Summary
In Matter of Association of Freedom of Choice v. Shapiro (9 N.Y.2d 376, 382) the Court of Appeals enjoined Special Term from indulging in "personal predelictions as to the purposes of a proposed corporation" and from imposing "personal views as to the social, political and economic matters involved" particularly where "no evidence is taken" in the proceeding.
Summary of this case from Matter of Wholesale Milk Distr. AssnOpinion
Argued February 20, 1961
Decided March 30, 1961
Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department, J. IRWIN SHAPIRO.
Alfred Avins, Edwin M. Bourke and William J. Neilan for appellant. Louis J. Lefkowitz, Attorney-General ( Dunton F. Tynan and Paxton Blair of counsel), for respondents.
These consolidated appeals, brought on constitutional grounds, involve two applications: (a) one made by petitioner-appellant and its New York subscribers to incorporate as a domestic membership corporation under section 10 of the Membership Corporations Law; (b) an application made to the Secretary of State to accept and file a certificate of incorporation which does not have the approval of a Justice of the Supreme Court as required by statute (Membership Corporations Law, § 10; General Corporation Law, § 211, subd. 2). For the purposes of this opinion we are concerned chiefly with the first-named application.
The proposed certificate of incorporation, as presented for the approval of a Justice of the Supreme Court, listed the following charter purposes:
"(a) to promote the right to individual freedom of choice and association, constituting the right of the individual to associate with only those persons with whom he desires to associate;
"(b) to conduct itself, and to encourage, promote, and aid in scientific research into problems engendered by a multicultural society, into problems of intergroup relations, in areas of ethnic characteristics and patterns, and into the implications and effects of such problems on freedom of choice and association, and to publish and to encourage, promote, aid and assist in publication of the results of such research in suitable scholarly periodicals and other publications;
"(c) to assist in the elimination of barriers to individual freedom of choice and its exercise in specific instances, as well as preventing and guarding against deprivation of this right at large; and
"(d) to find and promote the means through freedom of choice and association by which the numerous groups in our multicultural society can find their fullest development."
Approval was denied ( Matter of Association for Freedom of Choice, 17 Misc.2d 1012, 1013). In his opinion the Justice said: "In passing upon an application for the approval of a membership corporation, the duty of the court is not merely to see to it that the requirements of the statute have been met, but also to judicially determine whether the objects and purposes of the proposed corporation are lawful, in accord with public policy and not injurious to the community." Subsequently the same Justice, when requested to reconsider his decision, said in another opinion: "Certainly the sponsors of the proposed membership corporation are completely free to associate for the purposes they spelled out in the proposed certificate. * * * But they may not compel the State to grant them, for these purposes, the benefits and privileges of a membership corporation." ( 18 Misc.2d 534, 535.)
Thus, the issue at the Supreme Court ex parte level was clearly drawn to the effect that although the purposes expressed in the proposed certificate were not unlawful, nevertheless its sponsors were not entitled to incorporate. The conclusion, therefore, must be drawn that denial of approval was based upon public policy, or injury to the community, or both, as envisaged by the Justice before whom the matter was placed.
Subsequently, appellant made an application to the Appellate Division, Second Department, for an order directing the Justice who had denied approval for the proposed certificate to annul and revoke both of his opinions, and approve the certificate. The Appellate Division denied this application and granted the Justice's cross motion to dismiss the petition on the ground of insufficiency as a matter of law ( 10 A.D.2d 873). Appellant thereafter appealed to this court from the order entered upon the decision of the Appellate Division, alleging that constitutional questions are presented, and it is this appeal with which we are chiefly concerned. The other appeal from an order of the Appellate Division, First Department, which denied relief by way of mandamus against the Secretary of State, presents somewhat different issues and is really superfluous so far as the main issue is concerned, i.e., whether the courts have constitutionally applied the provisions of section 10 of the Membership Corporations Law.
This statute has been in effect for many years without change of language significant here, and was originally derived from section 1 of chapter 319 of the Laws of 1848. Stripped of technical requirements and exceptions not pertinent here, its language is simple: "Five or more persons may become a membership corporation for any lawful purpose * * *. Every certificate of incorporation filed under this chapter shall have endorsed thereon or annexed thereto the approval of a justice of the supreme court of the judicial district in which the office of the corporation is to be located."
With some exceptions not relevant here, no standards are set up to guide the exercise of judicial power. It would seem logical, therefore, to assume that the function of judicial scrutiny as intended by the Legislature was to ascertain whether the proposed incorporation was for a lawful purpose. This was a function which could not be handily carried out by the Legislature, or readily left to a ministerial officer such as the Secretary of State, hence it was committed to the judiciary, but only that and nothing more so far as the language of the statute is concerned.
From time to time, however, the courts below have enlarged this comparatively simple and narrow judicial function and have engrafted thereon the requirement of "a finding that the objects and purposes of the proposed corporation are in accord with public policy * * * and not injurious to the community" ( Matter of Daughters of Israel Orphan Aid Soc., 125 Misc. 217, 219). Since the case cited was decided in 1925, many decisions have followed its reasoning, in effect that a Justice is at liberty to grant or deny applications based on his personal notion of what is contrary to public policy or injurious to the community.
We feel impelled to hold these views erroneous. In the first place the public policy of the State is not violated by purposes which are not unlawful. To hold otherwise would be a contradiction in terms. In the second place the test as to what may be injurious to the community is too vague, indefinite and elusive to serve as an objective judicial standard. Within such a scope the individual Justice would be at liberty to indulge in his own personal predilections as to the purposes of a proposed corporation, and impose his own personal views as to the social, political and economic matters involved. This is the direct antithesis of judicial objectivity, especially in an ex parte proceeding where no evidence is taken.
The Attorney-General, in his very comprehensive brief, says that the constitutionality of section 10 of the Membership Corporations Law has not been attacked since its original enactment in 1848. This is true, so far as we can discover, insofar as any court test is concerned, but the statute or rather the manner of its construction and application by the courts of this State has been heavily criticized by legal students and scholars (55 Col. L. Rev. 380 [1955]; 66 Yale L.J. 545, 550 [1957]; 6 Howard L.J. 169 [1960]; 46 Cornell L.Q. 290 [1961]; Dwight, Objections to Judicial Approval of Non-Profit Corporations, 12 Business Lawyer 454 [1957]).
Many fundamental concepts are involved that are akin to freedom of association, for instance freedom of expression, and the latter, of course, cannot be limited to ideas that are palatable only to the majority without impinging on the constitutional rights of a minority. But we think an enlarged discussion of such concepts is unnecessary, and we limit our expression to the foregoing observations directly applicable to the statute involved. We agree with the courts below that the purposes expressed in the proffered certificate of incorporation are not unlawful, and hence we can find no legal basis for its rejection. The reasons assigned by the courts below are, in our opinion, untenable. It is perfectly lawful for an individual or group of individuals to agitate for the repeal or modification of any law on the statute books of the State; or even for a change in the form of the State government itself, provided such agitation is not coupled with the advocacy of force and violence. Such activity is not against public policy whether indulged in by an individual or a membership corporation, but of course approval of a corporate charter devoted to such a purpose does not imply approval of the views of its sponsors. It simply means that their expression is lawful, and their sponsors entitled to a vehicle for such expression under a statute which cannot constitutionally be made available only to those who are in harmony with the majority viewpoint. Dissenting organizations have equal rights, so far as freedom of expression is concerned, as any other groups, and are entitled to an equal and objective application of the statute.
The order of the Appellate Division, Second Department, in the proceeding against J. IRWIN SHAPIRO, Acting Justice of the Supreme Court, Queens County, should be reversed, without costs, and the matter remitted to the Appellate Division for proceedings consistent with this opinion.
The order of the Appellate Division, First Department, denying relief by way of mandamus against the Secretary of State should be affirmed, without costs.
I dissent and vote to affirm. The only issue presented is whether the standard applied by Special Term in this case satisfies the constitutional requirement of definiteness. We are not now concerned with what criteria may have been relied on in other situations.
That which is sought here is not solely permission to accomplish a simple act of business, to organize for political purposes and exercise freedom of speech, but rather to obtain "the imprimatur of incorporation", bearing the blessing of the Supreme Court, the benediction of the Secretary of State, and the right to affix the characterization "Incorporated under the Laws of the State of New York" to public matter so as to enable the organizers to assure themselves the prestige which accompanies the privilege (see Matter of Stillwell Political Club, 26 Misc.2d 931; Matter of Patriotic Citizenship Assn., 26 Misc.2d 995).
A State should not be forced to lend its prestige to efforts of a group whose objectives are a contradiction of State law. No decision of the United States Supreme Court is so clearly to the contrary that we should subordinate our policy to that of the Federal Government.
The use of the word "lawful", as describing the purposes for which a membership corporation may be formed (Membership Corporations Law, § 10), does not restrict the Justice of the Supreme Court merely to the performance of a ministerial act, but rather requires the exercise of a judicial function. "That is LAWFUL which is in conformity with * * * the principle or spirit of the law, whether moral or juridical; that is LEGAL which is in conformity with the letter or rules of law as it is administered in the courts" (Webster's New International Dictionary [2d ed., Unabridged], p. 1401; Matter of Lewis v. Harlem Dental Co., 189 App. Div. 359). A "lawful purpose" hence must be in conformity not only with the letter but also the spirit of the law. To be "lawful" then, the purposes of a proposed incorporation, although legal, must also be in harmony with an explicitly defined public policy of a State.
The purposes of the applicant are in conflict with a well-known and recognized public policy of the State of New York, which finds expression in numerous statutes. Consequently the denial of this application by the courts below does not rest on an unconstitutionally vague notion of "what is wholesome public policy" or on any other vague personal philosophy, but on a definite standard of conduct mandated by the Legislature in various statutes. (Section 290 of the Executive Law states: "[T]he legislature hereby finds and declares that practices of discrimination against any of its inhabitants because of race, creed, color or national origin are a matter of state concern, that such discrimination threatens not only the rights and proper privileges of its inhabitants but menaces the institutions and foundation of a free democratic state.")
Incorporation, moreover, is a privilege which may be withheld (see Mayor of City of New York v. Twenty-Third St. Ry. Co., 113 N.Y. 311, 317). It is as much a privilege whether New York individuals or corporate entities of other States seek it ( Ashley v. Ryan, 153 U.S. 436).
When such a franchise is sought and where the Appellate Division has unanimously approved an exercise of discretion, we do not interfere if there is any basis in the evidence or the inferences to sustain the action taken below. The record here supports the unanimous conclusion of the Justices of the Supreme Court, which is the agent of the Legislature.
The policies of the petitioners are, beyond argument, in sharp conflict with those of the People of this State, as announced by the Legislature (e.g., N.Y. Const., art I, § 11; "Equal protection of laws; discrimination in civil rights prohibited"; see, also, specific provisions in Alcoholic Beverage Control Law, Civil Rights Law, Civil Service Law, Education Law, Executive Law, General Business Law, Military Law, Penal Law and Public Housing Law). Therefore, we could not hold that it was as a matter of law an abuse of discretion for the Justice of the Supreme Court to require, as a basic minimum, that the public policy of the granting body not be abridged (see Matter of General Von Steuben Bund, Inc., 159 Misc. 231). The discretion delegated by the Legislature may not be found to be improperly exercised or in violation of rights guaranteed by the United States Constitution when it is based on an oft-reaffirmed State polity, and is consistent with the rationale of decisions of the United States Supreme Court.
Each of the individual members of this proposed corporation has all of those rights of freedom of speech and association as may be guaranteed by either the State or Federal Constitution. Special Term did not prohibit or limit them in any such protected activity. They may continue, as they have undoubtedly done, to gather together and exercise their rights in all permissible forms. But the "constitutionally protected right of association" is not tantamount to a right of incorporation (compare N.A.A.C.P. v. Alabama, 357 U.S. 449, 463 with Bryant v. Zimmerman, 278 U.S. 63). Petitioner has no absolute prerogative to have a corporation created or to operate one within this State ( National Council U.A.M. v. State Council, 203 U.S. 151, 161, 163).
Although we respect the right of petitioners to share a belief that the exercise of freedom of choice is one of the constitutionally protected, inalienable rights referred to in the Declaration of Independence, we may give effect not only to our State public policy but also to the decisions of the United States Supreme Court, all of which are to the contrary.
Accordingly, the orders of the Appellate Division should be affirmed.
I concur entirely with Judge BURKE, and vote to affirm for the following additional reasons:
The power of creating corporations unquestionably rests with the Legislature. Formerly, the right to corporate existence was always granted by special charter or act of incorporation. By the Constitution of 1846, to obviate the necessity for much special legislation, corporations were authorized to be formed under general laws (N.Y. Const., art. X, § 1; Johnson v. Hudson Riv. R.R. Co., 49 N.Y. 455, 458). Whether organized directly by special act or indirectly under general laws, a corporation is given its life by the Legislature.
While a corporation may be formed for a lawful purpose, the purpose may not further an illegal object "or one necessarily inconsistent with public policy, as declared by the public law" ( Vinegar Co. v. Foehrenbach, 148 N.Y. 58, 64). It is inconceivable that the Legislature would charter by special act, or intend to be chartered under general law, a corporation whose avowed purposes are inconsistent with public policy as declared by the People of the State in our Constitution (art. I, § 11) and in the "Law Against Discrimination" (Executive Law, art. 15).
The Legislature, in requiring the approval, under section 10 of article 2 of the Membership Corporations Law, of a certificate of incorporation by a Justice of the Supreme Court, could not have intended that he should affix his signature as a mere matter of form, but authorized and empowered him to carry out the legislative intention.
Chief Judge DESMOND and Judges DYE, FULD and VAN VOORHIS concur with Judge FOSTER; Judge BURKE dissents in an opinion, as to proceeding No. 1, in which Judge FROESSEL concurs in a separate opinion in which Judge BURKE also concurs.
In proceeding No. 1: Order reversed, without costs, and the matter remitted to the Appellate Division for further proceedings in accordance with the opinion herein.
In proceeding No. 2: Order affirmed, without costs.