Ostrove v. New York State Teachers Retirement System Board

Greenblott, J.

These are appeals from a judgment of the Supreme Court at Special Term, entered September 22, 1967 in Albany County, which granted petitioner’s application in a proceeding under CPLR article 78 to rescind and revoke certain resolutions adopted by the New York State Teachers Retirement System Board, and from an order of the same court, entered June 24, 1968, which adhered to its original decision upon reargument.

The State Teachers Retirement System was created in 1911 (L. 1911, ch. 449), and now is one of the largest in the nation; it has two billion dollars in assets and invests about two million dollars each day. Its operation is entrusted to the appellant board which is composed of nine persons elected for three-year terms by the members of the Retirement System (Education Law, §§ 504, 505); the statutory scheme provides for representation on the board of bankers, school administrators as well as teachers who are members of the Retirement System. Board members serve without compensation (Education Law, § 506, subd. 4; § 508, subd. 3).

Petitioner is a member of the appellant board. He contends that two resolutions adopted by appellant on January 11, 1967 violate subdivision 1 of section 508 of the Education Law, *165and are therefore void. The disputed resolutions provide in part:

“ Resolved, That the funds which will become available for investments for the coming year be invested at the discretion of the Finance Committee.
“Resolved, That the Finance Committee of the Teachers Retirement Board be authorized to sell securities held by the New York State Teachers Retirement Board and that the Head of Division of the Treasury in the Department of Taxation and Finance shall execute the necessary assignments and transfers in connection with such sales when authorized to deliver such securities on an order signed by the Chairman of the Finance Committee and the Secretary of the Retirement Board.”

The crucial portion of subdivision 1 of section 508 of the Education Law states: ‘ ‘ The members of the retirement board shall be the trustees of the several funds created by this article, and shall determine from time to time what part of the moneys belonging to the retirement system shall be invested. When such board shall determine upon the investment of any moneys or upon the conversion or sale of any securities, it shall, by resolution duly adopted by a majority vote of the members of the board, direct the custodian to so invest the moneys or convert or sell the securities.” (Emphasis supplied.)

The Finance Committee is composed of five members of the nine-member board. It is they who are in charge of the details of appellant’s investments.

The appellant contends that it is impossible to have the entire board participate in daily investment decisions when it is considered that the board, is in essence, volunteer, and meets only four times each year. Moneys come in on a daily basis from employer-employee contributions, interest, and dividends. Decisions on the investment of funds, especially in secondary issues in the bond market, often must be made in a matter of minutes from the time of learning of the investment opportunity. It is necessary to buy and sell short-term government investments on a daily basis in order to meet the operating expenses of the system and still maintain minimum bank balances.

However, Special Term held the two resolutions to be illegal and ordered them revoked, basing its decision on the language contained in section 508, stating that ‘ ‘ the Legislature has most clearly directed that a majority of the members of the board must pass upon its investments or sales.”

We cannot agree with this interpretation. An examination of the pertinent provisions of the Education Law, coupled with an understanding of the complicated financial structure of the *166Retirement System, burdened as it is with the herculean task of managing the day-to-day financial decisions which must be coped with in the investment of the tremendous sums of money which are entrusted to the board, impels a contrary result.

It is a basic rule of statutory interpretation that all parts of a statute are to be construed together to determine the legislative intent, and that each should be harmonized with the others (Levine v. Bornstein, 4 N Y 2d 241). Section 508 is part of article 11 of the Education Law, which established the State Teachers Retirement System. In reaching its decision, Special Term apparently disregarded two other provisions of that article. Subdivision 1 of section 504 vests in the board the “ general administration and responsibility for the proper operation of the retirement system” (emphasis supplied). The board is authorized to establish “ rules and regulations for the administration and transaction of its business and for the control of the funds created”. It is clear that the board was not to be burdened by the day-to-day details of administration, but could create committees to perform such duties. Furthermore, section 502 vests in the appellant all of the ‘ ‘ powers and privileges of a corporation ”. New York corporate law permits corporate boards to delegate policy-making power to committees (Business Corporation Law, § 712, subd. [a]). This, appellant has done in the by-law creating the Finance Committee and in the resolutions implementing it.

The interpretation placed on section 508 of the Education Law by Special Term was a literal one. However, ‘ ‘ literal meanings of words are not to be adhered to or suffered to 1 defeat the general purpose and manifest policy intended to be promoted’. (People v. Ryan, 274 N. Y. 149, 152.) ” (Essenfeld Bros. v. Hostetter, 14 N Y 2d 47, 52.) There is nothing in section 508 that prohibits the practice of delegating the day-today administration of investments to the Finance Committee. Its only requirement is that the procedure by which the custodian is ordered to invest the moneys or sell the securities be accomplished by a resolution adopted by a majority of the board. Since the Finance Committee is the custodian for the board as to investments, and since the resolutions have been approved by a majority of the board, the provisions of section 508 have been complied with.

The order entered June 24, 1968, adhering on reargument to the original determination, should be reversed, on the law and the facts, and the petition dismissed, without costs. The appeal from the judgment entered September 22, 1967 should be dis*167missed since that judgment was superseded by the order made upon reargument.