Fink v. Cole

Bastow, J.

The State Racing Commission appeals from an order remanding the proceeding to that body for further consideration. On June 10, 1954, the petitioner filed with the commission an application for an owner’s racing license for 1954. Eight days later, the application was denied in a brief communication which stated that “ [a]t a meeting of the Commission held this date, your application for an owner’s license for the year commencing April 1, 1954 was denied.”

This proceeding was commenced on August 2, 1954. In the petition, it is alleged, among other things, that the action of the commission in denying the application was arbitrary and capricious. Seven days later and before filing its answer, the commission, in what it states in its answer to be “ in the interest of proper record,” wrote the petitioner stating “ that the grounds of refusal were your failure to meet the standards set forth by Section 7512 of the Unconsolidated Laws [L. 1926, ch. 440, § 9-b, as added by L. 1951, ch. 324].”

This section of the Unconsolidated Laws was enacted by section 4 of chapter 324 of the Laws of 1951, which at the same time repealed former section 9-b (added by L. 1934, ch. 310, § 5, as amd.) which had been declared unconstitutional in Matter of Fink v. Cole (302 N. Y. 216). Prior to the 1951 amendment, the Legislature, by the provisions of section 9-b, had delegated to the Jockey Club — a private corporation — the power to license owners of horses, trainers and jockeys at running races, pursuant to which the Jockey Club had empowered its stewards to grant or refuse such licenses at their discretion. In Matter of Fink v. Cole (supra) the court held that the delegation by the Legislature of its licensing power to the Jockey Club was such an abdication as to be patently an unconstitutional relinquishment of legislative power in violation of section I of article III of the State Constitution. It was further held that “ [e]ven if the Legislature’s power to license had been delegated to a governmental agency, the statute now challenged would have to be stricken down for lack of guides and proper standards.” (P. 225.) The court did not remit the proceeding for the obvious reason that there was no legally constituted authority to which the proceeding could be returned.

Twenty-one days after this decision of the Court of Appeals was handed down, the new statutory provision — to which reference has been made — was enacted by section 4 of chapter 324 of the Laws of 1951. This statute (§ 9-b) placed the licensing power in the State Pacing Commission. It established certain conditions in the following language; “ If the state racing commission shall find that the financial responsibility, experience, character and general fitness of the applicant are such that the participation of such person will be consistent with the public interest, convenience or necessity and with the best interests of racing generally in conformity with the purposes of this act, it shall thereupon grant a license. If the commission shall find that the applicant fails to meet any of said conditions, it shall not grant such license and it shall notify the applicant of the denial.” (§ 9-b, subd. 2.) The Attorney-General suggests in his brief and examination confirms the suggestion that this provision was modeled after the licensed check cashers’ statute (Banking Law, § 369; L. 1944, ch. 593, as amd.).

Unlike the former section, certain standards are established by the new section. It is provided that “ [t]he commission may refuse to issue or renew a license, or may suspend or revoke a license issued pursuant to this section, if it shall find that the applicant * * * has been convicted of a crime in any jurisdiction, or is or has been associating or consorting with any person who has or persons who have been convicted of a crime or crimes in any jurisdiction or jurisdictions, or is consorting or associating with or has consorted or associated with bookmakers, touts, or persons of similar pursuits, or has himself engaged in similar pursuits, or is financially irresponsible, or has been guilty of or attempted any fraud or misrepresentation in connection with racing, breeding or otherwise, or has violated or attempted to violate any law with respect to racing in any jurisdiction or any rule, regulation or order of the commission, or shall have violated any rule of racing which shall have been approved or adopted by the commission, or has been guilty of or engaged in similar, related or like practices. ’ ’

It is against this statutory background that we turn to a brief recital of the facts. The petitioner, Fink, had been granted an annual owner’s racing license from 1944 to 1949. His applications for a license for fhe years 1949 and 1950 were denied by the Jockey Club. The review procedure then in effect provided in part that “ [u]pon the application to the state racing commission of a person whose license has been refused or revoked # * * such person shall be entitled to a prompt hearing before a joint session of the state racing commission and two stewards of the Jockey Club ”. (L. 1926, ch. 440, § 9-b, as amd. by L. 1947, ch. 196.)

Thereafter, Fink, while protesting the unconstitutionality of the Jockey Club’s licensing power, demanded a hearing before the joint board. Such a hearing was had and testimony given by several witnesses. The board sustained the action of the Jockey Club and made the determination ‘ ‘ that it would be detrimental to the best interest of racing for an owner’s license to be issued to the applicant ”. This was a standard set by the rules of the Jockey Club and, as stated, no standards were set by the statute. In a proceeding to review this determination, the Court of Appeals struck down the licensing statute as unconstitutional. In so doing, the court annulled the determination of the joint board. (Matter of Fink v. Cole, supra.)

Some five years later in June, 1954, Fink again applied for an owner’s license. This application, as heretofore stated, was simply denied. The subsequent communication stated that the grounds of refusal were the failure of Fink to meet the standards set forth in section 7512 of the Unconsolidated Laws (L. 1926, ch. 440, § 9-b, as added by L. 1951, ch. 324, § 4). This section, however, sets forth many standards. Thus, affirmatively, the commission must find before granting a license that (a) the financial responsibility; (b) the experience; (e) the character; and (d) the general fitness of the applicant are snch that his participation in racing will be consistent with (1) public interest; (2) convenience and necessity; and (3) the best interests of racing generally in conformity with the purposes of the act. On the negative side, the commission may refuse to issue a license if it shall find (1) that “ the applicant, or any person who is a partner, agent, employee or associate of the applicant, has been convicted of a crime in any jurisdiction ”; or (2) that the applicant “ has been associating or consorting with any person who has or persons who have been convicted of a crime or crimes in any jurisdiction or jurisdictions ”; or (3) that the applicant “ has consorted or associated with bookmakers, touts, or persons of similar pursuits, or has himself engaged in similar pursuits ”; or (4) that the applicant “ is financially irresponsible ”; or (5) that the applicant ‘ ‘ has been guilty of or attempted any fraud or misrepresentation in connection with racing, breeding or otherwise ”; or (6) that the applicant “ has violated or attempted to violate any law with respect to racing in any jurisdiction or any rule, regulation or order of the commission, or shall have violated any rule of racing which shall have been approved or adopted by the commission, or has been guilty of or engaged in similar, related or like practices. ” (§ 9-b, subd. 2.)

We turn to the action taken by the commission in the 1954 proceeding. In complete disregard of the decision of the Court of Appeals annulling the determination of the joint board upon the ground that it was without authority to act because “ the delegation by the Legislature of its licensing power to The Jockey Club, a private corporation, is such an abdication as to be patently an unconstitutional relinquishment of legislative power ” (Matter of Fink v. Cole, 302 N. Y. 216, 225, supra), the present commission proceeded to pass upon the 1954 application as if our highest court had not made its decision. In its answer, the commission states “ That the Commission thereupon considered anew the proof in the [1949 proceeding] * * * and the decision made therein written by the Chairman of the Commission and adopted by the other members of the Commission and reaffirmed the said decision”. Thus, the present commission appears to have completely ignored the decision of our highest court and instead of bowing to the mandate thereof that the 1949 decision of the prior joint board was a nullity, it boldly undertook to consider anew the prior proof “ and reaffirmed the said decision ” that had been held to be a nullity.

It seems that such a determination is a flagrant disregard of both the opinion and decision of the Court of Appeals. The action of the commission can only be described as arbitrary and capricious. The evidence in the 1949 proceeding as well as the decision of the joint board lost all vitality by virtue of the ruling of the Court of Appeals and it would be a gross abuse, amounting to nullification of the constitutional principle there enunciated, to say that while the proceeding and the decision were ruled out of legitimate consideration, the evidence could be lifted out and, without more, become the entire basis and body of a like decision five years later. The evidence taken at the prior proceeding was as much of a nullity as the entire proceeding and constituted no proof at all.

It has been heretofore pointed out that the pertinent statute mandates the commission to make four affirmative “ findings ” before granting a license. Absent these four “ findings ”, the license must be denied. Similarly, it may refuse a license if it shall “ find ” the existence of any one of certain factual situations. It seems to us that upon the facts here presented, the commission was required to do something more than review the former proof, “ reaffirm ” the decision of a rump board and deny the license.

It is recognized that the statute before us does not require a hearing or the making of formal findings in the event of a refusal to issue a license. This being so, the decision of the commission may not be reviewed under the so-called “ substantial evidence ” rule (cf. Matter of Burke v. Bromberger, 300 N. Y. 248; Matter of Humphrey v. State Ins. Fund, 298 N. Y. 327, and Matter of Miller v. Kling, 291 N. Y. 65) because the decision under review in the language of section 1296 of the Civil Practice Act was not made “ as the result of a hearing held, and at which evidence was taken, pursuant to statutory direction

The petitioner in this proceeding, however, not only seeks an order reviewing and annulling the determination of the commission but also asks for an order in the nature of mandamus directing the issuance of a license to him. This involves an inquiry as to whether there is clear and convincing proof that the discretion of the commission has been exercised arbitrarily, unfairly or capriciously. (Cf. Matter of Marburg v. Cole, 286 N. Y. 202, 208; People ex rel. Empire City Trotting Club v. State Racing Comm., 190 N. Y. 311, and People ex rel. Lodes v. Department of Health, 189 N. Y. 187. See, generally, Benjamin on Administrative Adjudication, vol. 1, p. 352; Attorney-General Goldstein on Judicial Review of Administrative Action, 2 Syracuse L. Rev., p. 200, also in N. Y. L. J., May 15, 16 and 17, 1951, pp. 1780, 1800 and 1822, and dissenting opinion of Judge Desmond in Matter of Barry v. O’Connell, 303 N. Y. 46, 58.)

Measured by these standards, we find in this record clear and convincing proof that the discretion of the commission has been exercised not only arbitrarily and capriciously, but in such a manner that it has sought to revitalize and ‘ ‘ reaffirm ’ ’ a decision that our highest court has held to be a nullity.

It has been heretofore stated that in our opinion the “ proof ” in the 1949 proceeding was improperly used as the basis for the present decision. There is no other proof in the record. It is obvious that the decision of the commission must be bottomed upon what might fairly be regarded as “ proof ”, although it need not be limited by rules of evidence. Moreover, in some form there must be a finding — either formally made or by suitable notification to the applicant — for which the court can find the purported support and basis in the record in order that the court may determine whether or not the decision is arbitrary.

In this posture of the case, Matter of Perpente v. Moss (293 N. Y. 325) outlines the procedure. Therein it appeared that the petitioner on August 5,1942, applied for an employment agent’s license which was refused by the commissioner of licenses. This court on April 22, 1943, affirmed the determination of the commissioner. (Matter of Perpente v. Moss, 265 App. Div. 789.) An application for reargument or for leave to appeal to the Court of Appeals was denied. (Matter of Perpente v. Moss, 266 App. Div. 775.) On May 7, 1943, the petitioner made a new application to the commissioner for a license. On May 29, 1943, the latter notified the petitioner “ ‘ that * * * (the Commissioner’s) original decision denying the application, which had been sustained by the Appellate Division, was adhered to. ’ ” (293 N. Y. 325, 328.) The petitioner again sought relief in court to annul the determination of the commissioner and for a direction that a license be issued to him. Upon the return of the proceeding, Special Term denied the motion upon the ground that the question “ ‘ presented is controlled by the decision of the Appellate Division on the earlier application (In re Perpente v. Moss), 265 App. Div. 769.’ ” (293 N. Y. 325, 328.) We affirmed, by a divided court, without opinion. (Matter of Perpente v. Moss, 267 App. Div. 974.)

The Court of Appeals (293 N. Y. 325) dismissed the appeal upon the ground that the order appealed from did not finally determine the special proceeding. In its opinion, however, it set forth certain definite standards of procedure for both the administrative agency and the courts. The statute there under consideration was similar to the one in this proceeding in that no formal hearing was required and the commissioner was not required to make formal findings. The court, after setting forth the pertinent facts and applicable statutory provisions, proceeded to say that “ [t]he statute does not in express terms require that a formal hearing be held where no protest has been filed and perhaps no requirement for said hearing may be read into the statute by implication. * * * Nonetheless the application for a license is, in such case, to be denied only if it shall appear from an ‘ inspection or examination made by the said mayor or commissioner ’ that one of the statutory grounds for denying the application exists. Refusal may not be arbitrary and the determination of the Commissioner is subject to review by the court. Though formal hearings and formal findings may not be required, a license may not be refused on the ground that the applicant ‘ is not a person of good character ’ unless the applicant has fair opportunity to meet a challenge to his good character and unless the court of review is apprised of the basis for the finding against the applicant. The procedure of the Commissioner must conform to recognized standards of fairness and a record must be made which permits a review of the action of the Commissioner by the court. (Matter of Elite Dairy Products v. Ten Eyck, 271 N. Y. 488.) ” (P. 329.)

Similarly, in Matter of Newbrand v. City of Yonkers (285 N. Y. 164), it appeared that the enactment under consideration provided neither for a hearing nor findings of fact. The court said, however, that “ [t]he statute also omits any express provision defining the manner in which the Board must proceed in order to obtain the information or proof which will enable it to determine whether such fact has been established. But the nature of the right to a pension conferred by the law, under the specified circumstances, indicates unequivocally that the claimant must have fair opportunity to present both proof and argument to sustain the claim. We need not now define the nature or source of the information or proof upon which the Board of Trustees may act nor the procedure which the Board should adopt in order to give the claimant fair opportunity to establish the claim. It is sufficient now to decide that each claimant must be accorded a fair hearing and consideration of the claim and that, when a determination of the Board is challenged, a record must be presented which will enable the court to review the determination. (Matter of Elite Dairy Products, Inc., v. Ten Eyck, 271 N. Y. 488; Matter of New York Water Service Corp. v. Water Power & Control Comm., 283 N. Y. 23.) ” (P. 177.)

The dissenting opinion dismisses Matter of Perpente v. Moss (293 N. Y. 325, supra) as merely sounding a caveat. It is stated that here the petitioner “ had a full hearing on his associations prior to 1949.” (Post, p. 87.) The answer to this is that Perpente also had a full hearing on his original application. (Matter of Perpente v. Moss, 265 App. Div. 789, supra, record on appeal, fols. 85-118.) What the Court of Appeals condemned was exactly the procedure here followed. If doubt remained that the court was discussing rules applicable to a subsequent application, it is dispelled by the subsequent language of the court where it said (293 N. Y. 325, 329) that “ [w]e do not mean to imply that where the Commissioner has, upon sufficient evidence, determined that an applicant is not a person of good character and has denied his application the applicant may promptly file a new application and compel the Commissioner to re-examine the question. Usually there is room for the exercise of discretion whether the time has come for reconsideration. That may depend on many factors; the nature of the evidence originally examined and of the evidence offered when a new application is made; the ground for the denial of the first application, as well as the time that has elapsed since that denial. These and perhaps other questions still remain open.”

In summary, the law itself directs what the commission shall do if it “ shall find ’ ’ certain things and what it shall do if it “ shall find ” other things. (§ 9-b, subd. 2.) We take this all to mean, in the context of fair play which has almost become due process in our legal thinking, that there must be some enunciation by the commission of its finding and the basis for its finding, and that it must be bottomed upon something resembling proof. If then the evidence taken at the prior hearing is ruled out of consideration, the commission must consider the matter anew and make a fresh determination upon a record which permits a review of its action by the court.

We find it unnecessary to explore the area discussed in the dissenting opinion relating to the evils connected with running races and boxing and the lesser “ exposure to rascality in the conduct of harness racing” (post, p. 86). All of these “ sports ” in the face of a history of corruption have been legalized by the Legislature. We are here dealing with “ the problem of reconciling, in the field of administrative action, democratic safeguards and standards of fair play with the effective conduct of government.” (Of. Benjamin on Administrative Adjudication, vol. 1, p. 9.) A “ history of corruption ” should not blind us to the enunciated principle that “ [t]he procedure of the * * * [Commission] must conform to recognized standards of fairness and a record must be made which permits a review of the action of the * * * (Commission) by the court.” (Matter of Perpente v. Moss, 293 N. Y. 325, 329, supra.)

The order appealed from should he affirmed, with costs.