Court Opinion

ID: 3603871
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:49:53.070307+00
Date Added: 2024-06-11T13:58:45.216647
License: Public Domain

In disregard of settled restrictions on judicial review of a determination by an administrative agency, the majority of the court is upsetting an administrative decision which, depending upon a finding of fact, has reasonable support in the record. (See, e.g., Matter of Miller v. Kling, 291 N.Y. 65; cf.Matter of Mounting  Finishing Co. v. McGoldrick, 294 N.Y. 104,108.) *Page 24 
The question before the Comptroller of the City of New York was whether the agreement of October 1, 1931 — called a lease by the parties — effected a conditional sale of the personal property to which it related. If it did, certain payments provided for in the agreement were exempt from the city tax, even though made after the effective date of the tax law — December 10, 1934. On the other hand, the payments were taxable if the comptroller was justified in finding that the agreement was a lease, as it purported to be, rather than a conditional sale.
Whether the agreement was one or the other was essentially a question as to the underlying intent of the parties. (See CutlerMail Chute Co. v. Crawford, 167 App. Div. 246, 253; cf.Gardner v. Town of Cameron, 155 App. Div. 750, 753-757, affd.215 N.Y. 682.) As the majority itself has observed, that question must be viewed in the light of the nature of the transaction, the situation and relationship of the parties and the purposes sought to be achieved by them. From examination of these circumstances, their intent emerges, for the most part, as a matter of fact and not as a question of law. Principally for that reason, I conceive that, on this record, it is a usurpation of the function of the administrative official to whom determination of the question was committed, for the court to declare, as a matter of law, that the intent of the parties was to accomplish a conditional sale of the personalty.
Indeed, the majority opinion itself goes far to refute the conclusion that a conditional sale was intended. It notes that the apparent purpose of the parties was "to take advantage of a separate corporate structure to insulate valuable assets against the risks of the publishing business" (p. 19). That purpose would have been defeated if the Publishing Company's present position that the contract was one of conditional sale be accepted, for it does not appear that the contract was filed, as required by the conditional sales law, and such failure to file would have subjected the property to the claims of creditors of the Publishing Company (Personal Property Law, § 65). In other words, to credit the contention that the parties, in 1931, intended their agreement as a conditional sale, the comptroller would have been required to conclude that they intended to frustrate their principal objective of removing the *Page 25 
property from the reach of creditors of the Publishing Company. I believe he was fully justified in rejecting that inference and in finding that the transaction was intended as just the type of transfer the parties styled it, a lease.
It is, indeed, highly doubtful whether the 1931 agreement can be held to have accomplished a conditional sale, even if we view the matter as involving a pure question of law. This was a complex transaction, far removed from the simple situation envisaged by section 61 (2) of the Personal Property Law — a "contract for the bailment or leasing of goods by which the bailee or lessee contracts to pay as compensation a sum substantially equivalent to the value of the goods, and by which it is agreed that the bailee or lessee is bound to become, or has the option of becoming the owner of such goods upon full compliance with the terms of the contract."
Thus, the lease in this case embraced both realty and personalty, and the clause giving the Publishing Company the option to purchase was, by its terms, exercisable only by payment of the agreed price of both the realty and the personalty. A lease of personalty containing an option to purchase is not treated as a conditional sale if the price largely exceeds the aggregate rentals payable thereunder. (See Cutler Mail ChuteCo. v. Crawford, supra; see, also, 1 Williston on Sales [2d ed.], § 336, p. 783.) In the present case, the lessee was not entitled to acquire title to the personal property except by paying a substantial additional amount for the real property as well; and the situation was not within the ambit of section 61 (2) of the Personal Property Law — i.e., where payment of the specified annual rentals for the use of the personalty would per se result in payment of the agreed purchase price.
Moreover, apart from that consideration, the rental payments which, according to the majority, were bound to accomplish full payment of the purchase price, were not definitely fixed in the agreement. The court's opinion thus proceeds on the assumption that the lessee was obligated to pay the entire agreed cost of the personalty in the form of rental payments within the term of the lease, by reason of the annual payments of depreciation at the rate of 10% of the cost of the personalty and at the rate of 2% of the cost of the realty. The agreement did *Page 26 
not, however, specify the rate of depreciation, but provided only for a "reasonable" rate; and the record does not conclusively establish that the Publishing Company bound itself, by explicit contract, not to reduce the rate of the depreciation payments actually made by it. Depreciation rates substantially lower than those in fact paid may well have been found by the comptroller to have been the extent of the Publishing Company's obligations in that regard under the lease, thereby necessitating a period longer than the original and renewal terms of the lease to achieve full payment of the purchase price by means of depreciation payments.
Beyond all this, section 61 (2) of the Personal Property Law appears to be aimed primarily at the evil of attempted evasion of the filing requirements of the conditional sales law to the prejudice of creditors or bona fide purchasers who rely on the apparent title of the party put in possession of the goods, by the device of cloaking in the guise of a bailment or lease a transaction which is in substance a conditional sale. (See Bogert, Commentaries on Conditional Sales, 2A, Uniform Laws Annotated, pp. 22, 23.) But, in the present case, no evidence appears of any aim to disguise the real nature of the transaction, and there is no challenge by any creditor or bona fide purchaser. Nor was the retention of title by the lessor here intended to serve the purpose only of securing payment of the purchase price.
Consideration of all the circumstances of the case, it seems to me, clearly points the conclusion that the determination reached by the comptroller is not without reasonable support. That being so, the courts may not interfere.
I would affirm the order of the Appellate Division.
LOUGHRAN, Ch. J., LEWIS, CONWAY and DYE, JJ., concur with THACHER, J.; FULD, J., dissents in opinion in which DESMOND, J., concurs.
Order reversed, etc. *Page 27