author: Smith, J.

text:
    [632 NE2d 866, 610 NYS2d 460]
    In the Matter of Lorna S. McBarnette, as Acting Commissioner of Health of the State of New York, Appellant, v Thomas Sobol, as Commissioner of Education of the State of New York, et al., Respondents.
    Argued February 9, 1994;
    decided March 24, 1994

      POINTS OF COUNSEL

      Joseph C. Bierman, Albany, and Peter J. Millock for appellant.
    I. Due process of law does not require that access be provided to confidential complaints. (Matter of John P. v Whalen, 54 NY2d 89; Matter of Howard v Wyman, 28 NY2d 434; Matter of Axelrod v Sobol, 78 NY2d 112; Pharmaceutical Mfrs. Assn. v Whalen, 54 NY2d 486; Matter of Hecht v Monaghan, 307 NY 461; Matter of Simpson v Wolansky, 38 NY2d 391; Matter of Sowa v Looney, 23 NY2d 329; Matter of Epstein v Cort Watch Co., 7 AD2d 663, 5 NY2d 709; Matter of Domino v Board of Regents, 124 AD2d 271, 70 NY2d 613; Matter of Albany Med. Ctr. Hosp. v Denis, 161 AD2d 1030.) II. Witnesses do not waive the confidentiality of their complaints by testifying. (People v Lynch, 23 NY2d 262; Matter of Grattan v People, 65 NY2d 243; Matter of Love Canal, 92 AD2d 416.)

      Megan Lesser Levine, Albany, and Kathy A. Ahearn for Thomas Sobol and another, respondents.
    I. Any confidentiality interests protected by Public Health Law § 230 have been waived. (Matter of Doe v Axelrod, 123 AD2d 21; Matter of County of Westchester v People, 122 AD2d 1; People v Bach, 65 Misc 2d 994; Davis v Alaska, 415 US 308; Matter of Grattan v People, 65 NY2d 243; Matter of Chugh v Axelrod, 151 AD2d 999.) II. The accused’s right to due process and cross-examinatian outweigh a prosecutor’s interest in confidentiality. (Davis v Alaska, 415 US 308; Greene v McElroy, 360 US 474; People v Banch, 80 NY2d 610; Matter of Hecht v Monaghan, 307 NY 461; Matter of Friedel v Board of Regents, 296 NY 347; Alford v United States, 282 US 687; In re Ruffalo, 390 US 544; Waddell v New York State Racing & Wagering Bd., 97 AD2d 955; Matter of Garabedian v New York State Liq. Auth., 33 AD2d 980, 26 NY2d 614; Matter of Milburn v New York State Div. of Parole, 173 AD2d 1016.)

      Halperin Klein & Halperin, New York City (Guy S. Halperin and Jerome R. Halperin of counsel), for Gilbert K. Seligman, respondent.
    Respondent physician should be afforded the right and opportunity to cross-examine the four complaining witnesses concerning prior statements made by them to the board, and if in writing, require that the statements be produced, a fundamental right guaranteed by the Constitutions of the United States and the State of New York and permitted under Public Health Law § 230. (Matter of Doe v Axelrod, 123 AD2d 21, 71 NY2d 484; Matter of Hecht v Monaghan, 307 NY 461; Matter of Erdman v Ingraham, 28 AD2d 5; Matter of Epstein v Board of Regents, 267 App Div 27; Matter of Day v Board of Regents, 266 App Div 888; Matter of Wignall v Fletcher, 303 NY 435; Matter of Simpson v Wolansky, 38 NY2d 391; Matter of Sowa v Looney, 23 NY2d 329; Matter of Bender v Board of Regents, 262 App Div 627; Matter of DeBonis v Corbisiero, 155 AD2d 299.)
   OPINION OF THE COURT

Smith, J.

The issue here is whether the mandate of Public Health Law § 230 (11) (a) that written misconduct complaints against physicians remain confidential bars disclosure of the complaints for purposes of cross-examination where the complainants have testified against the physician in a disciplinary proceeding involving alleged sexual misconduct. Under the circumstances presented in this proceeding, where confidentiality is maintained and where the credibility of the complainants is a primary issue, we hold that the physician is entitled to the complaints in order to fully cross-examine the complainants.

This matter is before us for the third time. In April 1985, the Office of Professional Medical Conduct (OPMC) charged respondent, a licensed physician, with misconduct pursuant to Education Law § 6509 based upon claims of sexual abuse by four of his former patients. The charges stemmed from written complaints by the patients that the physician sexually abused them during the course of psychiatric treatment between 1970 and 1980.

At the hearing before the Committee on Professional Conduct (Committee), the physician sought and was denied access to the written complaints notwithstanding the Administrative Officer’s (AO) demand that counsel for OPMC provide them. OPMC based its denial of the request upon Public Health Law § 230 (11) (a) which provides that reports of "professional misconduct * * * shall remain confidential and shall not be admitted into evidence in any administrative or judicial proceeding except that the board, its staff, or the members of its committees may begin investigations on the basis of such reports and may use them to develop further information.” The AO then struck the complainants’ testimony and directed the Committee not to consider it. After the Committee, in its report to petitioner Commissioner of Health, indicated that it could not render a determination absent the complainants’ testimony, the Commissioner reversed the AO’s ruling and remanded the matter to the Committee to complete the hearing.

The physician challenged the Commissioner’s determination in a CPLR article 78 proceeding. The Appellate Division reversed Special Term’s judgment insofar as it dismissed the petition, annulled the Commissioner’s determination overruling the AO, and remanded the matter for either the limited disclosure specified by the AO or dismissal of the charges against the physician (see, Matter of Doe v Axelrod, 123 AD2d 21). The Appellate Division then certified a question to this Court, essentially, whether it properly made its order reversing the judgment of Supreme Court. This Court resolved the matter on procedural grounds (Matter of Doe v Axelrod, 71 NY2d 484, 490).

Upon the conclusion of the hearing, misconduct was found and the matter was sent to respondent State Board of Regents with the recommendation that the determination of misconduct be accepted. The Board of Regents and respondent Commissioner of Education refused to accept the recommendation and remitted the matter to reopen the hearing once the physician received access to the complaints. The then Commissioner of Health, David Axelrod, instituted an article 78 proceeding which challenged the authority of the respondents to compel him to disclose the complaints. The Appellate Division granted the motion to dismiss the petition, citing Matter of Axelrod v Ambach (126 AD2d 288, 290-291), on the grounds that the Commissioner of Health lacked standing. That proceeding was also resolved by this Court (Matter of Axelrod v Sobol, 78 NY2d 112), and, after a standing issue was litigated and another procedural infirmity addressed (see, Matter of Axelrod v Sobol, 180 AD2d 905), petitioner Loma S. McBarnette, as acting Commissioner of Health, commenced this article 78 proceeding in Supreme Court, again challenging the authority of respondents Commissioner of Education and the Board of Regents to direct disclosure of the complaints. The petition was dismissed, and the Appellate Division affirmed Supreme Court’s judgment (190 AD2d 229). The Commissioner appeals to this Court, as of right, pursuant to CPLR 5601 (b) (1).

Here, the Commissioner of Health contends that due process of law does not require that the respondent physician be provided access to the confidential complaints and that the witnesses did not waive the confidentiality of their complaints by testifying. Respondent physician argues that he has a fundamental right to confrontation and to access to the statements pursuant to the Federal and State Constitutions in order to facilitate that confrontation. Respondents Commissioner of Education and the Board of Regents contend that the doctor’s right to due process and cross-examination outweigh the interests of confidentiality.

The issue is whether respondent may be denied access to the complaints, some made 15 to 20 years ago, under the circumstances here, where the complainants have already testified and made themselves known to respondent. While the parties have emphasized the constitutional issues of due process and right to confront witnesses, in the view taken here, it is unnecessary to decide the case on constitutional grounds.

Section 230 of the Public Health Law governs proceedings involving professional medical conduct. The Public Health Law creates a board consisting of physicians and lay members to address disciplinary matters within the medical profession (see, Public Health Law § 230 [1], [7]). Petitioner argues that the provision in question, Public Health Law § 230 (11) (a), contains no exceptions, explicit or implied in its prohibition against disclosure of written complaints. In addition to the statute’s direct prohibition, the governing regulation bars either party from introducing the written complaints into evidence and prevents the Hearing Officer from requiring a party to produce them (see, 10 NYCRR 51.11 [d] [8]).

Public Health Law § 230 (11) (a) was not intended to preclude access to written complaints where, as here, the complainants are known to the physician and the complainants have testified against the physician at a hearing. This statutory provision was designed to encourage those who were alleged victims of professional misconduct on the part of a physician to come forward without fear of disclosure so that appropriate investigations might be pursued (see, Matter of Axelrod v Sobol, 78 NY2d 112, 115, supra). It was also intended to preclude the indiscriminate use of these reports, whether to reveal sources of information which led to investigations, to reveal the patients or former patients of the doctor or to reveal unsubstantiated complaints against a physician, as well as to encourage policing from within the profession.

Additionally, any concerns that a complainant, professional or otherwise, may have regarding the risks of litigation or retribution as a result of submitting a complaint or testifying against a physician would not be implicated under these facts. The risks of litigation would be the same whether the complainant agreed to testify in the presence of the accused or by a statement disclosing the complainant’s identity. Concerns of retribution, or a physician’s response to a complaint by testimony or written document, would not change notwithstanding the method by which the physician learned of the individual’s complaint. Also, even after disclosure, the complainants in this case are treated the same as any other complainant who chose to file a written complaint against a physician; the difference here is that these complainants made the additional step of testifying, in the physician’s presence, as to the substance of the complaints. This is one of the situations contemplated in Matter of Grattan v People (65 NY2d 243, 246), where it was at least implied that in some settings, an individual’s actions may require that statutorily imposed confidentiality be overridden.

This Court cannot ignore the prejudice to the physician where he is forced, without access to the predicate complaints, to confront complainants who have made charges against him based on the complaints made several years ago, where the statutory provision barring access to the complaints is not applicable to the facts of his case. It is settled that even where administrative proceedings are at issue, "no essential element of a fair trial can be dispensed with unless waived” (see, Matter of Hecht v Monaghan, 307 NY 461, 470). In addition, "the party whose rights are being determined must be fully apprised of the claims of the opposing party and of the evidence to be considered, and must be given the opportunity to cross-examine witnesses, to inspect documents and to offer evidence in explanation or rebuttal” (id., at 470; see also, Matter of Simpson v Wolansky, 38 NY2d 391, 395; People v Ramistella, 306 NY 379, 384-385).

Moreover, several statutory provisions are consistent with disclosure here. Public Health Law § 230 (10) (c) authorizes the production of witnesses and evidence "in manner and form as prescribed by the civil practice law and rules.” CPLR 4514 provides that, in addition to common-law impeachment methods, "any party may introduce proof that any witness has made a prior statement inconsistent with his testimony if the statement was made in a writing subscribed by him or was made under oath.” Education Law § 6510 (8) directs that the "files” relating to an investigation of misconduct remain confidential and inaccessible to "any person, except upon the order of a court in a pending action or proceeding.” Further, this confidentiality provision makes an exception for "documents introduced in evidence at a hearing” (id.). It follows that although the victims’ testimony would not constitute "documents introduced in evidence,” such documents should be available to the accused when the actual individual testifies at the hearing, concededly testifying to much of the substance of the documents.

In enacting Public Health Law § 230 (11) (a), the Legislature’s concern was primarily that of encouraging complaints by colleagues. The legislative history to Public Health Law § 230 (11) (a) indicates that the focus was upon removing impediments from fellow professionals to submit complaints, stressing that "one of the major problems for state regulating boards has been the reluctance of hospitals, medical societies, and physicians to provide information concerning errant doctors, because of a fear of litigation” (Mem of Alan G. Hevesi, L 1977, ch 773, 1977 NY Legis Ann, at 256). Noting that the bill was directed at "physician disclosure of professional misconduct”, the Assemblyman’s Memorandum states:

"The bill requires physicians, statewide medical specialty societies, state and county medical and osteopathic societies, and any institution established pursuant to article twenty-eight of the public health law to report to the State Board for Professional Medical Conduct any information that appears to show a physician is guilty of professional misconduct, or is otherwise incompetent to practice medicine safely” (id., at 256).

Although the statute also refers to the right of "any person” to complain against a physician, the purpose of the statute was that of mobilizing police efforts from within the profession. Neither this objective, nor that of shielding a complainant’s identity from the accused, is met by denying the physician access to the complaints filed by these complainants whose identities are already known to him.

Additionally, even though the complaints are submitted to the physician, because these proceedings have traditionally been regarded as confidential (see, Doe v Office of Professional Med. Conduct, 81 NY2d 1050; Matter of Johnson Newspaper Corp. v Melino, 77 NY2d 1, 10, supra; Matter of Capoccia, 59 NY2d 549, 553), the complainants’ interests in privacy regarding these matters have not been abandoned. The policy of confidentiality that we would recognize absent the statute, because such policy "serves the purpose of safeguarding information that a potential complainant may regard as private or confidential and thereby removes a possible disincentive to the filing of complaints,” remains intact (Matter of Johnson Newspaper Corp. v Melino, supra, at 10-11). This confidentiality also protects the accused physician by preventing any unwarranted mar upon that professional’s reputation (id., at 11). The confidential and safeguarded nature of proceedings involving potential discipline of licensed professionals has been reaffirmed by our recent holding that disciplinary proceedings should not be open to the public and disclosure should not occur before the proceedings have been finally determined (see, Doe v Office of Professional Med. Conduct, 81 NY2d 1050, 1052, supra; see also, Matter of J.P. v Chassin, 82 NY2d 694 [proceedings involving ophthalmology specialist must remain confidential until finally determined]).

We hold that where, as here, the physician faces charges, some of which are 15 to 20 years old, and the authors of the complaints have testified and are already known to the physician, Public Health Law § 230 (11) (a) does not bar access to the written complaints so that the physician may fully confront the witnesses against him.

Based on the foregoing, we do not reach the issue of waiver of confidentiality.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Kaye and Judges Simons, Bellacosa and Ciparick concur; Judges Titone and Levine taking no part.

Order affirmed, with costs.

      . As stated in Matter of Johnson Newspaper Corp. v Melino (77 NY2d 1, 4), professional disciplinary proceedings involve the following process: "At the first stage, the Education Department’s Office of Professional Discipline (OPD) conducts an adversarial hearing on the charges of misconduct (Educatian Law § 6510 [3] [c]). Thereafter, the hearing panel prepares a written report, which includes a recommendation of guilty or not guilty, and, if necessary, a penalty recommendation (§ 6510 [3] [d]). The Regents’ review committee reviews the report and the hearing transcript, and prepares a written report of its own (§6510 [4] [b]). The two reports and the hearing transcript are then forwarded to the Board of Regents which renders a final decision (§ 6510 [4] [c]).”

      . 10 NYCRR 51.11 (d) (8) states: "Complaints relating to matters governed by Public Health Law, section 230 may not be introduced into evidence by either party and their production may not be required by the hearing officer even if the complainant is a witness.”


source: Caselaw Access Project

author: Levine, J. Smith, J.

license: Public Domain

text:
    [632 NE2d 870, 610 NYS2d 464]
    The People of the State of New York, Respondent, v Yuseff Parris, Appellant.
    Argued February 10, 1994;
    decided March 29, 1994

      POINTS OF COUNSEL

      Abigail Everett, New York City, and Philip L. Weinstein for appellant.
    The arresting officers’ testimony did not establish probable cause where they could only repeat the conclusory information provided by the sending officer, and did not, themselves, know anything about the informant or the basis of his knowledge. (People v Havelka, 45 NY2d 636; People v Lypka, 36 NY2d 210; People v Bigelow, 66 NY2d 417; People v Petralia, 62 NY2d 47, 469 US 852; Whiteley v Warden, 401 US 560; People v Rosario, 78 NY2d 583; People v Dodt, 61 NY2d 408; People v Landy, 59 NY2d 369; People v Johnson, 66 NY2d 398.)

      Richard A. Brown, District Attorney of Queens County, Kew Gardens (Steven J. Chananie and John M. Castellano of counsel), for respondent.
    I. The testimony of the arresting officers provided the suppression court with a sufficient basis to determine that they had probable cause to arrest defendant based on the hearsay information supplied by an eyewitness citizen informant. (People v Lypka, 36 NY2d 210; People v Petralia, 62 NY2d 47, 469 US 852; Aguilar v Texas, 378 US 108; Spinelli v

      United States, 393 US 410; People v Havelka, 45 NY2d 636; People v Johnson, 66 NY2d 398; People v Elwell, 50 NY2d 231; People v Rodriguez, 52 NY2d 483; People v DiFalco, 80 NY2d 693; People v Landy, 59 NY2d 369.) II. The showup of defendant was conducted within minutes of the crime and only a few blocks away in order to ensure that the police had arrested the correct person; as such, it was entirely proper. (People v Duuvon, 77 NY2d 541; People v Tyson, 160 AD2d 826; People v Hicks, 68 NY2d 234; People v Love, 57 NY2d 1023; People v Adams, 53 NY2d 241; People v Johnson, 102 AD2d 616.)
   OPINION OF THE COURT

Levine, J.

The principal issue on this appeal is whether, at the suppression hearing, the People sufficiently established probable cause for defendant’s warrantless arrest. The proof at the suppression hearing was as follows. The police received a report of a 911 call regarding a burglary in progress at 64-04 Wetherole Street, Queens County, from a next-door neighbor. Uniformed Officers Small and Lopez, on motor patrol, were dispatched to the scene. Lopez and Small were the only witnesses to testify at the suppression hearing. When they arrived at 64-04 Wetherole Street, they met another police unit already on the scene in response to a radio communication. One of the members of the other unit, an Officer Ianelle, informed Small and Lopez that the next-door neighbor, characterized by Ianelle as an “eyewitness”, gave him a detailed description of the perpetrator who had fled on a bicycle before the police arrived. Ianelle repeated the suspect’s description to Officers Small and Lopez.

Officers Small and Lopez began a canvass of the immediate area by driving to a thoroughfare two or three blocks away, and shortly thereafter spotted defendant, who fit the description they had been given. When they approached defendant with guns drawn, he fled on his bicycle. The police pursued him by car until he abandoned the bicycle, after which the chase continued on foot. During his flight, defendant abandoned a loaded revolver recovered later by the police. Defendant was eventually apprehended by the officers and found to have in his possession various stolen articles from the burglarized premises. The next-door neighbor was brought to the scene of defendant’s arrest and identified him as the burglar. Defendant made certain incriminating admissions to Officers Small and Lopez.

After indictment, defendant moved to suppress the stolen property and gun the police recovered, his statement and the showup identification at the scene of his arrest, on the ground, inter alla, that the police lacked probable cause for the arrest. Supreme Court denied the motion in its entirety. Defendant then pleaded guilty to a reduced charge of attempted burglary in the first degree. On appeal to the Appellate Division, defendant’s principal argument was that probable cause was not established at the suppression hearing because of the People’s failure to produce as a witness Officer Ianelle, whose information was relied upon by Officers Small and Lopez in arresting defendant. The Appellate Division upheld Supreme Court’s denial of the motion to suppress (190 AD2d 872). In doing so, the Court relied upon our decision in People v Petralia (62 NY2d 47, cert denied 469 US 852). A Judge of this Court granted defendant leave to appeal, and we now reverse.

Defendant’s primary argument for reversal is that where (as here) the arresting officers had no knowledge of facts establishing probable cause but merely had a description of the perpetrator communicated to them (as the receiving officers) by another police officer of the same or another law enforcement agency (the sending officer), probable cause cannot be demonstrated at the suppression hearing consistent with the requirements of the Aguilar-Spinelli test (see, Spinelli v United States, 393 US 410; Aguilar v Texas, 378 US 108), without the testimony of the sending officer.

Defendant concedes that the foregoing position appears to be inconsistent with People v Petralia (supra), the case relied upon by the Appellate Division. In Petralia, this Court sustained the denial of a suppression motion although the only witness at the hearing was the receiving officer who made the arrest without any personal knowledge of the facts establishing probable cause. The basis of the arrest was a radio communication to the arresting officer from an undercover officer that the undercover had just purchased heroin from a specifically described suspect who drove off after the sale in a particularly described vehicle. We held in Petralia that the arresting officer’s testimony to that effect was sufficient. Defendant would limit Petralia to undercover investigations where secrecy of the sending officer’s identity is a concern, or to cases where the arresting officer is relying on the personal observations of a fellow officer in a common investigation.

Our decision in People v Petralia should not be read in the limited manner defendant suggests, but proceeds from well-established principles of search and seizure law. First, when the subject of the suppression hearing is evidence which was the product of a warrantless arrest or seizure, the suppression court’s probable cause analysis is essentially "the same as that used by a magistrate in passing on an application for an arrest or search warrant” (People v Dodt, 61 NY2d 408, 415 [citations omitted]; see also, People v Petralia, 62 NY2d, at 52, supra). Therefore, rulings on the sufficiency of hearsay information to satisfy the requirements of the Aguilar-Spinelli test in warrant cases apply for determining whether hearsay information possessed by the police is sufficient to establish probable cause for a warrantless arrest (see, Jones v United States, 362 US 257, 270).

It also is axiomatic that, at a suppression hearing reviewing the validity of a warrantless arrest, the People are not obligated to produce any particular witness, provided they sustain their burden of coming forward with evidence showing that there was probable cause for the arrest (see, People v Petralia, 62 NY2d, at 52, supra). Indeed, there is no obligation on the prosecution to produce, or even disclose, the name of the third party whose information to the police provided probable cause for the arrest, so long as the requirements of the AguilarSpinelli test are met (see, McCray v Illinois, 386 US 300, 311; United States v Ventresca, 380 US 102, 108; 4 LaFave, Search and Seizure § 11.2 [d], at 245 [2d ed]). Case law also clearly establishes that probable cause can be established at the suppression hearing (or before the Magistrate on a warrant application) by hearsay information (see, Draper v United States, 358 US 307, 311-312; see also, United States v Ventresca, supra).

Thus, contrary to defendant’s argument here, People v Petralia (supra) does not merely represent an undercover officer exception for dispensing with the sending officer’s testimony at a suppression hearing. Rather, Petralia is a straightforward application of the principle that hearsay information, if compatible with the requirements of Aguilar-Spinelli, may establish probable cause, either to sustain a warrantless arrest or to support the issuance of a search or arrest warrant. In Petralia, the hearsay information satisfied both prongs of the Aguilar-Spinelli standard, i.e., the informant’s reliability and basis of knowledge (see, People v Bigelow, 66 NY2d 417, 423). The informant in Petralia, who was both the sending officer and the undercover officer, had a basis of knowledge, since the information came from a drug purchase in which he personally participated. Moreover, as a police officer he was deemed to be a reliable informant (People v Petralia, 62 NY2d, at 52, supra; see also, United States v Ventresca, 380 US, at 111, supra; 2 LaFave, Search and Seizure § 3.5 [a], at 2-4 [2d ed]).

Nor can People v Petralia be limited as authorizing only a single level of hearsay information supplied by a fellow officer, defendant’s alternative suggestion. "Even hearsay-upon-hearsay may be utilized to show probable cause” (1 LaFave, Search and Seizure § 3.2 [d], at 580 [2d ed]). Indeed, the Supreme Court in Spinelli v United States (supra) recognized that the police agency’s hearsay information may validly be derived by its informant from sources other than firsthand observations, including the words of third persons. Thus, Justice Harlan, writing for the Spinelli majority, explained the deficiency in the warrant application regarding the FBI informant’s basis of knowledge in that case as follows: "We are not told how the FBI’s source received his information — it is not alleged that the informant personally observed Spinelli at work or that he ever placed a bet with him. Moreover, if the informant came by the information indirectly, he did not explain why his sources were reliable” (Spinelli v United States, 393 US 410, 416, supra [emphasis supplied]). And, Justice White, in concurring, expressly acknowledged that a police confidential informant’s source may also be hearsay information and yet satisfy the Aguilar-Spinelli test:

"If the affidavit rests on hearsay — an informant’s report — what is necessary under Aguilar is one of two things: the informant must declare either (1) that he has himself seen or perceived the fact or facts asserted; or (2) that his information is hearsay, but there is good reason for believing it” (id., at 425 [emphasis supplied]).

Relying on the foregoing pronouncements by the Supreme Court, numerous courts in various jurisdictions have sanctioned the use of hearsay-upon-hearsay to establish probable cause, providing the requirements of Aguilar-Spinelli were met. Thus, in United States v Spach (518 F2d 866) the United States Court of Appeals for the Seventh Circuit stated: "It is undisputed that hearsay may be used in affidavits supporting the issuance of search warrants * * * Appellant argues that long chains of hearsay are suspect * * * but the issue is not the length of the chain but rather whether both prongs of the Aguilar test are met at each level” (id., at 869; see also, United States v McCoy, 478 F2d 176, 178-179 [10th Cir], cert denied 414 US 828; United States v Smith, 462 F2d 456, 459 [8th Cir]; Commonwealth v Musi, 486 Pa 102, 111-113, 404 A2d 378; State v Alderete, 88 NM 14, 15, 536 P2d 278 [Ct App]).

Defendant, however, reads People v Petralia (62 NY2d 47, supra), People v Havelka (45 NY2d 636) and People v Lypka (36 NY2d 210) as imposing an additional requirement in "receiving officer” cases: that the sending officer must appear at the suppression hearing when he lacked personal knowledge of the facts giving rise to probable cause. Though some courts have read our decisions that way (see, e.g., People v Ward, 95 AD2d 233), we clarify today that those cases do not impose such a special requirement and that admissibility of the evidence is governed solely by Aguilar-Spinelli. In Havelka, at the initial suppression hearing the only witness was the arresting officer. He merely testified that his desk sergeant, who was acting on hearsay information from a source at a named tavern, alerted him to the possibility that a motorcycle club might initiate a gun battle at the tavern. Obviously, the evidence at the suppression hearing failed to satisfy either prong of the Aguilar-Spinelli test, the reliability or the basis of knowledge of the desk sergeant’s informant. Indeed, from the evidence at a second suppression hearing that was conducted in Havelka, Aguilar-Spinelli would not have been satisfied even with the desk sergeant’s (i.e., sending officer’s) testimony, since the basis of knowledge of the actual police informant — the tavern bartender — "may well have been nothing more than unsubstantiated rumor” (45 NY2d, at 641, supra).

Nor is People v Lypka inconsistent with our holding here that double hearsay may be sufficient to establish probable cause. In People v Lypka (supra), the information the New York State and local police received from Pennsylvania law enforcement authorities clearly contained allegations sufficient to establish probable cause to arrest, i.e., that named and described suspects driving specifically described vehicles would be arriving at a particular New York State location in illegal possession of various firearms. But the arrest was invalidated because the sending Pennsylvania police officer related the foregoing facts constituting probable cause "[without disclosing the source of his information” (36 NY2d, at 212, supra). Thus, because the People’s evidence at the suppression hearing consisted solely of the content of communications received from the Pennsylvania police, the basis of knowledge of the Pennsylvania law enforcement authorities was not established to satisfy that prong of the Aguilar-Spinelli test. "[B]are reliance on an unsubstantiated hearsay communication from the instigating officer or department will not suffice for probable cause” (id., at 214 [emphasis supplied]). Accordingly, we held in Lypka that the arrests were invalid because “there was no proof whatsoever [at the suppression hearing] that the Pennsylvania authorities possessed the necessary probable cause” (id., at 214).

Moreover, the foregoing interpretation of Havelka and Lypka is precisely the basis upon which we found those cases not controlling in People v Petralia (62 NY2d 47, 51-52, supra). Thus, in Petralia we distinguished Havelka and Lypka by saying that “the key factor in those cases is that the record did not indicate how the sending officer had acquired his information * * * In the case now before us, the arrest was not based on information from an unknown source of unknown reliability” (id., at 51). Accordingly, Havelka and Lypka fit well within the Aguilar-Spinelli framework, and do not stand for some separate mandate for the production of the sending officer at the suppression hearing in order to establish probable cause for a warrantless arrest.

It follows from the foregoing that it was not per se fatal to the establishment of probable cause for defendant’s arrest that the People did not call as a witness at the suppression hearing the sending officer, in this case Officer Ianelle, who gave the arresting officers the information leading to defendant’s arrest. The testimony of the arresting officers recounted the contents of the hearsay-upon-hearsay information they received from Officer Ianelle and from his source, the neighbor of the burglarized dwelling, who purportedly was an eyewitness. The sufficiency of that double hearsay information to validly establish probable cause for the arrest is dependent upon whether the evidence at the hearing regarding Ianelle’s informant and his source’s information satisfied the AguilarSpinelli standard.

Since it is readily inferable from the suppression hearing evidence that Officer Ianelle’s source was the neighbor who made the 911 call of the burglary and who was later brought to the site of the arrest to identify defendant as the perpetrator, the first prong of the Aguilar-Spinelli test, the reliability of the informant, was met. An identified citizen informant is presumed to be personally reliable (see, People v Hetrick, 80 NY2d 344, 349).

The People’s position founders, however, when scrutinized under the basis-of-knowledge prong of Aguilar-Spinelli. The only evidence adduced at the hearing to establish the next-door neighbor’s basis of knowledge was, first, a description of the content of the 911 call between him and the police, and then the arresting officers’ account of their conversation with Officer Ianelle at the crime scene. The testimony regarding the contents of the 911 call was sketchy at best. At that point, the neighbor and his wife apparently had not seen who entered the burglarized premises, stating only their belief that someone was inside and had left a bicycle in front of the premises. The most detailed testimony regarding the arresting officers’ conversation with Officer Ianelle came from Officer Small. According to Small, Officer Ianelle stated that he had just interviewed an "eyewitness”, the "next door neighbor”, who gave him a detailed description of the perpetrator which Ianelle then repeated to him and Officer Lopez.

Absent from the foregoing narratives of conversations with the next-door neighbor of the dwelling at 64-04 Wetherole Street was any exposition of the factual basis for the neighbor’s belief that the person whose physical appearance he described had burglarized the premises — whether that belief resulted from personal observation of him actually entering or leaving the premises, or otherwise. Moreover, the testimonial account of the neighbor’s statements lacked any detailed description by the neighbor of the suspect’s movements entering or leaving the premises, from which it might be inferred that the neighbor’s assertion that a burglary had taken place was based upon personal observation. Thus, the suppression court was relegated to reliance upon Officer Ianelle’s conclusory characterization of the neighbor/informant as an "eyewitness”, in order to determine the reliability of the information claimed to have established probable cause. This, however, is precisely what the Aguilar-Spinelli standard was designed to avoid (see, Spinelli v United States, 393 US 410, 413, 419, supra; Aguilar v Texas, 378 US 108, 111-113, supra; see also, People v Bigelow, 66 NY2d 417, 424, supra; People v Mullins, 137 AD2d 227, 231, lv denied 72 NY2d 922).

Finally, the People may not rely upon their alternative theory to demonstrate that the police had probable cause, i.e., that the police had reasonable suspicion to stop defendant on the street on the basis of Ianelle’s description of his appearance, which then escalated to probable cause when defendant fled and abandoned his gun. That theory was never advanced before the suppression court and, therefore, may not be considered here (People v Johnson, 64 NY2d 617, 619, n 2; People v Dodt, 61 NY2d 408, 416, supra).

Accordingly, the order should be reversed, defendant’s motion to suppress granted and the case remitted to Supreme Court, Queens County, for further proceedings on the indictment.

Smith, J.

(dissenting). Because I believe there was probable cause for the arrest of the defendant and that the prosecution established it at the Mapp hearing, I dissent.

In his omnibus motion, defendant moved to suppress physical evidence, specifically a gun, assorted jewelry, a wallet and credit cards, on the grounds that "[t]here was no probable cause for the defendant’s arrest” and that "[tjhere were not even grounds for a reasonable suspicion that the defendant committed, or was about to commit a crime.”

In response to the omnibus motion, the prosecution asserted that defendant had been arrested after he threw away a gun. Specifically, the prosecution stated:

"The People contend that the defendant threw away a gun during a chase thereby abandoning same and ultimately seized in plain view by the police. Subsequent to the lawful arrest the defendant was found to have assorted jewelry, credit cards, and a wallet which were stolen. People therefore consent to a Mapp hearing.”

Two police officers testified at the Mapp hearing. One officer, John Small, testified that when he arrived at the scene after a radio run of a burglary in progress, he was given a description of the alleged perpetrator by another officer already on the scene. That officer had obtained the description from the next-door neighbor of the burglarized apartment. That person had also made a 911 call to the police. Once the description was given, Officer Small and his partner searched the area, came upon a person fitting the description of the perpetrator and chased him by car and on foot until he was apprehended. During the chase, the defendant threw a gun away.

Based upon the information received from the police unit already at the burglary scene, Officer Small and his partner had reason to search the area. Once they came upon a person fitting the description of the perpetrator and that person began to flee in the manner in which he did, the officers had reasonable cause to arrest him. In addition, the officers had reasonable cause to make the arrest when they saw the defendant toss his gun away.

Even if probable cause can be established here only with the Aguilar/Spinelli standard, I cannot agree with the majority that the standard was not met. The majority agrees that the reliability of the informant, the next-door neighbor, was established. It states, however, that the basis of the informant’s knowledge was not established. Since the 911 call introduced into evidence indicated that a person had entered a premises and the same person who made the call gave the police a description of the person who entered, it was a reasonable inference that the basis of the information was personal observation.

In addition, I cannot agree that the People are precluded from arguing here that the police had reasonable suspicion to pursue the defendant. The issue of reasonable suspicion was first raised in the motion papers. The defendant himself raised the issue at the Appellate Division and argued against it.

I would affirm.

Chief Judge Kaye and Judges Simons, Bellacosa and Ciparick concur with Judge Levine; Judge Smith dissents and votes to affirm in a separate opinion; Judge Titone taking no part.

Order reversed, defendant’s motion to suppress granted and case remitted to Supreme Court, Queens County, for further proceedings in accordance with the opinion herein.

       I agree with the majority opinion to the extent that it states that under certain circumstances, probable cause may be established at a hearing without producing the sending officer or the person from whom the police obtained the information establishing probable cause.


text:
    [632 NE2d 876, 610 NYS2d 470]
    In the Matter of New York State Association of Life Underwriters, Inc., et al., Appellants, v New York State Banking Department et al., Respondents.
    Argued February 10, 1994;
    decided March 30, 1994

      POINTS OF COUNSEL

      Hinman, Straub, Pigors & Manning, P. C., Albany (Bartley

      J. Costello, III, Kimberly C. Lawrence and Ann M. Kappler of counsel), and Jenner & Block, of the District of Columbia Bar, admitted pro hac vice, for appellants.
    I. The statutory language, legislative history and case law unequivocally demonstrate that State commercial banks are not empowered to sell annuities. (Matter of Savings Bank Trust Co. v Comptroller of State of N. Y., 101 AD2d 908; O’Connor v Bankers Trust Co., 159 Misc 920, 253 App Div 714, 278 NY 649; Dyer v Broadway Cent. Bank, 252 NY 430; New York State Bankers Assn. v Albright, 38 NY2d 430; Matter of Alonzo M. v New York City Dept. of Probation, 72 NY2d 662; California Bank v Kennedy, 167 US 362; Matter of Capital Cities Communications v State Tax Commn., 65 AD2d 25; Matter of Duflo Spray-Chem. v Jorling, 153 AD2d 244; Matter of Grace Plaza v Axelrod, 121 AD2d 799; Matter of Frick v Bahou, 56 NY2d 777.) II. The department’s challenged rulings are not entitled to deference. (Matter of 172 E. 122 St. Tenants Assn. v Schwarz, 73 NY2d 340; Matter of Moran Towing & Transp. Co. v New York State Tax Commn., 72 NY2d 166; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Matter of Robak v Regan, 101 AD2d 608; Matter of Heimbach v Metropolitan Transp. Auth., 75 NY2d 387; Matter of De Mayo v Rensselaer Polytech Inst., 74 NY2d 459; Matter of Nelson v New York State Civ. Serv. Commn., 96 AD2d 132, 63 NY2d 802; Matter of Duflo Spray-Chem. v Jorling, 153 AD2d 244; Matter of Town of Mamaroneck PBA v New York State Pub. Empl. Relations Bd., 66 NY2d 722.) III. The lower Court’s decision effectively sanctions the department’s usurpation of legislative authority. (Matter of Nicholas v Kahn, 47 NY2d 24; Messersmith v American Fid. Co., 232 NY 161; Matter of Campagna v Shaffer, 73 NY2d 237; Boreali v Axelrod, 71 NY2d 1; Pajak v Pajak, 56 NY2d 394; Matter of Jones v Berman, 37 NY2d 42; Matter of Trump-Equit. Fifth Ave. Co. v Gliedman, 57 NY2d 588; Under 21 v City of New York, 65 NY2d 344.) IV. State-chartered commercial banks are not permitted, with or without Banking Board approval, to invest in corporations engaged in the sale of any type of insurance product, including annuities. (Leary v Capitol Trust Co., 238 App Div 661, 263 NY 640; Nassau Bank v Jones, 95 NY 115; Tracy v Talmage, 14 NY 162; Dyer v Broadway Cent. Bank, 225 App Div 366, 252 NY 430; Matter of Gunning v Codd, 65 AD2d 415, 49 NY2d 495; Matter of Rosa, 111 AD2d 239; Matter of Capital Cities Communications v State Tax Commn., 65 AD2d 25.)

      G. Oliver Koppell, Attorney-General, Albany (John McCon

      nell, Jerry Boone and Peter H. Schiff of counsel), for respondents.
    I. The Court below correctly sustained the department’s advisory letter interpreting Banking Law § 96 (1) to permit New York State-chartered commercial banks to broker fixed- and variable-rate annuity contracts. (Matter of Great Lakes-Dunbar-Rochester v State Tax Commn., 65 NY2d 339; State Bank of Commerce v Stone, 261 NY 175; Variable Annuity Life Ins. Co. v Clarke, 998 F2d 1295; Curtis v Leavitt, 15 NY 9; Dyer v Broadway Cent. Bank, 252 NY 430; Block v Pennsylvania Exch. Bank, 253 NY 227; Whiting v Hudson Trust Co., 234 NY 394; Kearney v Cruikshank, 117 NY 95; Crossman Co. v Rauch, 263 NY 264; Isham v Post, 141 NY 100.) II. The Court below correctly held that Banking Law § 97 empowers the Banking Board to permit investment by State-chartered commercial banks in subsidiaries which broker annuities.

      Frank W. Hunger, Assistant Attorney General, Mark B. Stern, Jacob M. Lewis, William P. Bowden, Jr., L. Robert Griffin, Ernest C. Barrett, III, and Yvonne D. Mclntire, of the District of Columbia Bar, admitted pro hac vice, for the Comptroller of the Currency of the United States, amicus curiae.

    I. The Banking Department reasonably determined that New York banks are empowered to sell annuities. (Curtis v Leavitt, 15 NY 9; Block v Pennsylvania Exch. Bank, 253 NY 227; Dyer v Broadway Cent. Bank, 252 NY 430; Merchants’ Bank v State Bank, 10 Wall [77 US] 604; First Natl. Bank v National Exch. Bank, 92 US 122; Clement Natl. Bank v Vermont, 231 US 120; Colorado Bank v Bedford, 310 US 41; Franklin Natl. Bank v New York, 347 US 373; M & M Leasing Corp. v Seattle First Natl. Bank, 563 F2d 1377, 436 US 956; First Natl. Bank v Taylor, 907 F2d 775, 498 US 972.) II. Annuities are not insurance. (Matter of Sothern, 257 App Div 574; Halvering v Le Gierse, 312 US 531; Rosenbloom v New York Life Ins. Co., 65 F Supp 692; Matter of Rhodes, 197 Misc 232; People ex rel. Metropolitan Life Ins. Co. v Knapp, 193 App Div 413, 231 NY 630; People v Security Life Ins. & Annuity Co., 78 NY 114; Estate of Keller v Commissioner of Internal Revenue, 312 US 543; Kernochan v United States, 29 F Supp 860, 309 US 675.)

      Sullivan & Cromwell, New York City (John L. Warden, H. Rodgin Cohen, Michael M. Wiseman, Theodore Edelman, Robert J. Giuffra, Jr., and Lisa J. Laplace of counsel), and David L. Glass for The New York State Bankers Association, amicus curiae.

    I. The Court below applied the proper standard of review in deferring to the Banking Department’s interpretation of Banking Law §96 (1) authorizing State-chartered banks to sell annuities. (Matter of Howard v Wyman, 28 NY2d 434; Matter of 172 E. 122 St. Tenants Assn. v Schwarz, 73 NY2d 340; Matter of Town of Mamaroneck PBA v New York State Pub. Empl. Relations Bd., 66 NY2d 722; Matter of Trump-Equit. Fifth Ave. Co. v Gliedman, 62 NY2d 539; Matter of SIN, Inc. v Department of Fin., 71 NY2d 616; Matter of Teachers Ins. & Annuity Assn. v City of New York, 82 NY2d 35; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Chevron, U. S. A. v Natural Resources Defense Council, 467 US 837; Matter of De Mayo v Rensselaer Polytech Inst., 74 NY2d 459.) II. The Court below correctly held that section 96 (1) authorizes commercial banks to engage in all aspects of the "business of banking”, including the sale of financial investment instruments. (American Ins. Assn. v Clarke, 656 F Supp 404, 865 F2d 278; Matter of Capital Cities Communications v State Tax Commn., 65 AD2d 25; Curtis v Leavitt, 15 NY 9; McCulloch v Maryland, 4 Wheat [17 US] 316; Dyer v Broadway Cent. Bank, 252 NY 430; Block v Pennsylvania Exch. Bank, 253 NY 227; Matter of Savings Bank Trust Co. v Comptroller of State of N. Y., 101 AD2d 908; Clark v Cuomo, 66 NY2d 185; United States v Price, 361 US 304; Matter of New York State Health Facilities Assn. v Axelrod, 77 NY2d 340.) III. The Court below correctly held that the Banking Department’s determination that annuities are financial investment instruments was not irrational or unreasonable. (Securities & Exch. Commn. v United Benefit Life Ins. Co., 387 US 202; Feinstein v Bergner, 48 NY2d 234; Matter of Capital Cities Communications v State Tax Commn., 65 AD2d 25; Matter of Sothern, 257 App Div 574; People ex rel. Metropolitan Life Ins. Co. v Knapp, 193 App Div 413, 231 NY 630; Matter of Rhodes, 197 Misc 232; American Ins. Assn. v Clarke, 656 F Supp 404, 865 F2d 278; M & M Leasing Corp. v Seattle First Natl. Bank, 563 F2d 1377, 436 US 956; Securities & Exch. Commn. v Variable Annuity Co., 359 US 65; State Bank of Commerce v Stone, 261 NY 175, 262 NY 522.)
   OPINION OF THE COURT

Smith, J.

The issues in this case are (1) whether the State Banking Law authorizes State-chartered commercial banks to purchase and sell annuities, either directly or through a subsidiary, and (2) whether annuities are insurance and, thus, within the express statutory proscription of sales by commercial banks.

On December 20, 1989 and February 12, 1990, pursuant to requests by certain national banks, the Federal Office of the Comptroller of the Currency (OCC) issued Interpretive Letters No. 494 and No. 499, respectively, stating, in essence, that 12 USC § 24 (Seventh) authorizes national banks to broker financial investment instruments, such as agricultural futures, options, and fixed-rate annuities. Thereafter, the New York State Bankers Association requested from the New York State Banking Department its opinion as to whether State-chartered commercial banks had comparable authority under State law. By letter dated January 24, 1991, the State Banking Department, for reasons similar to those stated in OCC Letter No. 499, opined that "brokerage of fixed-rate annuities by state-chartered banks is permissible because such activity falls within the banks’ power to broker financial investment instruments.” In a letter dated April 23, 1991, petitioners, consisting of three individual insurance agents and several nonprofit organizations representing the insurance industry, sought a ruling from the Banking Department, pursuant to section 204 of the State Administrative Procedure Act and Supervisory Procedure G 110 of the Regulations of the State Banking Department (3 NYCRR), declaring, among other things, that State-chartered commercial banks are not authorized, either directly or through a subsidiary, to sell annuities. In its response on May 17, 1991, the State Banking Department declined to issue a declaratory ruling and construed the request as one for interpretations of the Banking Law. The Banking Department stated that Banking Law § 96 (l) authorizes State-chartered commercial banks to sell fixed-rate and variable-rate annuities, and that such activity may be carried out either directly in the bank or through a subsidiary acquired pursuant to Banking Law § 97 (5).

Petitioners then commenced this CPLR article 78 proceeding challenging the State Banking Department’s January 24th and May 17th Interpretive Letters, and for a judgment declaring that the sale of annuities by a bank, directly or through a subsidiary, is not an "incidental power” of the "business of banking” within the meaning of Banking Law § 96 (1). Supreme Court converted the proceeding to a declaratory judgment action to the extent necessary, and granted petitioners a judgment (1) annulling the Interpretive Letters, and (2) declaring that "the sale of annuities by a bank, directly or through a subsidiary, is not an 'incidental power’ of the 'business of banking’ within the meaning of section 96 (1).” The court reasoned that nothing in the language of Banking Law § 96 (1) expressly authorized State-chartered commercial banks to broker annuities and that such activity is not necessary to carry on the enumerated powers in the statute. The Appellate Division modified, on the law, by (1) reversing so much of the judgment as annulled the Banking Department’s determination and declared that the sale of fixed-rate or variable-rate annuities by State-chartered commercial banks is not an "incidental power” of the "business of banking” under Banking Law § 96 (1), (2) confirming the Banking Department’s determination, and (3) declaring that such a sale is an "incidental power” of the "business of banking” under Banking Law § 96 (1), and otherwise affirmed the judgment (190 AD2d 338). The Appellate Division stated that the "incidental powers” clause of Banking Law § 96 (1) was not intended to limit the power of banks to the specifically enumerated powers of the Banking Law, but, rather, was intended to permit banks to expand their banking services over time consistent with evolving business practices and their customers’ needs (see, id., at 341). The Court also acknowledged that such a construction of the "incidental powers” clause does not mean that banks are free to engage in any type of business activity and that, indeed, certain types of business activities are prohibited (see, id.). This Court granted leave to appeal.

It is settled that "the construction given statutes and regulotions by the agency responsible for their administration, if not irrational or unreasonable, should be upheld” (Matter of Howard v Wyman, 28 NY2d 434, 438; see also, Matter of Salvati v Eimicke, 72 NY2d 784, 791; Matter of Colt Indus. v New York City Dept. of Fin., 66 NY2d 466, 471). Deference to such construction is appropriate where the language used in the statute is special or technical and does not consist of common words of clear import (cf., Matter of SIN, Inc. v Department of Fin., 71 NY2d 616, 620). In addition, deference to an agency’s construction of a statute is warranted "[w]here the interpretation of a statute or its application involves knowledge and understanding of underlying operational practices” (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459).

Banking Law § 10 authorizes the Banking Department to supervise and regulate all banking organizations. Pursuant to Banking Law § 11 (1), the Banking Department is "charged with the execution of the laws relating to the individuals, partnerships and corporations to which [the Banking Law] is applicable and shall exercise such powers and perform such duties as are conferred and imposed upon it” by the laws of this State. Furthermore, the Banking Board, within the Banking Department, may pass upon and determine any matter submitted to it for its determination (see, Banking Law § 14 [2]). Clearly, the "incidental powers” clause in Banking Law § 96 (1) does not consist of common words of clear import, and that clause is susceptible to differing interpretation. Because the Banking Department is charged with the supervision and regulation of the business of all banking organizations, it is presumed to have the requisite knowledge and understanding of the operational practices of such banking organizations and of the Banking Law. We conclude that the construction of Banking Law § 96 (1) afforded by the Banking Department was not unreasonable or irrational, and that the Appellate Division correctly deferred to the Banking Department’s determination that the sale of fixed-rate and variable-rate annuities by State-chartered commercial banks, either directly or through a subsidiary, is an "incidental power” of the "business of banking” within the meaning of the Banking Law.

Petitioners offer several reasons for rejecting the Banking Department’s determination. First, petitioners argue that banks are prohibited from exercising any powers not expressly granted to them, and that nothing in the plain language of Banking Law § 96 (1), including the "incidental powers” clause, expressly grants State-chartered commercial banks the authority to sell annuities. Petitioners’ position is that the statute should be narrowly construed to limit the term "business of banking” in the "incidental powers” clause of that statute to those activities that are essential to achieving the expressly enumerated powers.

In Curtis v Leavitt (15 NY 9), this Court rejected a similar argument when construing analogous language in the predecessor to the current Banking Law. In that case, the Court reasoned that the enumerated powers in the statute "were evidently intended not to restrict the appropriate business of banking, but as a mere legislative definition of that business; a definition not indispensable, perhaps, but eminently useful” (id., at 58). The Court explained that since other laws restrained banks from engaging in certain activities, including the powers of discount and deposit, without legislative approval, the enumerated powers were intended to explicitly remove the restraints, rather than leaving them to be derived from the general grant to carry on the business of banking (see, id., at 58-59). In explaining that the term "necessary” should be afforded a flexible meaning, the Court stated:

"There may be an absolute necessity, a great necessity, and a small necessity; and between these degrees there may be many others depending on the ever varying exigencies of human affairs. It is plain that corporations, in executing their express powers, are not confined to means of such indispensable necessity that without them there could be no execution at all. The contrary doctrine would lead at once to a very great absurdity; for if there are several modes of accomplishing the end, neither one is indispensable, and each would exclude all the others. And thus, by inevitable logic, an express grant of power would lie ' forever dormant, because there are more modes than one of carrying it into execution.
"It is almost as difficult to say that the incidental power depends for its existence on the degree of necessity which connects it with the power in chief’ (id., at 64-65).

We have long been mindful that the business of banking is not static but rather must adjust to meet the needs of the customers to whom banking organizations provide a valuable service. Our courts must be cognizant of these adjustments in ruling on cases involving interpretation of the Banking Law. Thus, in Dyer v Broadway Cent Bank (252 NY 430, 434), we stated that "care should be exercised not to cripple [banking organizations] and break down their usefulness by a narrow and unreasonable construction of the statutes which will result in unwisely limiting their usefulness in the transaction of business under modern conditions.” In Block v Pennsylvania Exch. Bank (253 NY 227, 233), we cautioned that " 'the transactions of banking * * * are not to be clogged, and their pace slackened, by overburdensome restrictions.’ ”

In Block, several New York City stockbrokers who had bought shares of stock and subscription rights on the order of a bank which was acting as agent for an unknown customer sought to recover damages after the bank refused to accept the certificates or pay the purchase price. In determining whether banks were authorized to purchase securities for the benefit of a customer, the Court acknowledged that the development and the evolution of business must also be considered. Thus, the Court stated:

" 'The central function of a commercial bank is to substitute its own credit, which has general acceptance in the business community, for the individual’s credit, which has only limited acceptability’ * * *. A bank 'manufactures credit by accepting the business paper of its customers as security in exchange for its own bank credit in the form of a deposit account’ * * *. It stands ready to exchange its own credits for those of its customers * * *. Whatever is an appropriate and usual incident to this substitution or exchange of credits, instead of being foreign to the functions and activities of banking, is in truth of their very essence. It is the end for which a bank exists” (id., at 230-231 [citations omitted]).

Furthermore, the Court stated that the test of a bank’s power to undertake certain activities "is the relation of the act to that substitution of credits which is of the essence of the banking function. Whatever risk is incidental to the fulfillment of that function, according to the practice of banking as it has developed in these days, is to be accepted and suffered as one of the perils of the business” (id., at 232; see also, O’Connor v Bankers Trust Co., 159 Misc 920, 923, affd 253 App Div 714, affd 278 NY 649 [a determination of the incidental powers which are necessary to carry out the business of banking involves a careful consideration of banking experience and history]).

While this Court has not sanctioned every activity engaged in by banks as an incidental power necessary to carry on the business of banking, commercial banks in this State now engage in such activities as selling certificates of deposit, buying and selling securities on behalf of customers, establishing individual retirement accounts, and providing financial planning and investment counseling services. It therefore follows, as the precedents of this Court demonstrate, that the "incidental powers” clause of Banking Law § 96 (1) may be construed so as not to limit the term "business of banking” to those activities which are necessary to achieve the powers expressly outlined in the statute. Rather, the clause must be construed as an independent, express grant of power, intended to reflect the ever-changing demands of the banking business.

Petitioner’s reliance on the failure of the Legislature to include in the Banking Law a provision expressly authorizing State-chartered commercial banks to broker fixed-rate and variable-rate annuities as proof that the Legislature did not intend to so empower those banking organizations, is unpersuasive. It is settled that inaction by the Legislature is inconclusive in determining legislative intent (see, Clark v Cuomo, 66 NY2d 185, 191-192; Flanagan v Mount Eden Gen. Hosp., 24 NY2d 427, 433).

Turning to petitioners’ second argument, we reject the assertion that annuities are insurance which banks are not authorized to sell. To be sure, Insurance Law § 1113 (a) (2) includes "annuities” in its description of "kinds of insurance authorized.” However, the great weight of authority supports the position that annuities are not insurance. First, an annuity is defined as "[a] fixed sum payable to a person at specified intervals for a specific period of time or for life. Payments represent a partial return of capital and a return (interest) on the capital investment” (Black’s Law Dictionary 90 [6th ed 1990]). An insurance contract, on the other hand, is defined as "[a] contract whereby one undertakes to indemnify another against loss, damage, or liability arising from an unknown or contingent event and is applicable only to some contingency or act to occur in the future” (id., at 802). Second, this Court has repeatedly embraced the notion that annuities are not insurance (see, People ex rel. Metropolitan Life Ins. Co. v Knapp, 193 App Div 413, 416, affd 231 NY 630 [a contract for an annuity is not a contract for insurance]; see also, People v Security Life Ins. & Annuity Co., 78 NY 114, 128 [annuity contracts are not contracts of insurance and are not governed by any rules applicable to life insurance]). Third, one commentator in the field of Insurance Law has emphasized the differences between annuity contracts and contracts of insurance by stating:

"An annuity contract is almost diametrically opposed to [an insurance contract]. The person designated as the recipient is the person paying the money. He pays in a fixed sum usually at one time, in return for which the company must then perform a series of obligations over a period of years, at designated times. The hazard of loss is no longer upon the company but upon the recipient who may die before any benefits are received. Instead of creating an immediate estate for the benefit of others, he has reduced his immediate estate in favor of future contingent income. The positions are almost exactly reversed. Annuity contracts must, therefore, be recognized as investments rather than as insurance” (1 Appleman, Insurance Law and Practice § 84, at 295 [rev vol]).

Thus, we reject the claim that annuities are a classic form of insurance. Moreover, we reject petitioners’ assertion that the Banking Department exceeded its statutory authority by permitting State-chartered banks to sell insurance. By opining that section 96 (1) of the Banking Law authorized the brokerage of annuities by State banks as a power incidental to the business of banking, the Banking Department was acting within the scope of the authority delegated to it by the Banking Law (see, Banking Law §§ 10, 11 [1]; § 14 [2]; § 96 [1]).

Further, we discern no need to depart from the Banking Department’s determination that the brokerage of fixed-rate and variable-rate annuities by State-chartered commercial banks is permissible because such activity falls within the bank’s power to broker financial investment instruments. Indeed, State-chartered commercial banks commonly broker other financial investment instruments, including certificates of deposit and various types of securities, which closely resemble annuities.

Petitioners’ claim that the Banking Department relied ex-elusively on a Federal agency’s analysis of Federal law, without regard to any State law, is untenable. Although the Banking Department noted that its opinion was based on "reasons similar to those stated in OCC Letter 499,” its Interpretive Letters clearly demonstrate that it considered the relevant sections of the Banking Law in rendering its opinion.

Further, petitioners’ assertion that the Banking Department’s determination should be rejected since the OCC Letter it relied on was struck down by a Federal appellate court, is unavailing. In Variable Annuity Life Ins. Co. v Clarke (998 F2d 1295), an insurance company commenced an action challenging OCC’s Interpretive Letter of March 21, 1990, determining, among other things, (1) that 12 USC § 24 (Seventh), which grants national banks the power to engage in incidental activities necessary to the business of banking, authorized national banks to sell annuity contracts, (2) that 12 USC § 92, which permits national banks to act as insurance agents in towns with less than 5,000 inhabitants, does not limit the power of national banks to sell insurance in towns with a population of over 5,000, and (3) that annuities are not insurance. The Fifth Circuit Court of Appeals concluded that annuities are a form of insurance, and held that section 92 impliedly prohibits national banks from selling annuities in cities with a population larger than 5,000, and that OCC’s determination that banks may sell annuities pursuant to the incidental powers clause of 12 USC § 24 (Seventh) is erroneous because the specific limitation on the power of national banks to sell insurance contained in section 92 controls the general grant of incidental power in section 24 (Seventh) (id., at 1296-1297).

New York currently has no statute that is analogous to 12 USC § 92, discussed in Variable Annuity (supra) which can be read as limiting or prohibiting the sale of annuities by banks. Moreover, as aforestated, the weight of authority is that annuities are not insurance contracts.

Finally, it is clear, as the Appellate Division noted, that Banking Law § 97 (5) permits State-chartered commercial banks to invest in the common or preferred stock of any corporation, including insurance companies other than life insurance companies, so long as the Banking Board’s decision in allowing such investment comports with the mandates of Banking Law § 10 (see, Banking Law § 14 [1] [d]; § 97 [4-a]).

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Kaye and Judges Simons, Bellacosa, Levine and Ciparick concur; Judge Titone taking no part.

Order affirmed, with costs.

      . 12 USC § 24 (Seventh) authorizes national banks: "To exercise * * * all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes according to the provisions of [title 62 of the Revised Statutes].”

      . Banking Law § 96 (1) outlines the general powers of State-chartered commercial banks and also authorizes those banks to "exercise all such incidental powers as shall be necessary to carry on the business of banking.”

      . Subdivision (5) of Banking Law § 97 authorizes a bank or trust company to invest in and have and exercise all rights of ownership with respect to "[s]o much of the capital stock of any other corporation as may be specifically authorized by the laws of this state or by resolution of the banking board upon a three-fifths vote of all its members.”


author: Ciparick, J.

text:
    [632 NE2d 1251, 610 NYS2d 928]
    In the Matter of Gary Delaraba, as President of the Police Benevolent Association of the Police Department of the County of Nassau, Inc., Respondent, v Nassau County Police Department et al., Appellants.
    Argued February 9, 1994;
    decided March 22, 1994

      POINTS OF COUNSEL

      Bee & Eisman, Mineóla (Peter A. Bee and Mitchell P. Klein of counsel), for appellants.
    I. Respondents-appellants’ plan to randomly test police officers assigned to narcotics control units for the use of controlled substances is constitutionally permissible regardless of the frequency of said tests. (Treasury Empls. v Von Raab, 489 US 656; Matter of Caruso v Ward, 72 NY2d 432; Skinner v Railway Labor Executives’ Assn., 489 US 602; Matter of Seelig v Koehler, 76 NY2d 87; Taylor v O’Grady, 888 F2d 1189; Shoemaker v Handel, 619 F Supp 1089, 795 F2d 1136, 479 US 986.) II. Respondents-appellants have demonstrated a compelling State interest in implementing a random drug testing plan. As such, they need not demonstrate that desired objectives cannot be accomplished with a less stringent frequency schedule. (Shoemaker v Handler, 619 F Supp 1089; Matter of Caruso v Ward, 72 NY2d 432; Skinner v Railway Labor Executives’ Assn., 489 US 602.)

      Solomon Richman Greenberg, P. C, Lake Success (Theodore C. Richman, Harry Greenberg and Robert J. Burzichelli of counsel), for respondent.
    I. Respondents-appellants’ plan to randomly test police officers assigned to alleged "narcotics control units” for the use of controlled substances is constitutionally impermissible due to the frequency of said tests. (Matter of Caruso v Ward, 72 NY2d 432; Treasury Empls. v Von Raab, 489 US 656; Matter of Patchogue-Medford Congress of Teachers v Board of Educ., 70 NY2d 57; O’Connor v Ortega, 480 US 709; Matter of Seelig v Koehler, 76 NY2d 87; Skinner v Railway Labor Executives’ Assn., 489 US 602; Shoemaker v Handel, 619 F Supp 1089, 795 F2d 1136; Feliciano v City of Cleveland, 661 F Supp 578.) II. Respondents-appellants have failed to demonstrate by competent evidence a compelling State interest which requires the frequency of testing under their plan and which cannot be accomplished by a less stringent frequency schedule. (Treasury Empls. v Von Raab, 489 US 656; Skinner v Railway Labor Executives’ Assn., 489 US 602; Matter of Caruso v Ward, 72 NY2d 432.)

      Paul A. Crotty, Corporation Counsel of New York City (Michael S. Adler and Francis F. Caputo of counsel), for City of New York, amicus curiae.

    I. The utilization of the "independent trial” technique in a random drug testing program should not be deemed to jeopardize the program’s legality. (Matter of Caruso v Ward, 72 NY2d 432; Matter of Seelig v Koehler, 76 NY2d 87, 498 US 847.) II. A reasonableness test should apply to the determination of whether the frequency utilized in a particular random drug testing program passes legal muster. No stricter test is appropriate for frequencies within the mainstream. (Matter of Delaraba v Nassau County Police Dept., 192 AD2d 655.) III. Utilization in a random drug testing program pertaining to sensitive police department units of an average frequency of one test every 10 months is not so excessive as to render the program unconstitutional, especially when the program is a newly inaugurated one and the employee group concedes that the employer’s interests are sufficiently compelling to justify imposition of random testing. (Matter of Seelig v Koehler, 76 NY2d 87; Matter of Caruso v Ward, 72 NY2d 432.)
   OPINION OF THE COURT

Ciparick, J.

The question this Court confronts is whether the frequency with which a random drug testing program is conducted can render the plan unconstitutional on the grounds that it is unreasonably intrusive and subjects the affected members’ reasonable expectation of privacy to unregulated discretion.

I.

The Commissioner of Police of the Nassau County Police Department, pursuant to 1989 Orders Numbers 16 and 27, authorized a program of drug testing, without reasonable suspicion, providing for monthly random testing of 10 members of the 100 members assigned to the Narcotics Bureau, special narcotics enforcement and the Scientific Investigation Bureau. Testing would be performed on an "independent trial” basis such that the random selection would not result in the removal of that member from the selection process for subsequent months.

The President of the Police Benevolent Association (PBA) of Nassau County commenced this CPLR article 78 proceeding seeking to prohibit respondents from implementing the plan on the ground that the frequency of the testing would be impermissibly intrusive. Supreme Court dismissed the petition holding that the statistical probabilities do not render the proposed testing unconstitutional, but the Appellate Division reversed, holding that "[ajbsent some evidence that the desired objectives require the frequency of testing under the respondents’ plan and cannot be accomplished with a less stringent testing schedule, we must conclude that the affected members’ reasonable expectations of privacy are subject to unregulated discretion, and that the respondents’ plan is therefore unreasonably intrusive” (192 AD2d 655, 657).

We disagree and reverse, thus upholding this random drug testing program, and dismiss the petition.

II.

It is well-established law that random drug screening constitutes a search and seizure within the meaning of the Federal and State Constitutions (Treasury Empls. v Von Raab, 489 US 656; Matter of Caruso v Ward, 72 NY2d 432). The guarantee against unreasonable searches and seizures found in both the State and Federal Constitutions (NY Const, art I, § 12; US Const 4th Amend) is designed to protect the personal privacy and dignity of the individual against unwarranted intrusions by the State (Matter of Abe A., 56 NY2d 288; Matter of Patchogue-Medford Congress of Teachers v Board of Educ., 70 NY2d 57, 64).

A three-pronged standard of review was articulated in Patchogue-Medford as it related to all probationary teachers eligible for appointment to submit to a urine test for the purpose of detecting potential drug abuse. This Court, invalidating the plan, held that a drug screening plan must be closely scrutinized and permitted only where: (1) the individual’s privacy interests are minimal, (2) the government’s interests are substantial, and (3) safeguards are in place to ensure that the individual’s reasonable expectations of privacy are not subject to unregulated discretion (Patchogue-Medford, supra, at 70).

These standards were applied in Matter of Caruso v Ward (72 NY2d 432, supra), which upheld the constitutionality of a drug testing directive issued by the New York City Police Commissioner. That program required the periodic, random urinalysis drug testing of the members of the Organized Crime Control Bureau. The Bureau was a specialized, high-risk, highly sensitive police unit made up of about 1,100 officers who were voluntarily assigned (id., at 435). This Court held that the members had a "very diminished expectation of privacy due to their pursuit of service in the elite unit.” (Id., at 440.) The voluntary nature of the assignment, the fact that the members were informed prior to assignment about the need for drug testing and the officers’ agreement to undergo close examination of their personal lives, their financial affairs and their professional judgment, led us to conclude that the drug testing program was "just another layer of an already heightened, persistent and employee-expected scrutiny” (id., at 440). The third prong of the Patchogue-Medford test was not analyzed in Caruso because the matter came to this Court before the plan’s "implementing details” were formulated (id., at 441). Thus, Caruso gives little guidance as to what constitutes sufficient procedural safeguards to avoid the experience of "unregulated discretion”.

The third prong was addressed, however, in Matter of Seelig v Koehler (76 NY2d 87, cert denied 498 US 847), which upheld the random drug testing program of the New York City Correction Department. In that instance, 50 officers from a pool of 7,200 were tested every two weeks. The third-prong safeguards or protocols included: (1) employees’ names were chosen randomly by computer, (2) a tenured officer had the right to a hearing before being discharged for refusal to comply with testing procedures, (3) state-of-the-art techniques were used to collect the specimen, insure its integrity, preserve it for challenge, and test and retest it, and (4) an employee who tested positively for drug contamination could choose another qualified laboratory to test the sample again (id., at 95-96).

Considering these factors, this Court concluded, "[t]he protocols overall allow for very little discretion and certainly not that which could be called 'unregulated discretion’ ” (id., at 96). Similarly, in Matter of McKenzie v Jackson (152 AD2d 1, affd 75 NY2d 995), this Court upheld the Westchester County Department of Corrections operational guidelines as they applied to random urinalysis testing of probationary correction officers, absent reasonable suspicion of drug use.

III.

At issue in this instance is the validity of the procedures promulgated by the Nassau County Police Commissioner in testing approximately 100 volunteer officers, requiring that 10 chosen randomly from the entire pool of 100 be tested each month. Statistically the system is one of "independent trials,” approved in Seelig.

Officers assigned to the three special units are required to sign a form acknowledging their consent to testing prior to such assignment and to further random testing following assignment. Incumbent members of the three units would be required as well to sign a form acknowledging their consent to random testing while so assigned. Incumbent members who decline to sign such forms would be transferred out of the special units, without penalty.

In this instance, just as in Caruso, those police officers who would be subject to random testing would have prior knowledge of the testing, may transfer out of the command if they object to the testing, and are voluntary members of an elite organization whose primary purpose is drug interdiction. Additionally, as in Caruso, the Nassau County Police Department has the same substantial State interest, that its elite members never take drugs, nor damage the community’s confidence in them, nor endanger each other due to impaired perception. The Commissioner’s order sets forth the drug testing procedures, including insuring that the sample is unadulterated, positive results are retested and the chain of custody is uninterrupted.

The PBA concedes the employer’s right to implement a random drug testing program. It agrees that compelling State interests will be achieved by a random drug testing plan. The PBA further acknowledges that police officers in certain unique and specific circumstances may have a diminished expectation of privacy. Thus, the first two prongs of the Patchogue-Medford test have been satisfied.

As to the third prong, that safeguards be employed to ensure that an individual’s reasonable expectation of privacy is not subject to unregulated discretion, this Court holds that the proposed protocols and procedural safeguards as articulated in Seelig have been met. Privacy rights have also been protected by allowing for the direct observation by a supervisor of the same sex. Thus, the proposed protocols are reasonable and in compliance with the rule as set forth in Seelig.

Turning to the issue of "independent trial” technique, the purpose of the program is safety and deterrence. These goals are most effectively met when an individual remains within the testing pool and remains subject to random testing. By contrast, removing the tested 10 from the pool each month destroys the randomness of the program (especially after the initial months). A drug user within the ranks puts the entire unit at peril. The drug-using officer might be derelict in performing required duties as a result of impaired judgment that could endanger other officers. In Seelig this Court approved the use of the "independent trial” technique in random drug testing as a deterrent. Clearly the best deterrent occurs when an individual remains in the pool subject to additional testing on an ongoing basis, otherwise the plan would be so watered down as to be useless. Random drug testing achieves the desired objectives by inducing individuals who might otherwise engage in drug usage to refrain from such usage. Without the "independent trial” technique, some period of immunity would be created for an individual who has already been tested and with the threat of further testing removed, the motivation to abstain due to fear of detection is eliminated. The "independent trial” technique has been found to be a necessary feature of effective random testing, its validity having been upheld in Seelig. This Court finds no reason to distinguish this case from Seelig and upholds the "independent trial” technique reflected in the Nassau County Police Department’s proposed plan.

IV.

The only remaining question, then, is whether this proposed random testing program can be regarded as so excessively frequent as to be unconstitutional by subjecting the affected members’ reasonable expectation of privacy to "unregulated discretion.” The standard of reasonableness must govern. "The constitutionality of a search conducted by a public employer for 'noninvestigatory, work-related purposes, as well as for investigations of work-related misconduct, should be judged by the standard of reasonableness under all the circumstances’ as to 'both the inception and the scope of the [government] intrusion’ ” (Caruso, supra, at 437; see also, O’Connor v Ortega, 480 US 709, 725-726).

Because the program here is concededly a "search” for Fourth Amendment purposes, the burden is on the Commissioner to establish its reasonableness both at its "inception” and in its "scope.” The Commissioner must come forward with evidence demonstrating that his decision to implement this program and to design it, as he did, was not arbitrary. In this case, however, both the inception and the scope of the proposed program are not unlike those previously endorsed by this Court in Caruso and Seelig. Thus, in this case we conclude that the Commissioner did not act arbitrarily and has met his burden of demonstrating the program’s reasonableness, including the chosen frequency.

Here, the employer has chosen a frequency that, although subjecting the employee to random drug testing at relatively frequent intervals, is nonetheless not so great and substantial an intrusion upon the employee’s privacy interests as to render it constitutionally impermissible. Clearly, a frequency may be chosen, in a given case, that might result in such a substantial intrusion upon the employee, that would render it impermissibly intrusive and warrant invalidation. This is not the case here. The frequency chosen requires that 10 officers be tested each month with all 100 members subject to testing each month, thus the maximum any employee could be tested would be 12 times a year (though on average an employee would be tested only once every 10 months). This maximum exposure to the employee is thus less than that approved in Seelig, where 50 officers out of a 7,200 person force were to be tested every two weeks, with all officers subject to testing each two-week period, the maximum any employee subject to being tested under that court approved plan being an improbable 26 times a year. This plan’s frequency rate, even if extended to its outer highly improbable limit of 12 times a year, represents a minimal over-all intrusion on the employee.

This group of employees clearly comes within the narrow exception contemplated by Caruso of an elite corps of volunteer officers subject to extraordinary scrutiny. With all procedural safeguards in place, this plan contemplates a frequency of testing well within the standard set by Seelig, and represents a reasonable compromise between the needs of government employers to protect against drug abuse by volunteer officers assigned to highly sensitive positions and the interests of these employees in limiting intrusions upon their personal privacy. The higher standard as advanced by the Appellate Division, that an employer must first demonstrate that no lesser frequency than that selected can achieve the objectives sought, cannot be sustained. Selecting the minimal frequency of drug testing necessary to advance the employer’s goals would be a near impossible task, since demanding exactitude in the selection of a frequency for testing would require years of experience to yield any reliable information.

Thus, the standard set forth by the Appellate Division must be rejected in favor of the "reasonableness” standard in determining whether frequency passes constitutional muster. In doing so we hold that the Commissioner of Police of the Nassau County Police Department has sustained his burden by a sufficient showing on the question of the reasonableness of its random drug testing program both at its inception and in its scope as furthering a compelling State interest. The presumption that warrantless intrusions without reasonable suspicion are unreasonable has been sufficiently rebutted.

Accordingly, this Court holds that the Commissioner’s plan to randomly test police officers as per its 1989 Orders Numbers 16 and 27 meets all constitutional requirements, is not unreasonably intrusive and not subject to unregulated discretion.

The order of the Appellate Division should therefore be reversed and the petition dismissed.

Chief Judge Kaye and Judges Simons, Bellacosa, Smith and Levine concur; Judge Titone taking no part.

Order reversed, with costs, and petition dismissed.