Dorsey v. Stuyvesant Town Corp. , 299 N.Y. 512 ( 1949 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] This appeal, involving two actions upon a consolidated record, raises the important question of whether a corporation organized under the Redevelopment Companies Law has the privilege, admittedly possessed by an ordinary private landlord, to exclude Negroes from consideration as tenants. Appellants deny that respondents Stuyvesant Town Corporation and Metropolitan Life Insurance Company have such a privilege. They contend that these respondents are subject to the restraints of the equal protection clauses of the State and Federal Constitutions and that in their selection of tenants they cannot lawfully discriminate against Negroes, a policy which has been adhered to in renting apartments in the Stuyvesant Town development in New York City. Since the constitutional provisions referred to impose restraints on State action only, and not on private action, the precise question to be decided is whether Stuyvesant and Metropolitan in the circumstances of this appeal are subject to the constitutional limitations applicable to State action.

The two actions involved in this appeal were brought simultaneously. In the Dorsey suit, plaintiffs are Negro veterans who have applied for apartments. In the Polier suit, plaintiff is a taxpayer. In both actions plaintiffs seek to enjoin Stuyvesant and Metropolitan from denying any of their accommodations and facilities in Stuyvesant Town to any person because of that person's race or color. In the Polier action, plaintiff seeks, in addition, to enjoin the City of New York from granting tax exemption to, and further performing a contract with, Stuyvesant and Metropolitan unless they cease discriminating against Negroes. Defendants' motions for judgment on the pleadings were granted below and judgments of dismissal unanimously affirmed by the Appellate Division, First Department. Since appellant Polier's status as a taxpayer does not support an action to challenge as unconstitutional the acts of respondent companies and officials (Bull v. Stichman, 273 App. Div. 311, affd.298 N.Y. 516), his appeal does not present the constitutional question essential to our jurisdiction (Civ. Prac. Act, § 588, subd. 1, cl. [a]) and must be dismissed. Subsequent references to appellants will indicate plaintiffs in the Dorsey suit, and to respondents will indicate Stuyvesant and Metropolitan.

Stuyvesant Town was built pursuant to a contract between the City of New York, Metropolitan and its wholly owned subsidiary Stuyvesant. The latter was organized by the former in 1943 as a redevelopment company under the Redevelopment Companies Law. Stuyvesant is a private corporation, all of its stock and debentures being owned and all of its working capital having been provided by Metropolitan. The entire cost of acquisition of the land in the project area and of the construction project has been advanced by Metropolitan. It represents an investment of not less than $90,000,000 of private funds held by Metropolitan for the benefit of its more than thirty-three million policyholders.

The project has been constructed in accordance with a plan approved by the city planning commission and the board of estimate of the City of New York, and the contract above referred to was approved by the State Superintendent of Insurance and the board of estimate, pursuant to the requirements of section 15 of the Redevelopment Companies Law.

The problems posed by this appeal require an understanding of the constitutional and statutory provisions applicable to housing in the State of New York. For that reason we proceed to set them forth in some detail. In 1938, the housing article of the State Constitution was adopted by the Constitutional Convention and approved by vote of the People. It is article XVIII, and in section 1 thereof it is provided that: "Subject to the provisions of this article, the legislature may provide in such manner, by such means and upon such terms and conditions as it may prescribe for low rent housing for persons of low income as defined by law, or for the clearance, replanning, reconstruction and rehabilitation of substandard and insanitary areas, or for both such purposes, and for recreational and other facilities incidental or appurtenant thereto." The two purposes are distinct and different, and Stuyvesant Town involves the clearance and rehabilitation of a substandard and insanitary area and not low rent housing for persons of low income (Matter of Murray v. LaGuardia, 291 N.Y. 320, 331-332). It may fairly be said that the whole housing article is instinct with the theory, consistent with its two purposes, that low rent housing for persons of low income is to be a function of government and the rehabilitation of substandard areas is to be the function of private enterprise aided by government. Section 2 provides that: "For and in aid of such purposes * * * the legislature may: make or contract to make or authorize to be made or contracted capital or periodic subsidies by the state to any city, town, village, or public corporation, payable only with moneys appropriated therefor from the general fund of the state; authorize any city, town or village to make or contract to make such subsidies to any public corporation, payable only with moneys locally appropriated therefor from the general or other fund available for current expenses of such municipality; authorize the contracting of indebtedness for the purpose of providing moneys out of which it may make or contract to make or authorize to be made or contracted loans by the state to any city, town, village or public corporation; authorize any city, town or village to make or contract to make loans to any public corporation; authorize any city, town or village to guarantee the principal of and interest on, or only the interest on, indebtedness contracted by a public corporation; authorize and provide for loans by the state and authorize loans by any city, town or village to or in aid of corporations regulated by law as to rents, profits, dividends and disposition of their property or franchises and engaged in providing housing facilities; authorize any city, town or village to make loans to the owners of existing multiple dwellings for the rehabilitation and improvement thereof for occupancy by persons of low income as defined by law; grant or authorize tax exemptions in whole or in part, except that no such exemption may be granted or authorized for a period of more than sixty years; authorize cooperation with and the acceptance of aid from the United States; grant the power of eminent domain to any city, town or village, to any public corporation and to any corporation regulated by law as to rents, profits, dividends and disposition of its property or franchises and engaged in providing housing facilities.

"As used in this article, the term ``public corporation' shall mean any corporate governmental agency (except a county or municipal corporation) organized pursuant to law to accomplish any or all of the purposes specified in this article."

It will be noted that in specifying the powers of the Legislature, section 2 of article XVIII makes a distinction between a public corporation — which is defined to mean any corporate governmental agency organized for any of the specified purposes — and a corporation regulated by law as to rents, profits, dividends and disposition of its property or franchises and engaged in providing housing facilities. For instance, the Legislature is empowered to make State subsidies to public corporations, but only loans to corporations regulated as above described, and to authorize municipalities to guarantee principal and interest of obligations incurred by public corporations but not other corporations. Stuyvesant is not a public corporation but is a corporation regulated by law. Sections 3 to 7, inclusive, make provision for the creation of State debt for capital and periodic subsidies, impose certain limitations thereon, set up restrictions on the powers of cities, towns and villages to contract indebtedness in aid of the above-mentioned two purposes, impose liability on cities, towns and villages for State loans made to certain public corporations, empower the Legislature to make loans or subsidies on conditions consistent with the purposes of the article, such as restricting occupancy to persons of low income and according preference in occupancy to those who live or have lived in the area of the project, and prescribe the method of computing the liability for guaranties of the indebtedness of public corporations. Sections 8 and 9 provide for the taking and condemnation of property in excess of that actually and immediately required for the project if needed to effectuate the purposes of the article. There is nothing in the Constitution or, as will be demonstrated hereinafter, in the statute exercising the power granted by the Constitution indicating that the State is to have any part in the operation of dwellings resulting from the rehabilitation of substandard areas. Indeed section 10 provides that: "* * * nothing in this article contained shall be deemed to authorize or empower the state, or any city, town, village or public corporation, to engage in any private business or enterprise other than the building and operation of low rent dwelling houses for persons of low income as defined by law, or the loaning of money to owners of existing multiple dwellings as herein provided."

Thereafter the Legislature enacted the Redevelopment Companies Law (L. 1942, ch. 845, as amd. by L. 1943, ch. 234 and L. 1947, ch. 840; McKinney's Unconsol. Laws, §§ 3401-3426). In approving the amendment the Governor stated, in part: "The law permits and encourages the entrance into the housing field of life insurance companies. Since the enactment of the original law, there have been no projects. The amendments made by this bill are designed to attract private investment funds into the housing field."

Section 2 of the Redevelopment Companies Law provides as follows: "* * * It is hereby declared that in certain areas of municipalities located within this state there exist substandard conditions and insanitary housing conditions owing to obsolescence, deterioration and dilapidation of buildings, or excessive land coverage, lack of planning, of public facilities, of sufficient light, air and space, and improper design and arrangement of living quarters; that there is not in such areas a sufficient supply of adequate, safe and sanitary dwelling accommodations properly planned and related to public facilities; that modern standards of urban life require that housing be related to adequate and convenient public facilities; that the aforesaid substandard and insanitary conditions depress and destroy the economic value of large areas and by impairing the value of private investments threaten the sources of public revenues; that the public interest requires the clearance, replanning, reconstruction and neighborhood rehabilitation of such substandard and insanitary areas, together with adequate provision for recreational and other facilities incidental and appurtenant thereto according to the requirements of modern urban life and that such clearance, replanning, reconstruction and neighborhood rehabilitation are essential to the protection of the financial stability of such municipalities; that in order to protect the sources of public revenue it is necessary to modernize the physical plan and conditions of urban life; that these conditions cannot be remedied by the ordinary operations of private enterprise; that provision must be made to encourage the investment of funds in corporations engaged in providing redevelopment facilities to be constructed according to the requirements of city planning and in effectuation of official city plans and regulated by law as to profits, dividends and disposition of their property or franchises; that provision must be made to enable insurance companies to provide such facilities, subject to regulation by law as to the return from such facilities and the disposition of property acquired for such purpose; and that provision must also be made for the acquisition for such corporations and companies at fair prices of real property required for such purposes in substandard areas and for public assistance of such corporations and companies by the granting of partial tax exemption; that the cooperation of the state and its subdivisions is necessary to accomplish such purposes; that the clearance, replanning and reconstruction, rehabilitation and modernization of substandard and insanitary areas and the provision of adequate, safe, sanitary and properly planned housing accommodations in effectuation of official city plans by such corporations and companies in these areas are public uses and purposes for which private property may be acquired for such corporations and companies and partial tax exemption granted; that these conditions require the creation of the agencies, instrumentalities and corporations hereinafter prescribed for the purpose of attaining the ends herein recited; and the necessity in the public interest for the provisions hereinafter enacted is hereby declared as a matter of legislative determination."

Section 4 provides that a redevelopment company may be created by three or more persons filing a certificate which, among other specified information, shall contain:

"13. A declaration that the redevelopment company has been organized to serve a public purpose and that it shall be and remain subject to the supervision and control of the supervising agency except as provided in this act, so long as this act remains applicable to any project of the redevelopment company; that all real and personal property acquired by it and all structures erected by it, shall be deemed to be acquired or created for the promotion of the purposes of this act.

"14. A declaration that, after providing for all expenses, taxes and assessments, there shall be paid annually out of the earnings of the redevelopment company for interest, amortization, depreciation and dividends, a sum equal to but not exceeding six per centum of the total actual final cost of the project as defined by subdivision two of section thirteen of this act".

Sections 6 and 7 provide that the provisions of the Business Corporations Law, General Corporation Law and Stock Corporation Law shall apply to redevelopment corporations, except where such provisions are in conflict with the provisions of the Redevelopment Companies Law, and that each such corporation shall have and may exercise such of the powers conferred by the General Corporation Law as shall be necessary in conducting its business and consistent with the provisions of the Redevelopment Companies Law. Limitations are imposed upon redevelopment companies in connection with various aspects of their businesses. Section 8 provides for a limited return on investment by stipulating that there shall be paid annually out of the earnings of the redevelopment company, after providing for all expenses, taxes and assessments a sum for interest, amortization, depreciation and dividends, equal to but not exceeding 6% of the total actual final cost of the project, which obligation shall be cumulative. Any cash surplus in excess of the amount so provided shall, upon dissolution of the company, be paid into the general fund of the municipality. Section 13 provides that a redevelopment company shall not have power to acquire any realty for a project unless the supervising agency and the local legislative body determine that such acquisition is necessary or convenient for the public purpose defined in the act. It also provides that no such company shall issue stock, debentures and bonds in an amount greater than the total actual final cost of the project and that no contract shall be made for the payment of salaries to officers or employees, or for the construction, substantial repair, improvement or operation of projects except subject to the approval of the supervising agency. The supervising agency referred to means only the Superintendent of Insurance where, as here, an insurance company owns the stock and debentures of a redevelopment company, and if, as here, a contract is entered into the parties to which are a municipality, a redevelopment company and an insurance company, the supervising agency shall have no continuing power of supervision once it shall have approved the contract (§§ 3, 15). This means that the general power of visitation, examination and control provided for by section 21 is inapplicable to Stuyvesant. There are other limitations upon methods of financing, mortgage, sale or disposition of property and alteration of structures (§§ 9, 10, 11, 12, 14, 16, 23).

Section 15 sets up a procedure for the submission and approval of a plan of a proposed project which requires the prior approval of the supervising agency and the local planning commission. Thereafter a contract shall be proposed which, prior to its execution, must be approved by the local legislative body. It is provided that the contract shall regulate the rents to be charged and may contain other provisions for the financing, construction, operation and supervision of the project.

The statute provides that a municipality may take property by condemnation for a redevelopment company provided the latter shall pay all sums expended in connection with such acquisition, and it authorizes the municipality to convey such land to the company (§ 20). It also authorizes any local legislative body to convey to such company land in any street which is duly closed or discontinued pursuant to the plan, upon payment therefor or upon exchange for other lands (§ 20).

Section 24 provides that after the termination of tax exemption, in any manner, a redevelopment company may dissolve and convey its property to whomsoever it desires, and all limitations of the act shall cease.

Finally, section 26 provides as follows:

"The local legislative body of any municipality in which a project of such company is or is to be located may by contract agree with any redevelopment company to exempt from local and municipal taxes, other than assessments for local improvements, all or part of the value of the property included in such project which represents an increase over the assessed valuation of the real property, both land and improvements, acquired for the project at the time of its acquisition by the redevelopment company which originally undertook the project and for such definite period of years as such contract may provide. The tax exemption shall not operate for a period of more than twenty-five years, commencing in each instance from the date on which the benefits of such exemption first become available and effective.

"A redevelopment company which has been granted and has received tax exemption pursuant to this section may at any time elect to pay to the municipality the total of all accrued taxes for which exemption was granted and received, together with interest at the rate of five per centum per annum. Upon such payment the tax exemption of the project shall thereupon cease and terminate."

The Legislature deliberately and intentionally refrained from imposing any restriction upon a redevelopment company in its choice of tenants. The law contains none. Attempts, repeatedly made in the Legislature since the law was enacted, to alter the policy of the statute in this respect have failed. (See, e.g., 1948 Sess., Assem. Int. 127, Pr. No. 127; Assem. Int. 217, Pr. No. 217; Assem. Int. 1270, Pr. 1294; 1947 Sess., Assem. Int. 35, Pr. No. 35; Assem. Int. 72, Pr. No. 72.) On the other hand, the Public Housing Law (§ 223), which is applicable to State-constructed, low cost housing projects, expressly prohibits discrimination. There is no claim that the Legislature refused by amendment to make similar provision in the Redevelopment Companies Law because it thought the statute already barred discrimination, and it is undisputed, therefore, that the legislative intent is clear to leave private enterprise free to select tenants of its own choice.

The matter of the exclusion of Negroes from the development arose in connection with the approval by the Governor of the 1943 amendments to the Redevelopment Companies Law and in contract negotiations between Metropolitan and the city. Commissioner Robert Moses, active in the plan, stated publicly to the Governor and the board of estimate that if any requirement was imposed which deprived the landlord of the right to select its tenants, no private venture would go into the business. Certainly the general impression was created — which Metropolitan did nothing to dispel — that Stuyvesant Town would not rent to Negroes. For that reason and others, unsuccessful attacks were made upon the desirability of the project. In the board of estimate at least three votes were cast against approval of the contract on the ground that exclusion on racial grounds would be practiced. The contract was finally approved without any provision regarding discrimination in the selection of tenants. It may be noted in passing that thereafter the New York City Council passed legislation withholding tax exemption from any subsequent redevelopment company unless it gave assurance that no discrimination would be practiced in its rental policies. This provision, however, expressly excluded from its operation any project "hitherto agreed upon or contracted for" (Administrative Code of City of New York, § J41-1.2).

In 1943, respondent Stuyvesant was formed by Metropolitan pursuant to the statute. A contract with the city was approved by the board of estimate of the City of New York in June, 1943. The contract embodied a plan for the rehabilitation of a substandard area comprising eighteen city blocks in the borough of Manhattan by the erection of thirty-five apartment houses capable of accommodating about twenty-five thousand people. Under the contract the City of New York agreed to condemn and bring under one good title the entire area. Stuyvesant agreed to acquire the area, demolish the old buildings and construct new ones, all without expense to the city. Metropolitan agreed to advance the necessary funds to Stuyvesant, guaranteed performance by the latter, and, with Stuyvesant, assumed all risks of the venture. The city granted tax exemption for twenty-five years only to the extent of the enhanced value to be created by the project. Stuyvesant agreed to convey to the city bordering strips around the periphery of the project in exchange for land in streets which the city agreed to close.

The contract regulates rents at rates intended to yield the statutory limited return, prohibits mortgaging and sale of the project, gives the city certain auditing privileges, and requires payment to the city upon the dissolution of Stuyvesant of any earned cash surplus after payment of all indebtedness. Upon the termination in any way of tax exemption, Stuyvesant may dissolve and convey its property to Metropolitan, and the statute and contract become inapplicable to the project.

In formulating an answer to the questions propounded at the beginning of this opinion we first consider whether there is anything in the Constitution of the State of New York which can be said to impose any broader or different restriction than is contained in the equal protection clauses of the Fourteenth Amendment of the Federal Constitution. Our conclusion is that the problem is precisely the same under the State Constitution as it is under the Federal Constitution.

Section 11 of article I of the State Constitution reads as follows: "No person shall be denied the equal protection of the laws of this state or any subdivision thereof. No person shall, because of race, color, creed or religion, be subjected to any discrimination in his civil rights by any other person or by any firm, corporation, or institution, or by the state or any agency or subdivision of the state."

The first sentence, which is obviously an equal protection clause, is no more broad in coverage than its Federal prototype, which reads: "No State shall * * * deny to any person within its jurisdiction the equal protection of the laws." (U.S. (Const., 14th Amendt., § 1.) This conclusion follows from the plain meaning of plain words. It is strongly reinforced, however, by the fact that the chairman of the Bill of Rights Committee of the New York State Constitutional Convention of 1938, at which convention the section in question was approved, stated at the convention that the first sentence of section 11 "in effect embodies in our Constitution the provisions of the Federal Constitution which are already binding upon our State and its agencies" (2 Rev. Record of N.Y. State Constitutional Convention, 1938, p. 1065). It is significant that in previous New York cases arising under the equal protection clauses of the Federal and State Constitutions it has not been suggested that the reach of the latter differed from that of the former (Kemp v. Rubin, 298 N.Y. 590; Madden v. Queens Co. Jockey Club,296 N.Y. 249).

The second sentence of section 11 is a civil rights clause and, although applicable to private persons and private corporations, protects only against "discrimination in * * * civil rights". Obviously such rights are those elsewhere declared. Again this conclusion is strongly supported by the statement of the chairman of the Bill of Rights Committee made at the convention to the effect that the provision in question was not self-executing and that it was implicit that it required legislative implementation to be effective (2 Rev. Record of N.Y. State Constitutional Convention, 1938, p. 1144). Furthermore, it was stated at the convention that the civil rights protected by the clause in question were those already denominated as such in the Constitution itself, in the Civil Rights Law or in other statutes (4 Rev. Record of N.Y. State Constitutional Convention, 1938, pp. 2626-2627). At the 1938 Constitutional Convention attempts to provide explicitly against discrimination in housing in the housing and civil rights articles of the Constitution proved unsuccessful (see, e.g., N.Y. State Constitutional Convention, Pr. Nos. 10, 18, 49, 203, 380, 625, 691). No statute in New York recognizes the opportunity to acquire interests in real property as a civil right, although there are in existence today nearly twenty anti-bias laws covering many fields of activity. The conclusion that the opportunity to acquire such interests in New York is not a civil right is reinforced by the fact that bills introduced in the State Legislature in 1947 and 1948 to amend the Civil Rights Law in order to declare the "opportunity to purchase and to lease real property without discrimination * * * to be a civil right", failed of passage (see e.g., 1947 Sess., Assem. Int. 34, Pr. No. 34; 1948 Sess., Assem. Int. 128, Pr. No. 128; Assem. Int. 715, Pr. No. 720; and Assem. Int. 1177, Pr. No. 1197; see, also, Pratt v. La Guardia, 182 Misc. 462, affd. 268 App. Div. 973, appeal dismissed 294 N.Y. 842).

Our decision then must rest on the co-ordinate commands expressed in the equal protection clauses of the Federal and State Constitutions. For many years it has been unquestioned that the great prohibitions of the Fourteenth Amendment are addressed to that action alone which "may fairly be said to be that of the States" (Shelley v. Kraemer, 334 U.S. 1, 13;Civil Rights Cases, 109 U.S. 3). Upon that characteristic of the constitutional inhibition these parties have joined issue. Respondents contend that they are private companies, beyond the reach of the constitutional restraint and free to select arbitrarily the tenants who will occupy Stuyvesant Town. Appellants insist that the avowed discrimination falls under the constitutional ban because they say it has been aided and made possible by the action of the State. The issue is decisive, for the policy of respondents could not be followed by a governmental body (cf. Buchanan v. Warley, 245 U.S. 60).

In an early decision of the Supreme Court under the Fourteenth Amendment we find the statement that "a State acts by its legislative, its executive, or its judicial authorities. It can act in no other way." (Ex Parte Virginia, 100 U.S. 339, 347.) In that case the court held the official conduct of a State judge subject to the mandate although he had acted on his own impulse and without authority from the law of the State. Subsequent cases have made it clear that the prohibited action of a State may be exerted through private individuals and corporations. Thus discrimination by private individuals offends the equal protection clause if they act under constraint of State law (Nixon v. Herndon, 273 U.S. 536; Buchanan v. Warley,245 U.S. 60, supra; Truax v. Raich, 239 U.S. 33).

In a more recent series of cases the Federal courts have held private groups subject to the constitutional restraints when they perform functions of a governmental character in matters of great public interest (Smith v. Allwright, 321 U.S. 649; Nixon v.Condon, 286 U.S. 73; Rice v. Elmore, 165 F.2d 387, certiorari denied 333 U.S. 875; Kerr v. Enoch Pratt FreeLib., 149 F.2d 212. But compare Mason v. Hitchcock,108 F.2d 134). Speaking of the executive committee of the Democratic Party in the State of Texas, Mr. Justice CARDOZO said: "They are not acting in matters of merely private concern like the directors or agents of business corporations. They are acting in matters of high public interest, matters intimately connected with the capacity of government to exercise its functions". (Nixon v.Condon, supra, at p. 88.) The result is unchanged though the State cast off all fetters upon their discretion (Rice v.Elmore, supra). The Supreme Court of the United States has indicated that the inhibitions of the Fifth Amendment upon the action of the Federal Government would apply to a labor union whose power to act as sole collective bargaining agent for railroad employees was derived from Federal statute (see Steele v. Louisville Nashville R.R. Co., 323 U.S. 192, 198-199).

In a final group of cases the State has lent its power in support of the actions of private individuals or corporations, and in so doing has clothed the private act with the character of State action (Shelley v. Kraemer, supra; Marsh v.Alabama, 326 U.S. 501). In the latter case an Alabama conviction for trespass in disseminating religious literature on the privately owned streets of a company town offended the due process clause of the Fourteenth Amendment. The language of the court indicates that if the right had been asserted in a different context the owner's action itself would have been condemned. Thus (326 U.S., at pp. 505-506): "We do not agree that the corporation's property interests settle the question. The State urges in effect that the corporation's right to control the inhabitants of Chickasaw is coextensive with the right of a homeowner to regulate the conduct of his guests. We cannot accept that contention. Ownership does not always mean absolute dominion. The more an owner, for his advantage, opens up his property for use by the public in general, the more do his rights become circumscribed by the statutory and constitutional rights of those who use it."

Appellants here rely upon those cases in urging that we must characterize as governmental action the rental policy of Metropolitan and Stuyvesant. They point to the acknowledged contribution made by government to the project — principally the tax exemption amounting to many millions of dollars, and aggregation of the land through use of the city's power of eminent domain and through exchange of bordering tracts for city streets which had been closed. Moreover, we are urged to consider the size of the project as in reality forming a large community within the city.

All of the previous decisions, and others cited, might be distinguished in that they disclose the exertion of governmental power directly to aid in discrimination or other deprivation of right, or the action of a private group in the exercise of a governmental function. Neither factor is present here, where the State has remained silent and has indicated that the public purpose has been fulfilled by the rehabilitation of a substandard area (Matter of Murray v. La Guardia, 291 N.Y. 320, supra). This conclusion is reinforced by the constitutional provision, hereinbefore referred to, which specifically negated any authorization to State or city to engage in any private business or enterprise in connection with the rehabilitation of substandard areas (art. XVIII, § 10).

However, to rest our decision solely upon conceptual distinction would be to ignore the character of the Constitution which we construe and of the decisions through which the Supreme Court of the United States has preserved its nature as a living instrument of government. The language quoted above from Marsh v. Alabama (supra) has a different ring from the earlier words of Ex Parte Virginia (supra). The evolution of our society has disclosed State action where doubtless it would not have been found in an earlier day. Institutions created to meet the social and industrial necessities of our times do not respond readily to the simple test enunciated in Ex Parte Virginia (e.g., Marsh v. Alabama, supra). Those considerations might suggest the desirability of holding that the test can be satisfied, and State action discerned, in any case where the State has tolerated discrimination respecting a matter of high public importance. Invocation of the Constitution then might depend upon a balance of the two values asserted — here the privilege of Metropolitan and Stuyvesant as against the right of appellants to equality of treatment.

Such a development in constitutional law would clash with a fundamental policy inherent in the Fourteenth Amendment and the decision of the Civil Rights Cases (109 U.S. 3, supra). Both are instinct with the idea that the rights defined in the amendment are to be protected by the States against the actions of private individuals. That high responsibility of the States, implicit in our Federal system, indicates that the political processes must furnish the appropriate means for extension of those rights in areas wherein they have not been heretofore asserted. The unquestioned value of that system suggests the limits to the expanding concept of State action, which has hitherto been found only in cases where the State has consciously exerted its power in aid of discrimination or where private individuals have acted in a governmental capacity so recognized by the State.

The State of New York has consciously and deliberately refrained from imposing any requirement of nondiscrimination upon respondents as a condition to the granting of aid in the rehabilitation of substandard areas. Furthermore, it has deliberately refrained from declaring by legislation that the opportunity to purchase and lease real property without discrimination is a civil right. To say that the aid accorded respondents is nevertheless subject to these requirements, on the ground that helpful co-operation between the State and the respondents transforms the activities of the latter into State action, comes perilously close to asserting that any State assistance to an organization which discriminates necessarily violates the Fourteenth Amendment. Tax exemption and power of eminent domain are freely given to many organizations which necessarily limit their benefits to a restricted group. It has not yet been held that the recipients are subject to the restraints of the Fourteenth Amendment.

The increasing and fruitful participation of government, both State and Federal, in the industrial and economic life of the nation — by subsidy and control analogous to that found in this case — suggests the grave and delicate problem in defining the scope of the constitutional inhibitions which would be posed if we were to characterize the rental policy of respondents as governmental action. To cite only a few examples: the merchant marine, air carriers and farmers all receive substantial economic aid from our Federal Government and are subject to varying degrees of control in the public interest. Yet it has never been suggested that those and similar groups are subject to the restraints upon governmental action embodied in the Fifth Amendment similar to the restrictions of the Fourteenth upon the States. We do not read the language in Steele v. Louisville Nashville R.R. Co. (323 U.S. 192, supra) as implying such a suggestion. Such restraints as have been imposed upon their freedom of action are derived from statute or common law, and we feel that those sources of control are the most appropriate.

We are agreed that the moral end advanced by appellants cannot justify the means through which it is sought to be attained. Respondents cannot be held to answer for their policy under the equal protection clauses of either Federal or State Constitution. The aid which the State has afforded to respondents and the control to which they are subject are not sufficient to transmute their conduct into State action under the constitutional provisions here in question.

The judgment in Dorsey v. Stuyvesant Town Corp. should be affirmed, with costs, and the appeal in Polier v. O'Dwyer should be dismissed, with costs.