Gold v. Lomenzo

• Decision Date: 15 July 1970
• Docket Number: No. 69 Civ. 3720.,69 Civ. 3720.
• Citation: 314 F. Supp. 871
• Parties: David C. GOLD, Plaintiff, v. John P. LOMENZO, individually and as Secretary of State of the Department of State of the State of New York, the Department of State of the State of New York and Howard R. Leary, individually and as Police Commissioner of the Police Department of the City of New York, Defendants.
• Court: U.S. District Court — Southern District of New York

314 F. Supp. 871

David C. GOLD, Plaintiff, v. John P. LOMENZO, individually and as Secretary of State of the Department of State of the State of New York, the Department of State of the State of New York and Howard R. Leary, individually and as Police Commissioner of the Police Department of the City of New York, Defendants.

No. 69 Civ. 3720.

United States District Court, S. D. New York.

July 15, 1970.

Norman J. Mordkofsky, New York City, for plaintiff.

Louis J. Lefkowitz, Atty. Gen. of New York, New York City, by Charles A. LaTorella, Jr., Asst. Atty. Gen., for John P. Lomenzo and the Department of State.

Before MOORE, Circuit Judge, and CROAKE and POLLACK, Judges.

OPINION

POLLACK, District Judge.

A three-judge district court has been convened pursuant to 28 U.S.C. §§ 2281 and 2284 on the complaint of David C. Gold against John P. Lomenzo, individually and as Secretary of State of New York State, et al. The complaint seeks an injunction against the suspension of Mr. Gold's real estate brokerage license by the Secretary of State on the ground that this was not authorized by state law and unconstitutional on a variety of federal and state grounds. Defendant Lomenzo has moved to dismiss the suit as devoid of legal merit.

For the reasons given in the following opinion, this Court will abstain from reaching the merits of plaintiff's claims but will deny the motion to dismiss the suit at this time and will retain jurisdiction pending consideration of the matter by the New York State Courts and a final determination with respect to the authority of the Secretary under State law.

Plaintiff, David C. Gold, held a real estate broker's license issued under § 441 of the New York Real Property Law, McKinney's Consol.Laws, c. 50. On July 24, 1969 a hearing officer of the Department of State determined (after a full hearing) that Gold's real estate broker's license should be suspended for "demonstrated untrustworthiness" within the meaning of § 441-c. (1).¹ This determination was concurred in by the Secretary of State. Suspension was ordered to commence on August 15, 1969 and to terminate only if Gold satisfied certain conditions, to wit: refunded to four clients amounts aggregating $585.85; filed statements that he had deleted an objectionable clause in his lease and that in the future he would not charge more than one month's rent as commission.

On September 2, 1969, plaintiff sought an injunction in the District Court, pendente lite, enjoining and restraining the Secretary of State from suspending his real estate broker's license, and sought an order convening a statutory court to consider the constitutionality of § 441 of the New York Real Property Law and the Secretary's application thereof.

The District Court denied a preliminary injunction and refused to convene a three-judge court. Gold v. Lomenzo, 304 F.Supp. 3 (S.D.N.Y.1969).

On appeal, the decision of the District Court was reversed. The Court of Appeals held that the claim that the limitation on Gold's fee was confiscatory raised a question to be administered by a three-judge court rather than by a single Judge. Gold v. Lomenzo, 425 F.2d 959 (2d Cir. 1970).²

Accordingly, on remand from the Court of Appeals, the District Court granted plaintiff's motion to convene a three-judge court pursuant to 28 U.S.C. §§ 2281 and 2284.

While review of the district court decision refusing to convene a three-judge court was pending before the Court of Appeals, plaintiff commenced an Article 78 proceeding in New York Supreme Court, Albany County, contesting the state suspension order. That proceeding was dismissed on the merits on December 30, 1969 by Mr. Justice De Forest C. Pitt, who ruled that the questioned statute was neither vague nor overbroad and that its application to plaintiff did not result in the impairment of contract. Upon reargument on February 13, 1970, Mr. Justice Pitt adhered to his original decision, stating among other things:

It should, perhaps, be noted that the court in its original determination of this proceeding was not of the opinion that it was in any manner bound by the determination of the United States District Court in the companion litigation. References to the opinion of that court are to be considered as indicative of this court's approval of the rationale and law quoted.

Plaintiff filed a notice of appeal to the Appellate Division, Third Department, from the dismissal of the Article 78 proceeding, and that appeal is pending but has not as yet been perfected.

On October 31, 1969, the Department of State held a second hearing, after which plaintiff's license was revoked on the ground that he had continued to operate his brokerage business in violation of the Secretary's order of suspension.

On oral argument before the three-judge court plaintiff asserted that his license had by its terms expired on October 31, 1969.

Plaintiff did not bring an Article 78 proceeding in connection with the alleged revocation of October 31, 1969 and presumably the statute of limitations now bars any such proceeding. N.Y.C. P.L.R. § 217.

Under provisions of state law or regulation plaintiff may reapply one year after a revocation for a new license. Art. 12-A, N.Y.Real Prop.Law § 441-c(4).

The instant complaint is not rendered moot on account of the subsequent revocation of plaintiff's license. Whether plaintiff's license lapsed or was revoked is of no moment, because plaintiff did not wait a year and filed an application for a new license which was denied by the Secretary of State. It is thus clear that the Secretary of State either considers that Gold's license was revoked (and hence no application will be entertained for a period of one year) or considers that the suspension order is still in effect and no license will be granted to Gold until he complies with the conditions attached to that order.

In either event, it is clear that the revocation of Gold's license resulted directly, or indirectly from the original suspension order. If Gold was in violation of an unconstitutional suspension order, it is doubtful whether under New York law the revocation could be valid.

What is, however, clear is that this Court should abstain from reaching the merits of the constitutional questions presented by plaintiff. If plaintiff pursues his Article 78 proceeding through to the New York Court of Appeals, a decision by that Court, which has heretofore never construed or interpreted the statute in question or the actions of the Secretary challenged herein, may well end the litigation and render unnecessary any decision on the federal constitutional questions.

A determination by the New York Court of Appeals could avoid a decision by the federal statutory court on the constitutional questions raised.

Plaintiff has contended that the suspension order for "demonstrated untrust-worthiness" was improper because inter alia, (a) the commissions he charged and which were considered by the hearing officer were not excessive; (b) the clause in the lease agreement which the hearing officer found objectionable and ordered him to delete in the future was a clause suggested by the Secretary of State; (c) the Secretary of State does not have the power to consider the amount of commissions charged by a broker in a determination of his trustworthiness because commissions are not regulated by statute or regulation.

Plaintiff has also attacked the conditions attached to the suspension order on the ground (among others) that the Secretary of State is not authorized by the legislation to fix brokerage commissions and cannot do so in carrying out the separate and distinct powers of licensing, suspension and revocation.

It is true that the New York Legislature has chosen not to regulate the commissions brokers may charge. The Secretary of State has similarly not chosen to regulate the amount of permissible commissions and has even noted in a pamphlet, "License Law for Brokers and Salesmen" (Feb. 1968 at p. 17), that the "commission or compensation of a real estate broker is not regulated by statute, nor is it legally fixed by the regulations of the real estate board in a particular...