Campagna v. Shaffer — 73 N.Y.2d 237

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In the Matter of Candida Campagna, Appellant, v Gail S. Shaffer, as Secretary of State of the State of New York, Respondent.

Argued January 5, 1989;

decided February 16, 1989

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POINTS OF COUNSEL

Michael T Wallender, John T. DeGraff, Jr., and Brian J. McCann for appellant.

I. The Secretary of State is not authorized to issue nonsolicitation orders nor to condition approval of office relocations. (Matter of Sullivan Co. v Miller, 289 NY 110 ; Rapp v Carey, 44 NY2d 157 ; Matter of Broidrick v Lindsay, 39 NY2d 641 ; Subcontractors Trade Assn. v Koch, 62 NY2d 422 ; Matter of Fullilove v Carey, 62 AD2d 798 , 48 NY2d 826 ; Matter of Fullilove v Beame, 48 NY2d 376 ; Under 21, Catholic Home Bur. v City of New York, 65 NY2d 344 ; Matter of Gold v Lomenzo, 29 NY2d 468 ; Matter of Oneida County v Berle, 49 NY2d 515 ; Thompson v Lomenzo, 78 Misc 2d 298 , 48 AD2d 869 .) II. The nonsolicitation orders violate Campagna’s First Amendment rights as a licensee and a real property owner located within a nonsolicitation area. (Young v American Mini Theatres, 427 US 50 ; Stanley v Georgia, 394 US 557 ; Red Lion Broadcasting Co. v FCC, 395 US 367 ; Fox v Board of Trustees, 841 F2d 1207 ; Virginia Pharmacy Bd. v Virginia Consumer Council, 425 US 748 ; City of New York v American School Publ., 119 AD2d 13 ; Hornstein v Hartigan, 676 F Supp 894 ; Carlin Communications v Federal Communications Commn., 749 F2d 113 ; Consolidated Edison Co. v Public Serv. Commn., 447 US 534 ; Palko v Connecticut, 302 US 319 .) III. The nonsolicitation orders and respondent’s refusal to issue unrestricted licenses for new and additional real estate offices violate petitioner’s right to equal protection. (Salem Inn v Frank, 522 F2d 1045 ; Greenberg v Bolger, 497 F Supp 756 ; Yick Wo v Hopkins, 118 US 356 ; People v Goodman, 31 NY2d 262 ; Matter of 303 W. 42nd St. Corp. v Klein, 46 NY2d 686 ; United States v Falk, 479 F2d 616 ; Perry v Sindermann, 408 US 593 .) IV. The prior approval requirement of 19 NYCRR

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175.20 (d) has been applied as an unconstitutional prior restraint. (Southeastern Promotions v Conrad, 420 US 546 ; Bantam Books v Sullivan, 372 US 58 ; New York Times Co. v United States, 403 US 713 ; Secretary of State of Md. v Munson Co., 467 US 947 ; Illinois Assn. of Realtors v Village of Bell-wood, 516 F Supp 1067 ; Cantwell v Connecticut, 310 US 296 ; Freedman v Maryland, 380 US 51 .)

Robert Abrams, Attorney-General (Kathie Ann Whipple, O. Peter Sherwood, Richard G. Liskov and Ellen J. Fried of counsel), for respondent.

I. The challenged orders and regulation are a proper and legitimate exercise of the Secretary’s authority to regulate brokers and eliminate improper practices. (Matter of Sullivan Co. v Miller, 289 NY 110 ; Galbreath-Ruffin Corp. v 40th & 3rd Corp., 25 AD2d 114 , 19 NY2d 354 ; Dodge v Richmond, 5 AD2d 593 ; Metz v People, 73 Misc 2d 219 ; Kostika v Cuomo, 41 NY2d 673 ; Matter of Diona v Lomenzo, 26 AD2d 473 ; Matter of Butterly & Green v Lomenzo, 36 NY2d 250 ; Matter of Gold v Lomenzo, 29 NY2d 468 ; Matter of Russo v Shaffer, 131 AD2d 853 ; Heinemann Agency v Ghezzi, 49 AD2d 747 .) II. The Secretary’s regulatory scheme is consistent with petitioner’s right to commercial speech. (Ohralik v Ohio State Bar Assn., 436 US 447 ; Friedman v Rogers, 440 US 1 ; Matter of Greene, 54 NY2d 118 , cert denied sub nom. Greene v Grievance Comm., 455 US 1035 ; In re R. M. J., 455 US 191 ; Central Hudson Gas & Elec. Corp. v Public Serv. Commn., 447 US 557 ; Fox v Board of Trustees, 841 F2d 1207 ; Curtis v Thompson, 840 F2d 1291 ; City of New York v American School Publ., 119 AD2d 13 , 69 NY2d 576 ; Matter of Russo v Shaffer, 131 AD2d 853 .) III. The Secretary’s regulatory scheme does not violate appellant’s right to equal protection. (City of New Orleans v Dukes, 427 US 297 ; Central Hudson Gas & Elec. Corp. v Public Serv. Commn., 447 US 557 ; Holt Civic Club v Tuscaloosa, 439 US 60 ; Ft. Smith Light Co. v Paving Dist., 274 US 387 ; McGowan v Maryland, 366 US 420 ; Matter of Toia v Regan, 40 NY2d 837 ; Heimbach v State of New York, 89 AD2d 138 , 59 NY2d 891 , 464 US 956 ; Day-Brite Light, v Missouri, 342 US 421 ; Matter of 303 W. 42nd St. Corp. v Klein, 46 NY2d 686 .)

OPINION OF THE COURT

Petitioner, a licensed real estate broker, challenges an order of the respondent Secretary of State, dated September 6, 1977,

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which interdicts real estate brokers and salespersons from soliciting for sale residential realty in eastern Bronx County. A related regulatory practice restricting the number of brokers permitted to operate in areas covered by the nonsolicitation order is also attacked. The lower courts upheld the authority of the Secretary of State to issue the order and to control the number of brokers in the area and declared the actions constitutional.

The Appellate Division order appealed as of right should be reversed because the Secretary of State’s power to regulate real estate brokers does not authorize the regulations under review. By deciding the case traditionally on the narrowest ground available, we need reach no other issue and do not reach the constitutional issue adjudicated by the lower courts as to whether this wholesale ban on solicitation is violative of the First Amendment (Central Hudson Gas & Elec. Corp. v Public Serv. Commn., 447 US 557 ).

The responsibility for licensing real estate brokers has been expressly delegated to the Secretary of State (Real Property Law § 441-a). The Secretary is also authorized to discipline any licensees who have demonstrated "untrustworthiness” (Real Property Law § 441-c) and is empowered to enact rules and regulations to effectuate this authority (Executive Law § 91) which, reasonably interpreted, authorizes her to set standards of conduct for the real estate industry and to promulgate regulations pertaining to the licensing and disciplining of real estate brokers. In 1969, the Legislature declared in Executive Law § 296 (3-b) that it shall be unlawful "for any real estate broker * * * to represent that a change has occurred or will or may occur in the composition [of a neighborhood or block] with respect to race, creed, color [or] national origin * * * and to represent, directly or indirectly, that this change will or may result in undesirable consequences * * * including but not limited to the lowering of property values, an increase in criminal or anti-social behavior, or a decline in the quality of schools or other facilities.”

To further this State policy of preserving stable and integrated communities and of avoiding churning and panic selling, the Secretary of State, acting expressly under both Real Property Law article 12-A and Executive Law § 91, promulgated a regulation which prohibited licensed real estate brokers from representing to homeowners that the value of their homes was decreasing due to an influx into the community of

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people of a different race, color or creed (19 NYCRR 175.17 [a]). The antiblockbusting regulation was initially to be enforced by individualized cease and desist orders against brokers soliciting individual homeowners who had notified the Secretary that they did not desire to sell or lease their property (19 NYCRR 175.17 [b]).

In the summer of 1977, residents and community representatives in eastern Bronx County complained to the Department of State of excessive solicitation and aggressive activities by real estate brokers in the community, despite the use of cease and desist orders. Following a public hearing on the issue, the Secretary of State issued an order under challenge in this lawsuit, which states in pertinent part "that all real estate brokers and salespersons are hereby restricted and shall cease and desist from soliciting listings of residential properties for sale and for purchase in any manner,' including but not limited to solicitation by means of letters, postcards, telephone calls, door-to-door canvassing, window signs, billboards, advertisement by handbills or news publications except news publications of general circulations within the boundaries of Community Planning Board 9, 10, 11 and 12 of Bronx County. That all solicitation be and is hereby prohibited until further notice” (record on appeal, vol I, at 46).

In addition to issuing the nonsolicitation order, the Secretary of State promulgated a regulation, also at issue here, providing that: "No broker shall relocate his principal office or any branch office without prior approval of the department” (19 NYCRR 175.20 [d]).

In June 1984, petitioner Campagna, a licensed real estate broker who resides in The Bronx, closed her real estate office in Stormville, Dutchess County. Six months later, she notified the Department that she wished to relocate her office to her Bronx residence within the area of the nonsolicitation order. The Department conditionally acquiesced.

In March 1985, petitioner sought a declaratory ruling from the Department that the nonsolicitation order and license relocation restrictions should not be enforced against petitioner and other licensees similarly situated. The Department declined to rule and this litigation ensued.

Petitioner contends that the Secretary of State lacked the authority to issue the order, that the Secretary has no authority to approve or condition broker relocation and that, in any event, her right to free speech was violated. She also alleges

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that the order unduly restricts her business activity, causing her economic hardship.

The Secretary of State defends, contending that it is within her expressly delegated authority to determine what conduct constitutes untrustworthiness and that she has determined that all broker-initiated contact in this specified area constitutes untrustworthiness. The Secretary also argues that the order is consistent with the legislatively declared policy to ban blockbusting and is a reasonable means to achieve that goal.

The Secretary claims she has authority to approve broker relocation under Real Property Law article 12-A generally and Real Property Law § 441-a (5) specifically, which provides in part: "Change of address. Notice in writing * * * shall be given the department * * * by a licensed real estate broker on his own behalf and on behalf of each salesman associated with him of any change in his or its principal business address.”

Before turning to the substance of our analysis, we note that we were previously confronted with a challenge to the scope and validity of a nonsolicitation order covering different geographic areas. In Matter of Hawley v Cuomo ( 46 NY2d 990 ), a 1976 nonsolicitation order encompassing all of Brooklyn and Queens was at issue, and we assumed without deciding that the Secretary had authority to issue the order. We nonetheless invalidated the order there as arbitrary and capricious, noting that "the facts before respondent failed to establish any rational basis for promulgation of an order so broad in geographic scope” (id., at 992).

Agencies, as creatures of the Legislature, act pursuant to specific grants of authority conferred by their creator. In discharging responsibilities, an agency is "clothed with those powers expressly conferred by its authorizing statute, as well as those required by necessary implication [citations omitted]. Where an agency has been endowed with broad power to regulate in the public interest, we have not hesitated to uphold reasonable acts on its part designed to further the regulatory scheme” (Matter of City of New York v State of New York Commn. on Cable Tel., 47 NY2d 89 , 92). It is correspondingly axiomatic, however, that an administrative officer has no power to declare through administrative fiat that which was never contemplated or delegated by the Legislature. An agency cannot by its regulations effect its vision of societal policy choices (Matter of Consolidated Edison Co. v Department of Envtl. Conservation, 71 NY2d 186 , 191-192;

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Boreali v Axelrod, 71 NY2d 1 , 9), and may adopt only rules and regulations which are in harmony with the statutory responsibilities it has been given to administer.

In Boreali v Axelrod (supra), for example, the Public Health Council was held for a number of reasons to have exceeded the boundaries of its lawfully delegated authority. A key feature of that case insofar as it bears on this case was that the Legislature had never articulated a policy regarding the public smoking controversy. In marked distinction in the instant case, the Legislature has condemned blockbusting, recognizing it as destructive, illegal and against the common good.

The question for us, however, is whether the nonsolicitation order in this case exceéded whatever authority the Secretary did have. We conclude that it did.

The Legislature has explicitly enumerated the types of solicitation it views as forbidden blockbusting activity. Brokers are not to represent "that a change has occurred or will or may occur in the composition [of the neighborhood] with respect to race, creed, color, national origin * * * [and] that this change will or may result in undesirable consequences” (Executive Law § 296 [3-b]).

The nonsolicitation order at issue leaps well beyond that legislative articulation and interdicts administratively all broker-initiated solicitation, not just the illegal solicitation as targeted by the Legislature. Thus, the Secretary has gone beyond administering the written law and has, under color of regulatory authority, actually rewritten and extended the law. The agency cannot make unlawful what the Legislature still has on the books as lawful.

Boord v O’Brien ( 277 App Div 253 , affd without opn 302 NY 890 ) provides a compelling analogue. There, the New York City Council, addressing complaints that hotel runners were fraudulently inducing persons to patronize certain hotels, amended section 436-3.0 of the Administrative Code of the City of New York in 1947 to provide "that a law be enacted permitting only those men who already possess licenses to continue in the business and providing that no additional licenses be issued. * * * The [police] commissioner may make such rules, regulations and orders as he may deem necessary for licensing and conduct of hotel runners” (Local Laws, 1947, No. 39 of City of New York). The Police Commissioner resolved that only persons who had no hotel in mind could be

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solicited. A licensed hotel runner balked, and the Appellate Division ruled as follows: "The city’s legislature chose to continue the business of hotel runner and created a licensing system to continue it under regulations intended to eliminate abuses. The mandate of the legislature was thus specific and defined. The commissioner could adopt regulations to effect the objects of the statute, but he could not substitute his own opinion of what was in the public interest and adopt regulations which would have the effect of eliminating the business and nullifying the statute. * * * Testing the regulations, therefore, by the standard of whether they implement the law, we find that the regulations cannot be sustained. The commissioner has gone beyond executing the law as written by the city legislature and undertaken to cut down the business of hotel runner below that permitted by law” (Boord v O’Brien, 277 App Div 253 , 256-257 [Peck, P. J.], supra).

Significantly, the court noted that "the commissioner did not attempt to confine his regulations to preventing misrepresentations or limiting licensees to persons of good character, which were the stated objects of the code provisions, but attempted to curtail the legitimate activity of a hotel runner” (id., at 257). The court concluded that while elimination of the business itself may be necessary to end the abuses, that plenary goal was for the Legislature and not the Commissioner to determine (id., at 258). In the instant case, as in Boord ( 277 App Div 253 , supra), the Legislature identified abuses in the real estate industry and enacted legislation designed to curtail them. If the only way to prevent blockbusting is to ban all broker solicitation in certain areas, that is a policy choice for the Legislature, not for the agency. That would, of course, have to pass constitutional muster, but would enjoy the threshold legislative presumption of constitutionality.

The means chosen by this agency to carry out its delegated task in this area are limited to its authority to regulate broker untrustworthiness flowing from unlawful discriminatory practice of blockbusting, only as the Legislature has defined it (see, Burlington Truck Lines v United States, 371 US 156 ). By promulgating the nonsolicitation order at issue, the Secretary exceeded her statutory mandate and sought to exercise a power she did not have.

Interestingly, the record offers no identified authority source for the particular and broad antidote selected by the Secretary

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to counteract the poison of blockbusting. While the record establishes that the subject community was besieged by unlawful blockbusting activity and that the then existing remedy —cease and desist orders — was insufficient, there was no discussion on how to strengthen enforcement of that case-by-case mechanism. There is no evidence that enhanced disciplinary measures were considered that would punish only those who were individually engaging in or demonstrating an intent to engage in invidious blockbusting activity (compare, Administrative Code former §§ Cl-1.0 — Cl-9.0). Startlingly, no provision was made to require a periodic review of the neighborhood covered by the nonsolicitation order to assess whether the need for an otherwise permanent and blanket ban still existed (compare, Administrative Code § 8-204). A 12-year-old public hearing record cannot float as proof that certain neighborhoods, at one time plagued by blockbusters, justified such all-out interventive restrictions imposed in perpetuity.

Finally, the issue with respect to the relocation of licensees is answered conclusively by Council for Owner Occupied Hous. v Abrams ( 72 NY2d 553 ) and by Real Property Law § 441-a (5) as well. The statute requires that the Secretary of State receive only notification of relocation. Thus, the regulation (19 NYCRR 175.20 [d]), which establishes preapproval to the licensee’s relocation and which in this case imposed conditions, exceeds the notification function of the statute and is invalid.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the petition should be granted declaring the regulations at issue invalid.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander and Hancock, Jr., concur; Judge Titone taking no part.

Order reversed, etc.

Cases cited

In re Wilson Sullivan Co. 289 NY 110 N.Y. 1942-10-15 p. 238, p. 239
Broidrick v. Lindsay 39 NY2d 641 N.Y. 1976-05-11 p. 238
Subcontractors Trade Ass'n v. Koch 62 NY2d 422 N.Y. 1984-06-14 p. 238
Fullilove v. Carey 62 AD2d 798 N.Y. App. Div. 1978-07-06 p. 238
Fullilove v. Carey 48 NY2d 826 N.Y. 1979-11-20 p. 238
Fullilove v. Beame 48 NY2d 376 N.Y. 1979-11-20 p. 238
Gold v. Lomenzo 29 NY2d 468 N.Y. 1972-02-09 p. 238, p. 239
County of Oneida v. Berle 49 NY2d 515 N.Y. 1980-04-01 p. 238
Thompson v. Lomenzo 78 Misc 2d 298 N.Y. Sup. Ct. 1974-05-31 p. 238
Thompson v. Lomenzo 48 AD2d 869 N.Y. App. Div. 1975-06-09 p. 238
Young v. American Mini Theatres, Inc. 427 US 50 SCOTUS 1976-06-24 p. 238
Stanley v. Georgia 394 US 557 SCOTUS 1969-04-07 p. 238
Red Lion Broadcasting Co. v. Federal Communications Commission 395 US 367 SCOTUS 1969-06-09 p. 238
Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc. 425 US 748 SCOTUS 1976-05-24 p. 238
City of New York v. American School Publications, Inc. 119 AD2d 13 N.Y. App. Div. 1986-07-31 p. 238, p. 239
Palko v. Connecticut 302 US 319 SCOTUS 1937-12-06 p. 238
Yick Wo v. Hopkins 118 US 356 SCOTUS 1886-05-10 p. 238
People v. Goodman 31 NY2d 262 N.Y. 1972-11-01 p. 238
303 West 42nd Street Corp. v. Klein 46 NY2d 686 N.Y. 1979-04-03 p. 238, p. 239
Perry v. Sindermann 408 US 593 SCOTUS 1972-06-29 p. 238
Southeastern Promotions, Ltd. v. Conrad 420 US 546 SCOTUS 1975-03-18 p. 239
Bantam Books, Inc. v. Sullivan 372 US 58 SCOTUS 1963-02-18 p. 239
New York Times Co. v. United States 403 US 713 SCOTUS 1971-06-30 p. 239
Secretary of Maryland v. Joseph H. Munson Co. 467 US 947 SCOTUS 1984-06-26 p. 239
Cantwell v. Connecticut 310 US 296 SCOTUS 1940-05-20 p. 239
Freedman v. Maryland 380 US 51 SCOTUS 1965-03-01 p. 239
Galbreath-Ruffin Corp. v. 40th & 3rd Corp. 25 AD2d 114 N.Y. App. Div. 1966-03-03 p. 239
Galbreath-Ruffin Corp. v. 40th & 3rd Corp. 19 NY2d 354 N.Y. 1967-04-11 p. 239
Dodge v. Richmond 5 AD2d 593 N.Y. App. Div. 1958-05-13 p. 239
Metz v. People 73 Misc 2d 219 N.Y. Sup. Ct. 1973-03-26 p. 239
Diona v. Lomenzo 26 AD2d 473 N.Y. App. Div. 1966-12-15 p. 239
Butterly & Green, Inc. v. Lomenzo 36 NY2d 250 N.Y. 1975-03-24 p. 239
Russo v. Shaffer 131 AD2d 853 N.Y. App. Div. 1987-06-29 p. 239
Ohralik v. Ohio State Bar Ass'n 436 US 447 SCOTUS 1978-05-30 p. 239
Friedman v. Rogers 440 US 1 SCOTUS 1979-02-21 p. 239
In re Greene 54 NY2d 118 N.Y. 1981-10-29 p. 239
In re R. M. J. 455 US 191 SCOTUS 1982-01-25 p. 239
Central Hudson Gas & Electric Corp. v. Public Service Commission 447 US 557 SCOTUS 1980-06-20 p. 239, p. 240
City of New York v. American School Publications, Inc. 69 NY2d 576 N.Y. 1987-06-02 p. 239
City of New Orleans v. Dukes 427 US 297 SCOTUS 1976-06-25 p. 239
Holt Civic Club v. City of Tuscaloosa 439 US 60 SCOTUS 1978-11-28 p. 239
Fort Smith Light & Traction Co. v. Board of Improvement of Paving District No. 16 274 US 387 SCOTUS 1927-05-16 p. 239
McGowan v. Maryland 366 US 420 SCOTUS 1961-05-29 p. 239
Toia v. Regan 40 NY2d 837 N.Y. 1976-09-17 p. 239
Heimbach v. State 89 AD2d 138 N.Y. App. Div. 1982-10-18 p. 239
Heimbach v. State 59 NY2d 891 N.Y. 1983-06-16 p. 239
Day-Brite Lighting, Inc. v. Missouri 342 US 421 SCOTUS 1952-03-03 p. 239
Hawley v. Cuomo 46 NY2d 990 N.Y. 1979-03-22 p. 242
City of New York v. State of New York Commission on Cable Television 47 NY2d 89 N.Y. 1979-05-08 at 92 p. 242
Consolidated Edison Co. of New York, Inc. v. Department of Environmental Conservation 71 NY2d 186 N.Y. 1988-01-07 at 191-192 p. 242
Boreali v. Axelrod 71 NY2d 1 N.Y. 1987-11-25 at 9 p. 243
Boord v. O'Brien 302 NY 890 N.Y. 1951-07-11 p. 243
Burlington Truck Lines, Inc. v. United States 371 US 156 SCOTUS 1962-12-03 p. 244
Council for Owner Occupied Housing, Inc. v. Abrams 72 NY2d 553 N.Y. 1988-11-22 p. 245

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Cases cited

Statutes and regulations cited