author: Chief Judge Cooke.

text:
    In the Matter of the Judicial Dissolution of Kemp & Beatley, Inc. Seymour Gardstein et al., Respondents; Kemp & Beatley, Inc., Appellant.
    Argued October 18, 1984;
    decided November 29, 1984

      POINTS OF COUNSEL

      Jerome M. Lasky, David B. Eizenman and Ira Schreck for appellant.
    I. An order of dissolution must be based upon wrongful conduct, and not simply upon the desire of minority shareholders to redeem their shares. (Mardikos v Arger, 116 Misc 2d 1028; Matter of Topper v Park Sheraton Pharmacy, 107 Misc 2d 25.) II. There is no factual support in the record for a finding that the minority shareholders were the victims of oppression by the majority. III. The court below failed to consider alternatives to the drastic remedy of dissolution. (Muller v Silverstein, 92 AD 2d 455.)

      Arthur H. Sobel and Richard L. Herzfeld for respondents,
    I. The conduct of the corporation and those in control constitutes oppressive conduct under section 1104-a of the Business Corporation Law. (Matter of Topper v Park Sheraton Pharmacy, 107 Misc 2d 25; Matter of Barry One Hour Photo Process, 111 Misc 2d 559.) II. The findings of oppressive conduct are amply supported in the record. (Matter of Hofbauer, 47 NY2d 648; Gabriel Inds. v Defiance Inds., 22 NY2d 405; Matter of Babbin v State Tax Comm., 49 NY2d 846; Blek v Blek, 306 NY 27; Perry v Perry, 79 AD2d 851; Nishman v De Marco, 76 AD2d 360; Matter of Cristo, 86 AD2d 700; Matter of Gershowitz v Planning Bd. of Town of Brookhaven, 52 NY2d 763; Weiner v New York State Dept. of Motor Vehicles, 79 AD2d 1022; Woodring v Board of Educ., 79 AD2d 1022.) III. Special Term properly concluded that liquidation of the corporation would be the only means whereby Gardstein and Dissin could reasonably expect to obtain a fair return on their investment in the shares of the corporation. (Matter of Gershowitz v Planning Bd. of Town of Brookhaven, 52 NY2d 763; Weiner v New York State Dept. of Motor Vehicles, 79 AD2d 1022; Woodring v Board of Educ., 79 AD2d 1022.)
   OPINION OF THE COURT

Chief Judge Cooke.

When the majority shareholders of a close corporation award de facto dividends to all shareholders except a class of minority shareholders, such a policy may constitute “oppressive actions” and serve as a basis for an order made pursuant to section 1104-a of the Business Corporation Law dissolving the corporation. In the instant matter, there is sufficient evidence to support the lower courts’ conclusion that the majority shareholders had altered a long-standing policy to distribute corporate earnings on the basis of stock ownership, as against petitioners only. Moreover, the courts did not abuse their discretion by concluding that dissolution was the only means by which petitioners could gain a fair return on their investment.

I

The business concern of Kemp & Beatley, incorporated under the laws of New York, designs and manufactures table linens and sundry tabletop items. The company’s stock consists of 1,500 outstanding shares held by eight shareholders. Petitioner Dissin had been employed by the company for 42 years when, in June 1979, he resigned. Prior to resignation, Dissin served as vice-president and a director of Kemp & Beatley. Over the course of his employment, Dissin had acquired stock in the company and currently owns 200 shares.

Petitioner Gardstein, like Dissin, had been a long-time employee of the company. Hired in 1944, Gardstein was for the next 35 years involved in various aspects of the business including material procurement, product design, and plant management. His employment was terminated by the company in December 1980. He currently owns 105 shares of Kemp & Beatley stock.

Apparent unhappiness surrounded petitioners’ leaving the employ of the company. Of particular concern was that they no longer received any distribution of the company’s earnings. Petitioners considered themselves to be “frozen out” of the company; whereas it had been their experience when with the company to receive a distribution of the company’s earnings according to their stockholdings, in the form of either dividends or extra compensation, that distribution was no longer forthcoming.

Gardstein and Dissin, together holding 20.33% of the company’s outstanding stock, commenced the instant proceeding in June 1981, seeking dissolution of Kemp & Beatley pursuant to section 1104-a of the Business Corporation Law. Their petition alleged “fraudulent and oppressive” conduct by the company’s board of directors such as to render petitioners’ stock “a virtually worthless asset.” Supreme Court referred the matter for a hearing, which was held in March 1982.

Upon considering the testimony of petitioners and the principals of Kemp & Beatley, the referee concluded that “the corporate management has by its policies effectively rendered petitioners’ shares worthless, and * * * the only way petitioners can expect any return is by dissolution”. Petitioners were found to have invested capital in the company expecting, among other things, to receive dividends or “bonuses” based upon their stock holdings. Also found was the company’s “established buy-out policy” by which it would purchase the stock of employee shareholders upon their leaving its employ.

The involuntary-dissolution statute (Business Corporation Law, § 1104-a) permits dissolution when a corporation’s controlling faction is found guilty of “oppressive action” toward the complaining shareholders. The referee considered oppression to arise when “those in control” of the corporation “have acted in such a manner as to defeat those expectations of the minority stockholders which formed the basis of [their] participation in the venture.” The expectations of petitioners that they would not be arbitrarily excluded from gaining a return on their investment and that their stock would be purchased by the corporation upon termination of employment, were deemed defeated by prevailing corporate policies. Dissolution was recommended in the referee’s report, subject to giving respondent corporation an opportunity to purchase petitioners’ stock.

Supreme Court confirmed the referee’s report. It, too, concluded that due to the corporation’s new dividend policy petitioners had been prevented from receiving any return on their investments. Liquidation of the corporate assets was found the only means by which petitioners would receive a fair return. The court considered judicial dissolution of a corporation to be “a serious and severe remedy.” Consequently, the order of dissolution was conditioned upon the corporation’s being permitted to purchase petitioners’ stock. The Appellate Division affirmed, without opinion.

At issue in this appeal is the scope of section 1104-a of the Business Corporation Law. Specifically, this court must determine whether the provision for involuntary dissolution when the “directors or those in control of the corporation have been guilty of * * * oppressive actions toward the complaining shareholders” was properly applied in the circumstances of this case. We hold that it was, and therefore affirm.

II

Judicially ordered dissolution of a corporation at the behest of minority interests is a remedy of relatively recent vintage in New York. Historically, this State’s courts were considered divested of equity jurisdiction to order dissolution, as statutory prescriptions were deemed exclusive (see Hitch v Hawley, 132 NY 212, 217). Statutes permitting judicial dissolution of corporations either limited the types of corporations under their purview (see L 1817, ch 146, §§ 1-4; see, also, Matter of Niagara Ins. Co., 1 Paige Ch 258) or restricted the parties who could petition for dissolution to the Attorney-General, or the directors, trustees, or majority shareholders of the corporation (see Hitch v Hawley, 132 NY, at pp 218-219, supra; see, generally, Business Corporation Law, §§ 1101-1104).

Minority shareholders were granted standing in the absence of statutory authority to seek dissolution of corporations when controlling shareholders engaged in certain egregious conduct (see Leibert v Clapp, 13 NY2d 313; Fontheim v Walker, 282 App Div 373, affd no opn 306 NY 926). Predicated on the majority shareholders’ fiduciary obligation to treat all shareholders fairly and equally, to preserve corporate assets, and to fulfill their responsibilities of corporate management with “scrupulous good faith,” the courts’ equitable power can be invoked when “it appears that the directors and majority shareholders ‘have so palpably breached the fiduciary duty they owe to the minority shareholders that they are disqualified from exercising the exclusive discretion and the dissolution power given to them by statute.’ ” (Leibert v Clapp, 13 NY2d, at p 317, supra, quoting Hoffman, New Horizons for the Close Corporation, 28 Brooklyn L Rev 1, 14.) True to the ancient principle that equity jurisdiction will not lie when there exists a remedy at law (see Brady v McCosker, 1 NY 214, 217), the courts have not entertained a minority’s petition in equity when their rights and interests could be adequately protected in a legal action, such as by a shareholder’s derivative suit (see Matter of Nelkin v H.J.R. Realty Corp., 25 NY2d 543, 550; cf. Leibert v Clapp, 13 NY2d, at p 317, supra).

Supplementing this principle of judicially ordered equitable dissolution of a corporation, the Legislature has shown a special solicitude toward the rights of minority shareholders of closely held corporations by enacting section 1104-a of the Business Corporation Law. That statute provides a mechanism for the holders of at least 20% of the outstanding shares of a corporation whose stock is not traded on a securities market to petition for its dissolution “under special circumstances” (see Business Corporation Law, § 1104-a, subd [a]). The circumstances that give rise to dissolution fall into two general classifications: mistreatment of complaining shareholders (subd [a], par [1]), or misappropriation of corporate assets (subd [a], par [2]) by controlling shareholders, directors or officers.

Section 1104-a (subd [a], par [1]) describes three types of proscribed activity: “illegal”, “fraudulent”, and “oppressive” conduct. The first two terms are familiar words that are commonly understood at law. The last, however, does not enjoy the same certainty gained through long usage. As no definition is provided by the statute, it falls upon the courts to provide guidance (see Goncalves v Regent Int. Hotels, 58 NY2d 206, 218).

The statutory concept of “oppressive actions” can, perhaps, best be understood by examining the characteristics of close corporations and the Legislature’s general purpose in creating this involuntary-dissolution statute. It is widely understood that, in addition to supplying capital to a contemplated or ongoing enterprise and expecting a fair and equal return, parties comprising the ownership of a close corporation may expect to be actively involved in its management and operation (O’Neal, Close Corporations [2d ed], §§ 1.07-1.09; Davidian, Corporate Dissolution in New York: Liberalizing the Rights of Minority Shareholders, 56 St John’s L Rev 24,26; Note, Involuntary Dissolution of Close Corporations for Mistreatment of Minority Shareholders, 60 Wash U LQ 1119, 1139-1143; Ann., 56 ALR3d 358, 363-367; see, also, Matter of Topper v Park Sheraton Pharmacy, 107 Misc 2d 25; Matter of Barry One Hour Photo Process, 111 Misc 2d 559). The small ownership cluster seeks to “contribute their capital, skills, experience and labor” toward the corporate enterprise (Kruger v Gerth, 16 NY2d 802, 805 [Desmond, Ch. J., dissenting]; see Matter of Pivot Punch & Die Corp., 15 Misc 2d 713, 715-716 [Jasen, J.]; Israels, Close Corporation and the Law, 33 Cornell LQ 488).

As a leading commentator in the field has observed: “Unlike the typical shareholder in a publicly held corporation, who may be simply an investor or a speculator and cares nothing for the responsibilities of management, the shareholder in a close corporation is a co-owner of the business and wants the privileges and powers that go with ownership. His participation in that particular corporation is often his principal or sole source of income. As a matter of fact, providing employment for himself may have been the principal reason why he participated in organizing the corporation. He may or may not anticipate an ultimate profit from the sale of his interest, but he normally draws very little from the corporation as dividends. In his capacity as an officer or employee of the corporation, he looks to his salary for the principal return on his capital investment, because earnings of a close corporation, as is well known, are distributed in major part in salaries, bonuses and retirement benefits.” (O’Neal, Close Corporations [2d ed], § 1.07, atpp 21-22 [n omitted].)

Shareholders enjoy flexibility in memorializing these expectations through agreements setting forth each party’s rights and obligations in corporate governance (see, generally, Kessler, Shareholder-Managed Close Corporation Under the New York Business Corporation Law, 43 Fordham L Rev 197; Davidian, op. cit., 56 St John’s L Rev 24, 29-30, and nn 21-22). In,.the absence of such an agreement, however, ultimate decision-making power respecting corporate policy will be reposed in the holders of a majority interest in the corporation (see, e.g., Business Corporation Law, §§ 614, 708). A wielding of this power by any group controlling a corporation may serve to destroy a stockholder’s vital interests and expectations.

As the stock of closely held corporations generally is not readily salable, a minority shareholder at odds with management policies may be without either a voice in protecting his or her interests or any reasonable means of withdrawing his or her investment. This predicament may fairly be considered the legislative concern underlying the provision at issue in this case; inclusion of the criteria that the corporation’s stock not be traded on securities markets and that the complaining shareholder be subject to oppressive actions supports this conclusion.

Defining oppressive conduct as distinct from illegality in the present context has been considered in other forums. The question has been resolved by considering oppressive actions to refer to conduct that substantially defeats the “reasonable expectations” held by minority shareholders in committing their capital to the particular enterprise (see, e.g., Mardikos v Arger, 116 Misc 2d 1028; Matter of Barry One Hour Photo Process, 111 Misc 2d 559, supra; Matter of Topper v Park Sheraton Pharmacy, 107 Misc 2d 25, supra; Capitol Toyota v Gervin, 381 So 2d 1038 [Miss]; Exadaktilos v Cinnaminson Realty Co., 167 NJ Super 141,153-156, affd 173 NJ Super 559; Masinter v Webco Co., 262 SE2d 433 [West Va]; O’Neal, Oppression of Minority Shareholders, §§ 3.01-3.11; O’Neal, Close Corporations: Existing Legislation and Recommended Reform, 33 Business Lawyer 873; After-man, Statutory Protection for Oppressed Minority Shareholders: A Model for Reform, 55 Va L Rev 1043; but cf. Polikoffv Dole & Clark Bldg. Corp., 37 Ill App 2d 29, 36; Baker v Commercial Body Bldrs., 264 Ore 614, 630). This concept is consistent with the apparent purpose underlying the provision under review. A shareholder who reasonably expected that ownership in the corporation would entitle him or her to a job, a share of corporate earnings, a place in corporate management, or some other form of security, would be oppressed in a very real sense when others in the corporation seek to defeat those expectations and there exists no effective means of salvaging the investment.

Given the nature of close corporations and the remedial purpose of the statute, this court holds that utilizing a complaining shareholder’s “reasonable expectations” as a means of identifying and measuring conduct alleged to be oppressive is appropriate. A court considering a petition alleging oppressive conduct must investigate what the majority shareholders knew, or should have known, to be the petitioner’s expectations in entering the particular enterprise. Majority conduct should not be deemed oppressive simply because the petitioner’s subjective hopes and desires in joining the venture are not fulfilled. Disappointment alone should not necessarily be equated with oppression.

Rather, oppression should be deemed to arise only when the majority conduct substantially defeats expectations that, objectively viewed, were both reasonable under the circumstances and were central to the petitioner’s decision to join the venture. It would be inappropriate, however, for us in this case to delineate the contours of the courts’ consideration in determining whether directors have been guilty of oppressive conduct. As in other areas of the law, much will depend on the circumstances in the individual case.

The appropriateness of an order of dissolution is in every case vested in the sound discretion of the court considering the application (see Business Corporation Law, § 1111, subd [a]). Under the terms of this statute, courts are instructed to consider both whether “liquidation of the corporation is the only feasible means” to protect the complaining shareholder’s expectation of a fair return on his or her investment and whether dissolution “is reasonably necessary” to protect “the rights or interests of any substantial number of shareholders” not limited to those complaining (Business Corporation Law, § 1104-a, subd [b], pars [1], [2]). Implicit in this direction is that once oppressive conduct is found, consideration must be given to the totality of circumstances surrounding the current state of corporate affairs and relations to determine whether some remedy short of or other than dissolution constitutes a feasible means of satisfying both the petitioner’s expectations and the rights and interests of any other substantial group of shareholders (see, also, Business Corporation Law, § 1111, subd [b], par [1]).

By invoking the statute, a petitioner has manifested his or her belief that dissolution may be the only appropriate remedy. Assuming the petitioner has set forth a prima facie case of oppressive conduct, it should be incumbent upon the parties seeking to forestall dissolution to demonstrate to the court the existence of an adequate, alternative remedy (cf. Baker v Commercial Body Bldrs., 264 Ore 614, supra; White v Perkins, 213 Va 129). A court has broad latitude in fashioning alternative relief, but when fulfillment of the oppressed petitioner’s expectations by these means is doubtful, such as when there has been a complete deterioration of relations between the parties, a court should not hesitate to order dissolution. Every order, of dissolution, however, must be conditioned upon permitting any shareholder of the corporation to elect to purchase the complaining shareholder’s stock at fair value (see Business Corporation Law, § 1118).

One further observation is in order. The purpose of this involuntary dissolution statute is to provide protection to the minority shareholder whose reasonable expectations in undertaking the venture have been frustrated and who has no adequate means of recovering his or her investment. It would be contrary to this remedial purpose to permit its use by minority shareholders as merely a coercive tool (see Davidian, op. cit., 56 St John’s L Rev 24, 59-60, and nn 159-160). Therefore, the minority shareholder whose own acts, made in bad faith and undertaken with a view toward forcing an involuntary dissolution, give rise to the complained-of oppression should be given no quarter in the statutory protection (cf. Mardikos v Arger, 116 Misc 2d 1028, 1032, supra).

Ill

There was sufficient evidence presented at the hearing to support the conclusion that Kemp & Beatley had a long-standing policy of awarding de facto dividends based on stock ownership in the form of “extra compensation bonuses.” Petitioners, both of whom had extensive experience in the management of the company, testified to this effect. Moreover, both related that receipt of this compensation, whether as true dividends or disguised as “extra compensation”, was a known incident to ownership of the company’s stock understood by all of the company’s principals. Finally, there was uncontroverted proof that this policy was changed either shortly before or shortly after petitioners’ employment ended. Extra compensation was still awarded by the company. The only difference was that stock ownership was no longer a basis for the payments; it was asserted that the basis became services rendered to the corporation. It was not unreasonable for the fact finder to have determined that this change in policy amounted to nothing less them an attempt to exclude petitioners from gaining any return on their investment through the mere recharacterization of distributions of corporate income. Under the circumstances of this case, there was no error in determining that this conduct constituted oppressive action within the meaning of section 1104-a of the Business Corporation Law.

Nor may it be said that Supreme Court abused its discretion in ordering Kemp & Beatley’s dissolution, subject to an opportunity for a buy-out of petitioners’ shares. After the referee had found that the controlling faction of the company was, in effect, attempting to “squeeze-out” petitioners by offering them no return on their investment and increasing other executive compensation, respondents, in opposing the report’s confirmation, attempted only to controvert the factual basis of the report. They suggested no feasible, alternative remedy to the forced dissolution. In light of an apparent deterioration in relations between petitioners and the governing shareholders of Kemp & Beatley, it was not unreasonable for the court to have determined that a forced buy-out of petitioners’ shares or liquidation of the corporation’s assets was the only means by which petitioners could be guaranteed a fair return on their investments.

Accordingly, the order of the Appellate Division should be modified, with costs to petitioners-respondents, by affirming the substantive determination of that court but extending the time for exercising the option to purchase petitioners-respondents’ shares to 30 days following this court’s determination.

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

Order modified, with costs to petitioners-respondents, in accordance with the opinion herein and, as so modified, affirmed.

      . The statute provides:
      “§ 1104-a. Petition for judicial dissolution under special circumstances
      “(a) The holders of twenty percent or more of all outstanding shares of a corporation, other than a corporation registered as an investment company under an act of congress entitled ‘Investment Company Act of 1940’, no shares of which are listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national or an affiliated securities association, who are entitled to vote in an election of directors may present a petition of dissolution on one or more of the following grounds:
      “(1) The directors or those in control of the corporation have been guilty of illegal, fraudulent or oppressive actions toward the complaining shareholders;
      “(2) The property or assets of the corporation are being looted, wasted, or diverted for non-corporate purposes by its directors, officers or those in control of the corporation.
      “(b) The court, in determining whether to proceed with involuntary dissolution pursuant to this section, shall take into account:
      “(1) Whether liquidation of the corporation is the only feasible means whereby the petitioners may reasonably expect to obtain a fair return on their investment; and
      “(2) Whether liquidation of the corporation is reasonably necessary for the protection of the rights and interests of any substantial number of shareholders or of the petitioners.”

      . Respondent is correct in arguing that there is no basis in the record for the referee’s conclusion that the corporation had an established policy to buyout the shares of employees when they left the company. Although the record reflects that petitioners intended to offer proof on this issue, the referee erroneously concluded that the issue was beyond the scope of the reference. He considered such evidence only as “background.” In light of this limitation of the issues under consideration, which neither side objected to, the referee could not then properly ground his decision on a failure by respondent to abide by any buy-out policy. The referee’s reliance on this ground is irrelevant for the purposes of this appeal, however, as Supreme Court’s confirmation of the report was based solely on the principal ground for the finding of oppression, the company’s failure to award dividends.


source: Caselaw Access Project

author: Jasen, J.

license: Public Domain

text:
    In the Matter of Lance J. Friedsam, Respondent, v State Tax Commission, Appellant.
    Argued October 10, 1984;
    decided December 18, 1984

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General (Francis V. Dow, Peter H. Schiff and Diane DeFurio Foody of counsel), for appellant.
    The privileges and immunities clause is not violated by the State Tax Commission’s determination that petitioner’s alimony payments are not a proper adjustment to income. (American Ins. Assn. v Lewis, 50 NY2d 617; Matter of Berardino v New York State Tax Comm., 78 AD2d 936; Toomer v Witsell, 334 US 385; Matter of Goodwin v State Tax Comm., 286 App Div 694,1 NY2d 680; Shaffer v Carter, 252 US 37; Travis v Yale & Towne Mfg. Co., 252 US 60; Matter of Long Is. Light. Co. v State Tax Comm., 45 NY2d 529; Heimbach v State of New York, 59 NY2d 891; Lehnhausen v Lake Shore Auto Parts Co., 410 US 356.)

      Rayner M. Hamilton and Stephen M. Piga for respondent.
    I. Disallowance of alimony as a deduction based exclusively upon the residence of the taxpayer violates the United States Constitution. (Matter of Golden v Tully, 58 NY2d 1047; Hicklin v Orbeck, 437 US 518.) II. Appellant’s reliance upon Matter of Goodwin v State Tax Comm, is misplaced. (Matter of Goodwin v State Tax Comm., 286 App Div 694, 1 NY2d 680, 352 US 805.) III. The Commission’s interpretation of the New York Tax Law as to the deductibility of alimony has prompted a constitutional confrontation that is unnecessary, unreasonable and improper. IV. Alimony is properly deductible under section 632 in this case because in fact it is directly attributable to the very income from petitioner’s occupation in New York which the Commission seeks to tax.
   OPINION OF THE COURT

Jasen, J.

We are asked to decide whether the determination of the State Tax Commission denying nonresident taxpayer an income tax deduction to which a resident taxpayer is entitled for payment of alimony conforms with the State’s tax policy (Tax Law, § 632, subd [a], par [1]; § 635, subd [c], par [1]).

During the tax year 1979, petitioner, Lance Friedsam, was a resident of Connecticut and employed by the International Business Machines Corporation (IBM) in White Plains, New York. Petitioner’s total compensation from IBM was $61,750, of which $52,710 was considered to be derived from employment duties performed in New York. Petitioner’s total income for the tax year 1979 was $65,836, which was based upon the IBM salary ($61,750), earned interest income ($4,577), and a capital loss ($491). In July 1979, petitioner was divorced from his wife, who, along with their three children, were residents of Connecticut. In 1979, petitioner paid alimony of $10,417 pursuant to a Connecticut divorce decree.

Petitioner timely filed a New York State Income Tax Nonresident Return (Form IT-203) for 1979, and in computing his New York adjusted gross income modified his Federal adjusted gross income, as required by section 632 (subd [a], par [1]) of the Tax Law, so as to take credit for alimony paid only in the same proportion as was represented by the New York portion of his IBM salary, to wit: $7,813. The State Income Tax Audit Division disallowed the alimony deduction of $7,813 ruling that it did not relate to the production of New York income. Subsequently, petitioner appealed the ruling to the State Tax Commission contending that the disallowance of his 1979 alimony adjustment violated his constitutional rights under the privileges and immunities clause (US Const, art IV, cl 2) and his statutory right to substantial equality in taxation under section 635 (subd [c], par [1]) of the Tax Law, since residents of New York were entitled to deduct their alimony payments.

The State Tax Commission, characterizing the $7,813 adjustment of gross income as a deduction, disallowed it. The majority of the Commission concluded that “alimony is not a deduction attributable to petitioner’s profession carried on in this state, within the meaning of Tax Law section 632(b)(1)(B)” and, therefore, not a proper adjustment to income in computing petitioner’s New York adjusted gross income.

Upon disallowance of the alimony adjustment, petitioner commenced an article 78 proceeding to annul the determination. Special Term, Albany County, granted petitioner’s application and held that because a resident is allowed alimony paid as an adjustment against income while a nonresident is not, the difference in treatment, without a substantial reason, was violative of the privileges and immunities clause of article IV. In affirming the judgment of Special Term, the Appellate Division, Third Department, held respondent’s contention, that the disparate treatment of nonresident petitioner was justified by the “personal” nature of the alimony deduction, to be without merit. While we now affirm the order of the Appellate Division, we do so upon statutory, not constitutional, grounds.

We begin our analysis by recognizing that section 215 of the . Internal Revenue Code of 1954 provided that alimony payments by a taxpayer to his former wife are deductible from his gross income. (26 USC §§ 71, 215.) When New York passed its personal income tax effective April 18, 1960, the Legislature provided:

“that the adoption by this state for its personal income tax purposes of the provisions of the laws of the United States relating to the determination of income for federal income tax purposes will (1) simplify preparation of state income tax returns by taxpayers, (2) improve enforcement of the state income tax through better use of information obtained from federal income tax audits, and (3) aid interpretation of the state tax law through increased use of federal judicial and administrative determinations and precedents.
“The legislature does therefore declare that article twenty-two be construed so as to accomplish the foregoing purposes.” (Historical Note, McKinney’s Cons Laws of NY, Book 59, p 262.) Beyond that declaration, the Legislature provided a statutory mandate to assure conformity: “Any term used in this article shall have the same meaning as when used in a comparable context in the laws of the United States relating to federal income taxes, unless a different meaning is clearly required.” (Tax Law, § 607.)

Section 632 of the New York Tax Law defines New York adjusted gross income for nonresidents as follows:

“(a) General. The New York adjusted gross income of a nonresident individual shall be the sum of the following:
“(1) the net amount of items of income, gain, loss and deduction entering into his federal adjusted gross income, as defined in the laws of the United States for the taxable year, derived from or connected with New York sources * * *
“(b) Income and deductions from New York sources.
“(1) Items of income, gain, loss and deduction derived from or connected with New York sources shall be those items attributable to:
* * *
“(B) a business, trade, profession or occupation carried on in this state”. (Tax Law, § 632.)

Section 635, which deals with deductions from adjusted gross income, provides that a nonresident can deduct from his New York adjusted gross income an itemized deduction which is either the same as or an allocated percentage of the itemized deduction provided for residents in section 615. Residents are permitted to deduct from their New York adjusted gross income the itemized deductions claimed on their Federal tax returns, which includes alimony, subject to various modifications not relevant here. (Tax Law, § 615.) Alimony had traditionally been deemed an itemized deduction on Federal income tax returns.

The problem of disparate treatment of nonresidents addressed by the Commission was derived from the Federal enactment of the Tax Reform Act of 1976 (PL 94-455). By this Act, the alimony deduction was changed from an “itemized deduction” to a “deduction” of income in determining adjusted gross income, so that alimony payment would benefit taxpayers who take the standard deduction, as well as those who itemize their deductions. (26 USC § 62 [13]; see US Code Cong & Admin News, 1976, p 2908.)

This liberalized Federal policy automatically inured to the benefit of New York residents on their New York tax returns because the starting point for a resident is his Federal adjusted gross income which affords him the benefit of an alimony payment offset whether reported as an “itemized deduction” or as a “deduction” from adjusted gross income. There was no State legislative response to this liberalized Federal policy and the Legislature gave no indication whatsoever that either New York’s historical policy of following Federal tax policy, or its long-standing treatment of alimony vis-a-vis nonresidents was to be changed in any respect.

Nevertheless, the Tax Commission disallowed petitioner’s alimony adjustment to his adjusted gross income on the ground that it was unrelated and unconnected to New York sources of income. We hold that the Commission’s determination supporting a disparate tax classification between resident and nonresident taxpayer is contrary to statute and tax policy of this State. Petitioner has sought an alimony “deduction” proportional to the ratio of his New York income derived from all sources. The amount by which petitioner reduced adjusted gross income for his alimony payment was commensurate with the income derived from New York sources, and was consistent with the reduction allowed to residents under similar circumstances. The conclusion is inescapable that in disallowing petitioner’s alimony deduction the Tax Commission improperly applied section 632 (subd [a], par [1]) of the Tax Law and failed to apply section 635 (subd [c], par [1]) of the Tax Law. The passage of section 635 (subd [c], par [1]) reflected a policy decision “that nonresidents be allowed the same non-business deductions as residents, but that such deductions be allowed to nonresidents in the proportion of their New York income to income from all sources.” (Murphy and Petite, Taxation of Nonresidents by New York State, 12 Syracuse L Rev 147,161-162; see, also, Memorandum of Governor, L 1961, ch 68, NY State Legis Ann, 1961, p 398.) This salutary policy of substantial equality, embodied in section 635 (subd [c], par [1]) of the Tax Law, serves to invalidate the challenged determination of the State Tax Commission.

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

Chief Judge Cooke and Judges Jones, Wachtler, Meyer, Simons and Kaye concur.

Order affirmed, with costs.


text:
    State of New York, Respondent, v Stewart’s Ice Cream Company, Inc., et al., Defendants, and Brundige Oil Company et al., Doing Business as Brundige Oil Company, Appellants.
    Argued November 14, 1984;
    decided December 18, 1984

      POINTS OF COUNSEL

      Randall J. Ezick for appellants.
    I. Section 188 of the Navigation Law expressly provides that upon any payment pursuant to article 12, the State is subrogated to all rights of claimant against the person or entity responsible for the wrongful discharge, and accordingly it is submitted that in pursuing such right the State stands in the place of claimant and the State’s action is subject to the Statute of Limitations and accrual date which would apply to an action brought by claimant. (State Bank of Albany v Dan-Bar Contr. Co., 12 AD2d 416, 12 NY2d 804; Seven Sixty Travel v American Motorists Ins. Co., 98 Misc 2d 509, 73 AD2d 761; Transamerica Ins. Co. v Lumbermen’s Cas. Ins. Co., 77 AD2d 5; Victorson v Bock Laundry Mach. Co., 37 NY2d 395.) II. The court below erred in determining that respondent had asserted a cause of action for implied indemnity in its complaint and further erred in holding that such cause of action accrues on the date of last payment pursuant to article 12 of the Navigation Law. (McDermott v City of New York, 50 NY2d 211; McCabe v Queensboro Farm Prods., 22 NY2d 204; 755 Seventh Ave. Corp. v Carroll, 266 NY 157; Relyea v State of New York, 59 AD2d 364; Dunn v Uvalde Asphalt Paving Co., 175 NY 214; State of New York v City of Binghamton, 72 AD2d 870; Matter of Finkelstein [Harris], 17 AD2d 137.)

      Robert Abrams, Attorney-General (Betsy Broder, Robert Hermann and Peter H. Schiff of counsel), for respondent.
    The court below correctly held that all of the State’s causes of action are timely. (Brown v Rosenbaum, 287 NY 510; Merrill Transp. Co. v State of New York, 94 AD2d 39; Roberts v Ely, 113 NY 128; McDermott v City of New York, 50 NY2d 211; State of New York v Cortelle Corp., 38 NY2d 83; Blanchard v Blanchard, 201 N Y 134; Murphy v American Home Prods., 58 NY2d 293; New York State Higher Educ. Servs. Corp. v Robbins, 76 AD2d 951, 53 NY2d 839.)
   OPINION OF THE COURT

Chief Judge Cooke.

When the State has expended moneys from the New York Environmental Protection and Spill Compensation Fund for the cleanup and removal of discharged petroleum, an action for common-law indemnity lies against any party who caused the discharge. Such an action is governed by a six-year Statute of Limitations and accrues upon any related expenditure by the State.

In 1977, the Legislature added a significant environmental protection measure by enacting the Oil Spill Prevention, Control, and Compensation Act (L 1977, ch 845; codified at Navigation Law, §§ 170-197). Grounded in the recognition of the extreme, deleterious effect oil spills have on the State’s lands and waterways (see Navigation Law, § 170), the Act seeks both to prevent the unregulated discharge of petroleum and to provide for speedy cleanups when spills occur (see Navigation Law, § 171).

This first policy is advanced by provisions requiring the licensing of facilities used to transport and store petroleum and the reporting by these facilities of their operations and activities (see Navigation Law, § 174). Also imposed on any party discharging oil is strict liability “for all cleanup and removal costs and all direct and indirect damages, no matter by whom sustained.” (Navigation Law, § 181, subd 1.) Prompt removal of discharged oil is facilitated by the statute’s creation of a special fund, out of which expenditures may be made for cleanup activities and for compensation to the owners of damaged property. Once a spill has occurred, the State has a primary duty to respond promptly, evaluate the environmental impact of a spill, and to engage an agent or contractor or to itself undertake a cleanup effort (Navigation Law, § 176).

The instant litigation arose from a leak in oil storage tanks located in Montgomery County and owned by defendant Brundige Oil Company. The leak, discovered in September 1978, contaminated the water well of a local restaurant, known as Chuck’s Lunch. In late 1979, the State acted to contain and remove the discharge. By the time the task was completed, nearly $10,000 had been expended. The State commenced this action in August 1982, seeking to recover its expenditures.

Defendant moved to dismiss the action as time-barred. It asserted that the action arose from a liability imposed by statute and was governed by a three-year Statute of Limitations (see CPLR 214, subd 2) which commenced to run upon discovery of the oil spill. Supreme Court denied the motion. While the court agreed that a three-year limitation period applied, it reasoned that the action sounded in indemnity and did not accrue until the State made payment for the cleanup, thereby discharging defendant’s primary responsibility. The court determined, however, that the suit was untimely as to those payments made more than three years before the action was commenced.

The Appellate Division modified by applying a different accrual time. The court agreed that the action was governed by a three-year Statute of Limitations. Relying on the strong legislative policy to protect the environment, however, the court held that the statute for the instant action should not commence to run until the final payment for the cleanup is made by the State or the identity of the party who discharged the oil is discovered, whichever occurs last. In this way, the court reasoned, satisfaction of the policy to hold dischargers of petroleum strictly liable would be assured. The part of the complaint seeking recovery for the early payments was, therefore, reinstated.

Defendant was granted leave to appeal to this court on a certified question. This court now affirms, but on different grounds.

As described above, the Navigation Law sets forth a statutory scheme that regulates the cleanup of oil spills and the respective obligations of the State and any party who has caused a discharge. Whereas both are required to pay for the cleanup, the discharger bears ultimate responsibility for the costs incurred (Navigation Law, § 181, subd 1). It is a well-settled principle that “[a] person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity”. (Restatement, Restitution, § 76; see McDermott v City of New York, 50 NY2d 211, 217.) The instant action falls squarely within this definition. The State has incurred expenses to perform a duty primarily owed by the dis-charger of oil, here alleged to be defendant. Thus, the lower courts correctly characterized this action as one for indemnity.

Those courts erred, however, in determining the appropriate limitations period. As an action for indemnity, the applicable statute is the six-year period for actions “upon a contractual obligation or liability express or implied” (CPLR 213, subd 2).

The underpinning or indemnity actions is the prevention of unjust enrichment. In cases where such unfairness would arise from the assumption by a third party of another’s debt or obligation, “a contract to reimburse or indemnify is implied by law” (Brown v Rosenbaum, 287 NY 510, 519; see Blanchard v Blanchard, 201 NY 134). As liability theoretically springs from an implied contract, the six-year period has been applied in indemnity actions (see McDermott v City of New York, 50 NY2d 211, 217, supra). Nothing in article 12 of the Navigation Law requires a different result here; the instant action cannot be said to be “created or imposed” by this statutory scheme. Indeed, the Navigation Law does not expressly provide for an indemnity action such as this. Moreover, it is clear that defendant’s underlying liability for an oil discharge falls outside the purview of the CPLR provision referring to the limitations period for statutory liabilities. That provision has been construed to apply to statutorily imposed liabilities “for wrongs not recognized in the common or decisional law” (State of New York v Cortelle Corp., 38 NY2d 83, 86). It cannot be said that liability for damage to land caused by an oil spill would not exist but for the statute.

Finally, this court rejects the invitation to formulate a variant accrual date for indemnity actions arising out of factual patterns such as presented in this appeal. Although the courts enjoy flexibility, absent statutory directive, in determining the time of an action’s accrual (see Martin v Edwards Labs., 60 NY2d 417, 425), no compelling reason is presented in this case to diverge from the traditional view that an action for indemnity accrues when any “loss is suffered” by the party seeking indemnity (see McDermott v City of New York, supra, at p 217, and authorities cited). Inasmuch as the suit was commenced within six years after the State expended funds for the cleanup, the action is timely as to all of plaintiff’s expenditures.

For the foregoing reasons, the order of the Appellate Division should be affirmed, with costs, and the question certified answered in the negative.

Judges Jasen, Jones, Wachtler, Meyer, Simons and Kaye concur.

Order affirmed, etc.


author: Meyer, J.

text:
    In the Matter of of Isidore Adlerstein, Appellant, v Board of Education of the City of New York, Respondent. In the Matter of Jac Radoff, Appellant, v Board of Education of the City of New York, Respondent.
    Argued November 13, 1984;
    decided December 18, 1984

      POINTS OF COUNSEL

      Ronald J. Koerner for appellant in the first above-entitled matter.
    I. The panel having determined that appellant should be reinstated to the classroom, he should have been restored to his position at New Utrecht with full pay. (Matter of Adrian v Board of Educ., 60 AD2d 840; Ricca v Board of Educ., 47 NY2d 385; Matter of Weimer v Board of Educ., 74 AD2d 574; Matter of Amos v Board of Educ., 54 AD2d 297,43 NY2d 706; Matter of Abramovich v Board of Educ., 46 NY2d 450; Matter of Lynch v Nyquist, 41 AD2d 363, 34 NY2d 588; Matter of Cole v Board of Educ., 90 AD2d 419; Matter of Lezette v Board of Educ., 35 NY2d 272; Board of Regents v Roth, 408 US 564; Perry v Sindermann, 408 US 593.) II. The decision of Special Term granting an order directing respondent Board to pay appellant his back pay from September 27, 1979 through November 17, 1981 should be affirmed and the court below reversed. (Matter of Jerry v Board of Educ., 35 NY2d 534; Matter of Wolfson v Board of Educ., 47 AD2d 748; Matter of Board of Educ. v Nyquist, 48 NY2d 97; Matter of Abramovich v Board of Educ., 46 NY2d 450; Matter of Van Heusen v Board of Educ., 26 AD2d 721; Matter of Adrian v Board of Educ., 60 AD2d 840; Matter of Amkraut v Hults, 21 AD2d 260, 15 NY2d 627; Sinicropi v Bennett, 92 AD2d 309; Matter of Gould v Looney, 34 AD2d 807; Matter of Damino v Shapiro, 50 AD2d 88, 40 NY2d 1056.) III. Petitioner did not have to grieve his assignment to Susan Wagner High School. (Matter of Lezette v Board of Educ., 35 NY2d 272; Bailey v McDougall, 66 Misc 2d 161, 36 AD2d 903; Matter of Community School Bd. 3 v Board of Educ., 68 Misc 2d 66; Matter of O’Connor v Emerson, 196 App Div 807, 232 NY 561; Matter of Scales v Board of Educ., 41 Misc 2d 391; Ricca v Board of Educ., 47 NY2d 385; Matter of Lynch v Nyquist, 34 NY2d 588.) IV. Appellant did not have to file a written notice of claim pursuant to section 3813 of the Education Law with reference to his claim for unpaid wages. CMatter of Piaggone v Board of Educ., 92 AD2d 106;
      Matter of De Paoli v Board of Educ., 92 AD2d 894; Matter of Gross v Board of Educ., 73 AD2d 949; Matter of Tadken v Board of Educ., 65 AD2d 820; Union Free School Dist. No. 6 v New York State Human Rights Appeal Bd., 35 NY2d 371; Ruocco v Doyle, 38 NY2d 132.)

      Frederick A. O. Schwarz, Jr., Corporation Counsel (Lawrence E. Becker, Richard I. Ellis and Joyce A. Brauer of counsel), for respondent in the first above-entitled matter.
    I. The court below was correct in denying appellant back pay for the period when he failed to report to his temporary assignment after his suspension from classroom duties pending trial of charges. (Matter of Jerry v Board of Educ., 35 NY2d 534; Matter of Bott v Board of Educ., 41 NY2d 265; Bailey v McDougall, 66 Misc 2d 161.) II. The court below was correct in denying appellant back pay for the posthearing period from November 24, 1980 to November 17, 1981, when he intentionally failed to report to a teaching assignment. (Rieder v State Univ. of N. Y., 39 NY2d 845; Matter of Houghton v Schuler, 61 AD2d 1104; Matter of Board of Educ. v Yonkers Federation of Teachers, 40 NY2d 268; Matter of Van Heusen v Board of Educ., 26 AD2d 721; Matter of Mishkoff v Nyquist, 57 AD2d 649; Matter of Nino v Yonkers City School Dist., 57 AD2d 558,43 NY2d 865.) III. Appellant’s failure to file a notice of claim pursuant to section 3813 of the Education Law bars his claim for back pay. (Parochial Bus Systems v Board of Educ., 60 NY2d 539; P. J. Panzeca, Inc. v Board of Educ., 29 NY2d 508; Union Free School Dist. No. 6 v New York State Human Rights Appeal Bd., 35 NY2d 371; Matter ofPiaggone v Board of Educ., 92 AD2d 106; Matter of De Paoli v Board of Educ., 92 AD2d 894; Matter of Gross v Board of Educ., 73 AI)2d 949; Matter of Tadken v Board of Educ., 65 AD2d 820; Matter of Coger v Davidoff, 71 AD2d 1044; Todd v Board of Educ., 272 App Div 618, 297 NY 873; Ruocco v Doyle, 38 AD2d 132.)

      Marjorie Mazen Smith and Kenneth E. Warner for appellant in the second above-entitled matter.
    I. Appellant, a tenured social studies teacher, cannot be dismissed for neglect of duty for failing to report to Board of Education headquarters or for failing to perform nonteaching assignments allegedly given while on predetermination suspension, since no duties are required to be performed by a teacher on predetermination suspension and the duties allegedly assigned were in any event outside appellant’s tenure area, and appellant could not be deprived of his salary during this period because State law mandates that salary be paid pending the determination of charges. (Holt v Board of Educ., 51 NY2d 709; Matter of Van Heusen v Board of Educ., 26 AD2d 721; Bailey v McDougall, 66 Misc 2d 161, 36 AD2d 903; Matter of Jerry v Board of Educ., 35 NY2d 534; Matter of Johnson v Board of Trustees, 61 NY2d 1014; Matter of Domino v Shapiro, 50 AD2d 888, 40 NY2d 1056; Ricca v Board of Educ., 47 NY2d 385; Matter of Baer v Nyquist, 34 NY2d 291; Matter of Romeo v Union Free School Dist., 64 AD2d 664.) II. The decision finding appellant guilty of the charge of failing to perform assignments while on suspension was erroneous because the findings and recommendation of the hearing panel were not based on substantial evidence. (300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; Matter of Empire Mut. Ins. Co. [Stroud], 43 AD2d 931; Matter of Leon RR, 48 NY2d 117.) III. The sanction of dismissal imposed on appellant should be set aside as “shocking to one’s sense of fairness” where the dismissal was predicated primarily on appellant’s failure to report to Board of Education headquarters during a portion of his lengthy period of predetermination suspension from his teaching duties, when the ultimate determination on the charges that led to his suspension was that he should be suspended for one year, not dismissed, and where appellant has been teaching satisfactorily for 18 years. (Matter of Pell v Board of Educ., 34 NY2d 222; Matter of Short v Nassau County Civ. Serv. Comm., 45 NY2d 721; Matter of Ansbr0o v McGuire, 49 NY2d 872; Matter of Ahsafv Nyquist, 37 NY2d 182; Matter of Harris v Mechanicville Cent. School Dist., 45 NY2d 279; Matter of Mitthauer v Patterson, 8 NY2d 37; Matter of Santora v D’Elia, 47 AD2d 634.)

      Frederick A. O. Schwarz, Jr., Corporation Counsel (Lawrence E. Becker, Francis F. Caputo, Diane J. Morgenroth and Leslie C. Kamelhar of counsel), for respondent in the second above-entitled matter.
    I. The determination that petitioner was guilty of the charges and specifications preferred against him on June 9, 1982 was reasonable and supported by substantial evidence. (Edison Co. v Labor Bd., 305 US 197; Matter of Collins v Codd, 38 NY2d 269; Matter of Avon Bar & Grill v O’Connell, 301 NY 150; Matter of Eagle v Paterson, 57 NY2d 831; 300 Gramatan Ave. x v State Div. of Human Rights, 45 NY2d 176; Matter of Sowav Looney, 23 NY2d 329.) II. The punishment of dismissal imposed by the Board of Education was not an abuse of discretion. (Matter of Pell v Board of Educ., 34 NY2d 222; Matter of Ahsaf v Nyquist, 37 NY2d 182; Matter of Ansbro v McGuire, 49 NY2d 872; Matter of SMC Employers Corp. v Workmen’s Compensation Bd., 39 NY2d 960; Kostika v Cuomo, 41 NY2d 673;
      Matter of Short v Nassau County Civ. Serv. Comm., 45 NY2d 721; Matter of Jerry v Board of Educ., 35 NY2d 534.)
   OPINION OF THE COURT

Meyer, J.

The refusal by a tenured teacher to accept assignment in his or her tenure area but in a different school than that in which previously employed, or during suspension from duty pending a disciplinary hearing to perform the duties of the staff position to which he or she is assigned, constituted insubordination warranting dismissal. In Adlerstein there should, therefore, be an affirmance, with costs, of the Appellate Division order denying petitioner’s motion for renewal, and in Radoff there should be an affirmance, with costs, of the Appellate Division judgment confirming the determination of the Board of Education dismissing petitioner from his position.

I

In Adlerstein, petitioner was the most senior teacher in the Art Department of New Utrecht High School in Brooklyn, having taught in that position for approximately 20 years. On October 3, 1979, he was suspended, effective September 27, 1979, upon charges that he was unable to render adequate classroom instruction or to maintain a classroom environment conducive to learning, that he failed to maintain adequate records and that he had demonstrated a disregard for authority. Petitioner was directed to report to the Superintendent of Brooklyn High Schools for reassignment and was assigned to, but never reported for, work in the office of the Executive Director of the Division of High Schools.

The hearing panel sustained 5 of the 13 specifications, but deemed the charges sustained insufficient to warrant dismissal. It recommended, however, that petitioner be assigned to a different school in view of the apparent conflict with the New Utrecht principal. The Board restored petitioner to classroom teaching, effective November 24, 1980, but at Susan Wagner High School on Staten Island rather than New Utrecht. It also appealed the panel’s decision to the Commissioner of Education.

Petitioner refused to report to Susan Wagner High School, demanded that he be returned to his former position and, when that demand was not met, began the article 78 proceeding out of which this appeal arises, seeking reinstatement to that position, back pay and pension contributions. While that action was pending the Commissioner, on November 17, 1981, decided the appeal. Concluding that petitioner’s classroom performance was seriously deficient, he authorized the Board either to suspend petitioner without pay for up to one semester or impose a fine of up to $5,000. The Board then suspended petitioner for one semester, effective February 1, 1982. That suspension is not before us on this appeal.

By decision dated December 7,1981, Special Term denied the article 78 petition without prejudice to renewal after exhaustion of administrative remedies. On April 6, 1982, however, it granted renewal and, concluding that petitioner had waived his right to utilize the contract grievance procedure but that the Commissioner’s determination did not take into consideration petitioner’s request for interim relief, awarded him back pay for the period September 27,1979 to November 17,1981, inclusive.

On the Board’s appeal to the Appellate Division, that court reversed. It held that both the assignment to the office of the Director of High Schools and the assignment to Susan Wagner High School were within the power of the Board and that petitioner’s failure timely to utilize the contract grievance procedure and failure to file a notice of claim as required by section 3813 of the Education Law barred petitioner’s right to redress for the period awarded. Petitioner appeals to this court pursuant to CPLR 5601 (subd [a], par [ii]).

Petitioner Radoff, a tenured social studies teacher at Bronx High School of Science for 18 years, was suspended on May 9, 1980. Pending hearing on the charges involved, he was directed to report to the Board’s personnel office and by it was assigned specific tasks, first in the Bureau of Science, then in the Curriculum Division and then in the Industrial Arts office. A hearing panel ultimately found him guilty of several of the charges for which he was suspended and recommended a one-year suspension. While the original charges were pending, however, a second set was filed predicated on Radoff’s failure to report to the Board office for a period of approximately nine months and his refusal to complete assigned tasks. On the second set of charges the hearing panel found petitioner guilty and recommended dismissal. The Board dismissed petitioner and he then began the instant article 78 proceeding to annul the determination and obtain reinstatement to his former position. The petition having been referred to the Appellate Division pursuant to CPLR 7804 (subd [g]), that court, citing the decision in Adler-stein and finding the determination supported by substantial evidence and the penalty not excessive, confirmed the determination and dismissed the petition. The appeal is before us by our leave (62 NY2d 604).

The issue common to the two appeals is whether the Board, of Education may require a suspended teacher to perform non-teaching assignments. Adlerstein also involves the Board’s power to transfer a teacher from one school to another after reinstatement at the conclusion of a disciplinary proceeding. Petitioners argue that the power to suspend from a tenured teaching position does not encompass the power to assign to any other tasks during suspension. Adlerstein argues also that his reassignment to Susan Wagner High School was penal in nature and not an authorized form of discipline. In both cases we affirm.

II

It is now well settled that except as authorized by a collective bargaining agreement or by express statutory authorization the pay of a teacher suspended pursuant to subdivision 2 of section 3020-a of the Education Law pending hearing and determination of disciplinary charges may not be withheld and that the reference in subdivision 4 of that section to reinstatement of an acquitted employee “with full pay for any period of suspension” is too oblique to constitute such an authorization (Matter of Jerry v Board of Educ., 35 NY2d 534; Matter of Board of Educ. v Nyquist, 48 NY2d 97). And although Matter of Jerry made clear that the Legislature was free to grant specifically defined authority to withhold compensation during suspension (35 NY2d, at p 543), there has been no amendment to that effect in the intervening years.

Starting from that premise petitioners conclude that though they must be paid during suspension they cannot be assigned during suspension to Board headquarters work because such an assignment is inconsistent with the meaning of the word “suspension”, because such an assignment is penal in nature and because a tenured teacher may not be assigned outside his or her tenure area without his or her consent (Matter of Bornstein, 17 Ed Dept Rep 236). We disagree.

As defined in Black’s Law Dictionary (5th ed, p 1297), “suspend” means “to interrupt; to cause to cease for a time * * * As a form of censure or discipline, to forbid a public officer, attorney, employee * * * from performing his duties or exercising his function for a more or less definite interval of time.” The argument overlooks that what subdivision 2 of section 3020-a of the Education Law authorizes is suspension “pending a hearing on the charges and the final determination thereof”, which is neither censure nor discipline but “for the protection of the pupils in certain circumstances, for the protection of the teacher in other circumstances, and in many situations for the promotion of the best interests of the public” (Matter of Jerry v Board of Educ., 35 NY2d, at p 541, supra). Nothing in the statutory language or in the Black’s definition necessarily implies that an employee suspended from performing his duties but being paid his salary may not be asked to perform other duties or functions.

For like reason, no penalty is involved in a predetermination suspension. The concept that it may be turns on the in terrorem suggestion that a Board may order a suspended teacher “to attend a job function, no matter how undignified, menial or disparate from his tenure area” (Adlerstein brief, p 20). That has not been shown to have happened here and, indeed, as the tenure discussion below makes clear, could not happen.

The legislative purpose behind the tenure statutes is “to attract qualified persons to teaching and to provide job protection to teachers who have given years of satisfactory service” (Matter of Baer v Nyquist, 34 NY2d 291, 295), “ ‘to give security to competent members of the educational system in the positions to which they have been appointed’ ” (Matter of Boyd v Collins, 11 NY2d 228, 233). That purpose can hardly be said to be frustrated by the temporary assignment, pending determination whether the teacher has demonstrated incompetence or rendered unsatisfactory service, to tasks which, though nonteaching, bear a reasonable relationship to the normal obligations of teachers. Tenure may relate to a special area, a general area, or be vertical or horizontal in reach (Steele v Board of Educ., 40 NY2d 456; Matter of Baer v Nyquist, 34 NY2d 291, supra). Without pausing to parse the distinctions in the various forms of tenure, we note that the concept does not entitle a teacher to a specific class or proscribe assignment to proper duties of a teacher other than classroom teaching of a specific subject. Thus, in situations not involving a teacher suspended pending disciplinary proceedings, assignment as a “ ‘floating teacher’ in grades one through five” has been upheld (Matter of Mishkoff, 57 AD2d 649; Matter of Middleton, 16 Ed Dept Rep 368) as has assignment to study hall, library and lunch room supervision (Matter of Van Heusen v Board of Educ., 26 AD2d 721; Matter of Garry, 19 Ed Dept Rep 359; Matter of Middleton, supra), and supervision in the school yard (Matter of v Fisch, 17 Ed Dept Rep 64). And although all of those cases involved either teaching or supervision of pupils in a school milieu, a teacher under suspension pending disciplinary proceedings has been held subject to reassignment during suspension to nonteacher supervisory school duties (Matter of Union Free School Dist. No. 10 v Miller, Supreme Ct, Suffolk County, Jan. 11, 1982, Index 80-2519), to assignment to the office of the Superintendent of Manhattan High Schools (Matter of MacDonald, 22 Ed Dept Rep 146), and to perform “other appropriate duties” (Matter of Community School Bd. No. 30 [Satz], interim order of Comr of Educ, May 14,1982). Bailey v McDougall (66 Misc 2d 161, affd 36 AD2d 903) is not to the contrary, for it held only that a temporary assignment of tenured teachers to a different school within a community school district was a “transfer” within the meaning of section 2590-j of the Education Law, which authorized transfer as disciplinary action (and for other inapplicable reasons) and, therefore, could only be accomplished after disciplinary proceedings had been begun by suspension.

Bearing in mind the relatively limited period of a suspension pending completion of disciplinary proceedings; the fact that the charges out of which suspension arises in some cases will counterindicate assignment of the suspended teacher to tasks involving pupil supervision; the financial burden upon the school district of having to pay both the suspended teacher and the substitute hired to replace him or her, and the chilling effect on otherwise appropriate disciplinary proceedings that would arise from such a burden; and the fact that the rationale of Matter of Jerry (supra) was not his or her release from all service but the protection of a suspended teacher from impoverishment during the period of suspension, we conclude that nonteaching assignment at district headquarters, or in other school or district offices, which bears reasonable relationship to the suspended teacher’s competence and training and is consistent wi th the dignity of the profession, is permissible. In the context of the cases under review, Radoff was properly dismissed for failure to perform the tasks to which assigned during suspension and for the same reason Adlerstein was not entitled to recover back pay for the period September 27, 1979 through November 24,1980.

Ill

There remains for consideration the question of Adler-stein’s back pay claim for the period November 25,1980 through November 17, 1981, which turns on whether he was entitled after the Board Panel decision reinstating him to return to his former teaching position at New Utrecht High School. He was not.

While we note that subdivision 8 of section 2590-j of the Education Law relating to community school districts, contains express provision for transfer of teachers within the school district as a matter of disciplinary action, and that subdivision 4 of section 3020-a prescribes as punishment only “a reprimand, a fine, a suspension for a fixed time without pay or dismissal”, we attach no significance to that fact in the context of Adierstein’s claim because subdivision 6 of section 2566, applicable to the Board of Education of the City of New York (§ 2550), authorizes the superintendent of schools of a city, expressly and without limitation, “to transfer teachers from one school to another”. That power has been held to be absolute in the absence of contractual provision otherwise or of malice, bad faith, gross error or prejudice (Matter ofLefkowitch v Nyquist, 29 Misc 2d 14; Matter of McLernon, 16 Ed Dept Rep 13, 14; Matter ofWoicik, 2 Ed Dept Rep 171; see Matter of Board of Educ. v Ambach, 84 AD2d 55, 58, revd on other grounds 56 NY2d 792).

Petitioner Adlerstein calls our attention to no applicable contract provision but argues that his transfer from New Utrecht High School in Brooklyn to Susan Wagner High School on Staten Island violated sections 2510 and 2585 of the Education Law, in that his services at New Utrecht were discontinued although his former position was not abolished, that it was intended as a penalty and that it requires him to travel for two hours each way between his home in Queens and Staten Island. He could, however, be transferred pursuant to subdivision 6 of section 2566 of the Education Law even though his position at his former school was not abolished. Moreover, petitioner has submitted no evidence suggesting that his transfer was in bad faith or arbitrary. To the contrary, the hearing panel that heard the charges against him recommended that he be reinstated “but with the profound hope that the Board of Education will be able to assign [him] to another building” and with the notation that to keep him “in the same building, where he would again be under Principal Russo, would be a mistake.”

The only other argument advanced against petitioner’s reassignment to Susan Wagner High School is that subdivision 4 of section 3020-a of the Education Law mandated that “[i]f the employee is acquitted he shall be restored to his position with full pay for any period of suspension and the charges expunged from his record.” Aside from the fact that petitioner was not acquitted, the subdivision does not specify that he must be returned to the same position in the same building from which he was suspended, but only that he be restored to his position as an art teacher, subject, as he was before suspension, to transfer by the superintendent to any other school within the district.

For the foregoing reasons, the order of the Appellate Division in Matter of Adlerstein should be affirmed, with costs, and in Matter ofRadoff the judgment of the Appellate Division should be affirmed, with costs.

Chief Judge Cooke and Judges Jasen, Jones, Wachtler, Simons and Kaye concur.

Matter of Adlerstein v Board of Educ.: Order affirmed, with costs.

Matter ofRadoff v Board of Educ.: Judgment affirmed, with costs.

      . In Adlerstein, the Board argues that the proceeding is barred by petitioner’s failure to exhaust contract grievance procedures or file a notice of claim as required by section 3813 of the Education Law. In view of our conclusion with respect to petitioner’s arguments, we need not reach those questions. In Radoff, petitioner argues that the contract between the Board and the United Federation of Teachers permitted assignment to district offices or central headquarters only on a voluntary basis, that there was not substantial evidence to sustain the charges and that the penalty of dismissal v/as excessive. We do not reach the first contract issue because the argument was not made to the courts below and the contract is not part of the record. The other two arguments we have considered and find to be without merit.

      . The powers granted the superintendent by section 2566 are “subject to the by-laws of the board of education,” but petitioner has not referred as to any applicable by-law.