Case Name: In the Matter of Frank Leogrande, Jr., Petitioner, v. State Liquor Authority of the State of New York, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1966-03-31
Citations: 25 A.D.2d 225
Docket Number: 
Parties: In the Matter of Frank Leogrande, Jr., Petitioner, v. State Liquor Authority of the State of New York, Respondent.
Judges: Botein, P. J., Rabin and Bastow, JJ., concur with Breitel, J.; Eager, J., dissents in opinion.
Reporter: Appellate Division Reports
Volume: 25
Pages: 225–236

Head Matter:
In the Matter of Frank Leogrande, Jr., Petitioner, v. State Liquor Authority of the State of New York, Respondent.
First Department,
March 31, 1966.
Arnold E. Wallach of counsel (Fruchtman & Wallach, attorneys), for petitioner.
Joseph S. Ryan of counsel (Hyman Amsel, attorney), for respondent.

Opinion:
Breitel, J.
Petitioner's restaurant liquor license was can-celled by the .State Liquor Authority and he brings this proceeding under article 78 of -CPLR to review the determination. The evidence before the agency, if competent, was ample to substantiate the charges that the licensee engaged on and off the licensed premises in professional gambling activities, namely, bookmaking and policy collections. Petitioner contends, however, that the evidence establishing the charges was not competent because such evidence was the product of illegal search and seizure by police officers. The police officers, testifying in this administrative proceeding, had acted under two search warrants in collateral criminal proceedings, in which the warrants were subsequently vacated for lack of probable cause. Petitioner argues that the evidence other than that tainted by illegality is insufficient to sustain the charges.
The cancellation of the license should be annulled and the license restored. It is concluded that the exclusionary rule barring the use of evidence obtained by illegal search and seizure by public officials extends to any official proceeding brought to impose official forfeitures, penalties, or similar sanctions for violations of law or regulation. It is noted, however, that the precise issue is not one that has been passed upon by the Court of Appeals, and rarely, if ever, by the highest courts in other jurisdictions.
The two search warrants were based on observations by police officers made from the street. As background, perhaps to explain the occasion for the police observations, it is notable that the licensee had been once before suspended by the agency for suffering gambling on the licensed premises.
On November 26, 1963, police officer Smyth observed the licensee being approached immediately outside the licensed premises by four persons unknown to the police, each of whom engaged the licensee in conversation and handed him money. Officer Smyth heard the fourth man say to the licensee: " Give me the five for a dollar."
On November 29 officer Smyth obtained a search warrant, entered the licensed premises with another police officer, made a search, and obtained from the licensee's person a slip of paper bearing evident gambling notations. From the table in the kitchen area of the licensed premises officer Smyth obtained a slip bearing 14 plays of " single action of mutual [sic] race operation " and the "identities" of collectors, a quantity of other gambling papers, and two racing programs of current date. According to officer Smyth, the licensee admitted to him that all the gambling papers were his " action." While there the officer answered the telephone on a number of occasions and the persons at the other end attempted to place bets. At the time of the search by officer Smyth, his partner (officer Segarra) remained at the bar where one Fay Ettinger approached him. She gave him a list of bets, containing 65 plays of mutuel race horse policy, single action and bolita, to deliver to the licensee and, after being arrested, told him that she had been taking policy bets for about two weeks and turning the numbers in to the licensee. Thereafter, in criminal proceedings brought against the licensee, the search warrant was controverted, the evidence obtained by it ruled inadmissible, and the criminal charges were dismissed.
The second search followed a somewhat similar course. On March 11 and 12, 1964, police officer Morgan observed one McHugh, outside the licensed premises, being approached by some 20 persons who engaged McHugh in conversations, handing him moneys, and McHugh making notations on paper. On both dates McHugh was later observed by officer Morgan turning over the papers and moneys to the licensee who was seated in his automobile outside the licensed premises.
After officer Morgan had obtained a search warrant based on the observations last described and on additional information, he returned to the neighborhood on March 19 and observed McHugh operating in similar fashion but this time delivering money and papers to the licensee inside the licensed premises. The observation was made through the front window of the bar. Upon executing the search warrant officer Morgan removed from the person of the licensee, as the latter was entering his automobile, a number of papers bearing wagers on horse races and $259 in money. In criminal proceedings brought against the licensee and McHugh this search warrant was also controverted, vacated for lack of probable cause, and the criminal proceedings dismissed.
The licensee, testifying in this proceeding, denied the circumstances of the street observations and all of the material incriminating elements connected with the searches and seizures under the warrants. Despite these denials, this Court is bound to accept the police version on the assumption that the agency's findings so concluded on the evidence (Matter of Radigan v. O'Connell, 304 N. Y. 396, 399).
It is evident that the police officers in entering the licensee's premises on the first search did so pursuant to a search warrant and not, as the agency now argues, in the exercise of any supervisory power over licensed premises authorized by subdivision 15 of section 106 of the Alcoholic Beverage Control Law. Moreover, the intrusive nature of the search of the premises and of the licensee's person was not consistent with a statutory supervisory inspection, but was explainable only as a police search in enforcement of the criminal laws. The second search, of course, did not occur inside the licensed premises.
The warrants having been vacated for insufficiency of probable cause, any evidence obtained through their execution was illegally obtained in violation of the Fourth Amendment of the Federal Constitution and section 12 of article I of the State Constitution. The effect under the exclusionary rule is that the incriminating papers which established the policy collecting and bookmaking activities of the licensee were not admissible in any criminal proceeding (People v. Rainey, 14 N Y 2d 35, 38-39; People v. Fino, 14 N Y 2d 160, 163-164).
Insofar as the conversations over the telephone with persons unknown to the police, intercepted by officer Smyth while executing one of the vacated search warrants, these, too, are subject to the search and seizure restrictions in the Constitution (Wong Sun v. United States, 371 U. S. 471, 485-488; People v. Rodriguez, 11 N Y 2d 279, 286). Generally, the interception of telephone calls in the course of a legal police search of another's premises is not prohibited by the constitutional restrictions (e.g., United States v. Pasha, 332 F. 2d 193, 196-198, cert. den., 379 U. S. 839; see, also, Anno.: Telephone Calls —Admissibility, 13 ALR 2d 1409, esp. cases cited pp. 1414-1419). However, the interceptions in question were not made during a lawful search and therefore they fall under the same prohibition applicable to the general search.
The conversations between officer Segarra, who was officer Smyth's partner in the first search, and the woman, Fay Ettinger, took place while officer Segarra was at the bar of the licensed premises and, arguably, occurred while that officer was not actually executing the warrant subsequently determined to be illegal. But, the conversations with the woman cannot be linked with the licensee unless the context of her remarks is accepted as true. It is not legally possible to accept the content of her remarks as true, as distinguished from the fact of their occurrence, without violating the hearsay rule (Richardson, Evidence [9th ed.], § 206-209, and cases cited). It is well established in this State that while hearsay evidence is admissible in an administrative proceeding there must be some legal or competent evidence to sustain the determination (e.g., Matter of Stammer v. Board of Regents, 287 N. Y. 359, 365; 1 N. Y. Jur., Administrative Law, § 141, 201).
All that then remains by way of competent evidence to establish the misconduct of the licensee on and off the licensed premises are the observations of the licensee and McHugh engaging in conversations with one another and with persons unknown to the police, the exchange of moneys and the making of notations on paper, with the additional overheard comment of one of the unknown men to the effect, " Give me the five for a dollar. ' ' The conduct observed was highly suspicious but not relatable to any criminal or disorderly activity (e.g., People v. Fino, 14 N Y 2d 160, 163, supra; People v. Moore, 11 N Y 2d 271). In considering this evidence there is no requirement in this civil proceeding that the proof meet as high a standard as that required in a criminal proceeding (Matter of Katz's Delicatessen v. O'Connell, 302 N. Y. 286, 288; Matter of Schnitzler v. Casey, 283 App. Div. 1092, and cases cited). Thus the evidence need not establish culpability beyond a reasonable doubt. Nevertheless, as a matter of logical proof and minimal standards of probability, merely suspicious conduct which might cause one quite properly to inquire further is not sufficient to establish misconduct. The evidence in this case might be tested by considering whether in a proceeding by the licensee's landlord to evict the tenant as objectionable the police observations without more would suffice to justify an eviction of the licensee as an objectionable tenant. It would not suffice. There are many lawful activities which involve persons exchanging money and making written notations with respect to the transactions the moneys represent (cf. People v. Moore, 11 N Y 2d 271, supra). In this case, without the gambling papers, culpability for misconduct is not made out.
The only question remaining is whether the exclusionary rule applicable to criminal proceedings and involving illegally obtained evidence extends to a proceeding of this character. The Court of Appeals has held that the exclusionary rule does not apply to a civil action between private persons involving the private but illegal seizure of evidence (Sackler v. Sackler, 15 N Y 2d 40). It had, theretofore, reserved the question whether the exclusionary rule extends to civil proceedings instituted by public officials in which evidence illegally obtained by public officials is tendered (People v. Laverne, 14 N Y 2d 304, 308).
The Laverne ease, a criminal action, involved suppression of observations made by a building inspector who entered a building against the wishes of its occupant but pursuant to a village ordinance authorizing entry at any reasonable hour. His observations were received as evidence in three criminal prosecutions brought to punish violations of another village ordinance making it a criminal offense to conduct a business in a non-business zone. The exclusionary rule was held applicable by the Court of Appeals in reversing the criminal convictions. Citing Frank v. Maryland (359 U. S. 360, rehearing den., 360 U. S. 914) and Eaton v. Price (364 U. S. 263), the Court of Appeals distinguished as inapplicable intrusions required for urgent administrative or summary action to preserve health or public safety.
Following the Court of Appeals' decision in the Láveme case, the Appellate Division, Second Department, excluded the same evidence in two proceedings, arising out of the same complex, where the municipality sought in the one to recover a civil penalty and in the other to punish for contempt (Incorporated Vil. of Laurel Hollow v. Laverne, Inc., 24 A D 2d 615; Incorporated Vil. of Laurel Hollow v. Laverne Originals, Inc., 24 A D 2d 616, app. dsmd., 16 N Y 2d 866). In doing so, the Appellate Division tersely characterized both proceedings as quasi-criminal in nature.
The question left unanswered by the Court of Appeals has been explored subsequently in commentaries (e.g., Case Comment, 50 Cornell L. Q. 282; Case Note, 49 Minn. L. Rev. 319). It has also been touched upon in a Federal case involving property forfeiture (One 1958 Plymouth Sedan v. Pennsylvania, 380 U. S. 693). In the 1958 Plymouth Sedan case the United States Supreme Court quoted with approval language from the ease of Boyd v. United States (116 U. S. 616), where, in refusing to accept the classification of civil, as opposed to criminal, in characterizing forfeiture proceedings for the purposes of applying the Fourth Amendment, it was said (116 U. S. at p. 634): "If the government prosecutor elects to waive an indictment, and to file a civil information against the claimants — that is, civil in form — can he by this device take from the proceeding its criminal aspect and deprive the claimants of their immunities as citizens, and extort from them a production of their private papers, or, as an alternative, a confession of guilt? This cannot be. The information, though technically a civil proceeding, is in substance and effect a criminal one As, therefore, suits for penalties and forfeitures incurred by the commission of offences against the law, are of this quasi-criminal nature, we think that they are within the reason of criminal proceedings for all the purposes of the Fourth Amendment of the Constitution V'
All of the reasons in policy which suggest the application of the exclusionary rule to illegal searches and seizures by public officers in criminal proceedings apply equally to administrative proceedings of the present character, namely those involving penalties, forfeitures, or other sanctions for the violation of law or regulation. The exception mentioned in the Laverne case has an understandable basis in protecting against immediate dangers to public life and health. The exclusionary rule is addressed to the obnoxiousness of illegal conduct by public officials and the visiting by officials of serious official consequences upon the victims of such illegal conduct. In this case the illegal activity of the police officers was equally obnoxious and has official consequences more grave in economic terms than those of the criminal sanctions for gambling. The licensee, as noted earlier, is subject to loss of his valuable liquor license and to forfeiture of ' ' the penal sum ' ' of $1,000 on the bond supplied to the administrative agency in connection with his license. The exclusionary rule rests on a theory of deterrence; that policy would not be served if the illegal official activity could be used, despite unavailability in criminal proceedings, to effect parallel sanctions of forfeiture in an administrative proceeding.
On this view, the police street observations in this case are not sufficient and the results of the police searches are not available to sustain the present administrative determination resulting as it does in the forfeiture of a valuable license and a penal sum. There being no other competent evidence to sustain the charges of misconduct against the licensee, the determination must be overturned, because the police observations and searches and the licensee's prior history establish the charges only in truth, but not in law.
Accordingly, the determination of the State Liquor Authority canceling the restaurant liquor license of petitioner under date of January 28,1965 should be annulled, on the law, without costs or disbursements to either party.
. See, however, People v. Valentine (17 N Y 2d 128), in which such proof was held sufficient only to provide probable cause for an arrest without a warrant.
. Thus, for example, now irrelevant and not now passed upon is the application of the exclusionary rule to subsequent and independent applications for licenses, positions in the public service, and the like.