein, 54 AD2d 896). Defendant Lerner contends, however, that because the sale to Lang resulted from an arbitration award it was “involuntary”, and that he was thus “under no legal obligation restricting competition on his part in the slightest degree” (Von Bremen v MacMonnies, 200 NY, at p 51, supra). As expressly found by the Trial Judge and affirmed by the Appellate Division, however, Lerner was free under the terms of the arbitration award to become either the buyer or the seller. This was not a situation in which “the owner [of goodwill] parts [with it] in invitum, as in bankruptcy proceedings or by operation of law, as in the liquidation of a partnership by lapse of time or its termination pursuant to the articles of copartnership” (Von Bremen v MacMonnies, supra, at p 51). Moreover, Lerner received considerable benefit ($525,000) in exchange for his interest. The transfer was not involuntary; “one made under restraint and without benefit to the original owner” (25 NY Jur, Good Will, § 19, at 231), and thus is subject to the “implied covenant” rule of Von Bremen and Mohawk.

Through his deliberate solicitation of Hyde Park customers following the sale of his interest in Hyde Park, Lerner breached the duty against impairment of the goodwill transferred as part of the sale of the business (Mohawk Maintenance, 52 NY2d, at pp 283, 285, supra; see, Von Bremen, 200 NY, at pp 47-49, supra; Planet Mfg. Corp. v Goldstein, 54 AD2d 896, 897, supra). Thus, plaintiffs were entitled to injunctive relief. The award of damages, however, measured solely by the profits derived by defendants from sales to Hyde Park customers was, in this case, improper.

A cause of action for wrongful diversion of goodwill previously sold to a plaintiff by a defendant is sometimes characterized as one to recover for a breach of an implied covenant of the contract of sale that the seller will permanently refrain from soliciting his prior customers (Borne Chem. Co. v Dictrow, 85 AD2d 646, 650). We have observed, however, that “it may be somewhat misleading to describe the duty of the seller to refrain from soliciting his former customers as one emanating from an ‘implied covenant’, since the duty is, in reality, one imposed by law in order to prevent the seller from taking back that which he has purported to sell” (Mohawk Maintenance, supra, at p 285).

Indeed, the law imposes upon the seller “a specific duty to refrain from soliciting his former customers after he has sold his business and the accompanying ‘good will’ to another” {id.., at pp 285-286).

The trial court found that those customers listed in the schedule annexed to the injunction were “Hyde Park customers” to whom sales had been made by defendants after March 24, 1978. Where the loss of such a customer resulted from defendants’ solicitation, plaintiffs were “entitled to recover as damages the amount of loss sustained by [them], including opportunities for profit on the accounts diverted * * * through defendants’ conduct” (Duane Jones Co. v Burke, 306 NY 172, 192; Fox & Sons v King Poultry Co., 23 NY2d 914, modfg on dissenting opn 30 AD2d 789, 790-791, rearg denied 24 NY2d 896). Such “loss” would include both plaintiffs’ own lost profits resulting from a reduction in sales to the listed Hyde Park customers during the years in which defendants improperly solicited such customers and any lost opportunities for profits during this period. Plaintiffs may show either reduced sales to a solicited customer to whom defendant sold peat moss or that the opportunity for profit on additional sales to such customer was lost by consequence of defendants’ solicitation.

The burden of establishing their ability to service the needs of such customers would rest upon plaintiffs and only those damages resulting from Lerner’s willful solicitation of Hyde Park’s customers may be recovered (Gast Furriers Supplies v Winter, 247 App Div 135; Planet Mfg. Corp. v Goldstein, 54 AD2d 896, 897, supra; Gramercy Brokerage Corp. v Cohen, 43 AD2d 968). Defendants may rebut plaintiffs’ evidence by showing that specific sales made to Hyde Park customers did not result from solicitation or that the purchasers were no longer Hyde Park customers at the time of the sale. Defendants likewise may demonstrate, should that be the fact, that plaintiffs could not have fulfilled the orders diverted by them because of the unavailability of peat moss and thus that the “lost opportunity for profit” was not caused by their solicitation.

Should defendants establish that any past sales did not come about through improper solicitation, those sales should not be considered in ascertaining plaintiffs’ damages. There was no express restrictive covenant against competition involved in the sale by Lerner to Lang. Where such a covenant is not included, a seller is free to pursue his own economic interest and may accept his former customers’ trade. Likewise, the injunction should not prohibit “sales” to Hyde Park customers; defendants should only be barred from improperly soliciting Hyde Park customers in the future.

In ordering the reference for an assessment of damages, the trial court specifically directed that “[defendants’ sales to mega-purchasers of peat moss such as chain stores (e.g., J.C. Penny et al.) should be excluded if defendants can show that in any particular period used in defining a Hyde Park customer the mega-purchaser bought from five or more sources other than these parties.” Lerner’s proffered testimony before the referee that he knew some of the customers listed in the schedule annexed to the order of reference to be “mega-purchasers” was properly excluded as hearsay. However, testimony as to his personal observations of various brand names on peat moss being handled by Hyde Park customers was relevant and thus should have been admitted, to be given such probative value as deemed appropriate.

The order of the Appellate Division should be reversed, with costs, and the matter remitted to Supreme Court for a new trial on the issue of damages only, and for modification of the injunction as indicated herein.

Chief Judge Wachtler and Judges Jasen, Meyer, Simons and Kaye concur; Judge Titone taking no part.

Order reversed, etc.


author: Chief Judge Wachtler. Jasen, J.

text:
    The People of the State of New York ex rel. Richard J. Arcara, as District Attorney of Erie County, Respondent, v Cloud Books, Inc., Doing Business as Village Book and News Store, Appellant, et al., Defendants.
    Argued May 2, 1985;
    decided June 13, 1985

      POINTS OF COUNSEL

      Paul J. Cambria, Jr., and Mary Good for appellant.
    I. Public Health Law, article 23, title II is not applicable to enjoin a nuisance occurring on premises other than a house of prostitution. (Commissioner of Dept. of Bldgs. v Sidne Enters., 90 Misc 2d 386; People ex rel. Lemon v Elmore, 256 NY 489; People ex rel. Rudd v Rizzo, 146 Misc 675; People v Macbeth Realty Co., 63 AD2d 908; California v LaRue, 409 US 109.) II. The mandatory closure provisions of article 23, title II constitute an impermissible prior restraint. (Roth v United States, 354 US 476; Vance v Universal Amusement Co., 445 US 308, 446 US 947; Cosgrove v Cloud Books, 83 AD2d 789; Near v Minnesota, 283 US 697; Southeastern Promotions v Conrad, 420 US 546; Bantam Books v Sullivan, 372 US 58; People v Taub, 37 NY2d 530; Natco Theatres v Ratner, 463 F Supp 1124; Healy v James, 408 US 169; United States v O'Brien, 391 US 367.)

      Richard J. Arcara, District Attorney (John J. DeFranks, Louis A. Haremski and Jo W. Faber of counsel), respondent pro se.

    I. Public Health Law, article 23, title II is applicable to enjoin a nuisance occurring on premises other than a house of prostitution. (Effective Communications West v Board of Coop. Educational Servs., 57 AD2d 485; Squadrito v Griebsch, 1 NY2d 471; People v O'Brien, 111 NY 1; People v Macbeth Realty Co., 63 AD2d 908; People ex rel. Rudd v Rizzo, 146 Misc 675; Commissioner of Dept. of Bldgs. v Sidne Enters., 90 Misc 2d 386; Singer Co. v Stott & Davis Motor Express, 79 AD2d 227; Weiss v Garfield, 21 AD2d 156; People ex rel. Lemon v Elmore, 256 NY 489.) II. The statutory provisions of Public Health Law, article 23, title II do not constitute an impermissible prior restraint. (Paris Adult Theatre I v Slaton, 413 US 49; Police Dept. of Chicago v Mosley, 408 US 92; Schneider v State, 308 US 147; People v Stover, 12 NY2d 462; Metromedia, Inc. v San Diego, 453 US 490; Young v American Mini Theatres, 427 US 50; Stromberg v California, 283 US 359; Lovell v Griffin, 303 US 444; United States v O'Brien, 391 US 367; United States v Carolene Prods. Co., 304 US 144.)
   OPINION OF THE COURT

Chief Judge Wachtler.

Plaintiff, the District Attorney of Erie County, has brought this action under Public Health Law, article 23, title II to permanently enjoin any conduct constituting lewdness, assignation or prostitution at a bookstore operated by defendant, Cloud Books, Inc., and to obtain an order of abatement which would close the premises for one year. The issues on this appeal are whether the statute under which the District Attorney proceeds applies to the type of business run by Cloud Books, and if so, whether the mandatory closure provision of the statute, on these facts, would be an impermissible prior restraint.

I.

Defendant, Cloud Books, Inc., operates a bookstore, The Village Books and News, on premises which it leases in the Village of Kenmore. The store sells books and magazines of a sexually frank nature and contains several coin-operated movie machines showing sexually explicit material. There are no specific allegations in this action that any of these items are obscene.

In September 1982, as part of an investigation initiated by the Erie County District Attorney, a deputy sheriff, working undercover, made several visits to the bookstore. In an affidavit recounting his visits, the officer specified various lewd and illegal acts he had witnessed. Based on this information, the District Attorney commenced the present action on behalf of the People seeking to enjoin the illicit conduct and to close the premises. The verified complaint alleges that the deputy sheriff observed sexual activity by patrons of the store, including four acts of masturbation and one act of fellatio, and was himself solicited for sexual conduct for a fee by persons on the premises on several occasions. The District Attorney also alleges that defendant was aware of these activities and permitted them to occur as long as the persons involved also spent some money on the books, magazines or movie machines in the store.

The complaint sets forth two causes of action. The first cause of action, sounding in common-law nuisance, was dismissed by Special Term and is not at issue on this appeal. The second cause of action is based on Public Health Law, article 23, title II, entitled “Houses of Prostitution: Injunction and Abatement”. Title II allows a District Attorney to bring an action to permanently enjoin conduct constituting a nuisance, as defined in Public Health Law § 2320, which provides:

“1. Whoever shall erect, establish, continue, maintain, use, own, or lease any building, erection, or place used for the purpose of lewdness, assignation, or prostitution is guilty of maintaining a nuisance.

“2. The building, erection, or place, or the ground itself, in or upon which any lewdness, assignation, or prostitution is conducted, permitted, or carried on, continued, or exists, and the furniture, fixtures, musical instruments, and movable property used in conducting or maintaining such nuisance, are hereby declared to be a nuisance and shall be enjoined and abated as hereafter provided.”

Sections 2321-2328 set forth the procedure to be followed for the trial of an action for a permanent injunction, the scope of such an injunction, and the penalties for violating it. Section 2329 provides that where a nuisance, as defined in section 2320, is established, the final judgment must include an order of abatement, which “shall direct” the removal and sale of all fixtures or movable property used in conducting the nuisance and “shall direct the effectual closing of the [premises] against its use for any purpose, and so keeping it closed for a period of one year, unless sooner released as hereinafter provided.” Section 2332 provides that a court may cancel an order of abatement if the owner of the premises pays all the costs of the proceeding and files a bond for the full value of the property.

The complaint alleges that defendant has been “maintaining, using and occupying” the premises in question as well as the “furniture, fixtures and personal property contained therein” “for the purpose of lewdness, assignation and prostitution”. The relief sought includes the permanent injunction and order of abatement provided for by statute.

Defendant moved for partial summary judgment on the statutory cause of action, arguing that title II was intended to cover only houses of prostitution, and thus was inapplicable to a store selling books and magazines, and that the relief requested, in particular the order of abatement, would in any event constitute a prior restraint prohibited by the First Amendment to the United States Constitution and NY Constitution, article I, § 8. Though defendant’s verified answer denies the allegations of sexual activity in the bookstore and states that even if any such activity did occur, it was not authorized or condoned by its employees, for purposes of this motion it admits the truth of these allegations.

Special Term denied the defendant’s motion for summary judgment, holding that title II could apply to a bookstore if there was a factual finding that the premises were “used for the purpose of lewdness, assignation, or prostitution”, and that none of the relief requested would work an impermissible prior restraint. The Appellate Division affirmed, holding that the statute could be applied whenever the plaintiff established “a consistent pattern of conduct sufficient to prove that the premises are being employed for a proscribed use” (101 AD2d 163, 168), and rejecting defendant’s constitutional argument. That court then granted defendant’s motion for leave to appeal to us, and, pursuant to CPLR 5713, certified the following questions:

“(1) Whether Title II, Article 23 of Public Health Law is applicable to enjoin nuisance occurring on premises other than a house of prostitution?

“(2) Do statute’s mandatory closure provisions constitute an impermissible prior restraint?”

II.

The first version of what is now title II was enacted in 1914 as Public Health Law article 17-a, and was entitled “Suppression of Certain Nuisances” (L 1914, ch 365, § 1). The 1914 statute provided for only injunctive relief, and was aimed at any building in which “assignation or prostitution” was conducted. In 1927, the Legislature, apparently not content with the effectiveness of the 1914 statute, repealed that version and enacted a statute (tit 17-a) which covered any building used for “lewdness, assignation or prostitution” and provided for an order of abatement (see, L 1927, ch 670). The present version of title II is essentially a reenactment of the 1927 statute, and there has been no change with respect to its applicability (see, L 1953, ch 879). New York was not alone in passing a “nuisance abatement” statute in the early 20th century, as statutes virtually identical to the 1927 act were enacted in numerous States, all modeled after a 1909 Iowa law (see generally, State ex rel. Wayne County Prosecutor v Diversified Theatrical Corp., 396 Mich 244, 246-250, 240 NW2d 460, 461-462).

Defendant’s first argument with respect to the scope of title II is that it applies only to places which are houses of prostitution, as that term is commonly known. Defendant bases this argument on the title of title II (“Houses of Prostitution: Injunction and Abatement”) and the titles of the individual sections (“Houses of Prostitution * * *”), on parts of the legislative history of the 1927 act which reveal a concern for such places, and on language in several decisions from other States suggesting this limited scope. None of these contentions is persuasive. While the title of a statute might in some cases aid in its interpretation, it is the language of the actual statutory provisions which determines the meaning of the act. (See, e.g., Squadrito v Griebsch, 1 NY2d 471, 475.) Here, section 2320, by its terms, covers any building used for the purpose of lewdness, assignation or prostitution as well as a building in which any such conduct occurs, and is thus unambiguously broader in reach than its title would suggest.

Defendant’s reliance on the legislative history of the 1927 act is unavailing. While it is clear that the Legislature intended that the statute could be utilized to shut down houses of prostitution, there is no indication that it intended that its application be restricted to that function. Rather, at the time of concern about the spread of “red light districts” and “commercialized vice,” the Legislature in 1927, as noted above, actually broadened the reach of the statute. Thus, there is no legislative intent which would override the plain meaning of section 2320. While decisions from other States interpreting virtually identical statutory provisions are instructive, the weight of such authority does not support defendant’s argument. In most of the cases on which defendant relies (see, State ex rel. Clemens v Toneca, Inc., 265 NW2d 909 [Iowa]; State ex rel. Wayne County Prosecutor v Diversified Theatrical Corp., 396 Mich 244, 240 NW2d 460, supra; State ex rel. English v Fanning, 97 Neb 224,149 NW 413; State ex rel. Carroll v Gatter, 43 Wn 2d 153, 260 P2d 360), the courts held only that the nuisance abatement statute did not apply either because none of the acts cited by the plaintiffs was within the conduct proscribed by the statute or because there had been no evidence to show that the premises were used “for the purpose of” lewdness, assignation or prostitution. In numerous other cases, courts in other States have applied their statute to places which were not houses of prostitution, as the term is commonly known (see, e.g., State v B. Bar Enters., 133 Ariz 99, 649 P2d 978; People ex rel. Van De Kamp v American Art Enters., 75 Cal App 3d 523, 142 Cal Rptr 338; People v Adult World Bookstore, 108 Cal App 3d 404,166 Cal Rptr 519; State ex rel. Wayne County Prosecuting Attorney v Levenburg, 406 Mich 455, 280 NW2d 810; Commonwealth ex rel. Lewis v Allouwill Realty Corp., 330 Pa Super Ct 32, 478 A2d 1334). While there are few cases from this State on point, in at least two instances other than the present action, the lower courts have applied title II to a location despite the presence of some other legitimate activity on the premises (see, People v Macbeth Realty Co., 63 AD2d 908; People v Morbel Realty Corp., 87 Misc 2d 989).

Defendant’s second argument concerning the scope of title II is that the People must show that the “primary purpose” for which the building in question is being used is lewdness, assignation or prostitution, an allegation not made by the plaintiff. Again, however, defendant’s contention is refuted by the language of section 2320. The language “for the purpose of” in section 2320 (1) does not support defendant’s position, as a building clearly can be used for more than one purpose, and the language “in or upon which any lewdness [is present]” flatly contradicts it. To the extent that the Supreme Court of Washington established a “primary purpose” test in State ex rel. Carroll v Gatter (supra), we decline to follow that decision. We note instead the application of other States’ statutes under circumstances similar to those alleged here in People v Adult World Bookstore (supra), People ex rel. Van De Kamp v American Art Enters. (supra), Commonwealth v Croatan Books (228 Va 383, 323 SE2d 86), and Commonwealth ex rel. Lewis v Allouwill Realty Corp. (supra).

Thus, we reject defendant’s contentions as to the scope of title II and agree with the lower courts that plaintiff’s allegations raise a question of fact as to its applicability here. That is not to say, and we do not hold, that any premises on which an isolated act of lewdness, assignation or prostitution occurs is subject to the remedies of title II. Rather, we agree with the Appellate Division that “the People will have to show a consistent pattern of conduct sufficient to prove that the premises are being employed for a proscribed use.” (101 AD2d, at p 168.) The most significant factors in making this factual determination will be the frequency of the conduct, the knowledge or even encouragement by the defendant of its existence, and the extent of the benefit, direct or indirect, derived by defendant from such activity. Finally, the fact that defendant’s bookstore is an “adult” bookstore featuring sexually explicit material is by itself of no relevance, as nothing in section 2320 supports the application of title II to a premise based on the content of material sold or displayed there (see, People ex rel. Busch v Projection Room Theater, 17 Cal 3d 42, 60-61, 550 P2d 600, 611, cert denied sub nom. Van de Kamp v Projection Room Theater, 429 US 922; People v Goldman, 7 Ill App 3d 253, 287 NE2d 177; State ex rel. Wayne County Prosecutor v Diversified Theatrical Corp., supra; State v Morley, 63 NM 267, 317 P2d 317).

III.

The additional relief requested by the District Attorney pursuant to title II is an order of abatement under section 2329 which would close for all purposes, for a period of one year, the premises where defendant operates its bookstore. Defendant’s constitutional argument is that closure of the premises will prevent the sale of materials protected by the First Amendment, and thus constitutes an impermissible prior restraint.

It is beyond dispute that the activity of selling books is entitled to the protections of the First Amendment (see, e.g., Smith v California, 361 US 147), and any limitation by a State of First Amendment freedoms must be premised upon “a compelling state interest in the regulation of a subject within the State’s constitutional power to regulate” (N. A. A. C. P. v Button, 371 US 415, 438). A regulation which suppresses speech in advance of its publication or distribution may be subject to particularly close scrutiny as a prior restraint (see, e.g., Southeastern Promotions v Conrad, 420 US 546, 558-559; Near v Minnesota, 283 US 697). The Supreme Court has stated that “[a]ny system of prior restraints of expression comes to this Court bearing a heavy presumption against its constitutional validity” (Bantam Books v Sullivan, 372 US 58, 70), and has justified this treatment of prior restraints on “a theory deeply etched in our law: a free society prefers to punish the few who abuse rights of speech after they break the law than to throttle them and all others beforehand” (Southeastern Promotions v Conrad, 420 US, at p 559, supra [emphasis in original]). A statutory scheme subject to this scrutiny will be upheld only if it falls within certain narrow categories established by the Supreme Court and contains procedural safeguards designed to prevent the establishment of a censorship system (id.; see, Note, Padlocks and Prior Restraints, supra, n 6, at 1495).

The lower courts rejected defendant’s argument that the principles set forth in Near and Southeastern Promotions applied to the closure of its bookstore. Special Term stated that closure would involve only the abatement of a nuisance, and would not be a prior restraint of presumptively protected materials, and the Appellate Division similarly noted that, by requesting closure of the bookstore, “the People seek only to employ the statute to enjoin illegal conduct occurring on the premises, not to regulate the content of materials disseminated by the store” (101 AD2d, at p 172). The District Attorney urges affirmance on this ground, arguing that closure of the bookstore would have no First Amendment implications.

Courts have broadly recognized that curtailment of a person’s ability to exercise freedom of expression based on prior actions can raise First Amendment concerns. In People v Taub (37 NY2d 530, 534), we held that a municipality’s denial of a permit for the use of sound amplification equipment based on the applicant’s prior conviction of a crime was an impermissible prior restraint. Many courts have held that denial or revocation of a license to operate a movie theater on the ground of a conviction for showing or distributing obscenity violates the First Amendment rights of the applicant or licensee (see, e.g., Gayety Theatres v City of Miami, 719 F2d 1550; Cornflower Entertainment v Salt Lake City Corp., 485 F Supp 777; Natco Theatres v Ratner, 463 F Supp 1124; Perrine v Municipal Ct., 5 Cal 3d 656, 488 P2d 648, cert denied 404 US 1038; Alexander v City of St. Paul, 303 Minn 201, 227 NW2d 370; Hamar Theatres v City of Newark, 150 NJ Super 14, 374 A2d 502). These courts based their decisions on the prior restraint doctrine, stressing the effect that the action would have on presumptively protected films. As stated by the Supreme Court of California, “to permit denial of a license because of a past conviction [for selling obscene material] would do more than create a hazard to protected freedoms; it would suppress them altogether. The penalty for [the criminal violation] does not include a forfeiture of First Amendment rights” (Perrine v Municipal Ct., 5 Cal 3d, at p 665, 488 P2d, at p 653, supra).

In numerous other cases, courts have considered the constitutionality of provisions of statutes which provide for an order of abatement closing a bookstore or movie theater for one year based on a showing that some obscene material was sold or exhibited on the premises (see generally, Note, Padlocks and Prior Restraints, supra, n 6). Virtually every court which has addressed this question has held that such a provision violates the First Amendment (see, e.g., General Corp. v State ex rel. Sweeton, 294 Ala 657, 320 So 2d 668, cert denied 425 US 904; People ex rel. Busch v Projection Room Theater, 17 Cal 3d 42, 550 P2d 600, cert denied sub nom. Van de Kamp v Projection Room Theater, 429 US 922, supra; Sanders v State, 231 Ga 608, 203 SE2d 153; State v A Motion Picture Entitled “The Bet’, 219 Kan 64, 547 P2d 760; Gulf States Theatres v Richardson, 287 So 2d 480 [La]; State ex rel. Andrews v Chateaux, 296 NC 251, 250 SE2d 603, vacated on other grounds 445 US 947; City of Minot v Central Ave. News, 308 NW2d 851 [ND], appeal dismissed 454 US 1117; State ex rel. Field v Hess, 540 P2d 1165 [Okla]). Again, the rationale underlying these decisions is the prior restraint doctrine set forth in Near and subsequent Supreme Court cases. Essentially, the courts have recognized that the mere fact that some of the material sold in a store can be suppressed as obscene does not provide a constitutional basis for labeling the store itself a “nuisance” and thus subject to closure.

The District Attorney cites two cases which have upheld closure provisions pertaining to obscenity, relying particularly on State ex rel. Ewing v A Motion Picture Film Entitled “Without a Stitch” (37 Ohio St 2d 95, 307 NE2d 911, appeal dismissed sub nom. Art Theater Guild v Ewing 421 US 923). The court in Ewing, however, in upholding the closure of a movie theater for one year based on the showing of one obscene film, stated that the “nuisance” was the exhibition of the particular film declared obscene, and thus the owner could obtain release from the closure order by demonstrating that this one film would no longer be shown (37 Ohio St 2d, at p 105, 307 NE2d, at pp 917-918, supra; see, State ex rel. Leis v Barton Co., 45 Ohio App 2d 249, 253, 344 NE2d 342).

The District Attorney also argues that the obscenity closure cases are not dispositive as they concern a restraint based on the content of material whereas in the present case, closure would be based on conduct and would be aimed at preventing recurrence of that conduct. We agree that the highest degree of protection is most appropriate where the government attempts to restrain future expression because of its content or the content of past expression (see, e.g., New York Times Co. v United States, 403 US 713; Organization for a Better Austin v Keefe, 402 US 415). We do not agree, however, that the mere fact that closure of defendant’s bookstore would not be based on the content of any materials sold there means that defendant’s First Amendment rights would not be implicated. An ordinance which prohibited all exercise of First Amendment rights in all public areas would be just as unconstitutional as one barring only expression with some particular content.

Although the fact that a premises houses a bookstore rather than some other commercial enterprise does not provide it with immunity from all regulation, bookstores operating as such may not simply be equated with ordinary nuisances or with personal property subject to forfeiture (see, e.g., Vance v Universal Amusement Co., 445 US 308, 315; Natco Theatres v Ratner, 463 F Supp 1124,1130, supra; Commonwealth v Croatan Books, 228 Va 383, 323 SE2d 86, 88, supra). What the District Attorney’s argument fails to address is the effect which closure of the bookstore would have on protected expression. Prior restraints or other restrictions on First Amendment rights may be present not only where a statute directly prohibits expression but also where the impact of the statute curtails the exercise of these rights (see, e.g., Secretary of State of Md. v Munson Co., 467 US _, 104 S Ct 2839, 2851, n 12; Southeastern Promotions v Conrad, 420 US, at pp 552, 556, n 8, supra; Healy v James, 408 US 169, 183).

Thus, while the reasons underlying the closure of a bookstore under title II are relevant in determining the constitutionality of the closure, good motivations alone are not dispositive. In Matter of Nicholson v State Commn. on Judicial Conduct (50 NY2d 597, 607), we stated that “[a] proper analysis calls for examination of the degree of interference with the First Amendment interests, the strength of the governmental interest justifying the restriction and the means chosen to prevent the asserted evil”. The Supreme Court has similarly held that where a law designed to serve a legitimate interest effectively limits the exercise of First Amendment rights, it will be invalidated if the interest could be served by means not affecting those rights (see, e.g., Village of Schaumberg v Citizens For a Better Environment, 444 US 620, 637; Shelton v Tucker, 364 US 479, 488).

Our test set forth in Nicholson most closely resembles the Supreme Court’s decision in United States v O’Brien (391 US 367). In O’Brien, the Court held that where “speech” and “non-speech” elements are combined in the same course of conduct, a law aimed at the “nonspeech” elements, but having an “incidental” effect on the protected expression, is justified “if it is within the constitutional power of the Government; if it furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest”. (391 US, at p 377.)

The Supreme Court has applied the O’Brien test, or a substantially similar analysis, in reviewing zoning ordinances which have a purpose other than suppressing protected speech, but which have incidental effects on the speech (see, Schad v Borough of Mount Ephraim, 452 US 61; Young v American Mini Theatres, 427 US 50 [plurality opn]; id., at p 79 [Powell, J., concurring on basis of O’Brien]), and, most recently, in examining a city ordinance, enacted for aesthetic purposes, which prohibited the posting of signs on public property (Members of City Council v Taxpayers of Vincent, 466 US 789).

Courts in three other States have addressed the constitutionality of closure orders provided for in their statutory equivalents of title II, as applied to a premise used for protected expression. In two of these cases, the court determined that the appropriate test was that set forth in O’Brien (see, People ex rel. Van De Kamp v American Art Enters., 75 Cal App 3d, at p 531,142 Cal Rptr, at p 342, supra; Commonwealth v Croatan Books, 228 Va, at p_, 323 SE2d, at p 88, supra). We agree with these decisions, and thus turn to an application of the four-part O’Brien test.

A statute aimed at the abatement of a public nuisance is certainly within the police power of the State (see, Lane v City of Mount Vernon, 38 NY2d 344; Lawton v Steele, 119 NY 226, affd 152 US 133). We also have no difficulty concluding that restriction of the conduct alleged in the complaint furthers an important governmental interest. Prostitution is criminal activity no matter where it occurs (Penal Law § 230.00), and the other sexual activity alleged is prohibited in public places (see, Penal Law § 245.00; cf. People v Adult World Bookstore, 108 Cal App 3d, at p 410, 166 Cal Rptr, at p 523, supra [“Not everyone who enters a dirty bookstore * * * expects to be molested, propositioned, or subjected to an open view of live homosexual acts of others.”]). Additionally, the interest in restricting this conduct is clearly unrelated to the suppression of free expression. Thus we find, as did the courts in Van De Kamp and Croatan Books, that the first three elements of the O’Brien test are satisfied.

In Croatan Books, the court concluded that closure of the premises involved was necessary to abate the sexual conduct proscribed by its statutory provisions, and thus found that the fourth element of the O’Brien test was satisfied as well. The court in Van De Kamp, to the contrary, found closure to be overbroad and thus unconstitutional. In Croatan Books, the court specifically noted that, following an initial hearing, the trial court had ordered temporary injunctive relief designed to eliminate the nuisance without closing the premises, and that the evidence at a second hearing showed that this relief had been ineffective. The court was thus able to conclude that “less restrictive remedial measures failed to abate what the trial court had unequivocally found * * * to be a nuisance” (228 Va, at p_, 323 SE2d, at p 90). In the present case, there has been no “less restrictive” relief imposed, nor has the District Attorney demonstrated that the injunctive relief provided for in title II would be insufficient to abate the nuisance. If the District Attorney succeeds at trial, he will be entitled to a permanent injunction against the existence or maintenance of a nuisance in violation of section 2320 and the injunction will be binding upon defendant. A violation of any of the provisions of the injunction would be a contempt, punishment for which could include imprisonment (see, §§ 2327, 2328).

Under these circumstances, we conclude that closure of defendant’s bookstore is not essential to the furtherance of the purposes underlying title II, and is thus an unconstitutional restraint on defendant’s First Amendment rights. While closure might be the most efficient remedy, “considerations of this sort do not empower a [State] to abridge freedom of speech” (Schneider v State, 308 US 147, 164).

Both certified questions are answered in the affirmative. The order of the Appellate Division is modified to grant defendant partial summary judgment dismissing those portions of the second cause of action seeking an order directing the closing of the premises in question.

Jasen, J.

(dissenting in part). While I join the majority insofar as it holds that the intended application of Public Health Law, article 23, title II is broad enough to encompass a bookstore or any other establishment employed for the conduct proscribed in section 2320 (1), nevertheless I do not believe that the constitutional issue is ripe for resolution at this time. Inasmuch as there has been neither a trial nor a final judgment imposing any sanction upon defendant, I agree with Justice Green’s concurring opinion below, that the constitutional question ought not to be anticipated and decided until or unless it need be.

At this point in the litigation, only defendant’s motion for summary judgment has been denied. If defendant should obtain a judgment after a full trial, the constitutionality of closing defendant’s bookstore for a period of one year pursuant to section 2329 would never be placed in issue. If, on the other hand, judgment should be awarded to plaintiff, there is still no certainty that the constitutionality of the closure would have to be decided. The one year closure might be avoided altogether by application of the alternative provided in section 2332. Pursuant thereto, the court may order the premises released to the owner if the latter pays the costs of the proceedings and files a bond for the full value of the property.

Accordingly, the closure challenged by defendant is presently speculative and resolution of its constitutionality seems unnecessary at this point. Imposition of the closure may never occur, for it is contingent upon future events which may never come to pass. Thus, it is my view that a declaration regarding the validity of the closure provision of section 2329 is premature, that it may never resolve anything between the parties, and that it, thereby, constitutes an advisory opinion upon a still uncertain state of facts. (See, Matter of New York State Inspection, Security & Law Enforcement Employees v Cuomo, 64 NY2d 233, 240; New York Public Interest Research Group v Carey, 42 NY2d 527, 530-531; cf. Ashwander v Valley Auth., 297 US 288, 325; Electric Bond Co. v Securities & Exch. Commn., 303 US 419, 443.)

Judges Meyer, Simons, Kaye and Alexander concur with Chief Judge Wachtler; Judge Jasen dissents in part and votes to affirm in a separate opinion; Judge Titone taking no part.

Order modified, without costs, in accordance with the opinion herein and, as so modified, affirmed. Questions certified answered in the affirmative.

      . While the owner of the premises, Charles Ottaviano, is also a named defendant in this action, this appeal concerns only the activities of Cloud Books, and any use of “defendant” refers to it.

      . The complaint also sought a preliminary injunction, but this relief was denied by the trial court and that order was affirmed by the Appellate Division.

      . In a concurring opinion, Justice Green expressed the view, urged by the partial dissent here, that the constitutional issue was premature, as defendant might prevail at trial and thus never be subjected to an order of abatement. Plaintiff, however, is not merely seeking to obtain a ruling on the constitutionality of an event which “is beyond the control of the parties and may never occur” (New York Public Interest Research Group v Carey, 42 NY2d 527, 531), as the District Attorney is actually seeking to obtain the very result which defendant asserts would be unconstitutional. Furthermore, where a challenged action would restrict a party’s First Amendment freedoms or might deter the exercise of such rights by others, an actual controversy may exist even though the party has yet to be subjected to any restriction of First Amendment freedoms (see, e.g., Secretary of State of Md. v Munson Co., 467 US _, 104 S Ct 2839; Younger v Harris, 401 US 37, 41; Thompson v Wallin, 301 NY 476, affd sub nom. Adler v Board of Educ., 342 US 485). Thus, we agree with the majority at the Appellate Division that a defendant in a civil action may move for summary judgment on a cause of action on the ground that the relief sought would be unconstitutional, at least where, as here, there are First Amendment interests asserted. Our adjudication of the First Amendment issue seems particularly appropriate under the circumstances of this case, as the unconstitutional restraint would have already occurred and the issue would likely be moot by the time of any posttrial review by us.

      . We will interpret the first question as asking more specifically whether title II may be applicable based on the allegations in this complaint, and thus the question raises an issue of law decisive of the appeal. (See, Cohen and Karger, Powers of the New York Court of Appeals § 87 [rev ed].) Furthermore, even though questions of fact remain to be determined at trial, the second question is properly before us because it is undisputed that defendant’s store is, in fact, a “bookstore” selling materials protected by the First Amendment. The District Attorney’s complaint refers to defendant’s business as including the sale of books, magazines and periodicals, alleges that literature of “an explicitly sexual nature” is sold at the store, and stresses in its brief to this court, as well as in an affidavit submitted to Special Term in opposition to defendant’s motion for partial summary judgment, that this action has been brought “not because the premises is a bookstore, but in spite of that fact.” Additionally, the lower courts have characterized the store as a “bookstore”. Thus, an affirmative answer to this question would mandate a modification of the Appellate Division order regardless of what conduct taking place within the bookstore is later proved at trial (cf. Patrician Plastic Corp. v Bernadel Realty Corp., 25 NY2d 599).

      . We further note that the titles for the statutes as a whole and the individual sections were not enacted in 1927 but were instead added in 1939 when article 17-a was changed to article 17 (see, L1939, ch 210), which adds to our reluctance to place any emphasis on them.

      . The provisions of section 2332 concerning relief from a closure order do not negate defendant’s argument, as that section provides only that the court may cancel the order upon certain conditions being met. Additionally, these conditions require that the owner of the premises take certain steps, including the posting of a bond, thus making relief for a lessee, such as defendant, dependent upon the discretion and financial status of the owner (see, Note, Pornography, Padlocks and Prior Restraints: The Constitutional Limits of the Nuisance Power, 58 NYU L Rev 1478,1507 [hereafter cited as “Padlocks and Prior Restraints”]).

      . The other case cited by the District Attorney is State ex rel. Kidwell v U.S. Mktg. (102 Idaho 451, 631 P2d 622, probable jurisdiction noted 454 US 1140, appeal dis. ússed on motion of appellant 455 US 1009), in which the Idaho Supreme Court upheld the closure, stating that it was not a prior restraint, but was instead merely an in rem punishment imposed on the property, analogous to a civil forfeiture of property used in a crime.

      . That defendant would still be free to use any other premises to sell books is of little relevance, in part because the availability and practicality of an alternate site will always be speculative (see, Note, Padlocks and Prior Restraints, supra, n 6, at 1506), but more fundamentally because “ ‘[o]ne is not to have the exercise of his liberty of expression in appropriate places abridged on the plea that it may be exercised in some other place’ ” (Southeastern Promotions v Conrad, supra, 420 US, at p 556; Schneider v State, 308 US 147, 163).

      . In the third case, Commonwealth ex rel. Lewis v Allouwill Realty Corp. (330 Pa Super Ct 32, 478 A2d 1334), the court recognized that closure might have an incidental effect on the dissemination of protected materials, but summarily rejected a First Amendment argument, noting only that it was “conceivable” that the bookstore operator could continue to sell his books elsewhere (330 Pa Super Ct, at p_, 478 A2d, at pp 1338-1339).


author: Per Curiam.

text:
    In the Matter of Great Lakes-Dunbar-Rochester, a Joint Venture, Respondent, v State Tax Commission, Appellant.
    Argued April 25, 1985;
    decided June 4, 1985
    POINTS OF COUNSEL

      Robert Abrams, Attorney-General (Julie Mereson, Robert Hermann, Peter H. Schiff and Maurice K. Peaslee of counsel), for appellant.
    There is substantial evidence in the record to support the determination of the Tax Commission that specific “rental” and “lease” payments made by petitioner to the corporate joint ventures were for rentals of equipment and vessels and were thus subject to the State’s use tax pursuant to Tax Law § 1110. The court below thus erred in annulling the determination. (Matter of Pell v Board of Educ., 34 NY2d 222; Matter of Markowitz v State Tax Commn., 54 AD2d 1023, 44 NY2d 684;
      300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; Matter of Babbin v State Tax Commn., 49 NY2d 846; Matter of Levin v Gallman, 42 NY2d 32; Matter of Liberman v Gallman, 41 NY2d 774; Matter of Young v Bragalini, 3 NY2d 602; Pederson v Manitowoc Co., 25 NY2d 412; Caplan v Caplan, 268 NY 445; Chemical Bank v Ashenburg, 94 Misc 2d 64.)

      Peter D. Cook for respondent.
    I. For purposes of article 28, a joint venture is not separate and distinct from the joint venturers, where the stated intent of the two joint venturers is to provide equipment in the same proportion as their interests in the joint venture and where the two joint venturers in fact provided equipment in the same proportion as their interests in the joint venture. (Ruzicka v Rager, 305 NY 191; Caplan v Caplan, 268 NY 445; Bathrick Enters. v Murphy, 27 AD2d 215, 23 NY2d 664; Matter of Petrolane Northeast Gas Serv. v State Tax Commn., 79 AD2d 1043, 53 NY2d 601.) II. Since neither title nor exclusive possession of the equipment passed to the joint venture, and since there was never any definite determination as to the amount of rent to be paid, there cannot be an assessment of sales and use tax for the “rentals”. (Feder v Caliguira, 8 NY2d 400; American Locker Co. v City of New York, 308 NY 264; Matter of Concrete Delivery v State Tax Commn.; 71 AD2d 330, 49 NY2d 709; Bathrick Enters, v Murphy, 27 AD2d 215; Dubay v Trans-America Ins. Co., 75 AD2d 312.) III. The word “rental” has a unique meaning within the dredging and marine construction industry. Subjecting petitioner to sales and use tax on “rentals” is improper in light of the practice of the industry, the joint venture agreement, and the fact that petitioner would not have been taxed if it had not called the payments “rentals”. (Matter of Young v Gerosa, 11 AD2d 67; Matter of Purdy v Kreisberg, 47 NY2d 354.) IV. In fairness and equity, the transactions in this case should not be taxable. (Matter of Holmes Elec. Protective Co. v McGoldrick, 262 App Div 514, 288 NY 635.)
   OPINION OF THE COURT

Per Curiam.

There is substantial evidence in the record of the proceedings before the State Tax Commission to support the Commission’s determination that designated “rental” and “lease” payments made by petitioner Great Lakes-Dunbar-Rochester, a joint venture, to the corporate venturers were, in fact, for rentals of vessels and equipment and, thus, subject to the use tax imposed by Tax Law § 1110. Therefore we reverse the order of the Appellate Division and reinstate the Commission’s determination.

Great Lakes Dredge & Dock Co. and Dunbar & Sullivan Dredging Co. formed a joint venture in 1969 to bid on and, if successful, execute a contract to construct a sewer outfall in Lake Ontario for the City of Rochester. The joint venture agreement specifically limited the relationship to the Rochester construction project and required each party to furnish equipment and supervisory personnel to the project in the same proportion, insofar as reasonably possible, as its interest in the joint venture. The parties’ interests in the joint venture were allocated 66% to Great Lakes and 33% to Dunbar. Supervisory personnel and heavy equipment, consisting of marine vessels such as tugs and scows together with clamshells and cranes mounted thereon, were assigned to the project. Each corporate venturer was to be reimbursed from time to time for equipment, tools and/or machinery it furnished for use in the performance of the project at “rental” rates set forth in the agreement. These reimbursement payments were characterized in the agreement as “rents” and invoiced as such between the joint venture and the corporate venturers. No sales or use taxes were paid on these “rental payments”, however. Following an audit conducted by respondent in 1974, a determination was made that over $300,000, plus penalties and interest, was due as use tax on these rentals .and on the purchase of certain parts and supplies charged to the vessels. Petitioner was partially successful in having some of the items on which the tax had been assessed eliminated, but the assessment of use tax due on the amounts that the corporate venturers were reimbursed for the equipment assigned to the project (the “rentals”) was sustained by the Commission. An article 78 proceeding, transferred directly to the Appellate Division pursuant to CPLR 7804 (g), ensued. A divided court found that there was no substantial evidence supporting respondent’s conclusion that a lease of personal property took place between the parties, and therefore that there was no rational basis for respondent’s assessment of the tax. We disagree.

In assessing a use tax on the reimbursement payments, the Tax Commission has treated the joint venture as a partnership, having an existence and entity separate and apart from the partners who comprise it, a treatment found by the majority at the Appellate Division to be contrary to “basic, established law” (102 AD2d, p 4). However, as pointed out by the dissenting Justice (id,., pp 6-7), this treatment is consistent with that accorded the relationship by the parties themselves, both in their written agreement and in their conduct.

Although terms of the agreement and the conduct of the parties are not determinative, support for the Commission’s view that the partnership is an entity separate and apart from its constituent partners can be found in the Tax Law itself, which specifically defines a “person” to include a partnership, association or combination of individuals or corporations (Tax Law § 1101 [a]). Ordinarily, partnerships and joint ventures are not considered persons (General Construction Law § 37). The inclusion of partnerships in the Tax Law definition of “person”, therefore, supports the conclusion that the Legislature intended to treat partnerships differently for tax purposes. Further support for this conclusion derives from the fact that the Legislature has only excluded select transactions from the definition of “retail sale”, such as, “distribution[s] of property by a partnership to its partners in whole or partial liquidation” and “contribution[s] of property to a partnership in consideration for a partnership interest therein” (Tax Law § 1101 [b] [4] [iii] [C], [E]). This selective exclusion evinces an intent by the Legislature to tax at least some transactions between partnerships and their members.

Similar treatment of such transactions is found in other tax statutes and regulations. For example, the Department of Taxation and Finance has provided that partnership contributions and liquidating distributions “are excluded from the definition of ‘retail sale’ because while the form of ownership of the property is changed, there is a continuity of interest in the property transferred” (20 NYCRR 526.6 [d] [1]). By contrast, the purchase by a partner of tangible personal property from the partnership is a retail sale (20 NYCRR 526.6 [d] [4] [ii]).

Under Federal tax law, “[i]f a partner engages in a transaction with a partnership other than in his capacity as a member of such partnership, the transaction shall * * * be considered as occurring between the partnership and one who is not a partner” (Internal Revenue Code [26 USC] § 707 [a]). The Treasury Department’s regulations elaborate: “Such transactions include, for example, loans of money or property by the partnership to the partner or by the partner to the partnership, the sale of property by the partner to the partnership, the purchase of property by the partner from the partnership, and the rendering of services by the partnership to the partner or by the partner to the partnership. Where a partner retains the ownership of property but allows the partnership to use such separately owned property for partnership purposes * * * the transaction is treated as one between a partnership and a partner not acting in his capacity as a partner * * * In all cases, the substance of the transaction will govern rather than its form” (Treas Reg [26 CFR] § 1.707-1 [a]).

“[C]ourts should defer to the interpretation given a statute by the agency charged with its enforcement if the interpretation is neither irrational, unreasonable, nor inconsistent with the governing statute” (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588, 597; see, Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459). We conclude, therefore, that the Commission’s interpretation of the Tax Law is rational and its determination that use taxes were due upon these rental transactions is supported by substantial evidence.

Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye and Alexander concur in Per Curiam opinion; Judge Titone taking no part.

Judgment reversed, with costs, and determination of the State Tax Commission reinstated.