source: Caselaw Access Project

author: Simons, J.

license: Public Domain

text:
    Council for Owner Occupied Housing, Inc., et al., Respondents, v Robert Abrams, as Attorney-General of the State of New York, Appellant.
    Argued October 19, 1988;
    decided November 22, 1988

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General (Nancy Kramer, O. Peter Sherwood, Lawrence S. Kahn and Frederick K. Mehlman of counsel), appellant pro se.

    The Attorney-General has authority to require sponsors of cooperative conversions to promise in their offering plans to comply with State and local laws which require the correction of dangerous or hazardous building conditions. (Matter of Ottinger v State Civ. Serv. Commn., 240 NY 435; People v Federated Radio Corp., 244 NY 33; People v Lexington Sixty-First Assocs., 38 NY2d 588; Madden v Queens County Jockey Club, 296 NY 249; Matter of Small v Moss, 279 NY 288; Matter of Barton Trucking Corp. v O’Connell, 7 NY2d 299; Wnek Vending & Amusements v City of Buffalo, 96 Misc 2d 983; Matter of Berger v Leach, 103 AD2d 1018; People ex rel. Schwab v Grant, 126 NY 473.)

      Herbert Teitelbaum, Thomas P. Battistoni, Mona R. Millstein and Alan Epstein for respondents.
    I. The Attorney-General has no power to engraft onto the disclosure purposes of the Martin Act substantive requirements that the offeror cure or eliminate certain building conditions. (Matter of Guardian Life Ins. Co. v Bohlinger, 308 NY 174; Matter of Dairylea Coop. v Walkley, 38 NY2d 6; Boreali v Axelrod, 71 NY2d 1; Matter of Nicholas v Kahn, 47 NY2d 24; Matter of Whalen v Lefkowitz, 36 NY2d 75; People v Lexington Sixty-First Assocs., 38 NY2d 588; Council for Owner Occupied Hous. v Koch, 119 Misc 2d 241, 61 NY2d 942; State of New York v Rachmani Corp., 71 NY2d 718; All Seasons Resorts v Abrams, 68 NY2d 81; Sopher v Abrams, 554 F Supp 532.) II. The challenged regulations cannot be predicated on any other statute. (Matter of Badem Bldgs. v Abrams, 70 NY2d 45; Matter of Greenthal & Co. v Lefkowitz, 32 NY2d 457; Phoenix Tenants Assn. v 6465 Realty Co., 119 AD2d 427; Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588; Freitas v Geddes Sav. & Loan Assn., 63 NY2d 254; Matter of Jones v Berman, 37 NY2d 42; Matter of Barry v O’Connell, 303 NY 46; Matter of Picone v Commissioner of Licenses, 241 NY 157; Subcontractors Trade Assn. v Koch, 62 NY2d 422.) III. Appellant’s argument that he is a "licensor” is a tortured misinterpretation of the Martin Act. (Matter of Bologno v O’Connell, 7 NY2d 155; Matter of Small v Moss, 279 NY 288.)

      Peter L. Zimroth, Corporation Counsel (Fay Leoussis and Francis F. Caputo of counsel), for the City of New York, amicus curiae.

    The Attorney-General’s regulation requiring sponsors of cooperative conversions to promise in their offering plans to comply with laws which require the correction of dangerous or hazardous conditions is not ultra vires. (Park W. Mgt. Corp. v Mitchell, 47 NY2d 316.)

      Richard L. Levenson and Michele Cortese for Metropolitan Council on Housing and another, amici curiae.

    I. Principles of statutory construction compel the conclusion that the Attorney-General has authority under the Martin Act to promulgate the regulations at issue. (We’re Assocs. Co. v Cohen, Stracher & Bloom, 65 NY2d 148; Matter of Industrial Commr. v Five Corners Tavern, 47 NY2d 639; United States v Nova Scotia Food Prods. Corp., 568 F2d 240; Rankin v Shanker, 23 NY2d 111; Matter of Anderson v Board of Educ., 46 AD2d 360, 38 NY2d 897; Matter of Schacht v Allen, 20 AD2d 507; Matter of Martinez v Ficano, 28 AD2d 215; Matter of Adesso [Roberts], 89 AD2d 662; People v Lexington Sixty-First Assocs., 38 NY2d 588; Lizby Assocs. v Baron, 130 Misc 2d 834.) II. The Attorney-General’s view that he has authority to promulgate the regulations at issue must be upheld if not irrational or unreasonable. (Matter of Johnson v Joy, 48 NY2d 689; Matter of Nisnewitz v Board of Regents, 95 AD2d 950; Matter of Reader’s Digest Assn. v State Tax Commn., 103 AD2d 926; 58 W. 58th Tenant Assn. v 58 W. 58th Assocs., 126 Misc 2d 500; Matter of Bates v Toia, 45 NY2d 460; Matter of City of New York v Tully, 88 AD2d 701; Matter of Fein v Rent Stabilization Assn., 101 Misc 2d 216; State of New York v Winter, 121 AD2d 287; Matter of Wiener v Abrams, 119 Misc 2d 970; State of New York v Solil Mgt. Corp., 128 Misc 2d 767.) III. The decision in Matter of Council for Owner Occupied Hous. v Abrams (125 AD2d 10) is not applicable to the regulations in the instant case.

      Stuart M. Saft and Eric B. Levine for Council of New York Cooperatives, Inc., amicus curiae.

    I. The courts below erroneously believed that the decision in Matter of Council for Owner Occupied Hous. v Abrams (125 AD2d 10 [3d Dept 1987]) is controlling. II. The Attorney-General has the implied authority to withhold his consent to the conversion of a building with known illegal conditions. (Matter of Barton Trucking Corp. v O’Connell, 7 NY2d 299; Dr. Bloom Dentist, Inc. v Cruise, 259 NY 358, 260 NY 571, 288 US 588; Matter of City of Rochester v County of Monroe, 81 Misc 2d 462; Matter of Berger v Leach, 103 AD2d 1018; Matter of Smith v University of State of N. Y., 81 Misc 2d 956, 49 AD2d 969; Under 21 v City of New York, 65 NY2d 344; Subcontractors Trade Assn. v Koch, 62 NY2d 422; Rapp v Carey, 44 NY2d 157; Matter of Bologno v O’Connell, 7 NY2d 155.)
   OPINION OF THE COURT

Simons, J.

This action challenges the authority of the Attorney-General under article 23-A of the General Business Law (the Martin Act), specifically his authority to promulgate and enforce 13 NYCRR 18.3 (hh) (3) governing the conversion of rental buildings to cooperative status. The regulation requires sponsors to state in their offering plans "that prior to closing or within a reasonable period of time thereafter, sponsor will cause to be cured all violations of record as of the closing date (except violations caused by acts or omissions of tenants of the building in their own units), and will eliminate all dangerous or hazardous conditions that sponsor has notice of, and comply with all work orders from mortgagees” (13 NYCRR 18.3 [hh] [3]).

Plaintiffs are the Council for Owner Occupied Housing, a not-for-profit corporation that comments upon rules, regulations and legislation affecting cooperative and condominium housing in New York, and three individual sponsors of cooperative housing. They instituted this action for declaratory judgment, successfully arguing in the courts below that the regulation exceeds the authority granted the Attorney-General by section 352-e of the General Business Law because it improperly purports to establish enforcement measures. We granted the Attorney-General leave to appeal and we now affirm, concluding that the regulation in question goes beyond the language and purpose of the statute.

Article 23-A of the General Business Law governs the offer and sale of securities in and from New York State. Section 352-e of the article authorizes the Attorney-General to require sponsors of real estate syndication offerings to file an offering plan prior to selling or offering for sale real estate securities, including cooperative interests in realty (see, General Business Law § 352-e [1] [b]; [6]). It provides that the offering plan must include the detailed terms of the transaction "and such additional information as the attorney general may prescribe in rules and regulations” promulgated under subdivision 6 "as will afford potential investors, purchasers and participants an adequate basis upon which to found their judgment” (General Business Law § 352-e [1] [b]). Subdivision 6 (a) authorizes the Attorney-General to adopt suitable rules and regulations to carry out the provisions of the statute, including regulations concerning the method, contents and filing procedures with respect to statements required by the statute. If the offering plan filed is not adequate to satisfy the informational purpose, the Attorney-General may refuse to accept it, and thereby prevent the property from being sold or offered for sale (General Business Law § 352-e [2]).

Notwithstanding these powers and our commitment to interpret the statute containing them liberally to achieve the remedial purpose intended (see, All Seasons Resorts v Abrams, 68 NY2d 81, 86-87), section 352-e is not, in any sense, an omnibus enforcement statute (see, Matter of Badem Bldgs. v Abrams, 70 NY2d 45). As its language and our decisions make clear, it is a disclosure statute, designed to protect the public from fraudulent exploitation in the sale of real estate securities. To that end, the required offering statement is intended to provide an adequate factual basis upon which "potential investors, purchasers and participants” can intelligently make their choice and "found their judgment” to buy or not to buy (see, id.; Matter of Whalen v Lefkowitz, 36 NY2d 75, 78; Matter of Greenthal & Co. v Lefkowitz, 32 NY2d 457, 462; Council for Owner Occupied Hous. v Koch, 119 Misc 2d 241, 244-245, affd 61 NY2d 942).

The present regulation goes far beyond that purpose, however, and requires not only the disclosure of all building and code violations, "dangerous or hazardous conditions” and all work orders from mortgagees but also a representation that they will be cured. Nothing in the statute authorizes the Attorney-General to require repair of a building, correction of statutory violations, or elimination of undefined conditions he finds "dangerous or hazardous”. The present regulation, by imposing such requirements, would, in effect, enable the Attorney-General to exercise extensive powers not only to enjoin sale of the real property (a power code enforcement officers do not generally possess) and prosecute code violations under the securities fraud provisions of the Martin Act for failure to state or misstating the intention to cure or eliminate building and code violations but also to preempt or interfere with the responsibilities of other regulatory agencies. There is nothing in the statutory scheme that authorizes the exercise of such powers, however, and we agree with Justice Kane, writing for the Appellate Division, that reading section 352-e to permit the Attorney-General to do so would extend the statutory language to situations not intended to be embraced by the Legislature (see, Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588, 595; Matter of Jones v Berman, 37 NY2d 42).

The Attorney-General contends that the Martin Act should be construed broadly to protect fraudulent exploitation of the public generally and that the Legislature has directed him to "oversee” the conversion of buildings to cooperative status with much the same regulatory powers as a licensing authority. He cites provisions found in other sections of the Martin Act designed to secure tenants from harassment (see, e.g., General Business Law § 352-eeee [3], [4]) or to avoid "warehousing” of vacancies (General Business Law § 352-eeee [2] [e]) and contends that these provisions indicate section 352-e also delegates substantive powers. Section 352-e does not authorize regulatory power, however, nor does it grant the Attorney-General the power to license sponsors of real estate conversions. On the contrary, the absence of substantive provisions in section 352-e indicates that the Legislature did not intend to confer such powers on the Attorney-General and, as an executive official, he may not extend the delegated power or exercise lawmaking power vested solely in the Legislature by adopting remedial measures that exceed the authority granted by the enabling statute (see, Clark v Cuomo, 66 NY2d 185, 189; Subcontractors Trade Assn. v Koch, 62 NY2d 422, 429).

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

Chief Judge Wachtler and Judges Kaye, Alexander, Titone, Hancock, Jr., and Bellacosa concur.

Order affirmed, with costs.

       The Attorney-General cites a number of overlapping laws and regulations requiring multiple dwelling units to be maintained in good repair and to correct inadequate conditions (State Uniform Fire Prevention and Building Code, 9 NYCRR parts 600-611, 650-652, 1230-1234, 1240-1246, 1300; Multiple Dwelling Law §§ 4, 77-80; Multiple Residence Law §§ 4, 40-43, 170-174; New York Sanitary Code, 10 NYCRR part 21 [excludes New York City]; Administrative Code of City of New York, tit 27, chs 1, 2; Real Property Law § 235-b [1]).


author: Kaye, J.

text:
    Gramercy Equities Corp. et al., Plaintiffs, v Paul Dumont, Defendant and Third-Party Plaintiff-Respondent. Anthony P. Russo, Third-Party Defendant-Appellant.
    Argued October 13, 1988;
    decided November 22, 1988

      POINTS OF COUNSEL

      Alan D. Scheinkman and Miriam M. Robinson for third-party defendant-appellant.
    I. As a matter of partnership law and public policy, Dumont is not entitled to any indemnification from Russo. (Blair v Scimone, 26 AD2d 751; Backus Plywood Corp. v Commercial Decal, 208 F Supp 687, 317 F2d 339; Sadwith v Lantry, 219 F Supp 171; Pedersen v Manitowoc Co., 25 NY2d 412; Steinbeck v Gerosa, 4 NY2d 302, 358 US 39; Austro v Niagara Mohawk Power Corp., 66 NY2d 674; General Stencils v Chiappa, 18 NY2d 125; Rosado v Proctor & Schwartz, 66 NY2d 21; McCabe v Queensboro Farm Prods., 22 NY2d 204.) II. Dumont’s breaches of the venture agreement preclude him from any right of indemnity. (Sadwith v Lantry, 219 F Supp 171; Wagner v Derecktor, 306 NY 386; Borne Chem. Co. v Dictrow, 85 AD2d 646.) III. Dumont is not entitled to indemnification because of his breach of fiduciary duty. (Gluck & Co. v Tankel, 12 AD2d 339; Lichtyger v Franchard Corp., 18 NY2d 528; Rivera Congress Assocs. v Yassky, 18 NY2d 540.) IV. Dumont should be estopped from relying on the prior judgment as a basis for indemnification. (Tannenbaum v Provident Mut. Life Ins. Co., 41 NY2d 1087; Sassower v Barone, 85 AD2d 81; General Stencils v Chiappa, 18 NY2d 125.) V. Judgment for indemnification is not an appropriate remedy.

      Aaron Gelbwaks and Laurence S. Margolin for defendant and third-party plaintiff-respondent.
    I. Paul Dumont acted within his authority under the joint venture agreement declared by Justice Schwartz and is entitled to indemnification from Anthony Russo. (Pedersen v Manitowoc Co., 25 NY2d 412; Ruzicka v Rager, 305 NY 191; Merrick v New York

      Subways Adv. Co., 14 Misc 2d 456; Halperin v Edwards & Hanly, 430 F Supp 121; Caplan v Caplan, 268 NY 445; Kiffer v Bienstock, 128 Misc 2d 451; A. G. Ship Maintenance Corp. v Lezak, 69 NY2d 1; Mighty Midgets v Centennial Ins. Co., 47 NY2d 12; Zuckerman v Antenucci, 124 Misc 2d 971.) II. Equity should not enable Russo to avoid indemnification. (Tannenbaum v Provident Mut. Life Ins. Co., 41 NY2d 1087; Sassower v Barone, 85 AD2d 81; Matter of Peck, 206 NY 55; Caplan v Caplan, 268 NY 445; Kittredge v Langley, 252 NY 405; Pedersen v Manitowoc Co., 25 NY2d 412; Walker v Anglo-American Mtge. & Trust Co., 72 Hun 334; Dyett v Hyman, 129 NY 351; Downey v Finucane, 205 NY 251.)
   OPINION OF THE COURT

Kaye, J.

Where one joint venturer, managing the business of the joint venture, alone commits an intentional fraud against third parties resulting in the recovery of damages by them, he is not thereafter entitled to be indemnified by the other joint venturer.

This appeal — involving solely the allocation of damages between coventurers inter se — arises out of the conversion of a Manhattan building from commercial lofts to a residential cooperative. In early 1978, Paul Dumont (plaintiff) and Anthony Russo (defendant) entered into an oral agreement to sponsor conversion of the building. Russo, a hairdresser by trade, was not expected to take an active role, but only to provide the cash then needed to buy the building. Dumont, who had experience in cooperative conversions, was to contribute his expertise and do the actual work required to form a cooperative corporation and convey the building to it. The two agreed that after the conveyance was complete, Russo would receive the proprietary lease for the eighth floor of the building as well as half the net proceeds.

In 1979, a cooperative corporation known as Gramercy Equities Corporation was formed and acquired title to the property. Dumont, sponsor of the plan, began selling shares in the cooperative; Russo took no part in this activity. Dumont ultimately sold all other floors but two which he retained — the ground floor (intended for a commercial tenant) and the sixth floor. It was understood that proprietary leaseholders, including Dumont, each would renovate their own "raw” space, so that the apartments could meet New York City Building Code requirements. Until those renovations and certain other repairs were complete, no certificate of occupancy could be obtained for the building. Dumont represented to the purchasers that the cooperative corporation would undertake to secure a tax abatement pursuant to "J-51” of the Administrative Code of the City of New York.

After a number of floors had been sold, Russo brought suit against Dumont, alleging in essence that he had failed to accord him his rights as a joint venturer, and demanding that Dumont account to him for the profits of the joint venture. Dumont denied the existence of any joint venture, and claimed that Russo was a mere subscriber to the offering plan. In August 1981, judgment was rendered declaring Russo a joint venturer with Dumont in the cooperative conversion and therefore entitled to half the profits. The court found, moreover, that Russo was not expected to take an active role in the business, but only to contribute the cash required to take title to the building. Supreme Court ordered that the moneys received by Dumont from the sale of shares be held in trust, and that an accounting be rendered.

Meanwhile, trouble brewed between Dumont and the other cooperative tenants. In order to qualify for the "J-51” tax abatement, a certificate of occupancy for the building had to be issued no later than September 30, 1981; all renovations required to bring the building up to code standards had to be completed before that date. While work was well underway on other floors, Dumont had repaired none of the violations on the sixth floor, owned by Dumont but at the time occupied by a tenant-in-possession. Ultimately, the September deadline passed without a certificate of occupancy, and the cooperative failed to qualify for a "J-51” tax abatement.

The tenants sought damages against Dumont for loss of the tax abatement, alleging that he had breached his contract as proprietary leaseholder to complete his renovations in a timely fashion so that the building could qualify for the tax benefit. Additionally, they separately charged Dumont with fraud, contending that although he had promised to complete certain renovations in time to obtain the tax abatement, he never had any intention of doing so. Dumont in turn served a third-party complaint on Russo, alleging that if he were found liable to the tenants, Russo, as joint venturer, had to indemnify him for half the damages, as they arose directly out of the business of the joint venture.

Dumont and Russo agreed that, as between themselves, there were no facts in dispute — only the legal consequences of their relationship. Dumont’s indemnification claim was therefore severed from the main action, to be later decided by the trial court.

At trial, the tenants’ evidence of damages consisted of the testimony of their tax attorney as to the amount of the rebate they would have received had Dumont timely completed his renovation. At the conclusion of the evidence, a large portion of the court’s instruction was devoted to the fraud charge, which was thereafter reread at the jury’s request. The jury found Dumont guilty of both breach of contract and intentional fraud — specifically answering in the affirmative the question, "Did the Defendant Paul Dumont commit a fraud against the plaintiffs?” The court awarded damages to the cooperative tenant plaintiffs in the amount lost as a result of their failure to obtain the "J-51” tax abatement, and then allowed Dumont indemnification for half that judgment against Russo, based upon its interpretation of partnership law principles.

While the jury found that Dumont had defrauded the tenants by making a promise with no intention of fulfilling it, the court made no finding that Russo in any sense participated in that wrongdoing or that Dumont’s fraud profited the joint venture. Noting that the earlier action had determined both that Russo was a joint venturer and that he was not intended to take an active role, Supreme Court simply rejected Russo’s claim that his exclusion from management foreclosed Dumont’s right of indemnification arising out of his unilateral management of the joint venture. Based upon its finding that the damages were liabilities incurred in the ordinary conduct of the joint venture, Supreme Court held that, pursuant to Partnership Law § 40 (2), Dumont was entitled to be indemnified, and the Appellate Division affirmed, without opinion. We now reverse.

Before reaching the merits of the dispute, we note Russo’s procedural argument: that resolution of the indemnification claim must await a final accounting at the end of the joint venture. Russo might well have succeeded in this argument had he raised it earlier, for courts are generally loath to intercede in squabbles between partners that result in piecemeal adjudications, preferring that partners either settle their own differences amicably or dissolve and finally conclude their affairs by a full accounting (see, Lord v Hull, 178 NY 9, 13; Schuler v Birnbaum, 62 AD2d 461, 463 [Simons, J.]). The impediment to our consideration of Russo’s procedural claim, however, is that he did not present it to the trial court, but defended against Dumont’s third-party complaint solely on the merits. In that both partners in this entity have chosen to submit the indemnification claim for resolution in this fashion, we do not determine whether the dispute would otherwise fall within the general proscription against piecemeal litigation of partnership matters, or within some exception to it (see, Schuler v Birnbaum, supra).

A joint venture is a " 'special combination of two or more persons where in some specific venture a profit is jointly sought’ ” (Forman v Lumm, 214 App Div 579, 583). It is in a sense a partnership for a limited purpose, and it has long been recognized that the legal consequences of a joint venture are equivalent to those of a partnership (see, Pedersen v Manitowoc Co., 25 NY2d 412, 419). Thus, the trial court properly looked to partnership law principles to resolve the dispute between Dumont and Russo.

In New York, the right of a partner to be indemnified for personal liabilities is governed by Partnership Law § 40 (2) (Uniform Partnership Act § 18), which provides that "[t]he partnership[] must indemnify every partner in respect of payments made and personal liabilities reasonably incurred by him in the ordinary and proper conduct of its business, or for the preservation of its business or property.” The question before us, simply put, is whether acts that have been determined to constitute the intentional fraud of only one of the coventurers — not shared by the other — may be considered to constitute "the ordinary and proper conduct” of the partnership business.

It is undisputed that the cooperative tenants could have brought suit for Dumont’s fraud against the joint venture, or even against Russo individually, and recovered their damages. As agents for each other, partners and joint venturers are jointly and severally liable to third parties for "any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership”. (Partnership Law §§ 24, 26 [1]; see also, Royal Bank & Trust Co. v Weintraub, Gold & Alper, 68 NY2d 124; Pedersen v Manitowoc Co., supra.) The sale of cooperative shares, during which Dumont made the fraudulent statements to purchasers, constituted the "ordinary” course of the business of this joint venture: it was formed for the very purpose of selling cooperative shares in the building. However, the tenants sued only Dumont, and the issue is whether as between the two joint venturers Dumont can shift a portion of the liability that has been imposed on him to his joint venturer, Russo. The fact that a charge may have been incurred in the ordinary course of partnership business — as the trial court found here — does not conclude the inquiry as to whether indemnification is necessarily recoverable. Partnership Law § 40 (2) contemplates something more.

The principle that a partnership must indemnify a partner who has incurred liabilities in the ordinary course of the partnership business is not determinative where the liability is the result of unauthorized, intentional wrongdoing. Although the public interest requires that the partnership or even innocent partners be held answerable to third parties for unlawful actions of their agents apparently taken on their behalf (see, Royal Bank & Trust Co. v Weintraub, Gold & Alper, supra, at 128-129; Kittredge v Langley, 252 NY 405, 419), there is no comparable interest in imposing liability on innocent partners when the suit is between the partners themselves (see, Reuschlein & Gregory, Agency and Partnership § 185 [1979]; Lindley, Partnership, at 460 [10th ed 1935]; Restatement [Second] of Agency § 440 [a]). Indeed, this distinction is codified in the Partnership Law, which imposes partnership liability for injury to third persons caused by "any wrongful act or omission of any partner acting in the ordinary course of the business” (Partnership Law § 24), but requires indemnification only for liabilities incurred in "the ordinary and proper conduct” of the partnership business (Partnership Law § 40 [2] [emphasis added]).

In matters of indemnification between two joint venturers, the unauthorized fraud found to have been practiced against third persons by only one venturer obviously is not the "proper conduct” of the partnership business. That Dumont was vested with sole managerial control of the business does not alter that result in the absence of a finding that Russo in any way shared in Dumont’s fraud. Partnership Law § 40 is expressly "subject to any agreement” between partners (see, Kraemer v Gallagher, 18 AD2d 676), but without any finding of complicity, the unauthorized fraud of one venturer cannot be said to be pursuant to the "agreement” of both.

Finally, we note that this result comports with the public policy of discouraging intentionally wrongful conduct. To permit a joint venturer to shift a portion of the liability for independent fraud to a partner not found to have had any complicity in it significantly diminishes the incentive to refrain from such conduct (see, Rosado v Proctor & Schwartz, 66 NY2d 21, 26-27). Such a policy has particular force in the case of joint venturers who — apart from their responsibilities to third persons — owe each other a duty of "finest loyalty” and honesty. (Meinhard v Salmon, 249 NY 458, 463-464.)

Accordingly, the Appellate Division order should be reversed, with costs, and the third-party complaint dismissed.

Chief Judge Wachtler and Judges Simons, Alexander, Titone, Hancock, Jr., and Bellacosa concur.

Order reversed, etc.

       While Partnership Law § 40 (2) speaks of indemnification by the entity, given the nature of this venture the claim has been asserted and defended individually — Dumont’s claim has been brought against Russo personally and Russo has defended personally.


author: Hancock, Jr., J.

text:
    Phil Caruso, as President of the Patrolmen’s Benevolent Association of the City of New York, et al., Appellants, v New York City Police Department Pension Funds, Article 1 and Article 2, et al., Respondents.
    Argued October 18, 1988;
    decided November 22, 1988

      POINTS OF COUNSEL

      W. Bernard Richland and Julie A. Prag for appellants.
    I. The police officer trustees, who share equally with the City administration trustees in the administration of the Police Pension Fund, participated in the "Heart Bill” litigation in their capacity as trustees of the Police Pension Fund, they did so in the exercise of their fiduciary duty and they are entitled to reimbursement of their attorney’s fees from the Pension Fund. (Schoenherr v Van Meter, 215 NY 548; Woodruff v New York, Lake Erie & W. R. R. Co., 129 NY 27; Corn Exch. Bank Trust Co. v Bankers Trust Co., 268 NY 224; Weidlich v Comley, 267 F2d 133; Morrissey v Segal, 526 F2d 121; New York State Teamsters Conference Pension & Retirement Fund v Hoh, 561 F Supp 687; Central States Pension Fund v Central Transp., 472 US 559; Matter of City of New York v Schoeck, 294 NY 559; Withers v Teachers’ Retirement Sys., 447 F Supp 1248, 595 F2d 1210; Matter of Dana [Manufacturers Hanover Trust Co.], 45 AD2d 676.) II. Abundant case law affirming common practice establishes plaintiffs-appellants’ right as government officials to have retained independent counsel at public expense for the purpose of correcting the Corporation Counsel’s misguided interpretation of the "Heart Bill”. (Matter of Randy G., 127 Misc 2d 1079; Cahn v Town of Huntington, 29 NY2d 451; Matter of Commco, Inc. v Amelkin, 62 NY2d 260; Buck v City of New York, 214 App Div 629; Hanna v Rewkowski, 81 Misc 2d 498; Zablow v Incorporated Vil. of Freeport, 41 Misc 2d 803; Matter of Murer v Butterfield, 122 Misc 2d 969; Matter of Slominski v Rutkowski, 91 AD2d 202, 62 NY2d 781.) III. It is the common practice in city government that when city departments or members of a city body need a judicial resolution of their disputes on controlling law, the Corporation Counsel takes one side and the view of the other side is advanced by private counsel at city expense. (Michael v Bellamy, 80 AD2d 147, 57 NY2d 603; Golden v Koch, 49 NY2d 690; Matter of Board of Educ. v City of New York, 41 NY2d 535; Matter of Board of Educ. v Goldin, 94 Misc 2d 574, 72 AD2d 603, 49 NY2d 705; Chance v Board of Examiners & Board of Educ., 534 F2d 993, cert denied sub nom. Council of Supervisors & Adm’rs v Chance, 431 US 965; Matter of New York City Hous. & Redevelopment Bd. v Foley, 23 AD2d 84, 16 NY2d 1071; Andrews v Koch, 528 F Supp 246, 688 F2d 815, affd sub nom. Giacobbe v Andrews, 459 US 801.)

      Peter L. Zimroth, Corporation Counsel (Doron Gopstein, Leonard Koerner and Edward F. X. Hart of counsel), for respondents.
    I. Individual trustees of New York City Public Employee Pension Funds may not be reimbursed for attorneys’ fees incurred by them for suits instituted by them without pension board approval and against the advice of the Corporation Counsel. New York City Charter § 394 invests the Corporation Counsel with "charge and conduct” of all the law business of the City and section 395 prohibits the retention of outside counsel, with statutory and judicially created exceptions not applicable here. Since the individual union trustees, in contravention of the advice of the Corporation Counsel and without seeking Board approval, instituted this action, they were acting on their own, regardless of their capacity as union trustees or union officials. Therefore, the Funds’ motion to dismiss the instant action for attorneys’ fees was properly granted. (Doyle v Allstate Ins. Co., 1 NY2d 439; Cahn v Town of Huntington, 29 NY2d 451; Matter of Commco, Inc. v Amelkin, 62 NY2d 260; Matter of Mooney v Cohen, 272 NY 33; Matter of Kay v Board of Higher Educ., 260 App Div 9, 912; Lyddy v Long Is. City, 104 NY 218; Judson v City of Niagara Falls, 140 App Div 62, 204 NY 630; Matter of City of New

      York v Retirement Bd. of Teachers Retirement Sys., 116 Misc 2d 496; People ex rel. Sherrill v Guggenheimer, 47 App Div 9; Matter of Abrams v Ronan, 36 NY2d 714; Sutherland, Alien Prop. Custodian v International Ins. Co., 43 F2d 969, 282 US 890; Westchester Ch., Civ. Serv. Employees Assn. v Levitt, 37 NY2d 519.) II. The unique structure of the Police Pension Fund and statutory restrictions on the powers of its trustees limit the applicability of analogies to private trusts. While the Board and its component members are bound to act in a fiduciary manner, the means for fulfilling their fiduciary duties are prescribed in and proscribed by the "terms of the trust”. Disputes concerning interpretation of pension statutes and their application to specific facts have traditionally been resolved in the courts in challenges brought by individual applicants or unions. (Matter of McCambridge v McGuire, 62 NY2d 563; Matter of Lichtenstein v Board of Trustees, 57 NY2d 1010; Matter of Tobin v Steisel, 64 NY2d 254; Matter of Canfora v Board of Trustees, 90 AD2d 751, 60 NY2d 347; Goldman v McGuire, 101 AD2d 768, 64 NY2d 1041; Matter of Mahoney v McGuire, 107 AD2d 363, 66 NY2d 622; Matter of Mondello v Beekman, 78 AD2d 824, 56 NY2d 513; Matter of Lowcher v New York City Teachers’ Retirement Sys., 54 NY2d 373; Matter of Rapp v New York City Employees’ Retirement Sys., 42 NY2d 1.)

      William Josephson, Sheldon Raab and Beverly Ross Campbell for Stanley Hill, amicus curiae.

    I. Plaintiffs-appellants, as trustees of an express trust, have standing and the right to retain and compensate counsel. (Velez v Feinstein, 87 AD2d 309; Central States Pension Fund v Central Transp., 472 US 559; NLRB v Amax Coal Co., 453 US 322; Savings Bank v New York Trust Co., 27 NY2d 963; Withers v Teachers’ Retirement Sys., 447 F Supp 1248, 595 F2d 1210; Matter of City of New York v Retirement Bd. of Teachers Retirement Sys., 116 Misc 2d 496; Blankenship v Boyle, 329 F Supp 1089; Sgaglione v Levitt, 37 NY2d 507; New York City Employees’ Retirement Sys. v Eliot, 267 NY 193; Parker v Rogerson, 49 AD2d 689; Matter of Garland, 159 Misc 333.) II. Plaintiffs-appellants were entitled to retain and compensate independent counsel notwithstanding New York City Charter §§ 394 and 395 because the Code of Professional Responsibility precluded the New York City Corporation Counsel from representing the Police Pension Fund trustees in this dispute. (Rosen v Hotel & Rest. Employees & Bartenders Intl. Pension Fund, 637 F2d 592, 454 US 898; Judson v City of Niagara Falls, 140 App Div 62, 204 NY 630; Death v Salem, 111 AD2d 778; Dunton v County of Suffolk, 729 F2d 903, 748 F2d 69; The Steamer Gray Jacket, 5 Wall [72 US] 370; Sutherland, Alien Prop. Custodian v International Ins. Co., 43 F2d 969, 282 US 890; United States v Muntzing, 69 F Supp 503; United States v ICC, 337 US 426.) III. The spectres of uncontrolled litigation and expense to the City raised by defendants-respondents are not founded in law or fact. (Matter of Patchin, 106 AD2d 730; Matter of Dana [Manufacturers Hanover Trust Co.], 45 AD2d 676; Matter of Rainone, 33 AD2d 1048; Matter of Wilhelm, 88 AD2d 6; duPont v Southern Natl. Bank, 575 F Supp 849, 771 F2d 874, 475 US 1085; Golden v Koch, 49 NY2d 690; Barry v City of New York, 175 Misc 712, 261 App Div 957; Cahn v Town of Huntington, 29 NY2d 451.) IV. The alternatives to granting plaintiffs-appellants’ appeal are unrealistic or contrary to public policy. (Greene v Greene, 47 NY2d 447; Matter of Randy G., 127 Misc 2d 1079; Lynch v Metropolitan El. Ry. Co., 129 NY 274; Schuehle v Reiman, 86 NY 270; West Point Iron Co. v Reymert, 45 NY 703.)

      Ronald H. Schechtman and Richard M. Betheil for Vincent Bollon and others, amici curiae.

    I. Cahn v Town of Huntington (29 NY2d 451), as applied and limited to the circumstances herein, requires reimbursement of the trustees’ legal expenses. II. The effect of the decision of the court below is to prevent the union trustees from effectively performing their duties as trustees. (Michael v Bellamy, 80 AD2d 147, 57 NY2d 603.)
   OPINION OF THE COURT

Hancock, Jr., J.

In this action to recover legal expenses, the question presented is whether individual trustees of the New York City Police Department Pension Funds (the Fund) may, at cost to the Fund, employ outside counsel to institute a lawsuit against other such trustees to resolve a disagreement over the proper construction of a statute governing eligibility for accident disability pension benefits. For the reasons that follow, we agree with the Appellate Division that, under the circumstances of this case, the individual trustees had no such authority and are, therefore, not entitled to reimbursement for the expenses they incurred.

The Board of Trustees of the Fund has 12 members. Eight are police union officials with weighted votes totaling six; four are City of New York officials having the same collective voting strength (Administrative Code of City of New York § 13-216 [a]). The Board reviews applications for disability pension benefits, a majority vote of seven being required for a resolution of approval (§ 13-216 [b]). When an application claiming accident disability is reviewed, a 6-6 tie vote of the Board results in a denial and the applicant is granted only ordinary disability benefits (§ 13-216 [b]; see, Matter of Canfora v Board of Trustees, 60 NY2d 347, 352). The lawsuits underlying this appeal arose from a deadlock within the Board over claims of accident disability from heart disease. On one side were the union officials; on the other were those of the City.

The disagreement between the two sides centered on the proper interpretation of General Municipal Law § 207-k, commonly known as the "Heart Bill”. The statute makes special provision for policemen who, having no history of heart disease prior to employment with the City, subsequently develop "any condition of impairment of health caused by diseases of the heart, resulting in total or partial disability or death”. Under the terms of the "Heart Bill”, such policemen shall be presumed to have incurred their heart disease "in the performance and discharge of duty, unless the contrary be proved by competent evidence”. In 1979, the Corporation Counsel issued an opinion that the rebuttable presumption thus created by the statute applied only to the question whether a cardiac disability was job-related, not to whether the disability was the result of an "accident” — i.e., the result of a particular, sudden, and unexpected event (see, Matter of Knight v McGuire, 62 NY2d 563; Matter of Lichtenstein v Board of Trustees, 57 NY2d 1010). According to his opinion, the burden of proof on that latter question remained with the applicant.

Not surprisingly, the City officials on the Board adopted that interpretation of the "Heart Bill” while the union officials strongly disagreed. The latter took the position that an applicant disabled by heart disease is entitled to accident benefits without having affirmatively to establish a sudden and unexpected event. The disagreement between the two sides resulted in repeated tie votes on cardiac disability claims and the consequent denial of accident disability benefits. Within a short time, the eight union officials retained private counsel to represent them in various proceedings in which they challenged the City officials’ interpretation of the "Heart Bill” and negative voting on accident disability applications. Ultimately, when the action for declaratory judgment reached this court, we sustained the union officials’ interpretation of the statute (see, Matter of De Milia v McGuire, 52 NY2d 463).

Following our decision in De Milia, the union officials sought reimbursement from the Fund for expenses incurred in that litigation, as well as in the several related proceedings. When the Fund refused, the union officials commenced the instant action. Supreme Court denied defendants’ motion to dismiss reasoning that, because the union officials could not be represented by the Corporation Counsel whose opinion they were contesting, they had no choice but to retain private counsel (122 Misc 2d 576). Subsequently, Supreme Court granted the union officials’ motion for summary judgment and awarded them the full amount of the attorneys’ fees requested. On appeal, the Appellate Division reversed the orders of Supreme Court and dismissed the complaint. In a thorough opinion, that court concluded that the union officials had neither express authority to retain private counsel nor authority inherent in their duties as trustees (136 AD2d 266). We now affirm.

Disagreement among members of the Board of Trustees does not justify the retention of private counsel by those who take issue with the others’ votes and with the legal advice of the Corporation Counsel upon which those others rely. While each member of the Board of Trustees acts in a fiduciary capacity in the administration of the Fund, the authority of the Board and its individual members is determined by the statutory structure establishing that Fund and defining the Board’s function (see, Administrative Code § 13-216 [a], [b]). The statutory provisions creating the Fund (see, Administrative Code §§ 13-201 — 13-287) are, in effect, the "terms of the trust” which confer and limit the powers of the Board and of each member trustee (see, 3 Scott, Trusts § 186 [3d ed]). Those terms require that the Fund be "administered by [the] board of trustees” and that such administration be "subject to the provisions of law” (Administrative Code § 13-216 [a] [emphasis added]). They also mandate that 'fejvery act of the board of trustees shall be by resolution” (§ 13-216 [b] [emphasis added]), and they prohibit trustees from using Fund moneys "in any manner * * * except to make such current and necessary payments as are authorized by [the BJoard” (§ 13-238 [emphasis added]). Additionally, the New York City Charter, which governs every board and officer of the City, states that the Corporation Counsel shall have exclusive responsibility for "the law business of the city and its agencies” and it unequivocally prohibits City officers and agencies from "employing] any attorney or counsel” except at their own expense in a matter which "may affect him or them individually” (NY City Charter § 394 [a]; § 395). The plain language of these governing statutes provides individual members of the Board of Trustees with no authority to retain their own counsel — and, thereafter, to obtain recompense from the Fund — where neither the Corporation Counsel nor the Board, by majority resolution, has given approval.

To be sure, as the union officials point out, the Corporation Counsel could not represent both them and the City officials in the underlying litigation; nor could he have reasonably represented the union officials alone inasmuch as they were challenging his ruling. Nevertheless, they cannot rely on these circumstances to claim necessity — and, therefore, implied authority — to retain private counsel to fulfill their lawful duties. The statutes which created and govern the Fund and the Board are simply devoid of any provision imposing a duty upon individual trustees to challenge either the votes of other trustees or the legal opinion of the Corporation Counsel, their attorney under the City Charter. A fortiori, there is no provision granting individual trustees authority to hire outside counsel to assist them in doing so. Hence, where, as here, there is a disagreement among the trustees in the ordinary and proper course of the Board’s activities — i.e., over the construction of a statute governing the review of accident disability claims — retention of private counsel by individual trustees is ultra vires under their statutorily defined role on the Board and, therefore, not compensable by the Fund.

Strong policy reasons support this conclusion. Administration of the police pension funds is highly regulated; the detailed statutory scheme under which the Board of Trustees operates insures a balance between the interests of the City, represented by its officials, and the interests of employees, represented by members of the union. Each side has the same total number of weighted votes and each resolution before the Board must obtain a majority for approval. Thus, because the Board can only act by such resolution, the affirmative vote of at least one trustee from each side is necessary for the Board to do anything. To permit the trustees on one side to prosecute claims against the others, on routine matters of differing opinion and subject to voting, would disturb that balance and subvert the purpose for requiring majority resolutions. Further, it would encourage such litigation by dissenting trustees over decisions rendered by the Board as a whole — whether denying or granting pension benefits — with the consequent depletion of the Fund to pay for those trustees’ private attorneys’ fees (cf., Corning v Village of Laurel Hollow, 48 NY2d 348, 351-352).

Finally, the cases relied upon by the union officials — Cahn v Town of Huntington (29 NY2d 451), Matter of Commco, Inc. v Amelkin (62 NY2d 260) and Matter of Slominski v Rutkowski (62 NY2d 781) — are inapposite. Whether, under the decisions in those cases, there might be exceptional circumstances where individual trustees, like those here, could ever retain private counsel, we need not decide. No such circumstances are presented here. This is not a case like Cahn, where the town planning board, acting in its statutorily defined capacity as a board, made an official decision to retain private counsel. Here, the decision to retain counsel was not by resolution of the Board acting in its official capacity, but by individual members acting on their own without any official sanction. Moreover, in Cahn, the planning board was defending itself in a proceeding instituted against it by the town; because the Town Attorney was representing the town, it was essential for the board to obtain the services of a private attorney. As we said in that case, the retention of outside counsel was necessary "to enable the board to effect the purposes of its creation and to allow it to properly function” (Cahn v Town of Huntington, supra, at 455). Here, by sharp contrast, the Board was receiving advice from its lawful attorney, the Corporation Counsel, and was fully able to serve its statutory purpose. Though the Board’s decisions on certain cardiac disability applications were ultimately held to be erroneous, it cannot be said that the Board was not "properly functioning]” — i.e., applications for accident disability were being reviewed, votes were being taken, and decisions were being rendered in the manner prescribed by the governing statutes.

Neither is the situation here comparable to that in Commco, where we upheld the retention of private counsel by a zoning board, even though the municipal attorney was, by statute, the exclusive legal representative of all municipal agencies. There, a conflict of interests arose between the board and the municipality itself and, as a result, the municipal attorney was precluded from representing the board in a proceeding brought by a dissatisfied applicant. In order to fulfill its statutory responsibilities, the board, we held, had implied authority under Cahn to retain its own counsel in order to defend itself. In the present case, however, the Corporation Counsel could and did represent the Board of Trustees in the underlying litigation, and the Board’s decisions were challenged, not externally by a dissatisfied applicant as in Commco, but internally by individual Board members who had neither statutory responsibility nor authority to do so.

Lastly, this case is not analogous to Slominski. There, the underlying dispute was between two high level municipal officers over competing claims of official authority. Because the municipal attorney represented the county executive, the comptroller retained private counsel. This court agreed with the Appellate Division that, under the circumstances of that case, the comptroller should be reimbursed for attorneys’ fees. The litigation there did not simply involve an "internal dispute between lower echelon officials” and, moreover, the comptroller had unquestioned authority to bring the proceeding in her official capacity (Matter of Slominski v Rutkowski, 91 AD2d 202, 212, affd as mod in other respects 62 NY2d 781, supra). Here, however, the underlying litigation for which the union officials seek to recover legal expenses did merely entail, as they themselves have described it, an internal dispute between individual trustees, over decisions rendered collectively as members of a single governmental entity, the Board of Trustees. Also, in contrast to the comptroller in Slominski, the union officials here were not seeking to resolve a dispute about their own legitimate authority; they did not, therefore, have any such compelling official need to bring the underlying lawsuits.

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

Chief Judge Wachtler and Judges Simons, Kaye, Alexander, Titone and Bellacosa concur.

Order affirmed, with costs.

      . The opinions of Corporation Counsel have varied on this point. In August 1973, the "Heart Bill” presumption was interpreted, as in 1979, as applying only to whether the disability was line of duty and not to whether it was an accident. In November of that same year, however, Corporation Counsel reversed itself and interpreted the presumption as applying to both questions.

      . Section 13-216 (b) of the Administrative Code of the City of New York provides: "Every act of the board of trustees shall be by resolution which shall be adopted only by a vote of at least seven-twelfths of the whole number of votes authorized to be cast by all of the members of such board.”

      . Section 13-238 of the Code provides, in pertinent part: "The trustees and such employees, directly or indirectly, for themselves or as agents or partners of others, shall not borrow any of its funds or deposits or in any manner use the same except to make such current and necessary payments as are authorized by such board”.

      . Section 394 (a) of the Charter provides: "Except as otherwise provided in this chapter or other law, the corporation counsel shall be attorney and counsel for the city and every agency thereof and shall have charge and conduct of all the law business of the city and its agencies and in which the city is interested.”
      Section 395 of the Charter provides, in pertinent part: "No officer or agency, except as provided in this chapter or otherwise especially provided, shall have or employ any attorney or counsel, except where a judgment or order in an action or proceeding may affect him or them individually or may be followed by a motion to commit for contempt of court, in which case he or they may employ and be represented by attorney or counsel at his own or their own expense.”

      . This is not to say, of course, that these same trustees were without standing to initiate litigation to challenge Board actions in -their capacities as union representatives.


author: Alexander, J.

text:
    The People of the State of New York, Respondent, v J. R. Cooperage Co., Inc., and Gustave Rosenberg, Appellants.
    Argued October 12, 1988;
    decided November 29, 1988

      POINTS OF COUNSEL

      Michael B. Gerrard and Jeffrey B. Gracer for appellants.
    I. The People failed to produce any evidence of solicitation or attempted solicitation. (People v McKinney, 24 NY2d 180.) II. Solicitation is an essential element of the offense charged. (People v Lubow, 29 NY2d 58; Northcross v Memphis Bd. of Educ., 412 US 427; People v Macellaro, 131 AD2d 699; Matter of Al Tech Specialty Steel Corp. v New York State Dept. of Taxation & Fin., 130 AD2d 84; People v Harris Corp., 104 AD2d 130; People v Green, 68 NY2d 151; People v Jackson, 106 AD2d 93; People v Consolidated Edison Co., 41 AD2d 809, 34 NY2d 646; Matter of State of New York v Strong Oil Co., 105 Misc 2d 803; People v Gottlieb, 36 NY2d 629.) III. Call to waste hauler was not ministerial act. (Matter of Pius v Bletsch, 70 NY2d 920.) IV. Defendants cannot be convicted of attempt. (People v Trepanier, 84 AD2d 374; People v King, 127 Misc 2d 776; People v Schmidt, 76 Misc 2d 976; People v Pollaci, 68 AD2d 71.)

      Robert Abrams, Attorney-General (Nancy Stearns, O. Peter Sherwood and James A. Sevinsky of counsel), for respondent.
    I. The unlawful dealing statute encompasses a broader range of conduct than criminal solicitation. (People v Macellaro, 131 AD2d 699; Matter of Al Tech Specialty Steel Corp. v New York State Dept. of Taxation & Fin., 130 AD2d 84; People v Harris Corp., 104 AD2d 130; People v Ditta, 52 NY2d 657; Finger

      Lakes Racing Assn. v New York State Racing & Wagering Bd., 45 NY2d 471; Matter of Albano v Kirby, 36 NY2d 526; Drelich v Kenlyn Homes, 86 AD2d 648; Matter of Empire Mut. Ins. Co. [Barone], 85 AD2d 201, 57 NY2d 833; People v Lubow, 29 NY2d 58; Northcross v Memphis Bd. of Educ., 412 US 427.) II. The jury had an adequate basis to find beyond a reasonable doubt that defendants had attempted to cause their carter to possess or dispose of hazardous wastes without authorization. (People v Montanez, 41 NY2d 53; People v Woods, 99 AD2d 556; People v Benzinger, 36 NY2d 29; People v Fortunato, 89 AD2d 610; People v Dorta, 56 AD2d 607, 44 NY2d 930; People v Johnson, 77 AD2d 666; People v Ciardullo, 106 AD2d 14; People v Bracey, 41 NY2d 296; People v Werblow, 241 NY 55; Hyde v United States, 225 US 347.)
   OPINION OF THE COURT

Alexander, J.

The issue on this appeal is whether defendants may be convicted under ECL 71-2715 (1) of attempting to cause another to unlawfully possess or dispose of hazardous wastes in the absence of any evidence of solicitation or attempted solicitation. For the reasons that follow, we conclude that it is not necessary that there be evidence of solicitation or attempted solicitation to establish a violation of this statute.

I

As indicated by the Appellate Division, the facts are essentially uncontroverted. Defendant J. R. Cooperage Co., Inc. is a corporation engaged in the business of recycling used steel drums for resale and defendant Gustave Rosenberg is its president. On December 13, 1983, a team comprised of representatives from the New York City Department of Environmental Protection and the New York City Fire, Police, and Sanitation Departments raided the defendants’ plant and seized 16 drums filled with a sludgy and viscous waste material. The drums were located both in and next to a refuse dumpster inscribed with the initials of the defendants’ commercial trash hauler, Red Ball Sanitation Service Corp. (Red Ball). Defendants’ business operation required the use of an oil separator located next to a pit which collected waste water and separated from it a thick, oily sludge. On the day of the raid, a damp shovel, a funnel and large and small drums were found near this pit. Defendant Rosenberg admitted to the investigative team that some of the material in the open drums found in and adjacent to the dumpster might have been corrosive and that his employees "might have probably” put the drums in the dumpster by accident. Chemical analysis of the material in the oil separator and the drums revealed high ph levels, indicating a highly corrosive substance. It is undisputed that this material was hazardous waste governed by the provisions of ECL article 27.

Although defendants were notified two months before the raid that the waste generated by their drum cleaning processes contained hazardous waste materials, they never retained a licensed hazardous waste hauler. Instead, they continued to contract with Red Ball, which, as a class 1 commercial refuse remover, was not licensed to remove hazardous waste. Pursuant to their contractual arrangement, Red Ball collected refuse only in response to pickup orders routinely made by the defendants when the dumpster was full; it apparently deviated from this practice only once when its employee took it upon himself to pick up the defendants’ refuse after noting that the dumpster was filled to capacity. Additionally, under the terms of the contract, Red Ball could not refuse a pickup order, and indeed, in order to discontinue service, Red Ball was required to give two weeks written notice by registered mail. Red Ball’s employees were not required to inspect the contents of defendants’ dumpster before emptying it and in the ordinary course of business, drums placed adjacent to the dumpster were also collected.

Defendants were indicted and convicted, after a jury trial, of unlawful dealing in hazardous wastes in the second degree in violation of ECL 71-2715. Supreme Court, interpreting the statute to require an actual or attempted solicitation, found the evidence legally insufficient to sustain the conviction and granted defendants’ motion to set aside the jury’s verdict. The Appellate Division reversed and reinstated the verdict. We now affirm.

II

The Environmental Conservation Law regulates, through a comprehensive system of permits and manifests, the siting of hazardous waste facilities (ECL 27-1101 et seq.), inactive hazardous waste disposal areas (ECL 27-1301 et seq.) and hazardous waste management, which is the systematic control of the collection, source separation, transportation, processing, treatment, recovery and disposal of hazardous wastes (ECL 27-0900 et seq.). Under this system, hazardous wastes are identified and tracked from their generation to their disposal. (See, Weinberg, Practice Commentary, McKinney’s Cons Laws of NY, Book 171/2, ECL 27-0900.)

In 1981, recognizing the threat to public safety created by the unlawful disposal of hazardous wastes and the inadequacies of the sanctions then in effect, the Legislature created a comprehensive criminal enforcement scheme to increase the criminal sanctions for violations of these hazardous waste laws. (L 1981, ch 719, Governor’s Mem of Approval in 1981 McKinney’s Session Laws of NY, at 2617.) As part of that scheme, the Legislature amended the Environmental Conservation Law, establishing felony and misdemeanor offenses for the unlawful possession (ECL 71-2707, 71-2709), unlawful disposal (ECL former 71-2711, 71-2713) and unlawful dealing in hazardous wastes (ECL 71-2715, 71-2717). The Legislature recognized the great danger to the public posed by hazardous waste, noting that "[t]he unlawful possession and disposal of hazardous wastes, with the long-term toxicity that is inherent in these substances, may pose a greater threat to the health and safety of the citizens of this State than street crime.” (L 1981, ch 719, Assembly Mem in support of amended bill.) The new criminal enforcement scheme was intended to deter violations of the State’s comprehensive hazardous waste laws "to the maximum extent practicable” and to make New York State an unattractive dumping ground for hazardous wastes generated out of State (L 1981, ch 719, Assembly Mem in support of bill; Governor’s Mem of approval).

Defendants challenge the Appellate Division’s reinstatement of the jury verdict convicting them of unlawful dealing in hazardous wastes in the second degree, a class A misdemeanor in violation of ECL 71-2715 (1). Analogizing to the criminal solicitation statutes (Penal Law § 100.00 et seq.), as did Supreme Court, they argue that the statute prohibits only solicitation and therefore proof of a communication or an attempted communication is essential to conviction. Although it is undisputed that the People presented no evidence of such a communication, which, in this case, as noted by the Appellate Division, would have been a telephoned pickup order, the uncontroverted evidence established that defendants’ employees loaded heavy drums filled with material known to be hazardous waste into the dumpster regularly emptied by Red Ball. Nevertheless, defendants argue that the statute’s prohibition of "otherwise attempting] to cause” unlawful disposal or possession should be construed as referring only to attempts made by means of an actual or attempted communication. We agree with the Appellate Division that to adopt such a narrow and restrictive construction would irreparably undermine the purposes of the subject legislation and create an intolerable loophole in the system of environmental regulation created by the Legislature.

The statute, which prohibits any "attempt to cause” another to unlawfully possess or dispose of hazardous waste, imposes no requirement that the attempt be effected by means of an actual or attempted communication. Although, as defendants argue, application of the doctrine of ejusdem generis might suggest that the Legislature intended to limit the general phrase "otherwise attempt to cause” by the preceding specific terms of "solicit, request, command [or] importune”, the legislative history does not support this conclusion and we decline to adopt such a narrow construction when it so clearly conflicts with the obvious legislative purpose of the statute (see, Mark v Colgate Univ., 53 AD2d 884). To limit the phrase "otherwise attempt to cause” to attempts effected by means of an actual or attempted communication would create an intolerable loophole in a statutory scheme intended to comprehensively regulate hazardous wastes. This statutory scheme prohibits unlawful possession and disposal of hazardous wastes and, in ECL 71-2715, also prohibits unlawful dealing in the form of solicitation. To construe the statute’s added prohibition of "attempts] to cause” unlawful disposal or possession as prohibiting only actual or attempted solicitations would reduce the "attempt to cause” language of ECL 71-2715 (1) to a redundancy while effectively eliminating any other basis within this statutory scheme upon which to prosecute an attempt to cause another to unlawfully possess or dispose of hazardous waste. Such a restrictive construction would do violence to the plain language and intended remedial purpose of ECL 71-2715 (1): to criminalize any attempt to cause another person to unlawfully possess or dispose of hazardous wastes (see, People v Frudenberg, 209 NY 218; see also, People v Ditta, 52 NY2d 657).

Nor is a more narrow construction of "otherwise attempt to cause” required because ECL 71-2715 (1) tracks the language of the criminal solicitation statutes (see, Penal Law §§ 100.00, 100.05, 100.10). Contrary to defendants’ argument, People v Lubow (29 NY2d 58) did not construe that phrase in the criminal solicitation statutes as prohibiting only attempted solicitations. Rather, we explained that the statutes, entitled "Criminal Solicitation”, prohibited solicitation, which consisted of a communication coupled with an intent that the other person engage in unlawful conduct (People v Lubow, 29 NY2d 58, 62, supra). We noted that, under the circumstances of that case, a failed attempt at communication also fell within the statutory proscription of "otherwise attempts to cause such other person to engage in such conduct” (id.). Our decision there does not foreclose a broader reading of "otherwise attempts to cause”. Moreover, even if a more narrow reading of "otherwise attempts to cause” might be appropriate when interpreting statutes aimed solely at criminal solicitation, it is not appropriate when the phrase is used in a public health statute such as ECL 71-2715 (1) intended to criminalize a broader range of conduct.

We conclude therefore that ECL 71-2715 (1) prohibits any attempt to cause another to possess or dispose of hazardous waste, whether or not the attempt was effected by means of an actual or attempted communication.

III

The only remaining issue is whether the evidence, when viewed in the light most favorable to the People (People v Montanez, 41 NY2d 53, 57), is legally sufficient to establish defendants’ guilt beyond a reasonable doubt. While Supreme Court purportedly applied this standard, it erred in its view that an actual or attempted communication is an essential element of unlawful dealing in hazardous wastes in the second degree. Having concluded that it is not, we agree with the Appellate Division that the defendants’ convictions are supported by legally sufficient evidence.

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

Chief Judge Wachtler and Judges Simons, Kaye, Titone, Hancock, Jr., and Bellacosa concur.

Order affirmed.

      . ECL 71-2715 (1) prohibits unlawful dealing in hazardous wastes:
      "No person shall:
      "1. With intent that another person possess or dispose of hazardous wastes without authorization, solicit, request, command, importune or otherwise attempt to cause such other person to engage in such conduct”. Defendants were also indicted on the charge of unlawful dealing in hazardous wastes in the first degree in violation of ECL 71-2717. The jury, however, returned a verdict of not guilty on that count.

      . Subsequent amendments to the ECL expanded criminal liability for the unlawful disposal of hazardous wastes, making it a crime to endanger the public health, safety or the environment by releasing hazardous substances into the environment (see, ECL 71-2710 — 71-2714).


author: Bellacosa, J. Alexander, J.

text:
    Claude Charlebois et al., Appellants, v J.M. Weller Associates, Inc., Respondent.
    Argued October 13, 1988;
    decided December 1, 1988

      POINTS OF COUNSEL

      Leslie F. Couch for appellants.
    I. A contract under the terms of which one other than a licensed architect or engineer is to provide architectural or engineering services is void and unenforceable. (American Store Equip. & Constr. Corp. v Dempsey’s Punch Bowl, 174 Misc 436, 258 App Div 794, 283 NY 601; Turner Constr. Co. v 1600 E. Ave., 30 Misc 2d 811, 15 AD2d 631.) II. The statutory scheme forbids combining engineering and construction services. (Dalton, Dalton, Little v Mirandi, 412 F Supp 1001.) III. The holding of the court below violates all rules of statutory construction. IV. The fact that an employee of the corporation had an engineering license does not validate the contract. (United Calendar Mfg. Corp. v Huang, 94 AD2d 176; George Piersa, Inc. v Rosenthal, 72 AD2d 593; Bronold v Engler, 194 NY 323; Hammerman v Jamco Indus., 119 AD2d 544.) V. The only way to enforce the licensing statutes is by declaring contracts which violate those statutes void. (American Store Equip. & Constr. Corp. v Dempsey’s Punch Bowl, 174 Misc 436; Carmine v Murphy, 285 NY 413; Richards Conditioning Corp. v Oleet, 21 NY2d 895; Mortise v 55 Liberty Owners Corp., 102 AD2d 719, 63 NY2d 743; Vereinigte Osterreichische Eisen und Stahlwerke v Modular Bldg. & Dev. Corp., 64 Misc 2d 1050.) VI. The State Board for Engineering and Land Surveying has declared the specific contract form used by defendant herein to be void as against public policy on two grounds. (United Calendar Mfg. Corp. v Huang, 94 AD2d 176; Griffin v Cafarelli, 38 AD2d 847.)

      Peter A. Firth for respondent.
    I. The public policy of New York requires only that those tasks requiring licensed skills be performed by those possessing such a license. (People v Sterling Opt. Co., 26 Misc 2d 412, 14 AD2d 838, 11 NY2d 970; Dutchess County Pharm. Socy. v State of New York, 47 AD2d 627, 38 NY2d 887; Vereinigte Osterreichische Eisen und Stahlwerke v Modular Bldg. & Dev. Corp., 64 Misc 2d 1050, 37 AD2d 525; We’re Assocs. Co. v Cohen, Stracher & Bloom, 103 AD2d 130; American Store Equip. & Constr. Corp. v Dempsey’s Punch Bowl, 174 Misc 436, 258 App Div 794, 283 NY 601; George Piersa, Inc. v Rosenthal, 72 AD2d 593; Mortise v 55 Liberty Owners Corp., 102 AD2d 716, 63 NY2d 743; Richards Conditioning Corp. v Oleet, 21 NY2d 895; Hammerman v Jamco Indus., 119 AD2d 544.) II. Plaintiffs-appellants are estopped from claiming lack of a license in this case. (Wormuth v Lower Eastside Action Project, 71 Misc 2d 314; Gargano v Smith, 97 Misc 2d 535.) III. The contractor should be allowed to pursue its remedies for those amounts under the contract for which no license was required.

      Norman A. Coplan for New York State Association of Architects, Inc., amicus curiae.

    I. Defendant-respondent, an unlicensed business corporation, is engaged in the practice of architecture and engineering. (Matter of Losi v Allen, 25 AD2d 474; Griffin v Cafarelli, 38 AD2d 847.) II. The practice of architecture and engineering by defendant-respondent is violative of law and public policy. (American Store Equip. & Constr. Corp. v Dempsey’s Punch Bowl, 174 Misc 436, 258 App Div 794, 283 NY 601; Hammerman v Jamco Indus., 119 AD2d 544; George Piersa, Inc. v Rosenthal, 72 AD2d 593; Food Mgt. v Blue Ribbon Beef Pack, 413 F2d 716; Dalton, Dalton, Little v Mirandi, 412 F Supp 1001; Matter of Bensel, 68 Misc 70.)

      Kriss & Kriss for the New York State Society of Professional Engineers, Inc., amicus curiae.

    I. The plain meaning of the State licensing provisions prohibit not only the “performing” of professional services by unlicensed individuals or entities but "rendering or offering to render” such services. (D’Luhosch v Andros, 200 Misc 400.) II. Enforcement of the licensing statutes demands' that design-build arrangements combining the services of design professional and contractor be declared void in the absence of specific legislative sanctioning for the creation of such commercial relationships. III. Defining the parameters of practice for professional services by corporations is a legislative prerogative.

      Robert E. Diaz, Frederick W. Burgess and Donald O. Meserve
      for Board of Regents and State Education Department, amicus curiae.

    Business corporations are- not authorized to offer or provide architectural or engineering services. (American Store Equip. & Constr. Corp. v Dempsey’s Punch Bowl, 174 Misc 436, 258 App Div 794, 283 NY 601; Dalton, Dalton, Little v Mirandi, 412 F Supp 1001; Hannon v Siegel-Cooper Co., 167 NY 244; People v Woodbury Dermatological Inst., 192 NY 454; Matter of Co-operative Law Co., 198 NY 479; State of New York v Abortion Information Agency, 37 AD2d 142, 30 NY2d 779; Turner Constr. Co. v 1600 E. Ave., 30 Misc 2d 811, 15 AD2d 631; Hammerman v Jamco Indus., 119 AD2d 544; George Piersa, Inc. v Rosenthal, 72 AD2d 593; Food Mgt. v Blue Ribbon Beef Pack, 413 F2d 716.)

      Verne O’Dell for General Building Contractors of New York State, Inc., amicus curiae.

    I. Defendant-respondent has not practiced engineering. (Vereinigte Osterreichische Eisen und Stahlwerke v Modular Bldg. & Dev. Corp., 64 Misc 2d 1050, 37 AD2d 525; Bronold v Engler, 194 NY 323.) II. The claims of the owner should be pursued by arbitration and/or by an action in negligence. (Mid-Atlantic Constr. Corp. v Guido, 30 AD2d 232; Matter of Yonkers Pub. Lib. v Landolfe Elec. Corp., 27 AD2d 576; Cole v Mostel, 27 AD2d 721; Bonwell v Stone, 128 AD2d 1013; Strauss v Belle Realty Co., 65 NY2d 399.) III. Voiding the executed contract would impose an inappropriate penalty and grant a windfall. (Murray Walter, Inc. v Sarkisian Bros., 107 AD2d 173; Central N. Y. Tel. & Tel. Co. v Averill, 199 NY 128; Kelly v Kosuga, 358 US 516; Continental Wall Paper Co. v Voight & Sons Co., 212 US 227.) IV. The form of the design-build contract and the architects role in the process, is determinative of their association’s position.
   OPINION OF THE COURT

Bellacosa, J.

Claude and Lesley Charlebois contracted with J.M. Weller Associates, Inc. (Weller Assocs.) for a new warehouse and an addition to an existing building from which the Charleboises operate their beer distributorship business. The contract, a standard agreement of the Associated General Contractors of America, called for a construction team consisting of contractor Weller Assocs., the owners Charleboises, and an architect-engineer, James M. Weller, P.E.

After construction was started, disputes (not the subject of the present action) arose between the parties over cost, design, building code compliance, and other alleged defects. The Charleboises refused to make further payment, allegedly leaving $600,000 in construction costs owed, until the disputes were resolved to their satisfaction. Pursuant to the contract, Weller Assocs. demanded arbitration. The arbitration proceeding was adjourned after the Charleboises instituted this action seeking a declaration that their contract was invalid as against public policy because it violated Education Law §§ 7202 and 7209 (4). The Charleboises also sued James M. Weller, P.E., an action not n,ow before us.

On cross summary judgment motions, the lower courts ruled in favor of Weller Assocs. that the contract was valid and the appeal is now before us on a two-Justice dissent at the Appellate Division. We affirm because this contract, with its express requirement for a separately retained licensed professional engineer to perform the design function, does not violate the pertinent Education Law licensing protections or the public policy which underlies them.

Supreme Court found that the contract required the engineering services by James M. Weller, P.E., that he was indisputably a duly licensed professional engineer, and that the policy sought to be protected by the Education Law provisions was adequately addressed by contractor Weller Assocs. engaging a properly licensed person, James M. Weller, P.E. The contract provided that the services of an "Architect/Engineer will be furnished by the Contractor pursuant to an agreement between the Contractor and the Architect/Engineer;” that "all Architectural & Structural Engineering services are provided by James M. Weller P.E.;” and that the contractor would "furnish the architectural, engineering and construction services”.

The Appellate Division majority, in affirming, added: "[defendant [Weller Assocs.] herein did not agree to perform architectural or engineering services; rather, plaintiffs and defendant agreed that a licensed third party would perform those services” (136 AD2d 214, 216). The dissent countered that a design-build contract of this kind would permit the contractor to become a "package dealer,” resulting in the frustration of the public policy behind the Education Law licensing requirement.

We are faced with a narrow question of whether this contract, entered into between the Charleboises and Weller Assocs., the latter being an unlicensed business corporation building contractor, should be declared invalid as against public policy when the parties concomitantly provided that the project design had to be fulfilled by the builder by engaging a specified licensed engineer. We hold that the contract is not void because, under the contractual arrangements of the parties, acknowledged by the lower courts- and verified independently in the record by plaintiffs themselves and by their separate lawsuit against James M. Weller, P.E., this does not constitute the unauthorized practice of engineering by the builder. Critically here, the engineer actually engaged to do the professional work is inescapably subject to the educational, regulatory and punishment mechanisms of the licensing entity, the State Education Department, without any necessity for him to have been a formal, technical signatory to the contract (Education Law §§ 7205, 7206, 6508, 6509; 8 NYCRR 29.1, 29.3).

Education Law § 7202 provides that "[o]nly a person licensed or otherwise authorized under this article shall practice engineering or use the title 'professional engineer’ ”. Only a professional corporation exclusively comprised of persons licensed to provide designated professional services may contract to engage in the practice of engineering (see, Education Law § 7209 [4]; Business Corporation Law art 15). Such professional corporations shall not "engage in any business other than the rendering of the professional services for which it was incorporated” (Business Corporation Law § 1506). Weller Assocs. is a business corporation, not a professional corporation, and as such is not qualified to practice engineering nor subject to the regulatory or disciplinary oversight of the State Education Department. Conversely, James M. Weller, P.E., is prohibited from engaging in the contracting trades while employing that professional suffix.

If defendant Weller Assocs. either contracted itself to engage or actually engaged in the practice of engineering, then the licensing proscription would surely have been violated with grave contractual and criminal consequences (see, e.g., Education Law § 6512). We recognize, of course, that when a : record establishes substantial performance of a contract, the absence of an appropriate license bars recovery on an agreement, as "the purpose of the regulatory scheme is to protect the public health and safety” (Richards Conditioning Corp. v Oleet, 21 NY2d 895, 896; see also, Johnston v Dahlgren, 166 NY 354; and People ex rel. Nechamcus v Warden, 144 NY 529). "So strict has been judicial construction of the statutory requirement through concern for the public health and welfare that the requirement may not be satisfied by employing or subletting” the work to an appropriately licensed person (Vitanza v City of New York, 48 AD2d 41, 44 [Marcus G. Christ, J.] [citations omitted], affd on opn below 40 NY2d 872). Where the company performing the work is not licensed, it is precluded from recovering for the work performed either pursuant to contract or in quantum meruit (see, Richards Conditioning Corp. v Oleet, supra, at 896-897; Hammerman v Jamco Indus., 119 AD2d 544, 545; George Piersa, Inc. v Rosenthal, 72 AD2d 593).

On the other hand, these cases do not erect an absolute or per se rule. For example, an exception to the all-or-nothing decisional sanction tied to this statutory licensing prerequisite was recognized early in Bronold v Engler (194 NY 323). There, a builder who himself lacked a statutorily required license was allowed to contract for completion of a structure, including work requiring licensure, if a properly licensed party was retained to perform the regulated work. The builder "would in such case in no fair sense be conducting the [licensed] 'trade, business or calling’ * * *. It would be the mere incident of a larger work” (id., at 325 [emphasis added]; Vitanza v City of New York, supra, at 45).

In the instant case, application of the pertinent principles satisfies the public policy concerns underlying Education Law §§ 7202 and 7209 because of the contract’s express requirement here that the contractor engage a specified licensed person or professional corporation to perform the tasks for which the law specifically requires a license (see, Vereinigte Osterreichische Eisen und Stahlwerke v Modular Bldg. & Dev. Corp., 64 Misc 2d 1050, mod on other grounds 37 AD2d 525). In that case, the court said:

"It cannot be * * * that an entire contract comprehending many services to be performed, including those calling for the services of licensed professionals, can be stricken because the party furnishing the services is not itself a licensed professional.
"To hold otherwise would mean that * * * builders and general contractors would likewise be incapable of enforcing their contracts because architectural and engineering skills are incidentally involved. * * *
"The rights sought -to be protected by the statute are adequately covered when the contractor, manufacturer or builder engages a properly licensed person to perform those tasks which the law specifies call for certified skills.” (Id., at 1051.)

Plaintiffs-appellants, the dissenting Justices at the Appellate Division, and the dissenters in this court place significant reliance on American Store Equip. & Constr. Corp. v Dempsey’s Punch Bowl (174 Misc 436, affd without opn 258 App Div 794, affd without opn 283 NY 601). There, an unlicensed business corporation contracted for itself to prepare architectural plans and then for itself to remodel a building according to those plans. We, of course, agree that this direct, otherwise unsanctionable, violation of public policy warranted withholding recovery from the offending contractor, but it has no persuasive or binding force on the very different commercial transaction and contractual relationships in this case.

Here, the contractual scheme survives the statutory and precedential prohibitions governing professional occupations for which a license is necessary, and specifically requires an independent licensee to perform the regulated services. Weller Assocs. did not agree to draft the designs for which an architectural or engineering license would be required as American Store did in the case so heavily relied upon by appellants. Instead, the design functions were contracted for and actually performed by a named licensed engineer, as the Charleboises agreed and expected under their contract. Pursuant to that arrangement, James M. Weller, P.E., was not acting in the capacity of an employee of the business corporation, but acted as a professional licensed engineer obligated by contract to exercise his professional judgment in the interests of the public health and welfare, and independent in that sense of unlicensed oversight. In fulfilling the independent professional role in this case, James M. Weller, P.E., was also subject to the plenary regulation of the State Education Department. Indeed, insofar as the professional obligation owed by Weller, P.E., is derived from the contract itself, at issue here, the professional services could not have been performed by Weller Assocs. and it was the independent professional judgment of James M. Weller, P.E., which flowed directly to the Charleboises. This is sufficiently consistent with the public policy sought to be served by the statute and the cases, without the ultimate ..sanction of voiding an otherwise valid and fulfilled contract.

Neither a fair reading of the contractual arrangement nor the regulatory scheme designed to protect an important public policy would support a view that Weller Assocs. agreed for itself to engage or actually engaged in the practice of engineering. That is what the Education Law forbids under these circumstances. The design in this case as part of the over-all project was performed lawfully by a licénsed professional.

Even if a violation were to be hypothesized for the sake of argument, the public policy that underlies the statute would not be furthered by complete avoidance of this contract. It cannot be overlooked that the Charleboises did not allege anywhere or argue anywhere, as is their burden as plaintiffs seeking to void the contract, the nonexistence of the expressly contemplated implementation by James M. Weller, P.E. Indeed, they virtually concede that James M. Weller, P.E., actually completed the work. Surely they would have, had that been the state of affairs as the dissent implies. Also, respondent urges that the Charleboises’ attorney prepared this contract; the record shows that the Charleboises have reaped the fruits of that contract by currently occupying the completed structures and operating their business from it; and they now seek to disaffirm that very contract and be forgiven $600,000 in payments for services and work completed and delivered to them.

A further response to the dissent is that the absolutism of its approach to this case as to the public policy enforcement mechanism ignores the plain and concededly commercial realities of the arm’s length transaction between the Charleboises and Weller Assocs., and would impose a disproportionate and unnecessary remedy and price. This overly broad interpretation would also unnecessarily have the effect of disenfranchising a fully regulated professional engineer from participating in a commercial transaction of this nature. In this case, the regulatory sanctions reinforced by the potential civil malpractice liability quite complementarily and proportionately protect the underlying public policy and certainly more than adequately protect the plaintiffs-appellants Charleboises.

Finally, forfeitures by operation of law are strongly disfavored as a matter of public policy and the Charleboises’ efforts to use that concept as a sword for personal gain rather than a shield for the public good should not be countenanced in the name of the Education Law public policy, slavishly applied. The legislative objective, after all, is professional performance —a matter of substance — not the vehicle of professional performance — a matter of form.

The remaining arguments raised by appellants are either unpreserved or without merit.

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

Alexander, J.

(dissenting). In my view, the "design-build” contract at issue, under which J.M. Weller Associates, Inc. (J.M. Weller) — a business corporation not licensed under article 15 of the Business Corporation Law to practice engineering or architecture — agreed to furnish architectural, engineering, and construction services to the owners, Claude and Lesley Charlebois, clearly violates the public policy of New York State and should be declared void and unenforceable. Furthermore, I believe that by sanctioning this contractual arrangement, the majority does violence to the comprehensive professional licensing scheme enacted by the Legislature and frustrates the long-standing policy of this State prohibiting the indirect rendering of professional services by unlicensed business corporations. Accordingly, I respectfully dissent.

In order to protect the life, health and property of New York State citizens, the Legislature has enacted a comprehensive licensing scheme regulating the rendering of professional services to the public (American Store Equip. & Constr. Corp. v Dempsey’s Punch Bowl, 174 Misc 436, affd 258 App Div 794, affd 283 NY 601; see, People v Merriweather, 135 Misc 2d 998, 1000; Wineman v Blueprint 100, 75 Misc 2d 665, 666). Under the statutory scheme, only persons licensed as architects or engineers may practice those professions (Education Law §§ 7202, 7302) and "[ajnyone not authorized to practice * * * who practices or offers to practice or holds himself out as being able to practice” architecture or engineering is guilty of a class E felony (Education Law § 6512).

Article 15 of the Business Corporation Law prescribes the exclusive means by which professionals may practice in the corporate form. A professional service corporation must have attached to its certificate of incorporation "a certificate or certificates issued by the licensing authority certifying that each of the proposed shareholders, directors and officers is authorized by law to practice” the particular profession (Business Corporation Law § 1503 [b]). Moreover, such corporation may not "engage in any business other than the rendering of the professional services for which it was incorporated” (Business Corporation Law § 1506). Conversely, a corporation not licensed to render professional services may not do so unless specifically authorized by statute, either because it is expressly permitted to retain licensed professionals for this purpose (see, e.g., Education Law §§ 6808 [pharmacy], 7106 [optometry], 7122 [ophthalmic dispensing], 7802 [massage]), or because it practiced the profession at a time when such practice was authorized by law (see, Education Law § 7209 [6] [engineering]; § 7307 [4] [architecture]).

It is undisputed that J.M. Weller is not licensed as a professional architectural and engineering corporation, it does not enjoy the benefit of any special statutory authorization to practice those professions through licensees, and it is not a "grandfathered” corporation under the relevant statutory provisions. Nevertheless, the majority concludes that the "design-build” contract does not offend the State’s public policy because it provides that a licensed professional engineer will perform all architectural and engineering services. As explained below, by improperly focusing exclusively on who performs the professional services, the majority permits unlicensed contractors to circumvent the statutory scheme and thereby accomplish exactly what the Legislature has declared impermissible.

The majority’s unduly restrictive view of the public policy concerns underlying the licensing statutes is most disturbing. These concerns are clearly not adequately protected merely because the contract requires that the architectural and engineering services be performed by a licensed professional. Bare "performance” in some otherwise undisclosed and undefined manner is manifestly insufficient where, as here, the licensed professional is also president of the unlicensed business corporation and, presumably, is beholden to that profit-motivated commercial enterprise. The purpose of a license goes beyond merely ensuring that the services will be performed by a professional; a license is intended also to guarantee that any services performed will be rendered in the exercise of independent professional judgment uninhibited by any outside influence or control. Surely, protection of the public health and safety depends at least as much on the professional independence of licensees as on their professional competence.

It is unrealistic to assume that the head of a construction company who, in managing that company’s construction contract, must be concerned with time and cost restraints, allocation of resources, and profit margins, will somehow remain unaffected by these concerns simply by donning his other hat and assuming the role of professional engineer. Indeed, the interrelated nature of the "design-build” contract at issue makes this kind of distancing impossible; the fees paid by the owner for architectural and engineering services are defined as a percentage of the total project cost, thus making the financial interests of the licensee inseparably wedded to those of the contractor. Therefore, it cannot be said with any confidence that the licensee will not subordinate the owner’s interests to those of his corporate employer. Especially is this true where the terms and conditions under which the architect/ engineer is retained by the contractor are undisclosed. Where there is neither contract nor privity directly between the professional licensee and the client, it is virtually impossible for the licensee to maintain a professional relationship of trust and confidence (see, Matter of Co-operative Law Co., 198 NY 479, 484). "His master would not be the client but the corporation, conducted it may be wholly by laymen, organized simply to make money and not” to render professional services of the highest caliber (Matter of Co-operative Law Co., 198 NY, at 484, supra). By ensuring that licensed professionals render unfettered independent judgment, the licensing statutes are designed to protect owners against the adverse consequences that may result from precisely this type of divided allegiance.

Neither Bronold v Engler (194 NY 323) nor Vitanza v City of New York (48 AD2d 41, affd on opn below 40 NY2d 872) offer any support for the result reached by the majority. Both those cases involved the application of section 45 of the General City Law prohibiting unlicensed persons from performing plumbing work. In Bronold, contrary to the assertion of the majority (majority opn, at 593), we held in the circumstances of that case, that no recovery may be had under a plumbing contract where the contractor is not properly licensed even if a licensed master plumber is employed as a manager in the business. Similarly, in Vitanza, we held that where the contractor is not properly licensed, it may not perform the plumbing work indirectly through a licensed plumber retained for this purpose. Thus, far from validating the "design-build” contract at issue here, both cases would appear to support just the opposite conclusion: namely, that the contractor may not avoid the licensing requirement by the simple expedient of employing a licensed professional in its construction business.

The majority mistakenly relies on an exception referred to in each case permitting an unlicensed contractor to retain licensed plumbers where "the builder contracts to erect a structure, including the plumbing work, for an all-inclusive sum and the plumbing work may be considered 'the mere incident of a larger work’ ” (Vitanza v City of New York, 48 AD2d, at 45, supra [quoting Bronold v Engler, 194 NY, at 325, supra]). The proscriptions against the unauthorized practice of engineering and architecture, however, unlike those relating to plumbing, extend not only to those who practice without a license but also to those who "[offer] to practice or [hold themselves] out as being able to practice” (compare, General City Law § 45; and Education Law § 6512). Thus, there is no justification for concluding that the above exception, arising under the licensing provisions of the General City Law, has any relevance to the instant case. Even if the exception alluded to were relevant, it cannot operate here, not only because the provision of architectural and engineering services for the agreed upon construction project can hardly be characterized as a "mere incident of a larger work” (Bronold v Engler, 194 NY, at 325, supra), but also because architecture and engineering, as distinguished from plumbing, qualify as "learned professions” that may not be practiced indirectly through licensees (see, Matter of Co-operative Law Co., 198 NY, at 484, supra).

In Matter of Co-operative Law Co., we considered and applied the "learned professions” principle in holding that an unlicensed business corporation may not practice law through licensed attorneys: "A corporation can neither practice law nor hire lawyers to carry on the business of practicing law * * * The legislature in authorizing the formation of corporations to carry on 'any lawful business’ did not intend to include the work of the learned professions * * * Business in its ordinary sense [is] aimed at, not the business or calling of members of the great professions, which for time out of mind have been given exclusive rights and subjected to peculiar responsibilities” (Matter of Co-operative Law Co., 198 NY, at 484-485, supra). Engineering and architecture are indisputably among the learned professions which are closely regulated by the State Board of Regents and the State Department of Education (Education Law §§6506, 6507, 6508, 7205, 7303). Practitioners must be of good moral character, possess a bachelor’s or higher degree, have several years of practical work experience, and pass a rigorous examination in order to qualify for a license (Education Law §§ 7206, 7304). Thus, inasmuch as an unlicensed business corporation may not practice architecture or engineering directly, it may not do so indirectly by retaining licensed professionals "as that would be an evasion which the law will not tolerate” (Matter of Cooperative Law Co., 198 NY, at 483, supra).

The current licensing provisions contained in title 8 of the Education Law are the product of five years of study by a Joint Legislative Committee formed "to revise and simplify that portion of the Education Law dealing with the professions” (Mem from Attorney-General, Governor’s Bill Jacket, L 1971, ch 987; see, Mem in support of bill, Governor’s Bill Jacket, L 1971, ch 987). Thus, in the absence of explicit statutory authorization permitting unlicensed business corporations to practice architecture and engineering through licensees, there is no reasoned basis for inferring that the Legislature intended to permit such practice. Yet, notwithstanding the clearly articulated legislative intent, as reflected in title 8 of the Education Law and article 15 of the Business Corporation Law, today the majority has permitted J.M. Weller to do that which law and public policy expressly prohibits. By endorsing the "design-build” agreement, the majority has, in my judgment, enervated this licensing scheme by seyerely diminishing the protections it was intended to provide. Accordingly, I would reverse the order of the Appellate Division and grant plaintiffs’ motion for summary judgment.

Chief Judge Wachtler and Judges Kaye and Hancock, Jr., concur with Judge Bellacosa; Judge Alexander dissents and votes to reverse in a separate opinion in which Judges Simons and Titone concur.

Order affirmed, with costs.

      . Although the contract at issue here makes reference to a secondary agreement between the contractor and the architect/engineer, there is absolutely no evidence in the record that any such agreement was ever entered into, let alone any indication as to its terms and conditions. Particularly absent is any provision explaining the professional obligations of the engineer vis-á-vis the Charleboises. Notably, the only signatures on the contract are those of J.M. Weller and the Charleboises; although James M. Weller, P.E. is named in the contract as the architect/engineer, his signature appears only in his representative capacity as president of J.M. Weller. Thus, although the named engineer may well have performed the work, the Charleboises were essentially at the mercy of the contractor in respect to the nature and extent of the licensee’s contractual obligations.

      . Although, as recognized by the majority (majority opn, at 592), a licensee may be disciplined by the State Board of Regents if found guilty of professional misconduct, this statutory protection, though important, is triggered only by carefully delineated and egregious forms of behavior (Education Law §§ 6509, 6511), and is inadequate to serve the more general statutory purpose of ensuring that owners receive the best efforts and undivided loyalty of the professional licensee. The same may be said of a client’s ability to sue the professional licensee in tort for malpractice.