New York Foreign Trade Zone Operators, Inc. v. State Liquor Auth.

• Court: New York Court of Appeals
• Citation: 34 N.E.2d 316,285 N.Y. 272
• Parties: NEW YORK FOREIGN TRADE ZONE OPERATORS, Inc., v. STATE LIQUOR AUTHORITY et al.
• Decision Date: 24 April 1941

285 N.Y. 272
34 N.E.2d 316

NEW YORK FOREIGN TRADE ZONE OPERATORS, Inc.,
v.
STATE LIQUOR AUTHORITY et al.

Court of Appeals of New York.

April 24, 1941.

Appeal from Supreme Court, Appellate Division, First Department.

Action by New York Foreign Trade Zone Operators, Inc., against the State Liquor Authority and others, for a declaratory judgment. From a judgment of the Appellate Division of the Supreme Court in the First Judicial Department entered July 18, 1940, 259 App.Div. 993, 20 N.Y.S.2d 986, affirming a judgment in favor of defendants entered upon an order of the Special Term which granted a motion by defendants for a dismissal of the complaint, 173 Misc. 540, 18 N.Y.S.2d 188, and in which reargument was denied in the Appellate Division, 259 App.Div. 1075, 21 N.Y.S.2d 612, plaintiff appeals.

Judgments reversed, and matter remitted to Special Term for further proceedings.

LEHMAN, C. J., and LEWIS and CONWAY, JJ., dissenting.

[34 N.E.2d 318]

Samuel S. Allan, of New York City, for appellant.

Monroe I. Katcher, II, and Francis V. McHugh, both of New York City, for respondents.

DESMOND, Judge.

Plaintiff is a domestic corporation engaged in operating Foreign Trade Zone No. 1 located on Staten Island, N. Y. The zone was established pursuant to the Foreign Trade Zone Act, 48 U.S.Stat. 998, Public No. 397 of the Seventy-Third Congress, June 18, 1934, 19 U.S.C.A. s 81a et seq. The act provides for the establishment, operation and maintenance of zones in ports of entry of the United States where foreign merchandise may be brought to be ‘stored, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, or otherwise manipulated,’ but not ‘manufactured or exhibited,’ without being subject to the customs laws of the United States. The purpose of the act is ‘to expedite and encourage foreign commerce.’ If the manipulated merchandise is thereafter brought into other ports of entry in the United States a custom duty is imposed; if it is shipped to another country no duty is imposed. The zone on Staten Island was established upon an application by the city of New York, authorized by the State of New York, L.1935, ch. 246. The city of New York granted plaintiff the right to operate Zone No. 1.

As a part of its business of manipulating foreign merchandise in the trade zone, plaintiff adds pure water to foreign distilled spirits, reducing the alcoholic ‘proof’ and increasing the volume. Plaintiff has been doing this without a distiller's license from the State Liquor Authority. By this action plaintiff seeks a declaratory judgment that it may continue to perform the above-described acts without obtaining such a license.

The complaint alleges that defendants, the State Liquor Authority and its members, have threatened to prevent plaintiff by injunction and otherwise from performing the above-described acts unless the plaintiff first obtains a distiller's license, and asks that the court declare whether the acts constitute ‘rectification’ within the meaning of the laws of the State of New York as asserted by defendants, and declare whether defendants have any power, authority or jurisdiction over the acts performed or caused to be performed by plaintiff within Foreign Trade Zone No. 1.

The complaint has been dismissed at Special Term on the ground that it appears on the face thereof that it does not state facts sufficient to constitute a cause of action. Special Term said, ‘There is no basis in the law for any such action in this case,’ and, ‘There can be no declaratory judgment in this case because the law affords an adequate remedy to the plaintiff.’ 173 Misc. 540, 541, 18 N.Y.S.2d 188. The judgment has been affirmed by the Appellate Division with two of the justices dissenting. 259 App.Div. 993, 20 N.Y.S.2d 986.

The power to grant or deny a declaratory judgment rests in the discretion of the Supreme Court. Civil Practice Act, s 473; Rules of Civil Practice rule 212. That power, however, is not unlimited (Westchester Mortgage Co. v. Grand Rapids & Ionia R. Co., 246 N.Y. 194, 158 N.E. 70); nor are its bounds unmarked. Dun & Bradstreet, Inc., v. City of New York, 276 N.Y. 198, 11 N.E.2d 728;Reed v....