Korn v. Gulotta

• Decision Date: 13 October 1988
• Citation: 530 N.E.2d 816,534 N.Y.S.2d 108,72 N.Y.2d 363
• Parties: , 530 N.E.2d 816 In the Matter of Richard J. KORN, Respondent, v. Thomas S. GULOTTA, as County Executive of Nassau County, et al., Appellants. Richard J. KORN, Respondent, v. Thomas S. GULOTTA, as County Executive of Nassau County, et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

Page 108

534 N.Y.S.2d 108

72 N.Y.2d 363, 530 N.E.2d 816

In the Matter of Richard J. KORN, Respondent, v. Thomas S. GULOTTA, as County Executive of Nassau County, et

al., Appellants.

Richard J. KORN, Respondent, v. Thomas S. GULOTTA, as County Executive of Nassau County, et

al., Appellants.

Court of Appeals of New York.

Oct. 13, 1988.

Edward T. O'Brien, County Atty., Garden City (George J. Farrell, Jr., William S. Norden, Long Beach, Bonnie P. Chaiken, John M. Armentano and Dolores Fredrich, Uniondale, of counsel), for appellants.

Marshall Beil, Frank R. Curtis and Mark W. Budwig, New York City, for respondent.

OPINION OF THE COURT

SIMONS, Judge.

Petitioner, a resident and taxpayer of Nassau County, instituted this article 78 proceeding to invalidate the 1988 Nassau County budget and to compel respondents to prepare and adopt a new one. At bottom the dispute concerns whether respondents, the County Executive and members of the County Board of Supervisors, illegally held estimated surplus moneys off budget in violation of the requirements of section 302 of the Nassau County Charter. Petitioner has been successful in the courts below and the matter is here by permission of this court.

I

On October 26, 1987 the Nassau County Executive, respondent Gulotta, issued an official county news release announcing that he anticipated a year-end cash surplus of $80.1 million in the county general fund. Stating that the entire surplus could be applied to reduce property tax rates for 1988 but that such "action would be short-sighted and could result in a dramatic increase in taxes next year", he proposed to "stabilize property taxes" by using the accumulated surplus over a three-year period. Two weeks later, on November 9, 1987, Gulotta announced his proposed 1988 budget to the public and sent it to the Board of Supervisors for approval. The charter also required him to send the Board of Supervisors an accompanying budget message and in his message, Gulotta repeated his earlier estimate of a record surplus, this time placing it at $90 million. He stated once more that the entire amount was available to reduce 1988 taxes but repeated his plan to accumulate the surplus and spend it proportionate over a three-year period thereby reducing taxes each year. Consistent with this officially announced plan, the proposed executive budget included only $17.7 million as an item of revenue which was variously labeled in the budget as "cash on hand", "general fund balance applicable to the ensuing fiscal year" or "fund balance beginning of year". The budget did not refer to the remaining funds in his estimated year-end cash balance and it did not contain an entry for a multiyear tax stabilization program or reserve fund. ¹ On December 21, 1987 the Board of Supervisors adopted the budget, consistent with the County Executive's plan, after adding $2.5 million to the year-end general fund balance.

Petitioner instituted this article 78 proceeding contending that the budget proposed by the County Executive and passed by the Board of Supervisors did not comply with County Charter § 302(5). That section requires the executive budget to contain a "statement of the estimated cash balance, after deducting commitments estimated to be outstanding at the close of the [then] current fiscal year". Respondents denied the essential allegations of the petition, interposed several objections in point of law and asserted counterclaims for abuse of process and malicious prosecution. They subsequently moved to dismiss the petition. On the return of the motion Supreme Court held that mandamus was an appropriate proceeding to compel executive action but not to review the validity of the legislatively adopted budget. Accordingly it severed the proceeding against the Board members and converted it to an actionunder section 51 of the General Municipal Law. It treated respondents' motion to dismiss the petition as a motion for summary judgment, searched the record and granted judgment to petitioner. In a well-reasoned decision, Justice DiPaola held that the budget adopted was invalid and could not be made effective by legislative action because "the Board of Supervisors relied upon a false premise, namely, that the entire amount of the year-end surplus required to be included" was so included. Two separate judgments were entered. In the first (the article 78 proceeding), the County Executive is the named respondent and the judgment directs him to resubmit to the Board of Supervisors a revised 1988 Nassau County budget which contains a statement complying with County Charter § 302(5). The second judgment (the General Municipal Law § 51 action) names the members of the Board of Supervisors as respondents, declares the 1988 Nassau County budget, as adopted, unlawful and invalid, directs the Board of Supervisors to adopt a new 1988 budget within six weeks after it receives the revised 1988 budget from the County Executive and dismisses the counterclaims. The Second Department affirmed both judgments, 140 A.D.2d 474, 528 N.Y.S.2d 584 and leave to appeal was granted by this court.

We agree with the courts below that the County Executive failed to comply with the legal requirements of the County Charter directing him to account in the budget for all estimated revenues and that the Board of Supervisors' action, in approving a document which did not state the County Executive's true estimate of the anticipated unencumbered cash balance, was a nullity. Accordingly, we modify the order of the Appellate Division, with respect to the time of performance only, and otherwise affirm.

II

Several threshold contentions raised by respondents must be treated before addressing the merits.

Respondents' principal claim is that this matter is nonjusticiable because it requires the courts to invade the budgetary process, the exclusive domain of the executive and legislative branches of government. They rely on Saxton v. Carey, 44 N.Y.2d 545, 406 N.Y.S.2d 732, 378 N.E.2d 95 and Judge Breitel's dissenting opinion in Hidley v. Rockefeller, 28 N.Y.2d 439, 440, 322 N.Y.S.2d 687, 271 N.E.2d 530. These authorities stand for the principle established in People v. Tremaine, 281 N.Y. 1, 21 N.E.2d 891 that the executive must itemize entries in the budget but that the degree of itemization is a matter of discretion which the court will not review. Manifestly, the courts cannot and will not intervene in the budget process if doing so requires them to substitute their judgment on matters of discretion. As we stated in Saxton, however, "[w]e do not suggest by our decision today that the budgetary process is per se always beyond the realm of judicial consideration * * * The courts will always be available to resolve disputes concerning the scope of that authority which is granted by the Constitution to the two other branches of the government" (44 N.Y.2d 545, 551, 406 N.Y.S.2d 732, 378 N.E.2d 95, supra; see also, Wein v. Carey, 41 N.Y.2d 498, 393 N.Y.S.2d 955, 362 N.E.2d 587, rearg. denied 42 N.Y.2d 910, 397 N.Y.S.2d 1029, 366 N.E.2d 1365; Matter of Block v. Sprague, 285 N.Y. 69, 32 N.E.2d 796; People v. Tremaine, 281 N.Y. 1, 21 N.E.2d 891, supra ).

Nor does City of Beacon v. County of Dutchess, 285 App.Div. 1050, 139 N.Y.S.2d 462, cited by respondents, support their position. In Beacon the plaintiff sought to recover real estate taxes that it paid to the defendant and alleged that the 1954 county budget contained excessive appropriations and underestimated revenues. The plaintiff claimed that its taxes could have been eliminated entirely had the surpluses in each fund been estimated correctly. The Appellate Division affirmed a judgment dismissing the complaint for failure to state a cause of action holding that "[i]n the absence of express statutory authority [citation omitted], courts do not have the power to review the exercise of discretionary powers by a municipal corporation as to estimates of the money required to carry on the affairs of the municipality" (id., at 1050-1051, 139 N.Y.S.2d 462). Respondents suggest that this decision states some general overriding principle of nonjusticiability with respect to intervention into the budgetary process. The differences between Saxton and Beacon and this case, however, could not be clearer. Petitioner does not question the County Executive's discretionary power to estimate surplus funds, or even to spread them over three years, if some legal method of doing so can be found. He contends that it was unlawful for the County Executive to keep revenues off-budget in violation of the mandate of section 302(5).

Next, respondent County Executive contends that the remedy of mandamus does not lie to review his estimate of the unencumbered cash balance because it is an inherently discretionary act. He contends that he complied with the requirement of section 302(5) when he included in his proposed budget an item for estimated cash balance and that courts may not substitute their judgment as to the appropriateness of the particular figure chosen by him. Mandamus will lie to compel acts that public officials are duty bound to perform regardless of how they may exercise their discretion in doing so (see, Klostermann v. Cuomo, 61 N.Y.2d 525, 539-540, 475 N.Y.S.2d 247, 463 N.E.2d 588). The remedy is appropriate here because the present dispute does not involve a difference of opinion on the size of the estimate contained in the budget but whether respondents may omit from the budget account of estimated year-end cash balance sums which the County Executive acknowledged the county would receive. That is a matter of statutory interpretation appropriately decided by the judiciary.

Respondents also contend that Supreme Court erred in holding that petitioner's failure to appear and object at a public hearing did not preclude him from commencing this litigation to challenge the budget. They rely on a statement to that effect by the Appellate Division in ...