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

Decision Date24 April 1941
Citation34 N.E.2d 316,285 N.Y. 272
PartiesNEW YORK FOREIGN TRADE ZONE OPERATORS, Inc., v. STATE LIQUOR AUTHORITY et al.
CourtNew York Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

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. 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. Littleton, 275 N.Y. 150, 9 N.E.2d 814. Further, if the court declines to pronounce a declaratory judgment, it must state the grounds upon which its discretion is so exercised (Rules of Civil Practice, rule 212); and if the ground stated is untenable, the discretion has been improperly exercised. Dun & Bradstreet, Inc., v. City of New York, supra. Cf. Newburger v. Lubell, 257 N.Y. 383, 178 N.E. 669.

We have here to consider: First, whether the Supreme Court has the power to render a declaratory judgment under the circumstances set forth in the complaint; second, if it has, was it justified in declining to consider the complaint on the ground that there are other reasonably adequate forms of action available to plaintiff.

The scope of the power vested by statute in the Supreme Court, ‘To declare rights and other legal relations on request,’ is not therein specifically defined. Implicit in the statute and the public policy which it expresses, however, are limitations upon the exercise of the power with respect to the nature of the controversy, and the character of the issues. Civil Practice Act, s 473.

The controversy must involve ‘rights and other legal relations.’ James v. Alderton Dock Yards, 256 N.Y. 298, 305, 176 N.E. 401, 403. Power to render a declaratory judgment does not include the power to decide a moot case. Borchard, The Declaratory Judgment, pp. 57-61. The remedy is available in cases ‘where a constitutional question is involved or the legality or meaning of a statute is in question and no question of fact is involved.’ Dun & Bradstreet, Inc., v. City of New York, supra, 276 N.Y. at page 206, 11 N.E.2d at page 732;Bank of Yorktown v. Boland, 280 N.Y. 673, 21 N.E.2d 191. The remedy, however, is not available to restrain the enforcement of a criminal prosecution where the facts are in dispute, or open to different interpretations. Mills Novelty Co. v. Sunderman, 266 N.Y. 32, 193 N.E. 541; Reed v. Littleton, supra; Guide Escort Service, Inc., v. Moss, 260 App.Div. 920, 24 N.Y.S.2d 150.

There can be no doubt that the necessary jural relation exists between plaintiff and defendants. Enforcement of the State Alcoholic Beverage Control Law, Consol.Laws, ch. 3-B, and the power to issue licenses thereunder is vested in the State Liquor Authority. L.1934, ch. 478, art. 2, Alcoholic Beverage Control Law, s 10 et seq. One of the acts which the Authority may license is the operation of a rectifying plant. Alcoholic Beverage Control Law, s 61, subd. 2. By this action plaintiff seeks a determination whether it must procure such a license in order to perform the acts described in the complaint. The necessity of a license may be the subject of an action for a declaratory judgment. Chung Mee Restaurant Co. v. Healey, 86 N.H. 483, 171 A. 263;Pratter v. Lascoff, 261 N.Y. 509, 185 N.E. 716; Reed v. Littleton, supra.

Defendants do not dispute the assertions that plaintiff merely adds pure water to foreign distilled spirits for the purpose of reducing the alcoholic ‘proof’ and increasing the...

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