author: Desmond, J.

text:
    Berkshire Fine Spinning Associates, Inc., Appellant, v. City of New York et al., Respondents.
    Argued January 20, 1959;
    decided March 12, 1959.

      Truman Henson and Robert D. Cole for appellant.
    I. The New York City General Business and Financial Tax Laws, as appHed to plaintiff, are unconstitutional and whoEy void for violation of the Constitution of the United States. (Field Enterprises v. Washington, 352 U. S. 806; Cheney Bros. Co. v. Massachusetts, 246 U. S. 147; Norton Co. v. Department of Revenue, 340 U. S. 534; Matter of Carter & Weekes Stevedoring Co. v. McGoldrick, 294 N. Y. 906, 330 U. S. 422; Matter of Seeth v. Joseph, 276 App. Div. 188; Matter of United Air Lines v. Joseph, 282 App. Div. 48, 307 N. Y. 762; Matter of United Piece Dye Works v. Joseph, 282 App. Div. 60, 307 N. Y. 780, 348 U. S. 916; National Steel Corp. v. City of New York, 1 Misc 2d 1012, 283 App. Div. 867; United States Envelope Co. v. City of New York, 2 A D 2d 343, 3 N Y 2d 418.) II. Whether or not plaintiff is engaged in the City of New York in interstate commerce exclusively, the New York City General Business and Financial Tax Laws are stiE inapplicable to plaintiff because the provisions of said laws relating to apportionment are, as appEed to plaintiff, unconstitutional and void for offense against the Constitution of the United States and the Constitution of the State of New York. The provisions thereof purporting to prescribe a basis of apportionment are unconstitutional and void for failure distinctly to state the tax, for vagueness and uncertainty, for unlawful delegation of the taxing power, and for prescribing an arbitrary and discriminatory basis of apportionment. (Schechter Corp. v. United States, 295 U. S. 495; United States v. Cohen Grocery Co., 255 U. S. 81; Cline v. Frink Dairy Co., 274 U. S. 445; Connolly v. General Constr. Co., 269 U. S. 385; Small Co. v. American Sugar Refining Co., 267 U. S. 233; Standard Chem. & Metals Corp. v. Waugh Chem. Corp., 231 N. Y. 51; Gautier v. Ditmar, 204 N. Y. 20; People ex rel. Hopkins v. Board of Supervisors of Kings County, 52 N. Y. 556.) III. The statute is unconstitutional and void for lack of uniformity, in violation of the due process and equal protection clauses of the State and Federal Constitutions. (Magoun v. Illinois Trust & Sav. Bank, 170 U. S. 283; Matter of Atlas Tel. Co., 273 N. Y. 51;
      Johnson v. Smith, 297 N. Y. 165, 335 U. S. 824.) IV, And it is unconstitutional and void for imposing a retroactive tax, in violation of the State and Federal Constitutions. (Oklahoma v. Wells, Fargo & Co., 223 U. S. 298; Lewellyn v. Frick, 268 U. S. 238; Nichols v. Coolidge, 274 U. S. 531; Goolidge v. Long, 282 U. S. 582; Miller v. United States, 294 U. S, 435; District of Columbia v. Radio Corp. of America, 232 F. 2d 376, 352 U. S. 845; Germania Sav. Bank v. Village of Suspension Bridge, 159 N. Y. 362; Matter of Pell, 171 N. Y. 48.) V. Plaintiff' is entitled to the relief prayed for in this action because, whatever the ground of unconstitutionality, the fact that the New York City General Business and Financial Tax Laws, as applied to plaintiff, are unconstitutional and void renders those laws wholly inapplicable to plaintiff and deprives defendants of all authority and jurisdiction. (Richfield Oil Corp. v. City of Syracuse, 287 N. Y. 234; Dun & Bradstreet v. City of New York, 276 N. Y. 198; Olive Coat Co. v. City of New York, 283 N. Y. 733; Matter of McCall Corp. v. Gerosa, 2 A D 2d 358; Gorham Mfg. Co. v. Tax Comm., 266 U. S. 265.)

      Charles H. Tenney, Corporation Counsel (Stanley Buchsbaum, Bernard E. Sherris and John J. Lyden of counsel), for respondents.
    I. The commerce clause does not bar the imposition of the tax. (Matter of United Piece Dye Works v. Joseph, 282 App. Div. 60, 307 N. Y. 780, 348 U. S. 916; Norton Co. v. Department of Revenue, 340 U. S. 534; Field Enterprises v. State of Washington, 47 Wn. [2d] 852, 352 U. S. 806; Puget Sound Co. v. Tax Comm., 302 U. S. 90; Joseph v. Carter & Weekes Co., 330 U. S. 422; Gwin, White & Prince v. Henneford, 305 U. S. 434; Fidelity & Deposit Co. v. United States, 187 U. S. 315; Spector Motor Service v. O’Connor, 340 U. S. 602; Real Silk Mills v. Portland, 268 U. S. 325; McGoldrick v. Berwind-White Co., 309 U. S. 33; McLeod v. Dilworth Co., 322 U. S. 327; Cheney Bros. Co. v. Massachusetts, 246 U. S. 147.) II. The provision in the enabling act and the local tax law directing the Comptroller to establish methods of allocation is constitutional. (Olive Coat Co. v. City of New York, 283 N. Y. 733; Matter of Olive Coat Co. v. McGoldrick, 287 N. Y. 769; Matter of New Yorker Mag. v. Gerosa, 3 N Y 2d 362, 356 U. S. 339; Wheeling Steel Corp. v. Fox, 298 U. S. 193; American Power Co. v. S. E. C., 329 U. S. 90; Hampton

      & Co. v. United States, 276 U. S. 394; People v. Brooklyn Garden Apts., 283 N. Y. 373; Opp Cotton Mills v. Administrator, 312 U. S. 126; United States v. Shreveport Grain & Elevator Co., 287 U. S. 77; Pacific Tel. Co. v. Seattle, 291 U. S. 300; Puget Sound Co. v. Seattle, 291 U. S. 619; Jordan v. De George, 341 U. S. 223.) III. Section 22 of article III of the New York Constitution does not apply to the tax law here involved. (Jones v. Chamberlain, 109 N. Y. 100; Sun Mut. Ins. Co. v. City of New York, 5 Sandf. 10; People v. Moring, 3 Abb. Ct. App. 539; People ex rel. Broderick v. Goldfogle, 123 Misc. 399, 213 App. Div. 677, 242 N. Y. 540; Steuben Restaurants v. City of New York, 202 Misc. 22; People v. Fire Assn. of Phila., 92 N. Y. 311; Matter of McPherson, 104 N. Y. 306; People v. Home Ins. Co., 92 N. Y. 328; People v. Supervisors of Orange County, 17 N. Y. 235.) IV. The validity of the allocation formula cannot be reviewed in this action. So long as plaintiff is subject to some tax, the amount of tax can only be determined by the administrative procedure and article 78 review. Invalidity of the formula does not destroy the entire right to tax. (Matter of Gulf Oil Corp. v. Joseph, 307 N. Y. 342; Matter of McCall Corp. v. Joseph, 284 App. Div. 484; Matter of McCall Corp. v. Gerosa, 3 A D 2d 358; Central Greyhound Lines v. Mealey, 298 N. Y. 876, 334 U. S. 653; Schuylkill Trust Co. v. Pennsylvania, 296 U. S. 113; Commonwealth v. Schuylkill Trust Co., 327 Pa. 127; Johnson Oil Co. v. Oklahoma, 290 U. S. 158.) V. Insofar as plaintiff contends that the tax is excessive because the Comptroller’s allocation formula was improper or on any other ground, the exclusive remedy provision applies and the question of the proper amount to be paid must be decided under the administrative procedure. (Excelsior Oil Co. v. City of New York, 4 A D 2d 937, 4 N Y 2d 675; Children’s Bus Service v. City of New York, 272 App. Div. 1058; Lewis v. City of Lockport, 276 N. Y. 336; All Amer. Bus Lines v. City of New York, 268 App. Div. 508, 296 N. Y. 571; Dun & Bradstreet v. City of New York, 276 N. Y. 198.)
   Desmond, J.

This suit was brought for a declaratory judgment that the New York City General Business and Financial Tax Laws (Administrative Code of City of New York, § B46-2.0, subd. a; see enabling act, General City Law, § 24-a) are, if and as applied to plaintiff, unconstitutional because plaintiff’s New York City activities constitute interstate commerce exclusively. As further relief plaintiff demanded judgment for $23,813.41 in refund of such taxes paid to the city by plaintiff under protest for the years 1947, 1948 and 1951. At Special Term each side moved for summary judgment in its favor and plaintiff was granted all the relief it had prayed for. However, the Appellate Division reversed and dismissed the complaint.

The problem is a familiar one. Are plaintiff’s New York City activities so substantial and separable from its interstate commerce as to be subject to this local tax? A negative answer will end the lawsuit and give plaintiff judgment. An affirmative answer will leave unanswered further inquiries as to whether the allocation formula of this tax law (see Administrative Code, § B46-11.0, subd. 8, and City Comptroller’s Regulations, art. 211) as applied to plaintiff is arbitrary and discriminatory and, if so, whether relief as to that can be granted in a plenary action like this one.

The facts are undisputed. Plaintiff is a Massachusetts corporation with its principal business and executive office in Providence, R. I., authorized to do business in New York State (but holding no corporate meetings here) and engaged in manufacturing textile fabrics and curtains in factories outside this State. All plaintiff’s receipts come from the sale of those fabrics and curtains. One of plaintiff’s out-of-State offices arranges for the purchase of cotton in the South, then has the cotton shipped to plaintiff’s factories in Rhode Island, Massachusetts and Vermont from which plaintiff ships out to its customers in various States greige goods (unbleached fabrics) and curtains and curtain materials. Some of the unbleached fabrics are sent for refinishing by plaintiff to dyeing plants (some of them in New York State) owned by others, where the greige goods are dyed or printed as required by accepted orders from plaintiff’s customers. In New York City plaintiff has two separate offices, one in the 1‘ curtain trade district ’ ’ and one in the ‘ ‘ textile district ’ ’. A vice-president of plaintiff supervises both offices and is head also of its finished goods department. Under him are two other vice-presidents, each managing one of the two New York City offices. The New York offices employ altogether about 90 people (out of its total force of 8,500 people) of whom 20 or so are salesmen, the rest being clerks, receptionists, telephone operators, a credit manager, etc. The rent for the two New York City offices runs to about $50,000 a year. Plaintiff has no factory, warehouse or store in New York State, keeps no stock of goods in this State and owns no property here except the furnishings of its New York City offices.

The functions of plaintiff’s New York City offices and staff are well described in its own complaint in this suit as follows: “to maintain contact with the trade by soliciting established and prospective accounts; to receive, and to reject, modify or accept, offers to buy; to forward accepted offers to one of plaintiff’s plants or warehouses outside the State of New York to be filled; to perform credit investigations and functions; to make up and dispatch invoices of sales of finished goods, but not of greige goods or curtains; and to receive and deposit payments from customers.” Plaintiff’s- New York City salesmen take from prospective customers and submit through their department heads to one of the New York City vice-presidents oral proposals to buy plaintiff’s goods (the minimum order is for 3,000 yards). If the price offered by the customer is up to plaintiff’s established price and the order is of a size which does not create special production problems, the offer is accepted and a contract entered into by plaintiff’s New York City personnel without further reference to plaintiff’s other offices or factories. If there is doubt in the minds of New York City personnel as to adequacy of the price offered of as to availability of the goods, there is consultation between the New York City and Providence offices. If the doubt is resolved, the offer is accepted by means of a contract made and signed for plaintiff at and by the New York, City office (except that in some instance the customer by preference uses his own purchase form which is accepted by plaintiff at New York City). No goods, however, are shipped from anywhere in New York State to any customer anywhere. Goods are shipped f.o.b. out-of-State points.

In addition to its 20 salesmen working in New York City, plaintiff has other salesmen in other parts of the United States. Purchase offers obtained by those out-of-State salesmen are sent by them to one of the two New York City offices and thereafter the offers are processed at New York City just like the offers which originate in New York City. All checking of a customer’s credit is done at New York City and no orders are accepted until the credit has been approved by the credit manager and his employees at one of the New York City offices. All plaintiff’s sales records and its accounts with its customers are kept at the New York City offices as is an inventory of all plaintiff’s goods wherever located. All payments for goods sold are received and banked in New York City but billing to customers for greige goods only is from Providence.

Plaintiff’s brief asserts that its “ sole and only activity in the City, or the State, of New York consists of the negotiation of such interstate sales.” However, the record shows activities going much beyond or outside sale negotiating. Plaintiff’s principal vice-president in New York City, a Mr. Kennedy, not only has charge of the selling of all plaintiff’s finished goods but supervises a department in New York City which creates designs and purchases designs for fabrics. Also, on the basis of information as to trends brought in by his salesmen, Kennedy gives directions to Providence as to colors and amounts of various dyeings. The New York City offices, in response to the discovered demands of the market, instructs Providence as to “ the type of fabrics that we (New York) wished to be made ”. The New York City curtain trade office similarly gives instructions direct to plaintiff’s curtain factory in Warren, Rhode Island, to manufacture more of certain curtain material when the inventory record kept at New York City showed an insufficient amount of that material on hand. The New York City offices carry on other incidental activities such as placing advertising in trade publications and making adjustments or settlements on at least some complaints of customers.

Is there anything in all this ‘ ‘ that can be regarded as a local business as distinguished from interstate commerce ” (Cheney Bros. Co. v. Massachusetts, 246 U. S. 147, 153-154)? Or is plaintiff’s local activity “such an integral part of the interstate process, the flow of commerce, that it cannot realistically be separated from it” (Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U. S. 157, 166)? The applicable rule of law is old and simple to state but less simple to apply, A local privilege tax like that of New York City may not be imposed upon interstate sales or solicitations by an interstate business (Matter of United Piece Dye Works v. Joseph, 307 N. Y. 780, cert. denied 348 U. S. 916). Mere local “drumming up” of orders does not without more authorize local taxation of the transaction when the goods are located and delivered in another State (Norton Co. v. Department of Revenue, 340 U. S. 534, 537). On the other hand, the local authorities may validly tax the privilege of doing business locally if the local business operations though related to interstate movements of goods extend substantially beyond the sale and promotion of the products and include a “local incident” which is “ sufficient to bring the transaction within its taxing power” (Norton Co. v. Department of Revenue, supra, p. 537).

Scores of decisions are cited to us by the parties but to reach decision on this phase of the case we will examine three only of those cited cases. The first is Matter of United Piece Dye Works v. Joseph (282 App. Div. 60, affd. 307 N. Y. 780, supra). United was a New Jersey corporation which at three plants (none of which was in New York State) dyed, printed and finished fabrics owned by others and which were received by United from its customers’ textile mills, all of which were outside the State. After its operations on the fabrics were completed, United shipped the goods back to the customers, sometimes at New York State points. In New York City United had a sales, promotional and clerical staff. The sales representatives carried about and showed to prospective customers samples of the work done at the out-of-State dyeing plants of United and furnished other information as to United’s services. The United Piece case record makes it clear that the New York office did no more than “solicit or promote”. Sales and contracts were never consummated in New York nor were bills sent from there or payments received there. The New York courts held that United conducted no separable business, the privilege of doing which could be locally taxed.

Next (but out of chronological order) we consider the Norton v. Department of Revenue case (340 U. S. 534 [1951], supra) which involved an Illinois privilege tax on selling tangible personal property in Illinois, expressly exempting “business in interstate commerce ”. The Illinois operations of the Norton concern, a Massachusetts corporation, were diversified. Its over-the-counter retail sales from local stock were, of course, locally taxable. Similarly, it seems, the local tax was held by the courts to be due on sales of goods ordered through the Chicago store but delivered not from the Illinois stock but direct from Massachusetts to the Illinois buyers. As to sales of goods not carried in Illinois stock but shipped into Illinois to fill orders sent direct to Massachusetts by Illinois customers and so not “generated” by Norton’s local services, the Supreme Court .held “interstate commerce” and exempted these from the tax. A controversial class of Norton sales was of goods not carried in stock by it in Illinois but sent and delivered through the Chicago store. This last class of sales, also, was held by the Supreme Court to be subject to the Illinois privilege tax. In the Norton opinion the Supreme Court, restating the rule as generally understood, made this statement (supra, p. 537): “ Where a corporation chooses to stay at home in all respects except to send abroad advertising or drummers to solicit orders which are sent directly to the home office for acceptance, filling, and delivery back to the buyer, it is obvious that the State of the buyer has no local grip on the seller. Unless some local incident occurs sufficient to bring the transaction within its taxing power, the vendor is not taxable.” Since Norton employed no Illinois solicitors or traveling salesmen it seems obvious that the “ local incident ” which justified local taxation as to that last-described group of sales was the maintenance in Illinois of the local office or store and the services it rendered in bringing about or completing those sales. Wrote the Supreme Court in Norton (supra, p. 538): “Petitioner has not established that such services as were rendered by the Chicago office were not décisive factors in establishing and holding this market.”

The third and last of the three cases we analyze is Field Enterprises v. State of Washington (352 U. S. 806 [1956]) where the Supreme Court affirmed the Washington State courts (47 Wn. [2d] 852) in holding Field’s book sale business to be subject to the State “ business and occupation tax ”. In Field, the United States Supreme Court wrote no opinion beyond the citation of the Norton decision (supra). But the absence of a full opinion does not make Field any less controlling an authority (see speech of Justice Hablan, Record of Association of Bar of City of New York, Yol. 13, pp. 541, 546). The facts of the Field case are set out in the Washington Supreme Court’s opinion. Field is a Delaware corporation with its principal office in Chicago and a divisional office in Seattle, staffed by two managers and clerks and bookkeepers. The Seattle district controlled operations in several States and employed a large number of salesmen of whom about 30 worked full time in the State of Washington. The sales were of sets of educational books, the stocks of which except necessary samples were maintained outside Washington. The salesmen solicited prospective customers and when successful procured signed order forms which were subject to acceptance in Chicago. The salesmen sent the form and a down payment (or full payment) to Chicago where the order was accepted or rejected. Field’s activities were held by the courts to be subject to the Washington State privilege tax which, like New York City’s, is measured by gross receipts.

There are, of course, factual differences between Norton and Field (supra) and between Field and the present case. But the differences favor taxability here, since the local New York City activities of the present plaintiff considerably exceed the local activities in Norton and Field and include a substantial measure of control by plaintiff’s officials in New York City of production, contracting, shipment and credit. We conclude that the Appellate Division was correct in this case in holding that the imposition on plaintiff of this New York City tax did not violate the Interstate Commerce Clause of the Federal Constitution.

Plaintiff argues, as did the dissenting Justices in the Appellate Division, that this is in effect an overruling of the comparatively recent Matter of United Piece Dye Works v. Joseph (307 N. Y. 780, cert. denied 348 U. S. 916, supra). The Supreme Court did not affirm in Matter of United Piece Dye Works but denied certiorari only. But the more persuasive answer to the argument from the United case is that the facts of that situation went no further than mere “ drumming up business ”, while here there are separable “ local incidents ” consisting of important services before and after sale and shipment of the goods.

After the argument herein, the United States Supreme Court, on February 24, 1959, handed down an opinion in two cases consolidated for decision: Northwestern States Portland Cement Co. v. Minnesota and Williams v. Stockham Valves & Fittings (358 U. S. 450). The decision upheld the validity of apportioned State net income taxes upon companies engaged exclusively in interstate commerce in the taxing States. We find nothing in that decision requiring any change in the conclusions now reached by us in the present case.

Plaintiff argues (and cites section 22 of article III of the New York State Constitution in support) that the statute imposing this New York City General Business Tax is unconstitutionally vague and represents an unconstitutional delegation of legislative power. The cited provision of the New York State Constitution does not apply at all to local taxes (see Matter of McPherson, 104 N. Y. 306; Jones v. Chamberlain, 109 N. Y. 100, 109). Plaintiff’s other charges of unconstitutional vagueness and delegation of power have been rejected by this court as to this very tax in Olive Coat Co. v. City of New York (283 N. Y. 733) which decision followed Matter of Western Elec. Co. v. Taylor (276 N. Y. 309; see, also, Matter of New Yorker Mag. v. Gerosa, 3 N Y 2d 362, 369, appeal dismissed 356 U. S. 339). The same result was reached in the later litigation between Olive Coat Company and the City Comptroller (reported at 287 N. Y. 769). Accordingly, these questions are no longer open in this court.

Finally, appellant asserts that the allocation formula applied by the City Comptroller to plaintiff’s combined receipts produces an arbitrary and unreasonable result in that it taxes plaintiff’s one third of whole gross receipts from its general interstate business whereas, according to plaintiff, only about 1% of its tangible property is within New York City and only some 2% to 3% of its total annual wage and salary budget is paid for services rendered to it by its officers and employees in New York City. Generally, plaintiff’s contention in this respect is the same as that made by the taxpayer in Matter of Gulf Oil Corp. v. Joseph (307 N. Y. 342) where this court rejected as arbitrary and contrary to legislative intent the use of the 33%% minimum which the Comptroller applies in these cases by use of the allocation formula set out in article 211 of his regulations (see Administrative Code of City of New York, § B46-11.0, and see our opinion in the Gulf Oil Corp. case, supra). However, plaintiff’s insuperable difficulty at this point is that his attack on the amount of the tax .and the correctness of the formula for arriving at it cannot be litigated in a plenary suit like the present one. The sole remedy for relief from incorrectness of allocation formula or the application thereof is a proceeding under article 78 of the Civil Practice Act, not by action (Administrative Code, § B46-9.0; Lewis v. City of Lockport, 276 N. Y. 336; Olive Coat Co. v. City of New York, 283 N. Y. 733, supra; Cooper Union v. City of New York, 298 N. Y. 578; Excelsior Oil Co. v. City of New York, 4 A D 2d 937, motion for leave to appeal denied 4 N Y 2d 675). As to the New York City sales tax we held many years ago in Dun & Bradstreet v. City of New York (276 N. Y. 198, 206) that “ where taxing officers have jurisdiction, their acts are not void for mere error * * * but can only be reviewed in the manner provided by statute ” (see Rockland Light & Power Co. v. City of New York, 289 N. Y. 45). Since this general business tax applies on its face and not unconstitutionally to plaintiff’s New York City activities, no reason appears why plaintiff to contest the amount of the tax or the formula for determining the amount should have any relief except that provided for within the statute itself (see Richfield Oil Corp. v. City of Syracuse, 287 N. Y. 234, 242). A taxpayer may and frequently does (see Matter of New Yorker Mag. v. Gerosa, 3 N Y 2d 362, supra) raise in an article 78 proceeding all possible questions of constitutionality, applicability, correctness of formula and of tax.

The judgment should be affirmed, with costs.

Chief Judge Conway and Judges Dye, Fuld, Froessel, Van Voorhis and Burke concur.

Judgment affirmed.


source: Caselaw Access Project

author: Desmond, J. Fuld, J. (dissenting).

license: Public Domain

text:
    In the Matter of the Claim of Felicia Stimburis, Appellant, against Leviton Mfg. Co. et al., Respondents. Workmen’s Compensation Board, Respondent.
    Argued January 6, 1959;
    decided March 12, 1959.

      Louis Mendelson and William Doblin for appellant.
    I. The board’s finding of fact that section 25-a of the Workmen’s Compensation Law is inapplicable to the claim is supported by substantial evidence in the record. II. The Workmen’s Compensation Board has inherent power to correct inequities, mistakes or fraud in its own proceedings. (Matter of Joyce v. Eastman Kodak Co., 238 N. Y. 142; Royal Ind. Co. v. Heller, 256 N. Y. 322; Matter of Fayetteville Cemetery Assn. v. McGarry, 202 Misc. 141; Matter of Lawrence v. Meyer-Garry, Inc., 278 App. Div. 990; Matter of Drew v. State Liq. Auth., 2 A D 2d 75, 2 N Y 2d 624, 2 N Y 2d 782; People ex rel. Hotchkiss v. Board of Supervisors, 65 N. Y. 222.) III. Claimant’s request on November 24, 1944 for a reopening of her claim although denied by the board may be reviewed by the board and a different result reached and an award made. (Matter of Foerg v. Sackett S Wilhelms Corp., 249 App. Div. 900; Matter of Frank v. Rypinski, 2 A D 2d 616; Matter of Roder v. Northern Maytag Co., 297 N. Y. 196.) IV. The liability of the employer and carrier under article 4-A of the Workmen’s Compensation Law was absolute and exclusive and the board properly held that the provisions of section 25-a did not apply to this case. (Matter of Diskin v. 99 Wall St. Corp., 279 App. Div. 1103, 304 N. Y. 986; Matter of Sturesky v. Straussman, 273 App. Div. 1036, 298 N. Y. 937; Matter of Casey v. Hinkle Iron Works, 299 N. Y. 382; Matter of Kopec v. Buffalo Brake Beam-Acme Steel & Malleable Iron Works,
      2 A D 2d 946.) V. The Appellate Division overlooked the purpose of the medical testimony and ignored the error of the board. (Matter of Rapkiewicz v. Taylor Iron Foundry, 266 App. Div. 35.)

      George J. Hayes, Charles G. Tierney and Morris N. Lissauer for Leviton Mfg. Co. and another, respondents.
    The Appellate Division properly determined that the claim for compensation under former article 4-A of the Workmen’s Compensation Law was barred by the time limitations as contained in sections 25-a and 123 of the statute. (Cifolo v. General Elec. Co., 305 N. Y. 209; Matter of Kazia v. Woodcrest Constr, Co., 282 App. Div. 580; Matter of Kaplan v. Wirth & Birnbaum, 301 N. Y. 121; Matter of Joyce v. Eastman Kodak Co., 238 N. Y. 142; Royal Ind. Co. v. Heller, 256 N. Y. 322; Matter of Fayetteville Cemetery Assn. v. McGarry, 202 Misc. 141; Matter of Lawrence v. Meyer-Garry, Inc., 278 App. Div. 990; Matter of Drew v. State Liq. Auth., 2 A D 2d 75, 2 N Y 2d 624; Matter of Frank v. Rypinski, 2 A D 2d 616; Matter of Roder v. Northern Maytag Co., 297 N. Y. 196; Scherini v. Titanium Alloy Co., 286 N. Y. 531; Powers v. Porcelain Insulator Corp., 285 N. Y. 54; Matter of Foerg v. Sackett & Wilhelms Corp., 249 App. Div. 900; Matter of Diskin v. 99 Wall St. Corp., 279 App. Div. 1103, 304 N. Y. 986; Matter of Sturesky v. Straussman, 273 App. Div. 1036, 298 N. Y. 937; Matter of Casey v. Hinkle Iron Works, 299 N. Y. 382; Matter of Rapkiewicz v. Taylor Iron Foundry, 266 App. Div. 35.)

      John M. Cullen for Special Fund for Reopened Cases, respondent.
    I. The order of the Appellate Division unanimously reversing the decision of the Workmen’s Compensation Board and dismissing the claim pursuant to the provisions of section 123 and section 25-a is proper. (Matter of Rapkiewicz v. Taylor Iron Foundry, 266 App. Div. 35; Matter of Kazia v. Woodcrest Constr. Co., 282 App. Div. 580; Matter of Kopec v. Buffalo Brake Beam-Acme Steel & Malleable Iron Works, 304 N. Y. 65; Matter of Iodice v. General Abrasive Co., 5 A D 2d 707; Matter of Kaplan v. Wirth & Birnbaum, 301 N. Y. 121; Matter of Houston v. Mantha Co., 301 N. Y. 121.) II. In no event may an award be made against the Reopened Case Fund under section 25-a because of its retroactive limitations.
   Desmond, J.

The question of law is: did the Workmen’s Compensation Board have power in 1955 to reopen this workmen’s compensation case wherein it had in 1944 dismissed the claim as noncompensable Í

Claimant appeals as of right from a unanimous Appellate Division, Third Department, order which reversed an award by the Workmen’s Compensation Board for total disability due to silicosis. The Appellate Division’s order dismissed the claim. Although the ‘ ‘ Special Fund for Reopened Cases ’ ’ appeared here as a respondent through its attorney, it was agreed on the argument that if the award reversed by the Appellate Division be sustained by us that award should run not against the Special Fund but against the employer and the State Insurance Fund as insurance carrier.

On March 24, 1944, at a time when then article 4-A of the Workmen’s Compensation Law provided for workmen’s compensation as to silicosis for total disability only and not for partial disability (see present § 3, subd. 2, col. 1, No. 28), this claimant filed her claim. She had been working for 15 years for appellant employer Levitón in a silica dust exposure job. Because of her physical condition she had been forced to give up that work a few days before she filed this claim. At about the same time claimant’s own physician Dr. Radetsky filed with the board a written report known as “ Attending Physician’s 48 Hour Preliminary Report ” in which he stated that claimant was suffering from “Bilateral diffuse advanced silicosis”. Elsewhere in that report Dr. Radetsky stated as to the probable duration of treatment: “Indefinite perm.” and stated that claimant was not working at the time of the report and that the probable duration of disability was indefinite and that claimant at that time was not able to work. Filed with the board in April, 1944 was a report by a Dr. Goldner who had examined claimant for the carrier and who reported that the obvious diagnosis was silicosis and that claimant was disabled at the time of the report and probably should never again do work involving exposure to dust or silica. Then the Workmen’s Compensation Board arranged for an examination and report by a Dr. Edgar Mayer, a member of its impartial chest panel. Dr. Mayer made a report which described * ‘ a widespread small nodular dissemination of silicosis throughout both lungs Dr. Mayer’s conclusion, however, years later admitted by him to have been erroneous as to permanency, was that claimant was suffering from “ 2nd stage silicosis ” but was not disabled and could do light work in a nondusty job. These written reports and no more were before the workmen’s compensation referee when he held hearings on the claim on June 28, 1944, and July 19, 1944. Claimant, who appeared at those hearings without an attorney or other representative, was merely asked how long she had worked for this employer and when she stopped work. She said that her doctor had told her she could work as long as there was no dust. On that record without any appearance by physicians the referee held that while claimant was suffering from silicosis as an occupational disease she could have no compensation under the existing statute because her disability was not total. The case was, therefore, closed. As was found long afterwards and is not now disputed, she was actually totally disabled at that time.

Several months later, on November 24, 1944, claimant, still without an attorney, filed an application for a reopening of the case in which she stated that she had a partial permanent disability and was unable to work. In that application she specifically requested a new hearing at which testimony of the physicians should be taken and stated that at the earlier hearing she had asked that her doctor be present to testify for her but that her request had been denied. With the application she submitted a report by her physician Dr. Badetsky in which Dr. Badetsky described her ailment, stated there was a permanent defect and a 50% “loss of use ” and stated that the ailment was industrially caused and that claimant could do only light dustless work as of August 15, 1944. However, despite the presence in its files of these reports showing a condition of silicosis industrially caused and obvious disability therefrom, the board declined to grant a hearing in which testimony would be taken but instead affirmed its former finding of partial disability only and closed the case without award as of December 15,1944.

In August, September and November, 1954, a Dr. Dorfman on behalf of claimant submitted to the board a series of reports concerning■ claimant’s condition in which he described her symptoms and stated that the condition was permanent and disability total. The case was then reopened and restored to the calendar with a direction that claimant be examined by the board’s impartial panel of chest examiners. As of March 28, 1955 the same Dr. Edgar Mayer (as a member of the State Board of Chest Examiners) who had submitted reports in 1944 sent in a new written report in which he now concluded that claimant was totally disabled. Then, for the first time the board took oral testimony. Dr. Mayer when called as a witness stated that on re-examining the X rays and other records which had been on file in 1944 he was now convinced that claimant had been “ totally disabled ” at that time. There is no doubt that Dr. Mayer meant simply that in 1944 he had made a wrong diagnosis. Testimony was taken also at the 1955 hearings from Dr. Badetsky, claimant’s former physician, who had apparently not treated or examined her since 1944. Under date of July 18, 1955, an attorney representing claimant wrote a letter again requesting a reopening and rehearing.

Dr. Badetsky’s testimony was that at some of the times he saw claimant in 1944 she was totally disabled but that he had expected that she would be able to do some light work later. Dr. Dorfman, too, gave testimony at the 1955 hearings that claimant, beginning some time in the Summer of 1944, was totally disabled but that at other times she was only partially disabled, whatever that may mean. He was clearly of the opinion, however, that as of the 1955 hearings claimant was totally disabled. Dr. Taylor at the 1955 hearings established that claimant’s silicosis condition was industrially caused. Apparently there were no further hearings until May, 1956 when Dr. Mayer gave the testimony as to his earlier mistake to which we have already referred. The board then made a decision as of October 31, 1956, which resulted in the award which was afterwards reversed by the Appellate Division and which is before us on this appeal. The board’s findings were that, on March 12, 1944, claimant became totally disabled as a result of silicosis, an occupational disease, and as a result she was entitled to compensation at the rate of $22.33 a week from March 20, .1944 up to the then statutory total of $7,500. That award ran against the State Insurance Fund, one of our present respondents, which was the insurance carrier of employer Levitón in 1944. There was in that 1956 decision an additional or secondary award against the Special Fund for Beopened Cases which additional award is now out of the case.

The employer and State Insurance Fund as carrier appealed to Appellate Division, Third Department, and that court unanimously reversed and dismissed the claim. The basis of the reversal was section 123 of the Workmen’s Compensation Law which, while providing that the jurisdiction of the board as to each case shall be continuing, says that 1‘ no claim for compensation or for death benefits that has been disallowed after a trial on the merits, or that has been otherwise disposed of without an award after the parties in interest have been given due notice of hearing or hearings and opportunity to be heard and for which no determination was made on the merits, shall be reopened after a lapse of seven years from the date of the accident or death.” It is true, as the Appellate Division pointed out, that section 25-a contemplates certain situations where a claim may be reopened more than seven years after accident or death. However, again as the Appellate Division pointed out, section 123 clearly says that no claim disallowed after a trial on the merits shah be reopened after seven years. We agree with the Appellate Division that even though no oral testimony was taken in 1944, nevertheless there was within the contemplation of the Workmen’s Compensation Law a trial on the merits at that time. However, that need not dispose of this case.

Matter of Roder v. Northern Maytag Co. (297 N. Y. 196) points the way for reversal here. In Boder the claim was disallowed on the ground that claimant had failed to establish causal connection. Not quite seven years after the death of her husband claimant applied for reopening for the purpose of introducing medical proof of causation. The board denied it on the ground that sufficient medical evidence had already been considered. This was in fact erroneous since there had been no such evidence. In March, 1943, seven and one-half years after the death, the board reopened the Boder case and the question on the appeal was as to whether the board had such power after the lapse of more than seven years. We held that such jurisdiction existed. Our rationale was that in reopening in 1943, more than seven years after the death, the board was merely reconsidering its previous denial of an application for rehearing made less than seven years after the death. No reason appears why the same holding should not be made here. In the present case an application for a rehearing was made and denied much less than seven years after injury.- So it was in Roder. In the present case, just as in Roder, the board because of a mistake refused reopening within the seven years. In Roder the mistake made was that the board erroneously thought it had taken a certain kind of medical evidence. In the present case the board’s mistake was in the erroneous opinion of its own impartial expert. I think it could also be said that the board here made a mistake when it originally denied reopening in 1945 in that it then thought that it had before it unequivocal medical testimony of nontotality. The 1944 and 1945 medical statements were not really conclusive on the factual question as to whether claimant’s disability at that time was total.

Matter of Roder v. Northern Maytag Co. (297 N. Y. 196, supra) clearly holds that when application for reopening is made within the seven years the board, after seven years, may reconsider its denial. In Roder, in the interests of justice we treated what the board did as a reconsideration after seven years of a petition for reopening made within the seven years.

Section 123 of the Workmen’s Compensation Law, above cited, in terms forbids a reopening more than seven years after accident or death where there has been a disallowance on the merits after hearings. However, that section is mainly used to prevent a brand new attempt to prove up a stale claim. It has little relevance to a situation where the board by refusing to accept proffered oral medical testimony fell into what after-wards turned out to be a plain error. Although the board did not in the present case say in so many words that the 1955 reopening was a reconsideration of the 1944 denial of reopening, it was such in fact or in justice it should be so considered. Section 123 of the act says and has always said that the board’s jurisdiction over a case “ shall be continuing ”.

The order of the Appellate Division should be reversed and the award of the Workmen’s Compensation Board reinstated, with costs in this court and in the Appellate Division.

Fuld, J. (dissenting).

In my view, the decision now being made contravenes an explicit legislative proscription.

Section 123 of the Workmen’s Compensation Law, designed to bar stale claims, declares that the power and jurisdiction of the Workmen’s Compensation Board shall be “continuing” and that it may, from time to time, make such modification or change with respect to former findings or decisions as in its opinion may be just, “ except that,” the section continues in language unequivocally plain,

‘ ‘ no claim for compensation * * * that has been disallowed after a trial on the merits * * * shall be reopened after a lapse of seven years from the date of the accident.”

In the case before us, the claim was filed in March of 1944 and the referee’s determination, adverse to the claimant, was made in July of the same year and the case marked “ closed.” Several months later, in November, 1944, the claimant filed an application with the board requesting review of the referee’s decision and reopening of the case. Following this application, the board by a decision, dated December 15, 1944, aErmed the finding earlier made and the closing of the case. Nothing happened for 10 years. Then, first informally in August, 1954 and then formally in 1955, the claimant requested a reopening of the case on the ground that a mistake had been made and that the board’s original determination had been wrong. The board granted the application and, after new hearings, reversed the decision it had rendered 10 years before and made an award in the claimant’s favor.

Whether or not the 1944 determination was erroneous is beside the point, for the statute in the clearest of terms provides that ‘1 no claim ’ ’ disallowed after a trial on the merits — as the present claim was — ‘ ‘ shall be reopened after a lapse of seven years ”. We are told, however, that Matter of Roder v. Northern Maytag Co. (297 N. Y. 196) is authority for the present holding. The resemblance between that case and this, and I say this with all deference to the views of the majority, is at most superficial and may not reasonably be read to justify what is now being done.

In Matter of Roder, the seven-year period specified in section 123 expired in September of 1942. In August of that year, and within that period, the claimant made an application to reopen the case. The board denied the application on November 16, 1942 — which was after the expiration of the seven-year period — and just one week later, on November 23, an application in the nature of a motion for reconsideration or reargument was made ” (297 N. Y., at p. 199). The hoard, noting that it was reconsidering the application, made within the permissible seven-year period, to reopen the case, “ promptly ‘ rescinded ’ ” its denial of the previous week. Mere statement of this chronology, it seems to me, points up the lack of similarity between the two cases. In the present one, both the board’s original determination and the claimant’s application to reopen were made more than 10 years before the case was actually reopened. In Roder, in sharp contrast, and this is what the court emphasized in reversing the board’s action in that case, a motion for reconsideration or reargument of the timely-made application to reopen had been made but a week after the board had denied the application (297 N. Y., at p. 200):

“It was the denial of November 16th which was promptly 1 rescinded ’ on the application of November 23d. * * * We think in this instance there was merely a rescinding of a ruling, made a week prior to the application for reconsideration, due to the fact that such application had called attention to an incorrect assumption of fact. We pass upon no other question.” (Emphasis supplied.)

As is almost self-evident, the reopening of the case after the lapse of seven years was upheld in Matter of Roder solely because of the prompt rescission of the board’s denial of the application, where such request was sought before the passage of seven years and denied thereafter; the claim had not become “ stale,” for “ in this instance,” to cull from the opinion, there was ‘1 merely a rescinding of a ruling, made a week prior to the application for reconsideration ” (297 N. Y., at p. 200).

The decision in the Roder case may have written an exception of sorts into section 123, but it certainly furnishes no warrant for construing the statute out of existence. And that is precisely what the present decision does, for it grants to the Workmen’s Compensation Board, contrary to the explicit language of the section, the power to reopen a case and reverse itself no matter how many years may have intervened between accident and application for reopening of the case and even between denial of such a motion and a new application, provided only that the initial request to reopen—denied, perhaps, as many as 15 years before—was made within seven years of the date of the accident. Actually, what this means is that a claimant may completely nullify the limitations provision of the statute by the simple device of filing an application to reopen immediately after the board has decided the case and rendered its determination. This could not possibly have been the design or purpose of the Legislature in enacting section 123.

The unanimous order of the Appellate Division should be affirmed.

Chief Judge Conway and Judges Dye and Burke concur with Judge Desmond; Judge Fuld dissents in an opinion in which Judges Froessel and Van Voorhis concur.

Order reversed, etc.


author: Burke, J. Van Voorhis, J. (dissenting).

text:
    In the Matter of Charles L. Engelsher, as Director, Owner and Licensee of Parkchester General Hospital, Appellant, against Morris A. Jacobs, as Commissioner of Hospitals of the City of New York and as Chairman of the Board of Hospitals of the City of New York, Respondent.
    Argued January 7, 1959;
    decided March 13, 1959.

      Menahem Stim and Allen S. Stim for appellant.
    I. The new hospital code is unreasonably discriminatory against private proprietary hospitals and thus denies appellant, who is the owner and operator of a private proprietary hospital, equal protection of the law and his right as a citizen to pursue a lawful trade or business, which rights are guaranteed appellant under the Constitutions of the United States and of the State of New York. (New York Sanitary Utilization Co. v. Department of Health, 32 Misc. 577, 61 App. Div. 106; People ex rel. Wineburg Adv. Co. v. Murphy, 129 App. Div. 260, 195 N. Y. 126; Health Dept. v. Rector, Church Wardens & Vestrymen of Trinity Church, 145 N. Y. 32.) II. The new hospital code deprives appellant of his property without due process of law in violation of his rights guaranteed under the Constitutions of the United States and of the State of New York. {New York, Sanitary Utilisation Co. v.- Department of Health, 32 Mise. 577, 61 App. Div. 106; Arverne Bay Constr. Co. v. Thatcher, 278 N. Y. 222.) III. Section 56 (subd. 4, par. b) is repugnant to the Constitutions of the United States and of the State of New York as being an ex post facto law and a law impairing the obligation of a contract.

      Raymond Rubin for Association of Private Hospitals, Inc., amicus curiae, in support of appellant’s position.
    I. The only issue before this court is whether or not the new standards as to area and nursing requirements of the code reasonably relate to the protection of patients’ health and safety when such requirements are limited only to private patients with a choice of selection of hospital accommodations and are not applicable to city and voluntary hospitals where no such choice exists. (Matter of Spielvogel v. Ford, 1 N Y 2d 558.) II. The hospital code and specifically sections 48 and 56 (subd. 4, par. b) thereof are inconsistent with the Constitution of the State of New York, the Fourteenth Amendment to the Federal Constitution, the laws of the State of New York, and section 538-d of the New York City Charter, and are, therefore, unconstitutional.

      Charles H. Tenney, Corporation Counsel (Alfred Weinstein, Seymour B. Quel and Joseph Entel of counsel), for respondent.
    It cannot he said that, regarding the need for regulation in the interest of public health, no reasonable basis can be conceived for distinguishing between hospitals operated for profit and those not operated for profit. Nor can it be said that the restrictions involved are not reasonably related to the protection of public health. Nor does the code make arbitrary distinctions in regard to the subject matter governed by it. (Matter of Spielvogel v. Ford, 1 N Y 2d 558; Meiselman v. Crown Heights Hosp., 285 N. Y. 389; Matter of 436 West 34th St. Corp. v. McGoldrick, 288 N. Y. 346; People ex rel. Bryant v. Zimmerman, 241 N. Y. 405; Queenside Hills Realty Co. v. Wilson, 294 N. Y. 917, 328 U. S. 80.)
   Burke, J.

This article 78 proceeding was instituted by petitioner to compel the Board of Hospitals of the City of New York to issue to him a license permitting him to operate a private proprietary hospital. The hoard had denied the application since petitioner had not complied with new regulations of the New York City Hospital Code, which became effective on October 1, 1956. This code superseded prior regulations, and was promulgated pursuant to subdivision 2 of section 583-a of the New York City Charter. The code made some changes in the rules and regulations governing the maintenance and operation of private proprietary hospitals. These regulations required that, in other than private rooms, each bed must have a floor area of 70 square feet. Insofar as private rooms were concerned, those hospitals licensed before 1956 were to have this same minimum floor area; those first licensed after the effective date of the new regulations were required to provide 100 square feet of floor area. The regulations also required an increase in the nursing staff for such hospitals.

Special Term .denied petitioner’s application to review and annul the determination of the board. This order was unanimously affirmed by the Appellate Division.

Petitioner claims that insofar as the new regulations require a minimum floor area for each bed, and an increase in the professional nursing staff, they not only constitute unreasonable discrimination, but also violate the due process provisions of the State and Federal Constitutions. (U. S. Const., 14th Arndt.; N. Y. Const., art. I, § 6.) In regards to the equal protection argument, it is urged that since these regulations do not equally apply to municipal hospitals and voluntary nonprofit hospitals, as well as private proprietary hospitals, there is unreasonable discrimination.

The police power of the State is the least limitable of all the powers of government. (Block v. Hirsh, 256 U. S. 135, 155; Queenside Hills Co. v. Saxl, 328 U. S. 80, 83.) “A legitimate public purpose may always be served without regard to the constitutional limitations of due process and equal protection ’ ’. (People v. Arlen Service Stations, 284 N. Y. 340, 344; People v. Perretta, 253 N. Y. 305, 309; People ex rel. Durham Realty Corp. v. La Fetra, 230 N. Y. 429; New York ex rel. Bryant v. Zimmerman, 278 U. S. 63.)

It cannot be disputed that hospitals come directly within the ambit of the police power since they are institutions which directly deal with the health of the citizenry. Where the hospital has been instituted by some branch of the Government— he it local or State — the hospital is already under the direct control of the Government. Such is the case, for example, with municipal hospitals in the City of New York. These hospitals are, under the New York City Charter, to be maintained and operated by the Department of Hospitals of that city (New York City Charter, § 583-a, subd. 1). Nonprofit voluntary institutions are not subject to the regulation of the Department of Hospitals (New York City Charter, § 583-a, subd. 2; see, e.g., Social Welfare Law, § 21; 1948 Atty. Gen. 247). It is only private proprietary hospitals which come within the licensing and regulatory power of the Department of Hospitals. The New York City Charter authorizes the Board of Hospitals to promulgate the necessary rules and regulations for private proprietary hospitals to promote the public health and welfare (New York City Charter, § 583-a, subd. 2). Thus, we can see that the Legislature itself, in respect to private proprietary hospitals in New York City, has established them in a separate class and has subjected them to special rules and regulations by the Board of Hospitals. It is easy to see why such a distinction was made. These other institutions come under the close scrutiny of either the city or the State; private hospitals, without regulation, do not (see People ex rel. Wagner v. Hagan, 52 App. Div. 387, 389).

Furthermore, while these regulations apply only in terms to private proprietary hospitals, it is not shown and, indeed, the record is devoid of any evidence as to whether there are any similar regulations in other statutes or rules applicable to city hospitals or voluntary hospitals.

Under the regulations in question, all private proprietary hospitals are treated alike. Equal protection is accomplished when all of the same class are treated in a like manner. (Queenside Hills Co. v. Saxl, supra.) That one class is treated differently than other classes can give rise to no complaint under the equal protection clause.

It is urged that the hospital in question was conducted in compliance with the regulations in the superseded hospital code, and the new hospital code which reduces the bed capacity of the hospital constitutes an unlawful taking, violating due process of law. The argument, in effect, is that petitioner has a ‘f non-conforming use ’ ’, which was exercised prior to the effective date of the new regulations, and, therefore, should be permitted to continue in effect as long as petitioner continues in business or chooses to operate under the former regulations. It is clearly settled that “in no case does the owner of property acquire immunity against the exercise of the police power because he constructed it in full compliance with existing laws ”. (Queenside Hills Co. v. Saxl, supra, p. 83; see, also, Hadacheck v. Los Angeles, 239 U. S. 394, 410; Hutchinson v. Valdosta, 227 U. S. 303.) If authority is needed for such a proposition in this State, Health Dept. v. Rector, Church Wardens & Vestrymen of Trinity Church (145 N. Y. 32, 43-44) will substantiate this position.

The only question then that we must consider in this case is the reasonableness of the regulations. There can be no doubt that they are calculated to promote the health and welfare of the public generally. Health Dept. v. Rector, Church Wardens & Vestrymen of Trinity Church (supra) suggests that the cost of expenditures incurred as a result of the-legislation must be reasonable. Where there are two or more beds in a room, the minfrrmm space requirements can be readily met by the removal of one or more beds. Hence, the main loss here is the loss of future profit. We cannot say as a matter of law that the minimum space requirements are unreasonable as a matter of law, and hence it follows that the Board of Hospitals did not act in an arbitrary manner in refusing a license to petitioner under the regulations.

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

Van Voorhis, J. (dissenting).

The problems presented by this litigation have their origin in an amendment to the Hospital Code and Regulations promulgated by the New York City Board of Hospitals (§ 56, subd. 4), effective October 1, 1956, which enlarged the floor area required to be occupied by each bed in double rooms in a proprietary hospital, and added to the number of professional nurses required to be in attendance. Appellant claims to have complied with these nursing requirements, but objects to increasing the floor space to be occupied by each bed in other than single rooms from about 62.5 square feet, as formerly, to 70 square feet, as newly required. In adopting the new regulation, the Board of Hospitals took account of the fact that it would be difficult to reconstruct existing single rooms so as to enlarge the floor space, and therefore provided that each single room in institutions licensed before October 1, 1956 might continue to have a floor area of at least 70 square feet, whereas new hospitals, licensed after that date, would be required to have a minimum floor area of 100 square feet. When it came to other than single rooms, however, no corresponding dispensation was allowed in the case of existing structures. The new regulation directs that each bed in other than single private rooms shall have a floor area of at least 70 square feet. The problem introduced by this requirement is that there are numerous private rooms designed for two patients with a space area of 125 square feet. That allows 62.5 feet to each bed. Unless the hospital is rebuilt in these areas, the requirement that each bed shall occupy a space of at least 70 square feet would require removal of one of these beds, leaving an area of 125 square feet, for the other bed. That would be much larger than any minimum requirement for existing or newly constructed single rooms. The consequence would be to reduce the authorized bed capacity of this hospital from 130 beds to 100 beds.

This hospital was constructed in 1929. It was bought by appellant in 1940, and has been operated by him since that date. Licenses for its operation have been issued annually by the city’s Department of Hospitals. During the previous 25 years, no minimum floor area was prescribed for each bed, it being simply required that ‘ ‘ All beds used for patients shall be at least three feet apart where arranged in series and at least two feet from lateral adjoining walls.”

The petition to compel a renewal of appellant’s hospital license has been denied on the ground that the new requirement of a minimmn of 70 square feet to a bed has been validly imposed and has not been complied with. Appellant contends that this new regulation deprives him of his right to pursue a lawful trade or business in violation of the State and Federal Constitutions. The principal ground on which its validity is challenged is that the equal protection of the law is denied for the reason that this regulation applies exclusively to private proprietary hospitals which provide hospital care for but 20% of paying patients in Hew York City, as contrasted with 80% provided for paying patients by the voluntary or city hospitals which are not limited as to bed capacity. If 7.5 additional square feet are necessary for the proper care of patients in proprietary hospitals, so as to bring the bed area to 70 square feet, it is difficult to understand why the same considerations affecting public health should not also apply to the larger number of patients hospitalized in these other institutions, nor is there reason why they should not likewise be extended to the nonpaying patients in city and other hospitals. Although the reach of the police power is wide, it must be exercised evenly under the Federal and State Constitutions so as to bear upon all who are affected by it without discrimination (New York Sanitary Utilization Co. v. Department of Health, 32 Misc. 577, affd. 61 App. Div. 106). The police power must serve the interests of the public generally as distinguished from those of a particular class, must be related to the advancement of public health, safety or welfare and its exercise will be restrained where it has some other object although ostensibly directed to the furtherance of one of the above-mentioned purposes (People ex rel. Wineburg Adv. Co. v. Murphy, 129 App. Div. 260, affd. 195 N. Y. 126; Health Dept. v. Rector, Church Wardens & Vestrymen of Trinity Church, 145 N. Y. 32; New York Sanitary Utilization Co. v. Department of Health, supra).

Appellant asserts that private proprietary hospitals (the Association of Private Hospitals, Inc., has filed as amicus curiae representing 37 member proprietary hospitals) are not regarded with favor by the City of New York and charges, in effect, that this and other harassments are designed to compel them eventually to cease operation. The city takes note of the unequal incidence of this regulation upon proprietary hospitals and attempts to meet the contentions by arguing that there is a basis for classification in that city hospitals and voluntary hospitals are not profit-making enterprises. The brief for the city states: “We argue that there is a reasonable basis for distinguishing between profit-making enterprises such as petitioner’s and those not operated for profit, on the ground that where the profit motive is involved there is a need for regulation to insure that the desire to increase income and cut expenses does not result in dangerous overcrowding and understaffing.”

This argument is unusual,and, in our view, unsound. Motive, we have been told in criminal cases, is not a basis for conviction, but is of evidentiary value in determining whether the accused has been guilty of the conduct which constitutes the crime (People v. Seppi, 221 N. Y. 62, 70; People v. Giordano, 213 N. Y. 575, 584). ‘ ‘ Motive can never, of itself, prove guilt ”, as was said in Giordano, and, conversely, where the act has been committed that the law forbids, motive is unnecessary to be shown (People v. Feigenbaum, 148 N. Y. 636). According to the reasoning of respondent, if a voluntary or city hospital provides 62.5 square feet to a bed, that meets with approval for the reason that it is not operated for profit. A proprietary hospital which has done the same thing is condemned on the basis that it acted for gain and, therefore, from what is assumed to be a sordid motive. If a party is authorized or forbidden to do what he does, the reasons which prompted him are ordinarily unimportant. The assignment of an improper motive, or reason, for doing an act, which the municipality was authorized to perform could not make that act illegal.” (Chase-Hibbard Milling Co. v. City of Elmira, 207 N. Y. 460, 467.)

If regulations like this are to be upheld or struck down according to the self-interest or degree of unselfishness of the actor, it would be necessary to consider the pecuniary interest of the doctors themselves in the voluntary or city hospitals, and to weigh the animating motives of the trustees or public officers who are responsible for their operation. The city hospitals and voluntary hospitals are also under unremitting pressure to admit patients due to Blue Cross and Blue Shield Plans and other forms of hospital or medical insurance and due to the cost of building new hospitals. Lack of an adequate number of hospital beds and nursing attendants to fulfill the demand is well known. Hospitals everywhere are notoriously overcrowded. The point is not that reasonable regulations are unlawful to prevent overcrowding, but that institutions cannot be discriminated against on the theory that the same act is commendable if performed by one but reprehensible if done by another.

Neither is it an answer to the discriminatory operation of this regulation that the Board of Hospitals does not have jurisdiction over paying patients in voluntary hospitals. Section 583-b of the New York City Charter gives the Board of Hospitals jurisdiction over city hospitals as well as proprietary hospitals, and over voluntary hospitals to the extent that they care for the overflow from the city hospitals at city expense. The city hospitals not affected by these limitations have 19,899 beds according to the latest annual report of the Department of Hospitals (1957) against 4,548 beds for the proprietary hospitals. This is a sufficient indication of unlawful discrimination in this regulation, even if the voluntary hospitals were to be left out of account.

The regulation is sought to be justified as an exercise of the police power upon no ground except promotion of the public health. If the health of patients in proprietary hospitals is affected, then the health of patients in the other hospitals in the city must be neglected. They are subject to no such regulation. There is no rational basis for distinction on the ground of public health, which is the only ground on which the police power can be invoked in this case. The majority opinion states that there is no evidence that the voluntary and city hospitals are not subjected to similar restrictions regarding bed area. The petition alleges that the other hospitals are free from these restrictions which are imposed on the proprietary hospitals alone. If the decision is to be based on lack of evidence of these facts which are alleged in the petition, then the petitioner-appellant should be allowed opportunity to prove them at a trial instead of being ordered summarily to discontinue the hospital.

Appellant is deprived of property — the right to follow his trade or profession — without due process of law as a result of this discriminatory, retroactive limitation on bed areas adopted without relation to the public health. This regulation distinguishes, as has been stated, between single rooms in hospitals licensed before and after October 1, 1956. It fails to distinguish between double rooms in hospitals licensed before and after that date. If it was proper, as it manifestly was, not to require the reconstruction of hospitals by enlarging the single rooms, the same principle could have been applied in case of the double rooms.

The order appealed from should not have directed appellant to discontinue operation of the hospital, which was equivalent to dismissal of the petition on the law. On the other hand, appellant is not entitled to an order in the nature of a peremptory mandamus compelling the issuance of the license if there are other violations on account of which the license renewal could have been refused. The answer of respondent also charges that this hospital is not staffed with registered nurses to the extent required by the regulations. These nursing regulations are not limited to proprietary hospitals, but call for compliance everywhere in the city with section 110 of the Sanitary Code which requires a registered professional nurse to be assigned to the labor and delivery rooms when a patient is in active labor and a registered professional nurse to be on duty in the nursery. Although appellant’s affidavit states that he has complied with the requirements of section 110 of the Sanitary Code and all of the other nursing obligations, the Commissioner of Hospitals has not confirmed this and his affidavit indicates deficiency in regard to these matters on prior inspection of the hospital. The Sanitary Code requirements are not discriminatory, inasmuch as they apply throughout the city. Appellant should have an opportunity to try before the Special Term the issue of whether the hospital does comply with the Sanitary Code as he avers that it now does.

The order appealed from should be modified by eliminating the direction to appellant to discontinue operation of Parkchester General Hospital and by remanding the matter to Special Term for a trial in the nature of an alternative mandamus, with costs to appellant to abide the event.

Chief Judge Conway and Judges Desmond, Dye and Fuld concur with Judge Burke ; Judge Van Voorhis dissents in an opinion in which Judge Froessel concurs.

Order affirmed.


author: Froessel, J.

text:
    In the Matter of Antonio Grottano, Appellant, against Stephen P. Kennedy, as Commissioner of the Police Department of the City of New York, Respondent.
    Argued November 12, 1958;
    decided March 13, 1959.

      William Richter for appellant.
    I. The direction of the hearing commissioner to petitioner to proceed forthwith to trial was not at bar an order of a superior officer nor was it a violation of any of the rules and regulations of the Police Department for petitioner to heed the advice of his counsel and not participate in the hearing proposed to be held on June 27, 1956. The refusal of an adjournment under the disclosed circumstances was arbitrary and an abuse of discretion. (Matter of Bush v. Beckmann, 283 App. Div. 1070; Matter of Friedel v. Board of Regents, 296 N. Y. 347; Matter of Greenehaum v. Bingham, 201 N. Y. 343.) II. The charge is untenable on its face; the Trial Commissioner was acting as a judge when he ordered petitioner to trial and was not acting as a Police Commissioner or as petitioner’s superior officer. (People ex rel. Bchauwecker v. Greene, 96 App. Div. 249; Martin v. O’Keefe, 195 App. Div. 814.) III. Respondent has failed to carry the burden imposed on him by law of proving the charges he filed accusing petitioner of conduct prejudicial to good order, efficiency, etc., by reason of the lt escort service ” charges. The competent evidence adduced established no violation by petitioner of “ the lawful orders of his superior officers.” (Matter of Shea v. Valentine, 249 App. Div. 556; Matter of Tate v. Beckmann, 273 App. Div. 906; Matter of Greenebaum v. Bingham, 201 N. Y. 343; Matter of Mitchell v. Mulrooney, 242 App. Div. 48; Matter of Wood v. Village of Port Chester, 284 App. Div. 900.) IV. The determination here made and the dismissal order which followed are the result of a hearing held in the absence of petitioner who was ordered to trial under circumstances constituting a grave abuse of discretion to the serious prejudice of petitioner. (Martin v. O’Keefe, 195 App. Div. 814; Matter of Klinkenberg v. Valentine, 256 App. Div. 638; Matter of Delehanty [Sullivan], 202 Misc. 33.) V. The final order of dismissal, being based as it is at bar on a finding of guilt on both the “ escort service ” charges and the “ insubordination ” charges, may not here be sustained unless it appears to the satisfaction of this court that all the relevant specifications contained in both charges have been' proved by the weight and sufficiency of substantial and competent evidence. (Matter of Sullivan v. Moynihan, 285 App. Div. 965; Matter of Jones v. Adams, 1 A D 2d 889; People ex rel. Gilson v. Gibbons, 231 N. Y. 171.) VI. The Police Department Rules and Regulations (§ 296) and the Administrative Code of the City of New York (§ 434a-14.0) are illegal and unconstitutional in that they fail to provide fair and reasonable standards and guides for punishment and are vague in their provisions and allow and make for autocratic, unrestricted, irresponsible and absolute power in depriving a person of vested, constitutional and property rights without due process of law and in violation of the United States Constitution and the Constitution of the State of New York. VTI. This court is empowered to review the penalty, punishment or measure of discipline imposed by the Police Commissioner. The final order of dismissal at bar was and is excessive and severe; it results from an abuse of discretion and is entirely disproportionate to the seriousness of the charges, if any are regarded as proved. (Matter of Stole v. Board of Regents, 4 A D 2d 361; Matter of Bancroft v. Usher, 4 A D 2d 808.)

      Charles H. Tenney, Corporation Counsel (Henry J. Shields and Seymour B. Quel of counsel), for respondent.
    I. The pendency of the criminal prosecutions against the men who held up the payrolls was valid reason for deferring the trial of the criminal charges against petitioner; his refusal to proceed with the trial of the escort charges constituted valid ground for a charge of insubordination. II. The insubordination charge was a valid charge against petitioner, since he could not divest the hearing officer of jurisdiction to try the charges then pending before him. Petitioner’s obligation was to proceed with the hearing under appropriate objection and exception. (Boone v. Lightner, 319 U. S. 561; People ex rel. Schauwecker v. Greene, 96 App. Div. 249; Martin v. O’Keefe, 195 App. Div. 814; People ex rel. Weston v. McClave, 123 N. Y. 512; People ex rel. Miller v. Board of Police Comrs., 67 N. Y. 475; People ex rel. Clapp v. Board of Police, 5 Hun 457, 72 N. Y. 415; Matter of Centner v. Monaghan, 1 A D 2d 652; Neugold v. Ace Mail Advertising, 244 App. Div. 675.) III. There is substantial evidence in support of the escort charges in the testimony of the persons who accompanied petitioner to and from banks with payroll moneys. (Barnett v. Kugel, 247 App. Div. 757; Rathfelder v. Flag, 257 App. Div. 71; Detzker v. City of New York, 267 App. Div. 912; Dallas v. Lahl, 270 App. Div. 819, 270 App. Div. 852; Matter of Clark [Smith], 271 App. Div. 804; People ex rel. Weston v. McClave, 123 N. Y. 512; Matter of Evans v. Monaghan, 306 N. Y. 312; Twogood v. Mayor of City of N. Y., 102 N. Y. 216; Williams v. City of New York, 214 N. Y. 259; People ex rel. Quiney v. Valentine, 274 N. Y. 331; Matter of Miller v. Kling, 291 N. Y. 65; Matter of Donahue v. Fletcher, 299 N. Y. 227; Matter of Humphrey v. State Ins. Fund, 298 N. Y. 327; Matter of Burke v. Bromberger, 300 N. Y. 248; Matter of Avon Bar & Grill v. O’Connell, 301 N. Y. 150.) IV. The insubordination charge alone was sufficient cause for petitioner’s dismissal. So, too, the specifications of the escort charges are full warrant for dismissal. (Matter of Stolz v. Board of Regents, 4 A D 2d 361.) V. There is no constitutional question in this case. There is no right of property in public office and petitioner does not plead nor prove that he was denied any rights incident to due process in the conduct of the proceedings leading to his removal.
      (Demarest v. Mayor of City of N. Y., 147 N. Y. 203; People ex rel. Kenny v. Folks, 89 App. Div. 171; Matter of L’Hommedieu v. Board of Regents, 276 App. Div. 494; Matter of Gianatasio v. Kaplan, 142 Misc. 611, 257 N. Y. 531, 284 U. S. 595; Conner v. Mayor of City of N. Y., 5 N. Y. 285; People ex rel. Hanrahan v. Board of Metropolitan Police, 26 N. Y. 316; Smith v. Mayor of City of N. Y., 37 N. Y. 516; People ex rel. Devery v. Coler, 173 N. Y. 103; Morrall v. County of Monroe, 271 N. Y. 48.)
   Froessel, J.

Petitioner, a patrolman with 30 years of service in the New York City Police Department, was suspended on April 28, 1956, after being named as “ finger-man ” in a series of payroll holdups by two members of an alleged holdup gang. Several of the victims of the gang had used petitioner in the past to guard their payrolls. On May 1 and 3, 1956, two sets of charges were filed against petitioner. The first set — referred to as the escort charges (No. 28644)—contained 13 specifications. Four violations of Department Rules and Regulations were aEeged with respect to the escort of each of three named persons:

1. Failure to obey lawful order of superior (to discontinue escort service after April 1, 1952) in violation of rule 201 (Specs. 1, 5, 9).
2. Acceptance of gratuities for such service without consent of the Commissioner in violation of rule 232 (Specs. 2, 6, 10).
3. Failure' to obtain permission to leave post and (in two cases) precinct confines or to make entry thereof in memo book, in violation of rule 114 (Specs. 3, 7, 11).
4. Riding in auto other than Police Department vehicle in violation of rule 125 (Specs. 4, 8, 12).
The 13th specification charged petitioner with failure to preserve his completed memorandum pads for future reference, in violation of rule 185.

The second set of charges — referred to as the criminal charges (No. 28645)—contained 8 specifications alleging various acts of supplying information to the holdup gang and receipt of a share of the proceeds of certain of the robberies. Petitioner pleaded not guilty to both sets of charges, and a hearing was set down for June 4th. On that date the Corporation Counsel requested an adjournment of three weeks so that he could have a week to serve a requested bill of particulars and defendant’s counsel could have two additional weeks to prepare his defense. Petitioner’s attorney acquiesced, stating that “the time would be contingent upon when we received” the bill of particulars.

The Corporation Counsel did not serve the ME of particulars on the escort charges until the adjourned date of June 27th. Petitioner’s attorney then stated to Commissioner Martin that he and opposing counsel had tentatively agreed upon a two-week adjournment pursuant to an understanding at the prior hearing that petitioner should have a reasonable time to study the ME. When the Commissioner denied an adjournment, petitioner’s attorney stated he was totaEy unprepared to go to trial at that time, and that to do so would prejudice his cHent. He indicated his intention to walk out of the hearing if the Commissioner insisted on proceeding, and advised his cHent to do Hkewise, stating: “you may, as you see fit, try him in absentia.” The Commissioner ordered petitioner to proceed to trial but the latter, on advice of counsel, left the hearing in the company of his attorney. Thereupon Commissioner Martin adjourned the hearing without date.

Petitioner’s refusal to participate in the trial on June 27th was made the subject of a third set of charges, referred to as the insubordination charge (No. 28793). The specification aEeged that “ Ptl. Grottano did knowingly and wilfuEy disobey an order by the Trial Commissioner Joseph P. Martin ”, and then referred to the circumstances above recited. At the end of the specification appears the notation: “ (R&R 201-297-435).” Rule 201, already aEuded to with respect to the escort charges, required obedience to “ aE lawful orders of his superior officers rule 297 provided for punishment of “ disorder or neglect to the prejudice of good order, efficiency or discipline and rule 435 provided, among other things, that ‘ ‘ prompt obedience to orders * * * wiU be exacted and rigidly enforced ”,

On July 6th, petitioner pleaded not guilty to the new charge, and it and the escort charges were set down for trial by Deputy Commissioner Melia for July 10th and later for July 11th. Although petitioner’s attorney conceded receipt of the bill of particulars on the escort charges on June 27th, together with a copy of the minutes of the investigation, he stated he had not yet inspected the department records with respect thereto, and twice protested to the Commissioner: “I don’t see what the hurry is.” Three days previously, on or about July 3d, petitioner had applied for retirement to take effect on August 2d (see Administrative Code of City of New York, § B18-4.0, subd. c).

The Commissioner indicated that the criminal charges would be tried not more than one week after completion of the trials on the other two charges, and the Corporation Counsel stated that he was then in a position to comply with petitioner’s demand for a bill of particulars on the criminal charges. The prior objection that divulging of certain confidential information might embarrass or impede the prosecution of the robbery cases was no longer pressed. Upon hearing this, petitioner’s attorney declared his refusal to proceed with the trial of any charges unless the criminal charges were tried first or dismissed, although at the June 4th hearing he merely stated that he preferred that “the quasi criminal charges” be moved first.

He made a “special appearance” on July 11th, the day finally set for trial, to repeat his objection, and upon denial of his application he said:

“ Under these circumstances may I in all due respect to you, Mr. Commissioner, advise my client not to participate in these proceedings, and we will take leave and you may do as you see fit provided you conduct this entire proceeding within his legal and constitutional rights.”

Shortly thereafter, petitioner and his attorney walked out of the hearing room, and the Commissioner proceeded to take testimony on the insubordination and escort charges. The witnesses included Commissioner Martin, Inspector Siegert and the three persons for whom petitioner was charged with providing escort service.

One week after the hearing, on July 18th, Commissioner Melia found petitioner guilty as charged, and recommended his dismissal. On July 27th respondent determined that petitioner was guilty as charged, except for specification 6 and part of specification 2 of the escort charges—both concerning receipt of gratuities — and ordered that he be dismissed. It is conceded that no hearing was ever had on the criminal charges — despite promises to that effect by the Corporation Counsel and the Trial Commissioner—nor were the charges dismissed. It is also undisputed that no criminal prosecution was evei instituted against petitioner.

Several issues are presented by this appeal. Petitioner challenges his dismissal on the ground that it was based upon a hearing ‘ ‘ held in the absence of the petitioner who was ordered to trial under circumstances constituting a grave abuse of discretion”. We do not see how Commissioner Helia’s refusal to grant an adjournment beyond July 11th could be considered an abuse of discretion. As set out above, petitioner had been served with a bill of particulars on the escort charges, as well as a copy of the minutes of investigation, on June 27th—and his attorney offered no valid reason why he had been unable to conduct the necessary investigation preparatory to trial, nor why such investigation could not have been completed prior to the trial date of July 11th, by which time he would have had the bill two weeks plus one day. Departmental regulations required that a trial be conducted “without unnecessary or unreasonable delay” (art. 5, § 13). In view of the fact that petitioner’s retirement would take effect August 2d, the Trial Commissioner could take into account petitioner’s apparent attempt to “ render the trial futile insofar as [his pension was] concerned” (Matter of Evans v. Monaghan, 306 N. Y. 312, 323).

We also think that the Commissioner had power to try petitioner in his absence, after his refusal to participate in the trial and under the circumstances here presented. Petitioner’s attorney seems to have been under the impression throughout the proceeding that the department had the power to hold a disciplinary trial in the absence of the defendant. Upon walking out the first time, he told Commissioner Martin, as already noted: “ you may, as you see fit, try him in absentia.” He probably took this attitude because he assumed the escort charges were not serious. On walking out the second time, he said to Commissioner Helia: “ you may do as you see fit provided you conduct this entire proceeding within his legal and constitutional rights.” While it would no doubt have been better if the department could have tried the so-called criminal charges prior to or with the less serious offenses, its failure so to do did not justify petitioner’s refusal to participate in the trial, particularly in view of what had previously transpired. A policeman may not walk out of a disciplinary hearing to avoid a trial on the eve of his retirement, and then claim that an otherwise lawful trial is invalid because he was tried in absentia.

In People ex rel. Miller v. Board of Police Comrs. (67 N. Y. 475, 477), we said:

“ The accused did not appear in person or by counsel, and the board were therefore authorized to proceed and publicly examine into the charges and inquire into their truth in his absence and ex parte.”

(See, also, People ex rel. Clapp v. Board of Police, 5 Hun 457, revd. on another ground, 72 N. Y. 415.) Although sanctioning generally a trial in absentia in the Miller case, we reversed the dismissal since the Commissioners had not conducted a trial or examination but had “ adjudged him guilty upon a paper not legitimately before them ”. The trial of the escort charges in the instant case, on the other hand, was conducted with due regard for petitioner’s rights.

A further question presented is whether petitioner’s refusal, on the advice of counsel, to obey the order to proceed to trial on June 27th could be made the basis of an insubordination charge. We conclude that it may not. Insubordination presupposes a “ lawful ” order of a superior (rule 201). Here the order to proceed to trial under the circumstances involved constituted an abuse of discretion on the part of the Trial Commissioner (see Matter of Bush v. Beckmann, 283 App. Div. 1070). At that stage of the proceedings — the June 27th hearing— in contrast with the later stage heretofore discussed, petitioner was clearly entitled to an adjournment for a reasonable time in order to prepare his case, in light of the fact that the bill of particulars was not served until the morning of June 27th.

We think the insubordination charge should be dismissed for an additional reason. When the Trial Commissioner ordered petitioner to proceed to trial, he was not acting in the capacity of his “ superior officer ” within the meaning and intent of the department rules. In People ex rel. Schauwecker v. Greene (96 App. Div. 249, 254), the police officer was tiharged with insubordination for refusing at a trial, on the advice of counsel, to be sworn on behalf of the prosecution. In reversing and ordering the officer’s reinstatement, the unanimous court stated:

“We think a distinction is to be made between the position occupied by a commissioner generally and when he is presiding as a judge at a trial. At such times the accused has been suspended from the force, and the commissioner is acting not as his superior officer but as his judge upon the charges preferred. The rules governing judicial tribunals, therefore, and not the rules of the police department would seemingly apply.”

See, also, Martin v. O’Keefe (195 App. Div. 814, 821) where the court additionally stated:

11 If the right to counsel secured to the accused by the statute means anything, the action of the suspended police officer in foEowing that advice cannot be made the basis of a charge of insubordination.”

The policy behind these decisions is a wise one. To hold otherwise and subject defendants in these quasi-judicial trials to discipEnary charges for every refusal to obey an order of the Trial Commissioner pertaining to the conduct of the trial would unduly stultify such trials, and hamper the actions of attorneys in defending their cEents against what are often serious charges.

We conclude that there is substantial evidence to support the findings of guilt on the various specifications that make up the escort charges. Since, however, the insubordination charge may not be sustained, we must remit the matter to the respondent to redetermine punishment in the light of the charges that have been sustained (Matter of Flo Inn v. O’Connell, 305 N. Y. 602; Matter of Wood v. Village of Port Chester, 284 App. Div. 900; People ex rel. Long v. Whitney, 143 App. Div. 17, 21). If, upon the remission, the new punishment imposed is whoEy disproportionate to the remaining offense or offenses, the petitioner will have an opportunity for further judicial review (Civ. Prac. Act, § 1296, suhd. 5-a).

The order appealed from should he modified by annulling so much of the determination of respondent as finds petitioner guilty of the charge contained in case No. 28793 (the so-called insubordination charge) and as dismisses him from the police force, Police Department, City of New York, and the matter remitted to respondent for a redetermination of the measure of punishment with respect to the charges which have not been annulled, and, as so modified, the order appealed from should he affirmed.

Chief Judge Conway and Judges Desmond, Dye, Fund, Van Voorhis and Burke concur.

Order modified and, as modified, affirmed, with costs to appellant, and the matter remitted to the Police Commissioner for further proceedings in accordance with the opinion herein.


author: Van Voorhis, J.

text:
    The People of the State of New York, Appellant, v. Peter Variano, Respondent.
    Argued January 23, 1959;
    decided April 9, 1959.

      Joseph F. Gagliardi, District Attorney (Leonard Rubenfeld, Warren J. Schneider and Arthur Praete of counsel), for appellant.
    I. Defendant’s guilt was proved beyond a reasonable doubt. (People v. Tieri, 300 N. Y. 569; People v. Lefhowitz, 232 App. Div. 18, 257 N. Y. 560.) II. Section 605 of the Federal Communications Act does not bar wire-tap evidence from use as evidence in a criminal proceeding in the courts of this State. (Benanti v. United States, 355 U. S. 96.) III. Illegal evidence, otherwise competent, is admissible in criminal prosecutions in the courts of this State. (People v. Adams, 176 N. Y. 351, 192 U. S. 585; People v. Richter’s Jewelers, 291 N. Y. 161; People v. Defore, 242 N. Y. 13, 270 U. S. 657; United States v. Gris, 247 F. 2d 860; Matter of Harlem Chech Cashing Corp. v. Bell 296 N. Y. 15; People v. Stemmer, 298 N. Y. 728, 336 U. S. 963; People v. Feld, 305 N. Y. 322; People v. Saperstein, 2 N Y 2d 210, 353 U. S. 946; Schwartz v. Texas, 344 U. S. 199.)

      Frank S. Hogan, District Attorney (Richard G. Denzer and H. Richard Uviller of counsel), for New York State District Attorneys’ Association, amicus curiae, in support of appellant’s position.
    Evidence obtained by the interception of telephone communications, pursuant to section 813-a of the Code of Criminal Procedure, is admissible, notwithstanding the provisions of the Federal Communications'Act. (Benanti v. United States, 355 U. S. 96; People v. Saperstein, 2 N Y 2d 210, 353 U. S. 946; People v. Stemmer, 298 N. Y. 728, 336 U. S. 963; Matter of Harlem Chech Cashing Corp. v. Bell, 296 N. Y. 15; Schwartz v. Texas, 344 U. S. 199; Wolf v. Colorado, 338 U. S. 25; People v. Defore, 242 N. Y. 13, 270 U. S. 657; People v. Adams, 176 N. Y. 351, 192 U. S. 585.)

      Walter A. Caddell for respondent.
    I. Defendant’s motion to dismiss the informations on the grounds that insufficient evidence was presented by the State to constitute a prima facie case should have been granted. (People ex rel. Lichtenstein v. Langan, 196 N. Y. 260; People v. Laude, 81 Misc. 256; People v. Scibelli, 267 App. Div. 883; Ruloff v. People, 18 N. Y. 179; People v. Sacks, 276 N. Y. 321.) II. A reasonable doubt as to the guilt of defendant existed, at the end of the case, as a matter of law. (People v. Richardson, 287 N. Y. 563; People v. Carpenito, 292 N. Y. 498; People v. Taddio, 292 N. Y. 488; People v. Abelson, 309 N. Y. 643.) III. Opinion evidence persistently repeated by the State’s witness that defendant was a bookmaker and engaged in book-making transactions was reversible error. (People v. Tassell, 272 App. Div. 710; People v. Grutz, 212 N. Y. 72; Noah v. Bowery Sav. Bank, 225 N. Y. 284; People v. Levine, 297 N. Y. 144.) IV. The wire-tap evidence should not have been admitted into evidence. (Benanti v. United States, 355 U. S. 96.) V. The character evidence offered in behalf of defendant deserves consideration as creating a reasonable doubt as to his guilt.
   Van Voorhis, J.

The People appeal from the reversal by the Westchester County Court of a conviction of defendant in the Police Justice Court of the Village of Tarrytown of bookmaking in violation of section 986 of the Penal Law. He was charged under three informations tried together, which are identical except that they charge the commission of the crime on separate days — December 18, 19 and 21, 1956, respectively.

The County Court reversed in the following memorandum:

“ Although four errors are assigned for the reversal of the judgment only the contention that the trial court admitted over the objection of the defendant a transcript of a recording of a wire-tapped conversation, need engage our attention.
“It is conceded by the District Attorney that the arrest of the defendant resulted directly from the information received as a result of wire-taps on a telephone used by the defendant. In the light of this court’s holding in People v. Binan * * * [15 Misc 2d 211] and the recent decision of the United States Supreme Court in Benanti v. United States * * * [355 U. S. 96] the judgment of conviction is reversed, the informations dismissed and the fine remitted.”

The County Court erred in basing its reversal on Benanti v. United States (355 U. S. 96) which is not decisive of this appeal. Assuming for argument only that the wire taps were illegally obtained, it would not be ground for reversal that illegally obtained evidence was introduced at the trial under New York State policy (People v. Richter’s Jewelers, 291 N. Y. 161; People v. Before, 242 N. Y. 13, cert. denied 270 U. S. 657). A State policy of admitting evidence having probative force, even though obtained illegally, does not contravene Federal law (Schwartz v. Texas, 344 U. S, 199). The opinion of the Supreme Court by Chief Justice Warren in the Benanti case (supra, p, 101) says concerning the Schwarts case: “ The rationale of that case is that despite the plain prohibition of Section 605, due regard to federal-state relations precluded the conclusion that Congress intended to thwart a state rule of evidence in the absence of a clear indication to that effect.”

The only basis on which the judgment of conviction might be attacked is that defendant was not proved guilty of the offenses charged beyond a reasonable doubt. He did not testify. In support of the dismissal of the informations by the County Court, it is urged that the wire taps of these three days indicated nothing, that the only papers taken from defendant at Pircio’s Cleaners (where he was telephoning across the street from Park Inn of which he was the proprietor) were a scratch sheet (National Racing Program) and a single slip of paper containing notations relating to several races being run that day which might have represented bets placed by himself. Section 986 does not proscribe betting, but only the taking of bets from others. When Pircio’s Cleaners was searched no gambling material was found there, nor anything in defendant’s own Park Inn across the street except a printed manual called ‘ ‘ Parlay Pay-off ” found in a drawer in the rear of the counter beneath the bar, and an envelope in the hallway of the Inn containing $26 and three daily double bets aggregating that sum on horses to be run on that day. It is said that these might have been for placement by defendant on his own account. Moreover, this envelope and its contents were not found with the Parlay Pay-off in the drawer under the bar, but in the public hall to which access was had by persons going to or from the men’s room or the ladies’ room in the tavern. It is said that this does not establish possession by defendant, even if this horse sheet could be said in form to be sufficient to implicate anyone under section 986.

Regardless of the effect of the papers found at Park Inn, we think that the paper found in defendant’s left hand when Pircio’s Cleaners was raided is sufficient to implicate him in conjunction with the intercepted telephone call on December 21. Defendant was still at the telephone when the police arrived. The raid was made immediately after defendant had been overheard receiving these three daily double bets over the telephone. Chief Criminal Investigator McCarthy testified that the substance of the intercepted telephone conversations was as follows: 11 The entire conversation as I see here on the 21st of December, 1956 are three daily double bets. The horses in question, ‘ Ignition ’ and 1 Batchelor Club ’ are, I will use the phrase hooked up together in the 1st of the daily double bets. ‘ Robert W. ’ and ‘ Bullish Force ’ are together in the second daily double bet; and ‘ Bogey Man ’ and ‘ Bullish Force ’ is in the third daily double bet. There are three separate and distinct transactions on that particular page.”

These bets received by defendant over the telephone from some other person were recorded, in the same fashion in which they were heard to come over the wire, on the paper which defendant was found clutching in his left hand when he was arrested at the telephone.

McCarthy testified in detail respecting the contents of this paper that these horses were scheduled to run on that date (December 21,1956), and that the notation T ” indicated that the races were to be held at Tropical Park. McCarthy further testified: From the slip I can draw no other inference as a result of listening to the [wire-tap] recordings, comparing the recordings with this slip and taking into consideration the fact that this particular slip was taken from the person of Mr. Variano, I can draw no other conclusion except that Mr. Variano was reducing to writing the names of the horses, the racetrack, the amount of money and the type of bets on the 21st day of December, 1956.”

He testified that the horses on the transcript of the recording and the paper found in defendant’s hand corresponded. He was testifying as an expert on book-making with many years of experience.

The order of the County Court is reversed and the matter remitted to the County Court to pass on the facts (Code Grim. Pro., §§ 543-a, 543-b).

Chief Judge Conway and Judges Desmonu, Dye, Fuld, Feoessel and Bubke concur.

Order reversed, etc.