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

Undenied and undeniable is the fundamental proposition that "Distinctions between citizens solely because of their ancestry are by their very nature odious to a free people whose institutions are founded upon the doctrine of equality". (Hirabayashi v. United States, 320 U.S. 81, 100.) The average citizen, aware of that truth but unschooled in legal niceties, will, I venture, find the decision which the court now makes extremely perplexing. While the Stuyvesant Town housing project was in blueprint and under construction, the public understood, and rightly, that it was an undertaking on which the State and the City of New York had bestowed the blessings and benefits of governmental powers. Now that the development is a reality, the public is told in effect that, because the Metropolitan Life Insurance Company (hereafter referred to as Metropolitan) and Stuyvesant Town Corporation (hereafter called Stuyvesant) are private companies, they are not subject to the equal protection clause, and may, if they choose, discriminate against Negroes in selecting tenants. That conclusion strikes me as totally at odds with common understanding and not less so with the facts and circumstances disclosed by the record.

In the City of New York as well as in other communities of this State, there are blighted areas whose rehabilitation has been the concern of public bodies for many years. Bent upon "the clearance, replanning, reconstruction and rehabilitation" of such areas, the People in 1938 adopted a new constitutional provision dealing with housing (N.Y. Const., art. XVIII). In aid of those purposes, 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). After announcing the State's concern over the existence of substandard and insanitary conditions which impaired real estate values, jeopardized public revenues, and depressed living standards, the Law declared that "these conditions cannot be remedied by the ordinary operations of private enterprise" (§ 2). Though providing that the actual work was to be done by privately owned redevelopment companies (§ 4), the statute acknowledged and recognized that there was need for "the cooperation of the state and its subdivisions" (§ 2).

The co-operative activities set forth in the statute demonstrate that the state and city governments were to have a deep interest in, and a close connection with, these redevelopment enterprises. Not only did it fix their maximum rents and profits but it laid down careful limitations with respect to their financing and mortgaging, the selling or disposing of the property and the altering of the structures (§§ 15, 23). To the city governments, the statute gave authority to approve any plan for a proposed development, and power to include, by contract, provisions for the "operation and supervision of the project" (§ 15). In addition, the City was enabled to use certain of its governmental powers to aid the work. It was empowered to condemn property by eminent domain in order to assemble the area to be rehabilitated, and then to convey the property to the redevelopment companies at cost (§ 20); to close off and transfer public streets; and to grant tax exemption on the improvements for a twenty-five-year period (§ 26). In sum, the companies and the enterprises were to be governmentally aided and effectuated, as well as supervised and regulated, in numerous ways.

In 1943, Metropolitan caused Stuyvesant to be formed pursuant to the statute. There followed negotiations, between the City on the one side and Stuyvesant and Metropolitan on the other, which culminated in a contract embodying a plan for the rehabilitation of a substandard area comprising eighteen city blocks in Manhattan, running north from East 14th Street to East 20th Street, and running east from First Avenue to the East River Drive or Avenue C. The plan and the proposed contract received the requisite approval from the State Superintendent of Insurance, from the Planning Commission and from the Board of Estimate of the City of New York. Following closely the contours of the Redevelopment Companies Law, the contract called for condemnation by the City of the site and its conveyance to Stuyvesant at cost; for grant by the City to Stuyvesant of all public streets within the project in return for an equivalent area on its periphery; and for tax exemption on improvements for twenty-five years. For its part, Stuyvesant agreed to acquire the area, demolish the old buildings and construct the Stuyvesant project. Metropolitan was to advance the necessary funds and to guarantee performance by Stuyvesant.

Condemnation of the land and its transfer to Stuyvesant, along with public streets, was accomplished in 1945, and construction of Stuyvesant Town began in that same year. The Town is now virtually completed, at a cost of over $90,000,000. It occupies eighteen city blocks and, with its thirty-five buildings, houses a population of about twenty-five thousand people. Streets in the area are "private" and signs at all entrances give the public notice of that fact.

Almost from the beginning, the question of exclusion of Negroes from the community was debated. While the project was under consideration by the Board of Estimate, Stuyvesant and Metropolitan insisted that they be given free choice in the selection of tenants and indicated that they planned to bar Negroes. Despite opposition to the contract on that ground, its execution was authorized. A local law was thereafter passed by the city forbidding racial discrimination in tax-exempt developments, but it expressly excepted from its coverage any project "hitherto agreed upon or contracted for" (N.Y.C. Administrative Code, § J41-1.2) — an exception which could relate only to Stuyvesant Town.

Though I digress for a moment, it is my opinion that there are present in the foregoing recital many factors which spell out governmental participation in illegal discrimination. Especially in the two items last mentioned, namely, the city contract sanctioning the very discrimination complained of and the city legislation actually ratifying that discriminatory conduct, do I find most clearly that "state action" which the Federal Constitution interdicts.

It is, of course, against the total background that we weigh appellants' claim that the admitted discrimination violates the equal protection clauses of the Federal and State Constitutions. The court has rejected that claim on the ground that such discrimination has neither been aided by the "consciously exerted" power of the State nor performed by private individuals acting in a recognized "governmental capacity" (pp. 534-535). For that reason, it is held, the discrimination does not fall within the constitutional restraints. I cannot believe that the requirement of equal protection permits of such artificial qualifications or that the constitutional provisions designed to guarantee it are written in such gossamer phrases that formalities of that sort can obscure fundamentals. Doubly pertinent here is Chief Justice MARSHALL'S century-old injunction that "we must never forget * * * it is a constitution we are expounding." (M'Culloch v. Maryland, 4 Wheat. [U.S.] 316, 407.)

The Fourteenth Amendment of the Federal Constitution, insofar as relevant, provides that "No State shall * * * deny to any person within its jurisdiction the equal protection of the laws." The Amendment, it is true, does not operate against purely private conduct (Civil Rights Cases, 109 U.S. 3), but it does prohibit discrimination even by private persons or agencies if such action can "fairly be said" to be that of the State. (SeeShelley v. Kraemer, 334 U.S. 1, 13.) The concept of "state action" has enjoyed a career of aggressive expansion during the sixty-six years since the Civil Rights Cases were decided. (109 U.S. 3.) It is no longer confined, if ever it was, merely to those affirmations of state authority which take the form of legislative enactments. It "refers to exertions of state power in all forms" (Shelley v. Kraemer, 334 U.S. 1, 20, supra), and has "the effect * * * of protecting the rights of individuals and minorities from many abuses of governmental power which were not contemplated at the time" of the Amendment's adoption. (Rice v.Elmore, 165 F.2d 387, 392, certiorari denied 333 U.S. 875.)

As long as there is present the basic element, an exertion of governmental power in some form, as long as there is present something "more" than purely private conduct (see Shelley v.Kraemer, 334 U.S. 1, 13, supra), the momentum of the principle carries it into areas once thought to be untouched by its direction.

For example, a private individual who practices discrimination under the constraint of state power violates the equal protection clause. (See, e.g., Buchanan v. Warley, 245 U.S. 60; Truax v. Raich, 239 U.S. 33.) In the latter case (Truax v.Raich), it was the action of a private employer, in discharging an alien pursuant to a statute limiting aliens to a stated percentage of the working force, that was deemed to deny equal protection. Similarly, a private association, a labor union, clothed with statutory power to bargain for a craft, has been implied to be under a constitutional duty to discharge its functions without discriminating against Negroes. (See Steele v. Louisville Nashville R.R. Co., 323 U.S. 192, 198.) Indeed, even without a formal delegation of powers — formal in the agency sense — a private group is subject to the equal protection clause while it acts in a matter of high public interest with the aid of the State (see Smith v. Allwright, 321 U.S. 649; Nixon v.Herndon, 273 U.S. 536) or with the sufferance and acquiescence of the State even without its aid. (See Rice v. Elmore,165 F.2d 387, certiorari denied 333 U.S. 875, supra.) Thus, for instance, in the Rice case — which stamps as unsupportable the court's rejection (opinion, p. 534) of the proposition that "state action" is to be discerned "in any case where the State has tolerated discrimination respecting a matter of high public importance" — it was the unaided action of a private voluntary political association which denied equal protection to the Negro. Not even the formal disavowal on the part of the State of all interest in the process of selecting political candidates — by repealing all of its pertinent statutes — served to free "private" political parties from the duty to function without discrimination. Finally under recent decisions of the Supreme Court, private discriminatory conduct, freely and voluntarily initiated by private individuals, has been declared to violate the equal protection principle when facilitated or rendered effective by an assertion of state power. (See, e.g., Shelley v. Kraemer, 334 U.S. 1, supra; cf. Marsh v. Alabama,326 U.S. 501.)

As the majority opinion recognizes (p. 534), the Fourteenth Amendment is no longer satisfied by a mechanical finding that the discriminatory conduct was not perpetrated by legislative, judicial or executive officials of the State. The concept of "state" action has been vitalized and expanded; the definition of "private" conduct in this context has been tightened and restricted. When private individuals or groups move beyond "matters of merely private concern" and act in "matters of high public interest", the test is not, Mr. Justice CARDOZO has written, whether they are "the representatives of the State in the strict sense in which an agent is the representative of his principal. The test is whether they are to be classified as representatives of the State to such an extent and in such a sense that the great restraints of the Constitution set limits to their action." (Nixon v. Condon, 286 U.S. 73, 88-89.)

The fact that the constitutional right is invaded in the exercise of "private" property interests is no more decisive than that the owner himself is "private". In Marsh v. Alabama (326 U.S. 501, supra), for instance, a Jehovah's Witness was convicted of trespass, in spite of her claim of constitutional right, for refusing to leave the streets of a company town completely owned by a private corporation. Relying upon its "private" proprietary rights, the owner urged that the Fourteenth Amendment was inapplicable to it, but the Supreme Court declared (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."

A kindred philosophy outlaws the enforcement of privately drawn restrictive covenants aimed at nonwhite ownership of property. (See Shelley v. Kraemer, 334 U.S. 1, supra.) It also runs through the numerous decisions which deny to the State and its subdivision, a city, the power to avoid their constitutional responsibilities by leasing or assigning to private persons important projects or functions in which discrimination is practiced. (See, e.g., Lawrence v. Hancock, 76 F. Supp. 1004;Kern v. City Commissioners of City of Newton, 151 Kan. 565;Culver v. City of Warren, 83 N.E.2d 82 [Ohio App.].)

The teaching of this body of law is clear. On the one hand, the equal protection clause does not prohibit private persons from exercising rights of private ownership in matters merely private, however arbitrarily or capriciously they may discriminate. On the other hand, even the conduct of private individuals offends against the constitutional provision if it appears in an activity of public importance and if the State has accorded the transaction either the panoply of its authority or the weight of its power, interest and support.

Respondents' main defense to the charge of constitutional violation is that they, rather than the City, are behind the discrimination, and that they, as private corporations, are not answerable for it. Their premise is faulty. Stuyvesant is in no sense an ordinary private landlord. Its title bespeaks its character. With buildings covering many city blocks, housing a population of twenty-five thousand persons, Stuyvesant is a "Town" in more than name. Its very being depended upon constitutional amendment, statutory enactment and city contract. The exercise of a number of governmental functions was absolutely prerequisite to its existence. As a geographic entity, Stuyvesant Town was created by the City's exercise of its eminent domain and street-closing powers and by its act of transferring such condemned land and public property to respondents. As an economic enterprise, Stuyvesant Town was made possible by the acquisition of this land at its cost to the City — not augmented by reason of any increase in value through assembly of the entire tract under single ownership — and by the City's grant of tax exemption. As a going community, Stuyvesant Town functions subject to supervision by governmental agencies. Upon dissolution, its surplus assets revert to the public. All in all, the resemblance between Stuyvesant Town and the company town of Marsh v. Alabama (326 U.S. 501, supra) is strong, the analogy between this case and that one, clear.

To intimate that this is just another instance of a government subsidy is to misconceive the case. To claim that the construction and operation of a project such as Stuyvesant is a matter of but private concern is to disregard the obvious. Unmistakable are the signs that this undertaking was a governmentally conceived, governmentally aided and governmentally regulated project in urban redevelopment. Everywhere in evidence are the voice and authority of the State and the City. Approval of the underlying constitutional housing article set in motion numerous governmental acts necessary to accomplish the "reconstruction and rehabilitation" of slum areas and to provide "incidental * * * facilities" (§ 1). Proceeding under that authority, the Legislature had in view more than merely the effacement or razing of blighted substandard buildings; their "modernization" and "reconstruction" to provide "adequate, safe, sanitary and properly planned housing accommodations in effectuation of official city plans" were declared to be "public uses and purposes" (§ 2). And it was to achieve all these ends — not merely the clearance of a slum area — that the plans for Stuyvesant Town were conceived and executed, that the City condemned property for use by defendants, closed public streets and turned over their land area — comprising 19% of the total area of the project — granted tax exemption upon improvements and insisted upon regulation of the rents, profits and financing methods of the redevelopment corporation.

That there is "state action" here is supported and established, however, by more than the constitutional and statutory provisions which made the development possible, by more than the city and state participation and aid that brought Stuyvesant Town into being. In addition, there is the exceedingly significant fact that the City's Board of Estimate approved and authorized the contract for the construction and operation of Stuyvesant Town after having been apprised by city representatives and company officials that Negroes would be excluded from the development. Beyond that, the City Council deliberately excepted Stuyvesant from the coverage of the law, subsequently enacted, which barred discrimination in tax-exempt projects. In a most literal sense, in a most direct way, here was "action," and — if such a showing were necessary (but see, contra, Steele v. Louisville Nashville R.R. Co., 323 U.S. 192, supra) — action, "consciously exerted," by the State "in aid of" the discrimination being practiced (opinion, p. 535). To suggest that the Constitution's command does not apply because such action was not exerted "directly" in aid of the discrimination (opinion, p. 533), is to overlook the nature of the case. We cannot close our eyes to what led to the end result, nor properly hold that the final product of that action should be considered and appraised without regard to its roots or its background. Nothing to the contrary was decided in Matter ofMurray v. La Guardia (291 N.Y. 320), wherein this court simply upheld the constitutionality of the exercise of eminent domain powers to assemble the area to be cleared.

If the City had zoned the site of Stuyvesant Town and closed it to Negroes, no one would doubt that the equal protection clause had been violated. (See Buchanan v. Warley, 245 U.S. 60,supra.) If the City, instead of doing that, had built a similar development and leased it to private operators for occupancy by white tenants only, the discrimination would have been condemned with equal vigor. Here, instead of a zoning ordinance or a city lease, there is a city-approved and city-executed contract, providing for a housing project from which it was realized Negroes would be barred, and a city law ratifying that discrimination. No one claims or even suggests that the City adopted an alternative strategem to effect discrimination, but it may not be gainsaid that the development plan, the contract and the local law brought about precisely the same situation as if the City had zoned or leased a "white" development. We draw distinctions too fine and too subtle when we say that the several cases are different or that they merit different consideration.

It is my conclusion, then, that the Fourteenth Amendment proscribes discrimination in Stuyvesant Town. And, since the equal protection clause of the Constitution of New York State (art. I, § 11) is at least as broad in coverage as its Federal counterpart, it is likewise my conclusion that the State Constitution also condemns it.

It is vehemently urged that to hold that Stuyvesant must discontinue its discriminatory practices would be to deprive respondents of an advantage implicit in their bargain with the City. The flaw in that argument is that the unseen protocol being relied upon was lawless from the start and may not be given effect. The argument overlooks that the constitutional rights of American citizens are involved and that such rights may not be used as pawns in driving bargains; respondents may not, by making a contract and bargain, succeed in avoiding the restraints imposed by Federal and State Constitutions upon their rights and powers. As Mr. Justice HOLMES observed, "One whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract about them." (Hudson County Water Co. v.McCarter, 209 U.S. 349, 357.) In brief, the vice of the bargain asserted lies in its very effort to accomplish forbidden discrimination. In point of fact, the argument advanced proves too much. Insofar as respondents rely upon a bargain with the City for discrimination, we have confirmation indisputable that state action was present. If, on the other hand, respondents do not insist that there was such an agreement, they may not complain that they were led by the City to believe that they could practice discrimination.

As an enterprise in urban redevelopment, Stuyvesant Town is a far cry from a privately built and privately run apartment house. More, its peculiar features yield to those eligible as tenants tremendous advantages in modern housing and at rentals far below those charged in purely private developments. As citizens and residents of the City, Negroes as well as white people have contributed to the development. Those who have paid and will continue to pay should share in the benefits to be derived. Stuyvesant Town in its role as chosen instrument for this public purpose may not escape the obligations that accompany the privileges accorded to it.

It is impossible to balance the essence of democracy against fireproof buildings and well-kept lawns, and, fortunately, the Constitutions, Federal and State, forbid our putting the former into the judicial scales just as they forbade the city officials from putting it upon the bargaining table. The mandate that there be equal protection of the laws, designed as a basic safeguard for all, binds us and respondents as well to put an end to this discrimination.

I would reverse in the Dorsey action.

In Dorsey v. Stuyvesant Town Corp.; LEWIS, CONWAY and DYE, JJ., concur with BROMLEY, J.; FULD, J., dissents in opinion in which LOUGHRAN, Ch. J., and DESMOND, J., concur.

Judgment affirmed.

In Polier v. O'Dwyer; LOUGHRAN, Ch. J., LEWIS, CONWAY, DESMOND, DYE and FULD, JJ., concur.

Appeal dismissed.

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