Schulz v. State

• Decision Date: 11 May 1993
• Citation: 81 N.Y.2d 336,615 N.E.2d 953,599 N.Y.S.2d 469
• Parties: , 615 N.E.2d 953 In the Matter of Robert L. SCHULZ et al., Appellants, v. STATE of New York et al., Respondents. In the Matter of Robert L. SCHULZ et al., Appellants, v. STATE of New York et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 469

599 N.Y.S.2d 469

81 N.Y.2d 336, 615 N.E.2d 953

In the Matter of Robert L. SCHULZ et al., Appellants, v. STATE of New York et al., Respondents.

In the Matter of Robert L. SCHULZ et al., Appellants, v. STATE of New York et al., Respondents.

Court of Appeals of New York.

May 11, 1993.

Robert L. Schulz, John Salvador, Jr., Gilbert O. Boehm and William Busch, pro se in both actions.

Robert Abrams, Atty. Gen., Albany (Peter G. Crary, Jerry Boone and Peter H. Schiff, of counsel), for respondents in the first above-entitled matter.

Robert Abrams, Atty. Gen., Albany (Frank K. Walsh, Jerry Boone and Peter H. Schiff, of counsel), for respondents in the second above-entitled matter.

OPINION OF THE COURT

BELLACOSA, Judge.

In these cases, a group of citizens challenges State financing schemes embodied in chapter 190 (Schulz Appeal No. 1) and chapter 220 (Schulz Appeal No. 2) of the Laws of 1990. The lawsuits have failed up to now for lack of threshold standing to sue. Appellants advance several theories to support their standing to sue on discrete aspects of the lawsuits, and argue on the merits that the various public financing statutes violate provisions of the New York State Constitution pertaining to how the State may incur debt. We conclude that the appellants in Schulz Appeal No. 1 should be accorded standing only on a constitutional voter basis. However, we affirm the order of the Appellate Division in that appeal on the sole ground of laches. In Schulz Appeal No. 2, we dismiss the appeal for lack of a preserved substantial constitutional question. ^*

I.

Supreme Court dismissed those portions of the pleading challenging sections of chapter 190 of the Laws of 1990 (the Act) which deal with the extension of State credit and long-term debt without voter approval. The dismissal was predicated on the authority of State Finance Law § 123-b, New York State Coalition for Criminal Justice v. Coughlin, 64 N.Y.2d 660, 485 N.Y.S.2d 247, 474 N.E.2d 607 and Wein v. Comptroller of State of N.Y., 46 N.Y.2d 394, 413 N.Y.S.2d 633, 386 N.E.2d 242. In particular, the challenges to sections 349 and 356, as well as portions of sections 339, 342 and 371 of chapter 190, were dismissed. The Supreme Court, however, found that "the remaining statutory provisions challenged by the petitioners do not address the 'authorization, sale, execution or delivery of a bond issue' [State Finance Law § 123-b] and petitioners do not seek to litigate that issue".

On the State defendants' appeal to the Appellate Division, that Court reversed, finding that the challenges to all sections of the Act were interrelated and could not be effectively separated, since they "all stem from the initial issuance of the bonds in question". For standing purposes analysis only, we likewise treat those aspects as interrelated. The Appellate Division on that basis dismissed the entire proceeding (Matter of Schulz v. State of New York, 180 A.D.2d 42, 44, 583 N.Y.S.2d 549). Appellants in Schulz Appeal No. 1 appeal from that Appellate Division order as of right on constitutional grounds (CPLR 5601 [b] [1]. The claim to standing as voters is expressly asserted in their primary pleading in this proceeding. The challengers asserted that they are registered voters and that they "have standing to maintain this action as voters who have been denied their right to vote in a referendum[ ] submitted to the people at a general election pursuant to Section 11 of Article VII of the State Constitution".

The challenge in the proceeding underlying Schulz Appeal No. 2 sought to invalidate various sections of chapter 220 of the Laws of 1990 establishing the New York Local Government Assistance Corporation for the issuance of $4.7 billion in bonds. Both lower courts dismissed that proceeding outright on lack of standing. Significantly, plaintiffs in this case failed to allege their voter status as an express theory of standing in their pleadings in that case. The appeal from the Appellate Division order in that matter is also taken as of right on constitutional grounds (CPLR 5601 [b] [1].

Because appellants in Schulz Appeal No. 1 asserted at the first opportunity in the pleadings their standing as voters pursuant to New York Constitution, article VII, § 11 that precise claim is preserved with respect to the order of the Appellate Division stemming from the State defendants' appeal in that Court and the appeal from that order lies as of right. Because plaintiffs did not expressly allege voter standing in the proceeding underlying Schulz Appeal No. 2, no substantial constitutional question is presented and we thus dismiss that appeal and deny the motion for leave to appeal made at oral argument.

II.

Schulz Appeal No. 1 to this Court, properly before us, requires us to decide the standing-to-sue issue in the context of the challenge to various sections of chapter 190 of the State Laws of 1990. The Appellate Division dismissed that lawsuit in its entirety. The Act provides for the sale and leaseback of Attica Correctional Facility and Interstate Highway 287 by the State to a State-created public corporation. These sales were designed to generate $200 million and $30 million cash, respectively, as nonrecurring revenues, so called "one shots". The purchases were financed by bond issues of the Urban Development Corporation during the fiscal year 1990-1991. The appraisal of the standing issue presents a difficult and complicated question which is affected by weighty precedential and statutory factors.

Until 1976, this Court consistently "held that the constitutionality of a State statute may be tested only by one personally aggrieved thereby, and then only if the determination of the grievance requires a determination of constitutionality" (St. Clair v. Yonkers Raceway, 13 N.Y.2d 72, 76, 242 N.Y.S.2d 43, 192 N.E.2d 15, cert. denied, 375 U.S. 970, 84 S.Ct. 488, 11 L.Ed.2d 417). In Boryszewski v. Brydges, 37 N.Y.2d 361, 372 N.Y.S.2d 623, 334 N.E.2d 579, this Court loosened the reins, stating: "We hold today that a taxpayer has standing to challenge enactments of our State Legislature as contrary to the mandates of our State Constitution" (id., at 362, 372 N.Y.S.2d 623, 334 N.E.2d 579 [emphasis added]. The rationale for the expansive turnabout is simple, critical and compelling:

"We are satisfied that the time has now come when the judicially formulated restriction on standing (which we recognize has had a venerable existence) should be modified to bring our State's practice with respect to review of State legislative action into conformity not only with the practice in the majority of other States but also with the procedural standing of taxpayers to challenge local actions (General Municipal Law, § 51). We are not prepared to recognize standing where, as in the present case, the failure to accord such standing would be in effect to erect an impenetrable barrier to any judicial scrutiny of legislative action. In the present instance it must be considered unlikely that the officials of State government who would otherwise be the only ones having standing to seek review would vigorously attack legislation under which each is or may be a personal beneficiary" (id., at 364, 372 N.Y.S.2d 623, 334 N.E.2d 579).

Part of the issue today is whether our precedents and legislation after Boryszewski reversed its forward thrust with respect to these public financing challenges. More precisely, the question is whether "voters" may be turned out of court when they have been denied access to the voting booth in alleged violation of an express referendum right conferred by the New York Constitution. To draw from the key language of Boryszewski, should the Executive and Legislative Branches, with the support of our subsequent standing cases, be allowed to erect "an impenetrable barrier to any judicial scrutiny of legislative action[s]" which are alleged to have violated the highest organ of law, the State Constitution itself? We conclude not. History and sound checks-and-balances principles of governance recognize the People as the source of all governmental power. Because the express voter referendum requirement to incur debt contained in article VII, § 11 is inextricably linked to the constitutional grant of debt-incurring authority, we determine that voter standing should be recognized in the proceeding culminating in Schulz Appeal No. 1. The general constitutional authorization to contract public debt and, likewise, the referendum core of the constitutional limitation on the exercise of that power are contained in article VII, § 11 of the New York Constitution. That section commands essentially that the State may borrow money only when a majority of the voters at a general election approve. The history of State finances and of the State Constitution provide clear evidence of the purport behind these provisions: Public indebtedness is viewed skeptically by the People of New York and must be tightly circumscribed by the People themselves and not entrusted finally even to their elected representatives. The constitutional prerequisite of a public referendum was considered the most effective way to avoid the "over-burdening of future generations by the incurring of long-term debt for capital improvements" (Wein v. Levitt, 42 N.Y.2d 300, 304, 397 N.Y.S.2d 758, 366 N.E.2d 847). A similar skepticism applies to borrowing by long-term debt to pay ordinary operating expenses of the government. The People of New York enacted this constitutional provision because history had shown them the governmental officials of the day are often tempted to borrow against the future under circumstances in which the electorate itself needs to exert the ultimate, prudent check-and-balance (see generally, Wein v. State of New York, 39 N.Y.2d 136, 141-145, 383 N.Y.S.2d 225, 347 N.E.2d 586; see also, Newell v. People ex rel. Phelps, 7 N.Y. 9 [1852]; Bergan, The History of the New York Court of Appeals, 1847-1932...