Wein v. City of New York

• Decision Date: 12 March 1975
• Parties: Leon Edward WEIN, Plaintiff, v. The CITY OF NEW YORK et al., Defendants.
• Court: New York Supreme Court

Page 955

365 N.Y.S.2d 955

80 Misc.2d 894

Leon Edward WEIN, Plaintiff, v. The CITY OF NEW YORK et al., Defendants.

Supreme Court, Special Term, New York County, Part I.

March 12, 1975.

Leon Edward Wein, Brooklyn, plaintiff pro se.

W. Bernard Richland, Corp. Counsel, New York City (Leonard Bernikow, Kew Gardens, Kenneth F. Hartman, Riverdale, of counsel), for defendants.

HYMAN KORN, Justice:

Defendants' motion to dismiss the complaint pursuant to 3211(a)(3) and 3211(a) (7) of CPLR is disposed of as follows:

This taxpayer's action brought pursuant to Section 51 of the General Municipal Law seeks a declaratory judgment that:

(1) The Stabilization Reserve Corporation Act (SRCA (Chapt. 594 of the Laws of 1974)) violates Article 8 and Article 10 of the Constitution of the State of New York; and (2) $700,000,000 in bonds and notes including $260,000,000 in bonds and notes of the Stabilization Reserve Corporation (SRC) to be issued pursuant to the SRCA constitutes a debt of the defendant City of New York and will exceed the debt limit as set forth in Article 8 of the Constitution.

Plaintiff further seeks permanent injunctive relief against the sale of said bonds and notes by the defendants and to restrain the defendants from contracting other debts in violation of Article 8.

Defendants move to dismiss the complaint alleging that plaintiff lacks the capacity to bring suit and that the complaint fails to state a cause of action.

In support of their contention of plaintiff's lack of standing, defendants characterize the complaint as directed essentially against the State of New York, and the SRC in challenging the validity of the SRC and claiming the bonds and notes of the SRC are debts of the City. Defendants allege that the State is a necessary party herein but cannot be joined since plaintiff does not allege the requisite violation of a personal right. Defendants further assert that the SRC cannot be joined in this action since it is a public benefit corporation, not subject to suit under Section 51 of the General Municipal Law.

A fair reading of the complaint herein demonstrates that it is directed against the named defendants, the City of New York, the Mayor and the Comptroller, to prohibit the alleged illegal expenditure of municipal funds resulting in an alleged unconstitutional exceeding of the debt limit through the mechanism of the SRC as created by the SRCA.

Section 51 of the General Municipal Law is remedial in nature and to be liberally construed for the protection of taxpayers. (Holton v. Board of Supervisors of Monroe County, 245 App.Div. 144, 281 N.Y.S. 350; Meinhardt v. Britting, 10 Misc.2d 757, 169 N.Y.S.2d 925; Queens County Water Co. v. Monroe, 83 App.Div. 105, 82 N.Y.S. 610.)

Under this Section, plaintiff has a preventive right of action resting solely on illegal official action. Plaintiff need not demonstrate any individual interest other than the taxpayer's presumed direct and immediate interest to challenge the expenditure of municipal funds. (Mass. v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078; Ofenloch v. Gaynor, 66 Misc.2d 185, 320 N.Y.S.2d 362, aff'd 35 A.D.2d 913, 317 N.Y.S.2d 267; Bush v. Coler, 60 App.Div. 56, 69 N.Y.S. 770, aff'd 170 N.Y. 587, 63 N.E. 1115; Hansen v. Ludera, 67 Misc.2d 574, 325 N.Y.S.2d 78; N.Y. State Electric & Gas Corp. v. City of Plattsburg, 168 Misc. 597, 6 N.Y.S.2d 419, modified on other grounds 256 App.Div. 732, 12 N.Y.S.2d 318, modified 281 N.Y. 450, 24 N.E.2d 122, rearg. denied 282 N.Y. 682, 26 N.E.2d 812).

Although a Sec. 51 right of action cannot be extended to include wrongful acts of officers and agents of the State without a showing of personal right (St. Clair v. Yonkers Raceway, 13 N.Y.2d 72, 242 N.Y.S.2d 43, 192 N.E.2d 15), this does not immunize the State from a challenge that it has acted beyond its constitutional authority. (Bloom v. Mayor of City of New York, 35 A.D.2d 92, 312 N.Y.S.2d 912, aff'd 28 N.Y.2d 952, 323 N.Y.S.2d 436, 271 N.E.2d 919.)

Thus, the complaint may not be dismissed for lack of standing.

Defendants' major contention, that the complaint fails to state a cause of action is well founded. The crux of the complaint is that the structure and funding of the SRC as created by the SRCA establishes that the bonds and notes of the SRC are in reality the debts of the defendant, The City of New York, and, as such, the City's debt is raised beyond the limit set forth in Article 8 of the Constitution.

No facts are alleged by the plaintiff in support of this premise. Rather, plaintiff relies on speculative conclusions drawn solely from the provisions of the SRCA. Plaintiff claims that the SRCA requires, that the City pay the expenses and debt service of the SRC (Public Authorities Law § 2540(a)); that the City pay funds into the general reserve fund of the SRC (2537); that if the City should not maintain the fund, the State is the maintain it out of various State aid funds (2540(b), (c)), and this without more, establishes that the City of New York has pledged its funds as security for the obligations of the SRC in violation of Article 10, Section 5 of the Constitution prohibiting the City from assuming liability for the debts of a public corporation, and in violation of Article 8 in that the City has not pledged its faith and credit as required for all City debts.

Plaintiff further alleges that the SRC is not a valid entity but a sham, a conduit created solely to permit the City of New York to evade its constitutional debt limit.

However, an examination of the provisions of the SRCA as well as the Official Statement and Notice of Sale clearly demonstrates that this speculative conclusion on the part of the plaintiff is invalid. Under the statute, the SRC is established as a public benefit corporation (Sec. 2532(a)) for an explicit purpose, 'to assist the City of New York to provide essential services on a sound financial basis during a period of unprecedented fiscal crisis.' (Sec. 2533). It is well established that the motives of the lawmakers inducing ligislative action are not subject to judicial review. Hansen v. Ludera, supra; Gaynor v. Rockefeller, 21 A.D.2d 92, 248 N.Y.S.2d 792. This is particularly pertinent herein where the purpose is so clearly set forth.

The SRCA authorizes the Mayor to certify to the SRC an amount up to $150,000,000 for the fiscal year 1973/74 and $370,000,000 for the year 1974/75 (Sec. 2538). Upon said certification the SRC is authorized to sell $520,000,000 of its own bonds and notes and to pay over the sale proceeds to the Comptroller for deposit in the City's general fund (Sec. 2536). The SRCA expressly states that these SRC bonds and notes are SRC obligations payable solely from SRC revenues and that they are neither the debts of the City of New York nor the debts of the State of New York (Sec. 2542).

The payment of the principal of the notes is to be made out of the bond proceeds and the interest payments out of the capital reserve fund which is to be maintained by the City provided that the City shall have first...