People v. Valenza
| Citation | 436 N.Y.S.2d 937,108 Misc.2d 86 |
| Parties | The PEOPLE of the State of New York v. Frank VALENZA and Melting Moments, Inc., d/b/a The Palace, Defendants. The PEOPLE of the State of New York v. Frank VALENZA and Proof of the Pudding, Inc., Defendants. |
| Decision Date | 18 February 1981 |
| Court | United States State Supreme Court (New York) |
Robert Abrams, Atty. Gen., State of New York, for the People; Andrew Kosloff, New York City, of counsel.
Kase & Druker, Mineola, for defendants; John Kase, Mineola, of counsel.
The principle issue raised by defendants' multifaceted motion to dismiss the instant indictments is whether the failure to pay New York State sales tax can subject the delinquent taxpayer to a criminal prosecution for larceny.
Frank Valenza is the sole owner of two of New York City's most famous Manhattan restaurants, Proof of the Pudding and the Palace. Mr. Valenza and his corporate entities, Proof of the Pudding, Inc. and Melting Moments, Inc. (doing business as the "Palace"), have been charged in two indictments with grand larceny in the second degree (Penal Law § 155.05) and failure to file a New York State and local sales and use tax return (Tax Law § 1145(b)).
It is alleged that from June 1, 1978 up to and including July 31, 1979, the Palace Restaurant neither filed a sales tax return nor paid any sales taxes to the State, amounting to approximately $67,000. In addition, it is charged that during the period between January 1, 1978 and March 20, 1980, the Palace Restaurant failed to record as sales monies received for catering private parties, thereby withholding approximately $5,000 worth of sales taxes from the State.
Regarding the Proof of the Pudding Restaurant, it is alleged that from June 1, 1978, up to and including July 31, 1979, the defendants neither filed a sales tax return nor paid any sales taxes to the State, amounting to approximately $110,000. Furthermore, for the period between January 1, 1976, up to and including December 1979, the defendants issued gift certificates to various businesses in exchange for money and/or services and that, although sales taxes were collected on meals paid for by these certificates, the defendants failed to record those transactions as sales, thereby depriving the State of approximately $64,000 in revenue. A total of about $246,000 is the amount allegedly stolen.
Defendants are now undergoing reorganization in Bankruptcy Court of the Southern District of New York.
There is no provision in the Penal Law or Tax Law which expressly categorizes failure to pay the State sales tax as a larceny. Indeed, the Attorney General has only recently begun to prosecute these cases as larcenies.
Defendants argue that the State cannot proceed under the larceny statute since the Legislature intended Tax Law section 1145(b) to be the exclusive method of prosecution for violations of the sales tax laws. Furthermore, defendants claim that failure to pay sales tax merely creates a civil debt and therefore is not punishable as a crime. The People contend that the defendant collected the sales taxes as a trustee for and on account of the State, pursuant to Tax Law section 1132(a), and that failure to pay over the taxes constitutes larceny under Penal Law § 155.05.
Tax Law § 1145(b) provides in part:
"Any person failing to file a return or report required by this article, ... shall, in addition to any other penalties herein or elsewhere prescribed, be guilty of a misdemeanor, punishment for which shall be a fine of not more than one thousand dollars or imprisonment for not more than one year, or both such fine and imprisonment."
A state may proceed under a general statute even though a more specific criminal statute is available, unless the specific statute is intended to be the exclusive remedy (People v. Eboli, 34 N.Y.2d 281, 357 N.Y.S.2d 435, 313 N.E.2d 746 (1974); People v. Sansanese, 17 N.Y.2d 302, 270 N.Y.S.2d 607, 217 N.E.2d 660 (1966)). However, the rule that the specific controls the general applies only where the specific statute is in irreconcilable conflict with the general one (People ex rel. Knoblauch v. Warden, 216 N.Y. 154, 110 N.E. 451 (1915); People v. McLaughlin, 93 Misc.2d 980, 402 N.Y.S.2d 137 (1978)). The two statutes are not in irreconcilable conflict.
First, the elements of the two offenses differ. Section 1145(b) punishes a simple failure to file a return. No intent to defraud the State is required. On the other hand, "larceny" is defined as the wrongful taking, obtaining or withholding of the property of another, committed with the intent to deprive another of property or to appropriate the same § 155.05(1).
The People are charging defendants with what is in effect embezzlement, an essential element of which is fraudulent intent (People v. Chesler, 71 A.D.2d 792, 418 N.Y.S.2d 962, aff'd 50 N.Y.2d 203, 428 N.Y.S.2d 639, 406 N.E.2d 455 (1980); People v. Klinger, 165 Misc. 634, 1 N.Y.S.2d 449). Since the larceny statute contains this additional element, the two statutes are not in conflict (see Anderson v. State, 221 Wis. 78, 265 N.W. 210 (1936); People v. Chesler, supra).
Secondly, § 1145(b) specifically allows the use of other appropriate sanctions through the following language: "Any person failing to file a return ... shall, in addition to any other penalties herein or elsewhere prescribed be guilty of a misdemeanor ..." (emphasis added).
While the defendants argue that this phrase refers to civil remedies contained in other provisions of the Tax Law, such as § 1145(a) providing for penalties and interest on unpaid sales tax or § 1141 providing for proceedings to recover unpaid sales taxes, that analysis is unconvincing.
The People make an analogy to § 695 of the Tax Law which establishes criminal penalties for violations of the State income tax laws. Even though that section does specifically use the phrase "in addition to any other penalties herein or elsewhere prescribed," under § 685 the state is authorized to seek civil penalties for such violations. If the phrase is not necessary to establish that the state may pursue both civil and criminal penalties pursuant to sections within the Tax Law, then the inclusion of the phrase would most likely be an authorization for the state to pursue penalties outside the Tax Law. If not, then the words are mere surplusage.
The primary consideration in the construction of a statute is to ascertain the legislative intent (McKinney's Cons. Laws of N.Y., Book 1, Statutes § 92.) In ascertaining intent, words are to be given their plain and ordinary meaning and the language of the statute construed according to its natural and most obvious sense (McKinney's Cons. Laws of N.Y., supra, § 232).
The phrase "herein and elsewhere prescribed" is not an obscure one and is fairly unambiguous. It makes perfect sense to say that the phrase refers to any other appropriate sanctions both inside and outside the Tax Law.
As evidence that the Legislature intended the Tax Law misdemeanor provision to be the exclusive remedy for sales tax violations, defendants rely on the fact that in the past five years bills introduced in the Legislature to upgrade the penalties in that provision to a felony have all failed to pass. While the failure to adopt an amendment is It should be noted that the bill submitted this past year was withdrawn at the behest of the Attorney General, whose legal opinion was that the larceny statute would be sufficient to secure felony convictions for sales tax violations. I hold, therefore, that the Tax Law is not the exclusive remedy for sales tax violations.
a factor to be considered in ascertaining legislative intent, it is but one factor; it need not be the determining one (New York State Bankers Association v. Albright, 38 N.Y.2d 430, 381 N.Y.S.2d 17, 343 N.E.2d 735 (1975); Aponte v. Department of Investigation of the City of New York, 51 A.D.2d 905, 381 N.Y.S.2d 57 (1976)).
The heart of the People's argument is that defendants collected the sales taxes as a trustee for the State and that the failure to pay over the taxes constituted a larceny. Penal Law § 155.05(1) states that:
"A person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof."
This broadly defined statute encompasses all forms of larceny, including larceny by embezzlement (§ 155.05(2)(a)).
The law is clear that a trustee who withholds monies held in trust commits the crime of larceny by embezzlement (People v. Yannett, 49 N.Y.2d 296, 425 N.Y.S.2d 300, 401 N.E.2d 410 (1980); People v. Robinson, 284 N.Y. 75, 29 N.E.2d 475 (1942); People v. Epstein, 245 N.Y. 234, 157 N.E. 121 (1927)). That the State may be an owner of property for larceny purposes is also clear (Penal Law § 155.25(5); Penal Law § 10.07(7)).
Trustee or not trustee that is the $246,000 question. If an actual trust is created then the defendant is chargeable with larceny. If a mere debtor-creditor relationship or even a constructive trust is involved then the larceny counts must fall (People v. Yannett, supra). The answer is dependent upon whether or not the Tax Law sufficiently establishes a trust relationship between a vendor and the State with regard to sales taxes.
The crucial language in this case is contained in Tax Law § 1132(a):
...
To continue reading
Request your trial
-
People v. Lyon
... ... In fact, the Appellate Division, First Department, effectively reached the same result in People v. Felber, 264 App.Div. 181, 34 N.Y.S.2d 609, regarding the status of sales tax revenues collected for the City of New York (see, also, People v. Valenza, 108 Misc.2d 86, 436 N.Y.S.2d 937) ... In reaching the opposite conclusion, i.e., that the State is merely a creditor for the sales and withholding tax revenues collected for it, the court herein noted that under section 674 of the Tax Law there is no requirement that an employer ... ...
-
People v. Salvato
... ... On December 1, 1983, ... the Court of Appeals decided People v. Frank Valenza, 60 N.Y.2d 363, 469 N.Y.S.2d 642, 457 N.E.2d 748. The defendant herein relies on this case to justify his request pursuant to CPL § 440.10(1)(a) to vacate the judgment and dismiss the felony counts of the indictment alleging that this Court had no jurisdiction to enter a conviction for Attempted ... ...
-
People v. Walsh
... ... The parties have not been able to agree on the amount of the restitution. The defendants are awaiting sentence ... On December 1, 1983, the Court of Appeals decided People v. Valenza, 60 N.Y.2d 363, 469 N.Y.S.2d 642, 457 N.E.2d 748, which held that the failure to pay over sales tax to the State after having collected those funds may not be prosecuted as a larceny under the Penal Law. The defendants then brought the instant motion ... CONTENTIONS ... The ... ...
-
Attorney Grievance Com'n of Maryland v. Baldwin
... ... 4 At the hearing on charges Bar Counsel cited People v. Lyon, 82 A.D.2d 516, 442 N.Y.S.2d 538 (1981) which held that a New York taxpayer who had failed to report and pay state sales and withholding ... 27, §§ 340-343. Lyon repeatedly cited, and relied on the analysis in, the opinion by the Supreme Court, New York County, in People v. Valenza, 108 Misc.2d 86, 436 N.Y.S.2d 937 (1981), aff'd, 90 A.D.2d 466, 454 N.Y.S.2d 1018 (1982), rev'd in part and modified in part, 60 N.Y.2d 363, 457 ... ...