Case Name: In the Matter of George Campbell Painting Corp., Appellant, v. William Reid et al., Respondents; George Campbell Painting Corp., Appellant, v. William Reid et al., Respondents
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1967-07-07
Citations: 20 N.Y.2d 370
Docket Number: 
Parties: In the Matter of George Campbell Painting Corp., Appellant, v. William Reid et al., Respondents. George Campbell Painting Corp., Appellant, v. William Reid et al., Respondents.
Judges: 
Reporter: New York Reports
Volume: 20
Pages: 370–377

Head Matter:
In the Matter of George Campbell Painting Corp., Appellant, v. William Reid et al., Respondents. George Campbell Painting Corp., Appellant, v. William Reid et al., Respondents.
Argued May 15, 1967;
decided July 7, 1967.
Albert A. Blinder, Harry Lipner and Stephen Hochhauser for appellant.
I. The economic sanctions imposed by sections 2601 and 2602 of the Public Authorities Law against persons who assert constitutional rights are repugnant to and prohibited by the Fourteenth Amendment. (Spevach v. Klein, 385 U. S. 511; Malloy v. Hogan, 378 U. S. 1; Garrity v. New Jersey, 385 U. S. 493.) II. Under section 6 of article I of the New York State Constitution sanctions imposed against prospective defendants who refuse to waive their constitutional rights are authorized only against public officers. (People v. Steuding, 6 N Y 2d 214; Spevack v. Klein, 385 U. S. 511; Malloy v. Hogan, 378 U. S. 1; People v. De Feo, 308 N. Y. 595; People v. Yonkers Contr. Co., 17 N Y 2d 322.) III. The disqualification of appellant is unauthorized by the Public Authorities Law. (United States v. Lovett, 328 U. S. 303; Matter of Foscarinis. [Corsi], 284 App. Div. 476; Matter of Arglo Painting Corp. v. Board of Educ., 47 Misc 2d 618; People v. Canadian Fur Trappers Corp., 248 N. Y. 159.) IV. Even if some sanction is available against a witness who refuses to waive his constitutional rights, imposing the sanction against a corporation not controlled by the witness is repugnant to traditional concepts of due process. (Wieman v. Updegraff, 344 U. S. 183; Slochower v. Board of Educ., 350 U. S. 551; Beilan v. Board of Educ., 357 U. S. 399; Lerner v. Casey, 357 U. S. 468; Hanover Ins. Co. v. Harding, 272 U. S. 494; Frost Trucking Co. v. Railroad Comm., 271 U. S. 583; Matter of Conlon v. Murphy, 24 A D 2d 737; Matter of Gardner v. Murphy, 46 Misc 2d 728; Matter of Koutnik v. Murphy, 25 A D 2d 197; Matter of Peck v. Cargill, 167 N. Y. 391; Union Pac. R. R. Co. v. Public Service Comm., 248 U. S. 67; Steinberg v. United States, 163 F. Supp. 590; Griffin v. California, 380 U. S. 609.) V. The erroneous determination that an officer and director of appellant refused to sign a waiver of immunity is reviewable under article 78. (Hanft v. Hanft, 46 Misc 2d 548; Matter of Lipin, 9 Misc 2d 708, 6 A D 2d 1011; Colvin v. Smith, 276 App. Div. 9; Queens County Water Co. v. O’Brien, 131 App. Div. 91; People ex rel. Empire City Trotting Club v. State Racing Comm., 190 N. Y. 31; Matter of 54 Cafe & Rest. v. O’Connell, 274 App. Div. 428, 298 N. Y. 883; Matter of Joseph v. New York State Liq. Auth., 42 Misc 2d 366, 21 A D 2d 751.) VX One against whom a statute has been misapplied cannot be restricted to the limited remedy provided therein.
Paul W. Hessel, Harry Levy and I. Stanley Stein for respondents.
I. Assuming that the Authority improperly cancelled the contracts and disqualified appellant, appellant’s remedy lies either in a plenary action for damages at law, or in the special and exclusive proceeding provided by section 2603 of the Public Authorities Law. (Matter of Mudzinski v. Board of Estimate, 37 Misc 2d 1044; People ex rel. Ryan v. Green, 58 N. Y. 295; Matter of Atlantic & Western Travel v. New York Tel. Co., 40 Misc 2d 950; People ex rel. Richards v. Hylan, 200 App. Div. 871, 234 N. Y. 508; People ex rel. Ryan v. Aldridge, 83 Hun 279; Matter of Towers Mgt. Corp. v. Thatcher, 271 N. Y. 94; Matter of Coombs v. Edwards, 280 N. Y. 361; Matter of Small v. Moss, 277 N. Y. 501; Matter of Alweis v. Wagner, 14 N Y 2d 923; Matter of Pruzan v. Valentine, 282 N. Y. 498.) II. The disqualification which is the subject of this action was validly predicated upon the contractual agreements of the parties, and presents no constitutional issue. (Hollerbach v. United States, 233 U. S. 165; Atkin v. Kansas, 191 U. S. 207; Campbell v. City of New York, 244 N. Y. 317; People v. Crane, 214 N. Y. 154; Shepard v. Barron, 194 U. S. 553; Humbird v. Avery, 195 U. S. 480; Mayor of New York v. Manhattan Ry. Co., 143 N. Y. 1; Musco v. United Sur. Co., 196 N. Y. 459; Pierce v. Somerset Ry., 171 U. S. 641; Matter of Bleakley v. Schlesinger, 294 N. Y. 312; June Fabrics v. Teri Sue Fashions. 194 Misc 267; James v. Hotel Gramatan, 251 App. Div. 748; People v. Hudson Val. Constr. Co., 165 App. Div. 626, 217 N. Y. 172; People ex rel. Lewisohn v. O’Brien, 176 N. Y. 253; People v. Priori, 164 N. Y. 459; Bradley v. O’Hare, 2 A D 2d 436; Purdy v. Erie R. R. Co., 162 N. Y. 42; Powers v. Porcelain Insulator Corp., 285 N. Y. 54; Garrity v. New Jersey, 385 U. S. 493; Spevack v. Klein, 385 U. S. 511; People v. Guidarelli, 22 A D 2d 336; United States ex rel. Laino v. Warden, 246 F. Supp. 72, 355 F. 2d 208.) III. The sections of the Public Authorities Law requiring the provisions appearing in the contracts here involved and in issue herein, and otherwise providing for the sanction of disqualification, are constitutional. (Seagram & Sons v. Hostetter, 45 Misc 2d 956, 23 A D 2d 933, 16 N Y 2d 47, 384 U. S. 35; Matter of Spielvogel v. Ford, 1 N Y 2d 558; People v. Crane, 214 N. Y. 154, 239 U. S. 195; United States ex rel. Laino v. Warden, 246 F. Supp. 72, 355 F. 2d 208; Matter of Arglo Painting Corp. v. Board of Educ., 47 Misc 2d 618.) IV, On the basis of the undisputed facts herein the Authority properly cancelled the contracts and disqualified Campbell. Campbell, and not the Authority, has misinterpreted the contractual and statutory provisions, (Matter of Moore v. Board of Educ., Canandaigua, 274 App. Div. 403.) V. Plaintiff-appellant has an adequate and exclusive remedy under section 2603 of the Public Authorities Law, This action is accordingly barred, and the court below had no jurisdiction thereof. (McPherson v. C. U. L. Realty Corp., 270 App. Div. 1; Terner v. Glickstein & Terner, 283 N. Y. 299; Lewis v. City of Lockport, 276 N. Y. 336; Matter of New York, L. E. & W. R. R. Co., 110 N. Y. 374; Seymour v Judd, 2 N. Y. 464; Radano v. Town of Huntington, 281 App. Div. 682, 305 N. Y. 911; Dairy Sealed v. Ten Eyck, 248 App. Div. 352; Woollcott v. Shubert, 169 App. Div. 194; Matter of Towers Mgt. Corp. v. Thatcher, 271 N. Y. 94; Matter of Rosenbush v. Keller, 271 N. Y. 282; Matter of Gross v. Board of Educ., 46 Misc 2d 987; Matter of Wilson v. Board of Educ., Cheektowaga, 276 App. Div. 482.) VI. By reason of the indictment presently pending against George Campbell Painting Corp. and George Campbell, Jr., in connection with the very contracts here involved, the Authority will be justified in continuing their disqualification, and will not be restrained from doing so. (Matter of Zara Contr, Co. v. Cohen, 45 Misc 2d 497, 23 A D 2d 718, 16 N Y 2d 482; Matter of Arglo Painting Corp. v. Board of Educ., 47 Misc 2d 618.) VII. The documentray evidence demonstrates that the alleged resignation was not in good faith, and that in asserting it plaintiff-appellant do.es not come into this court of equity with ‘ ‘ clean hands ”, and should be denied relief.
Louis J. Lefkowits, Attorney-General (Samuel A. Hirshowitz, Robert E. Hugh and Brenda Soloff of counsel), in his statutory capacity under section 71 of the Executive Law.
I. Appel-' lant is bound by the terms of its contracts. Accordingly, it may not now complain of the operation of contractual provisions by reason of the purported resignation of its president on the eve of his appearance before the Grand Jury. (Campbell v. City of New York, 244 N. Y. 317; Brandt Corp. v. City of New York, 14 N Y 2d 217; Fahey v. Mallonee, 332 U. S. 245; Ashwander v. Valley Auth., 297 U. S. 288; Booth Fisheries v. Industrial Comm., 271 U. S. 208; Shepherd v. Mount Vernon Trust Co., 269 N. Y. 234; Essenfeld Bros. v. Hostetter, 20 A D 2d 34, 14 N Y 2d 47; Marine Bank v. Butler Colliery Co., 125 N. Y. 695; A. S. Rampell, Inc. v. Hyster Co., 3 N Y 2d 369 ; Mutual Reserve Assn. v. Phelps, 190 U. S. 147; Guerin Mills v. Barrett, 254 N. Y. 380; Matter of Moore v. Board of Educ., Canandaigua, 274 App. Div. 403, 299 N. Y. 666;, Matter of Maine Maid v. State Liq. Auth., 18 A D 2d 919; Seneca Wire & Mfg, Co. v. Leach & Co., 247 N. Y. 1; People v. Canadian Fur Trappers Corp., 248 N. Y. 159.) II. The challenged statutes are an appropriate exercise of the right of the State to refuse to do business with one who fails to manifest candor with respect to his public contracts and are constitutional as applied to appellant corporation. (Matter of Van Berkel v. Power, 16 N Y 2d 37; Patterson v. University of State of N. Y., 14 N Y 2d 432; Matter of Zara Contr. Co. v. Cohen, 45 Misc 2d 497, 23 A D 2d 718, 16 N Y 2d 482; Matter of Caristo Constr. Corp. v. Rubin, 15 A D 2d 561, 10 N Y 2d 538; United States ex rel. Laino v. Warden, 246 F. Supp. 72, 355 F. 2d 208; People. v. Laino, 17 A D 2d 1029, 374 U. S. 104; Beilan v. Board of Educ., 357 U. S. 399; Slochower v. Board of Educ., 350 U. S. 551; United States ex rel. Carthan v. Sheriff, 330 F. 2d 100, 379 U. S. 929; Matter of Lerner v. Casey, 2 N Y 2d 355, 357 U. S. 468, 358 U. S. 858; St. Clair v. Yonkers Raceway, 13 N Y 2d 72, 375 U. S. 970; Matter of Murtha v. Monaghan, 1 A D 2d 178; Matter of Blaikie, 11 A D 2d 196; Dorsey v. Stuyvesant Town Corp., 299 N. Y. 512; Matter of Donohue v. Cornelius, 17 NY 2d 390.)
Frank S. Hogan, District Attorney (H. Richard Uviller and Michael R. Stack of counsel), for New York City Housing Authority, amicus curia.
The, Campbell corporation should be relegated to its existing remedies under section 2603 of the Public Authorities Law. (Matter of Campbell Painting Corp. v. Reid, 48 Misc 2d 544; Campbell Painting Corp. v. Reid, 27 A D 2d 649.)

Opinion:
Per Curiam.
This is a proceeding to nullify a determination of the New York City Housing Authority disqualifying the appellant corporation from bidding on future contracts with the Authority. In addition the appellant seeks an injunction against the Authority's enforcement of its decision. The disqualification is mandated by section 2601 of the Public Authorities Law since the appellant's former president appeared before a Grand Jury investigating bid-rigging and refused to sign a waiver of immunity.
We hold that section 2601 of the Public Authorities Law is constitutional (Matter of Gardner v. Broderick, 20 N Y 2d 227, decided herewith) and that the disqualification imposed on the appellant corporation is valid. The fact that the appellant's officer resigned his position and that the resignation was accepted prior to his appearance before the Grand Jury and his refusal to sign a waiver of immunity is not controlling. Where the termination of the relationship of the individual officer with the corporation occurs almost contemporaneously with his refusal to sign a waiver of immunity or where it is obvious that the resignation was tendered and accepted solely for the purpose of avoiding the statutory disqualification, the person so resigning or otherwise departing shall be deemed to have acted in his capacity as a corporate officer when he refused to sign the waiver.
There may be times when the statute will operate to penalize a corporation which had severed its connection with the recalcitrant officer and which has otherwise been co-operative. The Legislature has, however, recognized this problem and has spoci fled a procedure by which the disqualification can be removed under such circumstances. (Public Authorities Law, § 2603.) The appellant's exclusive remedy is the procedure outlined in that statute.
The orders of the Appellate Division should be affirmed, with costs.
Chief Judge Fuld and Judges Van Voorhis, Burke, Scileppi, Bergan and Keating concur; Judge Breitel taking no part.
Orders affirmed.