People v. Windsor Madison Corp.

• Decision Date: 05 May 1958
• Citation: 173 N.Y.S.2d 964,12 Misc.2d 446
• Parties: PEOPLE of The State of New York, Complainant, v. WINDSOR MADISON CORP., Defendant. City Magistrate's Court of New York City, Municipal Term, Borough of Manhattan
• Court: New York Magistrate Court

Page 964

173 N.Y.S.2d 964

12 Misc.2d 446

PEOPLE of The State of New York, Complainant, v. WINDSOR MADISON CORP., Defendant.

City Magistrate's Court of New York City, Municipal Term Borough of Manhattan.

May 5, 1958.

Peter Campbell Brown, Corp. Counsel, New York City (Joseph M. Callahan, Jr., and Samuel Mandell, New York City, of counsel), for the people.

Leon London, New York City, for defendant.

MANUEL A. GOMEZ, City Magistrate.

Defendant is charged with violating Chapter 32, Article 28, Section B32-207.0 (Chapter 929, Laws of 1937) of the Administrative Code of the City of New York in that it unlawfully published and conducted a 'forced out of business sale' without a license therefor.

It was established at the trial that defendant corporation, which conducts a haberdashery store in the Borough of Manhattan, applied to the Commissioner of Licenses of the City of New York for a license to conduct and advertise a 'forced out of business sale'. The Commissioner refused to issue the license. The defendant made an application to the Supreme Court to review the determination of the Commissioner of Licenses. Mr. Justice Steuer, in an extensive opinion, upheld the determination of the Commissioner as being neither arbitrary nor capricious. Windsor Madison Corp. v. O'Connell, Sup., 172 N.Y.S.2d 198.

The defendant did not await the determination of the Commissioner of Licenses to begin to conduct and advertise the sale, nor was it deterred by the denial of the license. The testimony at the trial establishes beyond a reasonable doubt, that, during the period that the application was pending and subsequent to its denial, the defendant affixed large signs to the exterior and on the windows of its premises, stating that it was being forced out of business.

Numerous summonses were served upon defendant in an effort to enforce compliance with the Administrative Code. The first eight summonses were consolidated at the trial herein, but it was agreed that separate verdicts are to be rendered.

This Court is not, of course, the proper forum to review the decision of the Commissioner of Licenses and its affirmance by the Supreme Court. The sole issue before this Court is whether the defendant has published and conducted a 'forced out of business sale' without first procuring a license therefor. That issue is resolved against the defendant. Even if the decision and judgment of Mr. Justice Steuer should be reversed on appeal, the defendant was not justified in proceeding with the sale herein so long as the license had not been granted.

The only remaining question is the validity of the Code provisions, the constitutionality of which is challenged by the defendant.

Section B32-205.0, which defines the sales covered by Article 28 of Chapter 32 of the Administrative Code, provides as follows:

'Definitions.--Whenever used in this article, the following terms shall mean:

'1. 'Sale.' The sale or an offer to sell to the public goods, wares and merchandise of any and all kinds and descriptions on hand and in stock in connection with a declared purpose, as set forth by advertising, on the part of the seller that such sale is anticipatory to the termination, closing, liquidation, revision, wind-up, discontinuance, conclusion or abandonment of the business in connection with such sale. It shall also include any sale advertised to be a 'fire sale,' 'adjustment sale,' 'creditor's sale,' 'trustee's sale,' 'liquidation sale,' 'reorganization sale,' 'alteration sale,' 'executor's sale,' 'administrator's sale,' 'insolvent sale,' 'insurance salvage sale,' 'mortgage sale,' 'assignee's sale,' 'adjustor's sale,' 'receiver's sale,' 'loss-of-lease sale,' 'wholesaler's close-out sale,' 'creditor's sale,' sale,' 'forced-out-of-business sale,' 'removal sale' and any and all sales advertised in such manner as to reasonably convey to the public that upon the disposal of the stock of goods on hand, the business will cease and be discontinued.

'2. 'Publish,' 'publishing,' 'advertisement,' 'advertising.' Any and all means of conveying to the public notice of sale or notice of intention to conduct a sale, whether by word of mouth, by newspaper advertisement, by magazine advertisement, by handbill, by written notice, by printed notice, by printed display, by billboard display, by poster, by radio announcement and any and all means including oral, written or printed.'

The statute further provides that it shall be unlawful to publish or conduct a sale of the type indicated without a license therefor. (B32-207.0) In order to secure a license, an application in writing, under oath, must be submitted which shall, among other things, contain an itemized list of the goods, wares and merchandise to be offered for sale, the place where such stock was purchased or acquired, and the means to be employed in publishing such sale, together with the proposed content of any advertisement. (B32-208.0) The Commissioner of Licenses is required to make an investigation of the application, and at the completion of such investigation, may grant a license for a period not exceeding thirty days. (B32-209.0) The application is to be accompanied with a fee of twenty-five dollars. Should the application be denied, the fee is to be applied against the costs of the investigation. (B32-212.0) If the license is granted, a duplicate original of the application and stock list shall be available at all times to the Commissioner or his inspectors, and the licensee shall permit sich inspectors to examine all merchandise on the premises for the purpose of comparison with the stock list. (B32-214.0) Violations are punishable by a fine of not more than one hundred dollars, or by imprisonment not exceeding sixty days, or both. (B32-217.0) Other provisions of the Article refer to renewals, display of license and exemptions.

The defendant asserts that the law here in question is an improper exercise of police power and violates the due process clause of the Federal Constitution (Fourteenth Amendment) and the Constitution of the State of New York (Article 1, Section 6).

The provision of the statute clearly indicate that it was the intention of the City Council to protect the public from the consequences of fraud, by requiring merchants who represent that they intend to dispose of their entire stock of merchandise and go out of business thereafter to submit proof as to the truth of the representations. It has long been established that the police power of the State is not limited to regulations necessary for the preservation of good order or the public health and safety, but extends to the prevention of fraud and deceit, cheating and imposition. 6 Ruling Case Law, Constitutional Law, Section 202, page 208. 'It may be laid down as a general principle that legislation is valid which has as its object the promotion of the public health, safety, morals, convenience, and general welfare or the prevention of fraud or immorality.' People ex rel. Armstrong v. Warden of City Prison of City of New York, 183 N.Y. 223, 226, 76 N.E. 11, 12, 2 L.R.A.,N.S., 859. Moreover, it is not necessary to prove fraud in order to exercise the police power of the State. '* * * it (the state) may regulate a business, however honest in itself, if it may become a medium of fraud. It is not enough to say that the business may be honestly conducted.' People v. Beakes Dairy Co., 222 N.Y. 416, 427, 119 N.E. 115, 118, 3 A.L.R. 1260.

The power to pass laws for the prevention of fraud must be reasonably exercised so as to accomplish its purpose. 'The right is not without limitation, for it must be so...