Blaikie, Application of
| Decision Date | 05 July 1960 |
| Citation | 202 N.Y.S.2d 659,11 A.D.2d 196 |
| Parties | Application of Robert B. BLAIKIE, for an order pursuant to Section 111 of the State Finance Law permitting him to commence a taxpayer's action to enjoin the payment of monies collected for the State without the warrant of the Comptroller of the State of New York. Robert B. Blaikie, Roosevelt Raceway, Inc., Harness Racing Commission, Yonkers Raceway, Inc. |
| Court | New York Supreme Court — Appellate Division |
Charles B. McGroddy, Jr., New York City, for Robert B. Blaikie.
Samuel I. Rosenman, New York City, of counsel (George Morton Levy, Mineola, Max Freund, Robert A. Kirtland and Ernest A. Gleit, New York City, on the brief; Rosenman, Goldmark, Colin & Kaye, New York City, and George Morton Levy, Mineola, attorneys), for Roosevelt Raceway, Inc.
Louis J. Lefkowitz, Atty. Gen., for State Harness Racing Commission.
Frank A. Fritz, New York City, of counsel (Arthur P. West, New York City, and John F. Minicus, White Plains, on the brief; Bleakley, Platt, Walker, Hart & Fritz, New York City, attorneys), for Yonkers Raceway, Inc.
Before BOTEIN, P. J., and RABIN, VALENTE, McNALLY and STEVENS, JJ.
Article I, Section 9 of the State Constitution, which prohibited gambling within the State, was amended in 1939 so as to provide for such 'pari-mutuel betting on horse races as may be prescribed by the legislature and from which the state shall derive a reasonable revenue * * *.' In 1940 the Legislature implemented the 1939 amendment by adopting the Pari-Mutuel Revenue Law (L.1940, c. 254, McK.Unconsol.Laws, § 7561 et seq.), which among other things, legalized betting at tracks and created the State Harness Racing Commission to license and supervise harness race tracks.
The Pari-Mutuel Revenue Law specified, in essence, that out of the moneys wagered daily by bettors at harness race tracks, the tracks should pay eighty-five cents of each dollar in the betting pool to the winning bettors and withhold fifteen cents. A graduated percentage of the fifteen cents was to be paid to the State, as a tax for the privilege of conducting such betting, and the remainder was to be retained by the track for its own uses and purposes.
The Commission licensed the two intervenors in this application to conduct pari-mutuel betting--Roosevelt Raceway, Inc. in 1940 and Yonkers Raceway, Inc. in 1949. From those dates to the present time these intervenors and other similarly licensed tracks have been in operation and paid taxes to the State. In 1956 the Legislature enacted Section 45-a of the Pari-Mutuel Revenue Law (L.1956, c. 837, § 1, McK.Unconsol.Laws, § 7603-a), the statute under attack by the applicant, after finding that some harness race tracks had 'become depreciated and inadequate for the proper conduct of harness horse race meetings'; and that as a consequence 'the state has lost substantial revenues and income * * *' and 'that enlargement and modernization of plant and structures * * * would result in increased admissions * * *' (subd. 1), which would, of course, mean larger tax payments to the State. Subdivision 7 authorizes the Commission to issue permits to tracks to make capital improvements, upon its finding that such improvements, among other things, will 'ultimately add to the revenues of the state.'
Subdivision 5 of the 1956 law provides for the establishment of a 'construction account', with the approval of the Commission, from which the tracks would be reimbursed for the expenses of the capital improvements. The Legislature retained the basic statutory structure for the division of the 15% of the betting proceeds that was to be withheld and divided between the track and the State, with some upward revision of the taxes; but it added a formula for allocating part of the State's share of the 15% retention to the funds to be deposited in the construction account. This formula does not become operative until the State has received under the basic provisions for payment of the taxes an amount equal to the parimutuel tax received from the track in the year 1955, after certain adjustments have been made. In 1955 the State had received its greatest revenue from harness racing in the fifteen years that sport had been authorized.
When the 1955 plateau of tax return has been reached from payments by all tracks (subdivision 6), 50% of the revenue that the State would be entitled to receive from any one track over and above that amount is to be deposited in the construction account, which is to be maintained in the name of the track; and the other half is to be paid to the State as taxes. At the end of every calendar year, all moneys, if any, in the construction account not payable to the track for completed and approved capital improvements are to be paid to the State as pari-mutuel taxes.
On June 5, 1956, the Commission issued a capital improvement license and construction permit to the intervenor Roosevelt, conditioned upon the completion of the capital improvement described in the latter's application. Roosevelt has completed its capital improvement project, at a cost certified by the Commission and running into many millions of dollars. Roosevelt has been reimbursed to date for only a part of this cost; and it is to the alleged illegality of the past payments and those contemplated for the future, that this application is directed.
It is a unique application, posing problems of first impression, and brought by a citizen and taxpayer named Blaikie. He seeks permission to institute and maintain an action, pursuant to the provisions of Section 111 of the State Finance Law, against Roosevelt and the State Harness Racing Commission. He proposes in such an action to seek the following relief: (1) an order restraining Roosevelt from reimbursing itself (without the warrant of the Comptroller of the State of New York) from the aforementioned construction account; (2) a declaratory judgment adjudicating as unconstitutional in its entirety that portion of the Pari-Mutuel Revenue Law which authorizes harness racing tracks to reimburse themselves for capital improvements; (3) an adjudication that all sums previously received and paid by Roosevelt to itself and those funds still remaining in its construction account constitute moneys and property of the State of New York; and (4) permission to bring similar actions against other harness tracks in the State which have set up such construction accounts and reimbursed themselves therefrom without warrant of the Comptroller of the State of New York.
Blaikie claims the right to commence a taxpayer's action by virtue of Article V, Section 1 of the Constitution of the State of New York which reads in part as follows:
'* * * The payment of any money of the state, or of any money under its control, or the refund of any money paid to the state, except upon audit by the comptroller, shall be void, and may be restrained upon the suit of any taxpayer with the consent of the supreme court in appellate division on notice to the attorney-general.'
This amendment, adopted at the 1938 Constitutional Convention, was implemented a year later by Section 111 of the State Finance Law, which provides:
It is these moneys in the construction account that the applicant contends should not have been and should not henceforth be disbursed without audit by the Comptroller under Section 111 and its constitutional progenitor. Before considering this aspect of the application, however, we shall address ourselves to Blaikie's contention that Section 45-a of the Pari-Mutuel Revenue Law (the 1956 statute), is unconstitutional in its entirety. The State constitutional provisions allegedly violated are (1) Article I, Section 11, which prohibits denial of equal protection of the laws; (2) Article VII, Section 8, which prohibits the gift or loan of State money or credit in aid of any private corporation, association or undertaking; (3) Article XVI, Section 1, which prohibits the surrender, suspension or contracting away of the power of taxation; and (4) Article III, Section 22, which provides that every law which imposes a tax shall distinctly state the tax and the object to which it is to be applied.
The constitutionality of the statute is not open to unconstrained attack by this applicant. The reason has been stated succinctly in Doolittle v. Supervisors of Broome County, 18 N.Y. 155, 162. 'Every person may legally question the constitutional validity of an act of the legislature which affects his private rights; but if a citizen may maintain an action for such a purpose in respect to his rights as a voter and taxpayer, the courts may regularly be called upon to revise all laws which may be passed.' When the capacity of the plaintiff to sue has been challenged, the rule denying an individual taxpayer the right to test the constitutionality of legislation has been enunciated consistently, unless his property rights are specifically and particularly affected thereby. See Kilbourne v. St. John, 59 N.Y. 21; Schieffelin v. Komfort, 212 N.Y. 520, 106 N.E. 675, L.R.A.1915D, 485; Bull v. Stichman, 273 App.Div. 311, 78 N.Y.S.2d 279.
This rule has in no wise been relaxed by Section 111 and Article V, Section 1 of the Constitution so as to furnish a...
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