text:
    In the Matter of Friends of the Shawangunks, Inc., et al., Respondents, v Frank Knowlton et al., Constituting the Planning Board of the Town of Rochester, Appellants, and Marriott Corporation, Intervenor-Appellant.
    Argued February 14, 1985;
    decided March 19, 1985

      POINTS OF COUNSEL

      Arthur M. Kahn for appellants.
    I. The court below.erroneoualy construed Town Law § 281 (b). (Matter of Kamhi v Planning Bd., 59 NY2d 385; Matter of Hiscox v Levine, 31 Misc 2d 151.) II. The Planning Board properly applied the zoning law of the town independently of the conservation easement. (Ginsberg v Yeshiva of Far Rockaway, 45 AD2d 334; Matter of Isenbarth v Bartnett, 206 App Div 546,237 NY 617; People [Complaint of Wolfe] v Margolies, 166 Misc 135; Matter of G. M. L. Land Corp. v Foley, 20 AD2d 645, 14 NY2d 823; Cohen v Rosevale Realty Co., 120 Misc 416, 206 App Div 681; Matter of 109 Main St. Corp. v Burns, 14 Misc 2d 1037.)

      Benjamin R. Pratt, Jr., and Robert J. Kafin for intervenor appellant.
    The court below erroneously substituted its judgment for that of the Planning Board in deciding the appropriate density of residential uses in the Town of Rochester. (Matter of Fiore v Zoning Bd. of Appeals, 21 NY2d 393; People ex rel. Hudson-Harlem Val. Tit. & Mtge. Co. v Walker, 282 NY 400; Ontario Knitting Co. v State of New York, 205 NY 409; Phelps v Mayor of City of N. Y., 112 NY 216; City of Hudson v Flemming, 139 App Div 327; Matter of 109 Main St. Corp. v Burns, 14 Misc 2d 1037; People ex rel. Rosevale Realty Co. v Kleinert, 204 App Div 883, 237 NY 580, 268 US 646.)

      Philip H. Dixon, Philip H. Gitlen and William Ginsberg for respondents.
    The court below correctly held that the lands subject to the conservation easement could not be used in computing maximum allowable density for the “cluster”-zoned condominium development. (Kanaley v Brennan, 119 Misc 2d 1003; Matter of Kamhi v Planning Bd., 89 AD2d 111, 59 NY2d 385; Matter of County of Suffolk, 70 Misc 2d 232.)

      David S. Sampson, Gail Bowers and William A. Kuchinski for Adirondack Council, Scenic Hudson, Inc., and another, amici curiae. I. A conservation easement is a preservation tool, not a development tool. II. Interpretation of Town Law § 281 prohibits calculation of the restricted acres for density purposes. (Orell v Planning Bd., 66 Misc 2d 843; Rodgers v Village of Tarry town, 302 NY 115; Little Joseph Realty v Town of Babylon, 41 NY2d 738; Udell v Haas, 21 NY2d 463; Matter of Kamhi v Planning Bd., 59 NY2d 385; Kanaley v Brennan, 119 Misc 2d 1003; Riegert Apts. Corp. v Planning Bd., 105 Misc 2d 298, 57 NY2d 206; Matter of Oakwood Co. v Planning Bd., 89 AD2d 606; Matter of County of Suffolk, 70 Misc 2d 232; Regan v Tobin, 89 AD2d 586.)
   OPINION OF THE COURT

Meyer, J.

Notwithstanding that a previously granted conservation easement proscribes erection of residences on part of the land included in a cluster zoning application, the land thus burdened may be counted in determining the number of residential units that may be erected on the unburdened acreage. A conservation easement is not an “applicable requirement” within the meaning of Town Law § 281 (b), and nothing in the Town Law or the Environmental Conservation Law forecloses the owner of the fee under land thus burdened from using it as open area required under the cluster zoning ordinance. The Appellate Division having annulled the Planning Board’s approval of intervenor’s cluster zoning application, its order should, therefore, be reversed, with costs, and the judgment of Supreme Court, Ulster County, which dismissed the petition, should be reinstated.

I

Lake Minnewaska Mountain Houses, Inc. (Mountain Houses), owns approximately 450 acres of land located on Lake Minnewaska in the Town of Rochester, Ulster County. In 1977, Mountain Houses sold to the Palisades Interstate Park Commission (PIPC) a conservation easement on 240 acres of the land contiguous to the 10,000 acre Minnewaska State Park owned by PIPC. The easement permits the erection of one single family residence, a potable water storage pond and the maintenance of the existing golf course and accessory areas, but otherwise proscribes development of the 240 acres. By agreement dated February 26,1980, Mountain Houses sold the entire 450 acres to the Marriott Corporation, subject, however, as a condition precedent to closing, to Marriott’s obtaining approval of subdivision of the property to permit construction of a hotel and condominium units.

In April 1982, Marriott applied to the Town Planning Board for approval of a plat of the 450 acres calling for construction of a hotel and 300 residential condominium units, the condominium units to be clustered on part of the 210 acres not covered by the conservation easement. The district in which the 450 acres is located requires a plot of one or more acres per residential uni t. After notice to interested parties and a public hearing on the application, the Planning Board approved the requested 300 units. PIPC, though given notice, interposed no objection.

Petitioners, eight individual owners of nearby properties and two not-for-profit conservation organizations, then commenced this article 78 proceeding against the Planning Board. Special Term granted Marriott’s application to intervene and on the merits dismissed the petition. The Appellate Division reversed, concluding that the 240 acres subject to the conservation easement could not be counted in determining the number of uni bs permissible under the town’s cluster zoning resolution, because the conservation easement constituted an “applicable requirement” within the meaning of Town Law § 281 (b), the enablin g act pursuant to which the cluster zoning provisions of the zonin g ordinance were adopted. Both the Planning Board and Marrio tt appeal as of right.

Town Law § 281 provides in pertinent part that:

“The town board is hereby empowered by resolution to authorize the planning board, simultaneously with the approval of a plat or plats pursuant to this article, to modify applicable provisions of the zoning ordinance, subject to the conditions hereinafter set forth and such other reasonable conditions as the town board may in its discretion add thereto. Such authorization shall specify the lands outside the limits of any incorporated village to which this procedure may be applicable. The purposes of such authorization shall be to enable and encourage flexibility of design and development of land in such a manner as to promote the most appropriate use of land, to facilitate the adequate and economical provision of streets and utilities, and to preserve the natural and scenic qualities of open lands. The conditions hereinabove referred to are as follows:

* * *

“(b) The application of this procedure shall result in a permitted number of building plots or dwelling units which shall in no case exceed the number which could be permitted, in the planning board’s judgment, if the land were subdivided into lots conforming to the minimum lot size and density requirements of the zoning ordinance applicable to the district or districts in which such land is situated and conforming to all other applicable requirements.

* * *

“(d) In the event that the application of this procedure results in a plat showing lands available for park, recreation, open space, or other municipal purposes directly related to the plat, then the planning board as a condition of plat approval may establish such conditions on the ownership, use, and maintenance of such lands as it deems necessary to assure the preservation of such lands for their intended purposes. The town board may require that such conditions shall be approved by the town board before the plat may be approved for filing.”

The Town of Rochester, pursuant to that authorization, has incorporated in its zoning ordinance provisions for residential cluster development permitting its Planning Board to vary the residential density within a tract provided that the proposed development produces a total acreage density as specified for the district in which located and guarantees permanent retention and maintenance of “open areas.”

Petitioners argue (1) that conservation easements are authorized by ECL 49-0301 et seq. and, therefore, that the PIPC easement is an “applicable requirement” within the meaning of Town Law § 281 (b), and (2) that because the land covered by the easement is not “legally buildable,” it cannot be considered in determining permissible density for a cluster zoning development. We disagree and, therefore, reverse.

II

The use that may be made of land under a zoning ordinance and the use of the same land under an easement or restrictive covenant are, as a general rule, separate and distinct matters, the ordinance being a legislative enactment and the easement or covenant a matter of private agreement (see, Ginsberg v Yeshiva of Far Rockaway, 36 NY2d 706, affg 45 AD2d 334, 337-338; 4 Rathkopf, The Law of Zoning and Planning § 57.02 [4th eel]). Thus, a particular use of land may be enjoined as in violation of a restrictive covenant, although the use is permissible under the zoning ordinance (Gordon v Incorporated Vil. of Lawrence, 56 NY2d 1003, affg 84 AD2d 558, 559; Regan v Tobin, 89 AD2d 586, 587), and the issuance of a permit for a use allowed by a zoning ordinance may not be denied because the proposed use would be in violation of a restrictive covenant (People ex rel. Rosevale Realty Co. v Kleinert, 204 App Div 883, on later appeal 206 App Div 712, appeal dismissed 236 NY 605, order resettled 207 App Div 828, affd 237 NY 580, writ dismissed 268 US 6416; Matter of 109 Main St. Corp. v Burns, 14 Misc 2d 1037; Matter of Forte v Wolf, 225 NYS2d 858; cf. Matter of Isenbarth v Bartnett, 206 App Div 546, affd 237 NY 617).

Petitioners seek to distinguish those rules as related only to covenants and easements appurtenant to an interest in real property, whereas a conservation easement, as defined in article 49 of the Environmental Conservation Law, may be held only by a public body or not-for-profit conservation organization (ECL 49-0305 [3] [a]) and is enforceable notwithstanding that it is of a character wholly distinct from the easements traditionally recognized at common law and notwithstanding defenses that would defeat a common-law easement (ECL 49-0305 [5]). The short answer to the argument is that ECL article 49 was not enacted until 1983 and that PIPC does own the adjacent Minnewaska State Park. Thus the easement granted PIPC in 1977 was a common-law easement appurtenant, which, whatever its burden upon intervenor’s use of the 240 acres it covered, cannot be construed to be an “applicable requirement” within the meaning of Town Law § 281 (b), unless the usual rule that words in a statute are to be construed by reference to words and phrases with which they are associated (McKinney’s Cons Laws of NY, Book 1, Statutes § 239 [a]) is to be ignored.

More importantly, the present version of Town Law § 281 was enacted by chapter 963 of the Laws of 1963, 20 years before enactment of the Environmental Conservation Law provisions relating to conservation easements (L 1983, ch 1020). Petitioners point to nothing in the legislative history of either statute to suggest a legislative intent to include within the concept of the “other applicable requirements” referred to in Town Law § 281 (b), such an easement rather than other zoning and planning requirements imposed by the Town Law. This, therefore, is not a case such as Baddour v City of Long Beach (279 NY 167, appeal dismissed 308 US 503), in which by interim ordinance “designed to effect compulsory obedience to the restrictive covenants in the grants from the original owners” (279 NY, at p 172) the legislative body indicated an intent to proscribe boarding house use, which was proscribed by the prior restrictive covenant, even though the zoning ordinance as finally adopted prohibited use for business purposes and did not specifically preclude boarding houses. Indeed, if it were, a serious constitutional question might arise whether Mountain Houses had not been deprived of all economic value of the fee underlying the easement (cf. French Investing Co. v City of New York, 39 NY2d 587, appeal dismissed and cert denied 429 US 990) which nevertheless remains subject to taxation, there being here, unlike the situation in Baddour, serious question whether there is any reasonable income-productive or other use that could be made of the fee as restricted by the conservation easement.

Nor are petitioners aided, as they suggest, by the provision of the Environmental Conservation Law authorizing enforcement of its provisions by parties other than the grantor or holder of the easement. To the contrary, that provision refutes their position for if Town Law § 281 (b) is construed as allowing nearby landowners to block cluster subdivision as contrary to the conservation easement, the class of persons having standing to enforce a conservation easement will have been expanded significantly beyond the limits deliberately set by the Legislature in the ECL.

Ill

The argument that, because the 240 acres subject to the easement cannot be built upon while the easement continues in force, the burdened land may not be counted in determining cluster zoning density is of no greater aid to petitioners. “[I]t is undisputed that the PIPC does not own the land burdened by the easement. It merely has an easement, which is ‘a right, distinct from ownership, to use in some way the land of another’ ” (Matter of Sierra Club v Palisades Interstate Park Commn., 99 AD2d 548, 549, lv denied 63 NY2d 604). Mountain Houses, having granted PIPC only an easement, continued to own the underlying fee and with it the right to use the property in any manner not in violation of the easement. Marriott, as Mountain Houses’ conditional vendee, proposes to use the land in fulfillment of its obligation under the cluster development provisions of the town zoning ordinance to provide open areas and guarantee their permanent maintenance and retention, a use in furtherance of the purpose declared by Town Law § 281, “to preserve the natural and scenic qualities of open lands” and in no way violative of PIPC’s easement.

As the conditional vendee of the fee of the 450-acre tract, Marriott is entitled to have the entire 450 acres considered in determining the permissible number of dwelling units. One of the major purposes of cluster zoning being the preservation of the natural and scenic qualities of open land, it is fundamentally inconsistent with the statutory purpose to hold that because that part of the land that will be thus preserved under a cluster zoning proposal is also subject to an easement that preserves it as open land, it may not be counted in determining density. The more so is this true in light of the case law, discussed above, holding zoning ordinances and restrictive covenants to be separate and distinct matters.

Equally unavailing are petitioners’ suggestions (1) that if the property covered by the conservation easement may be counted, density on the adjoining land greater than permissible under conventional zoning will result, threatening the preservation goal of the conservation easement, and (2) that, having granted an easement to PIPC, Mountain Houses should not be permitted to “double dip” by using the underlying fee in computing cluster density. The answer to the first is that the declared purposes of Town Law § 281 contemplate both “flexibility of design and development” and the preservation of “the natural and scenic qualities of open lands.” Those purposes are frustrated if the trade-off of increased density on the developed portion of the land in return for preserving undeveloped the remainder of the land* **** is foreclosed by exclusion of the open area from the density computation simply because the developer has agreed with others to keep the open areas open. Moreover, because the PIPC easement makes the burdened land available for use and enjoyment of the public (NY Const, art XIV, §4; ECL 49-0301; PRHPL 9.05 [5]), it is difficult to understand how the preservation goal of the easement is threatened by inclusion of the open area in the density computation. To read the statutes as necessarily implying the rule of exclusion for which petitioners contend would be to ignore not only the history of Town Law § 281 (see, n 5, supra) and the usual rules of statutory construction (Matter of Kamhi v Planning Bd., 59 NY2d 385, 392; People v Graham, 55 NY2d 144, 152), but also the fact that subdivision (b) of that section makes the number of permitted dwelling units a matter of “the planning board’s judgment,” which may be overturned only if illegal, arbitrary or an abuse of discretion (CPLR 7803; Town Law § 282).

The double dip argument is essentially addressed to the process of negotiation with PIPC rather than to any provision of either law. Petitioners point to nothing in the Environmental Conservation Law that would prevent PIPC from acquiring a.n easement over the cluster open areas had cluster approval been sought first, or that requires PIPC when acquiring a conservation easement to proscribe use of the burdened land if the landowner later applies for cluster development approval.* *** Had cluster approval been obtained first, the acquisition price of a conservation easement over the already burdened open area would probably have been less, but even that is not entirely clear when it is remembered that PIPC’s purposes include not only obtaining conservation easements (ECL 49-0303 [3]), but also the provision of hotel and other facilities for the use of the public (PRHPL 9.05 [5]). Whatever the result, the point is that the matter was within the discretion of PIPC and, as already noted, it neither interposed an objection to Marriott’s 300-unit application nor included in its conservation easement agreement anything related to use of the burdened area as cluster zone open space.

For the foregoing reasons the order of the Appellate Division should be reversed, with costs, and the judgment of Special Term, Ulster County, should be reinstated.

Chief Judge Wachtler and Judges Jasen, Simons, Kaye and Alexander concur.

Order reversed, with costs, and judgment of Supreme Court, Ulster County, reinstated.

      . The agreement also covered additional acreage not involved in this proceeding.

      . Village Law § 7-738 contains essentially identical provisions and General City Law § 37 includes comparable, though not identical, provisions.

      . The reference in Town Law § 281 (b) to “requirements of the zoning ordinance” implies that the “other applicable requirements” in its concluding phrase be governmental, if not legislative, in origin. PIPC, formed under interstate compact (PRHPL 9.01), is a governmental agency, but it has purchased an easement, not imposed a governmental requirement.

      . At the time that the Planning Board determination challenged in this proceeding was made, the statute provided that a conservation easement could be enforced by its grantor, holder (which must be a public body or not-for-profit corporation [ECL 49-0305 (3)]), the Attorney-General or an organization designated in the easement as having a third-party enforcement right (ECL 49-0305 [5]). As amended by chapter 292 of the Laws of 1984, the statute r.ow provides that a conservation easement is enforceable only by the grantor, holder or a not-for-profit conservation organization designated in the easement as having third-party enforcement rights. Under either version of the statute, petitioners lack standing to enforce the easement granted to PIPC.

      . Matter of Hiscox v Levine (31 Misc 2d 151, 155) and Kanaley v Brennan (119 Misc 2d 1003), cited by petitioners, hold otherwise but are not to be followed in this respect. The Hiscox statement was dictum, unsupported by reasoning or authority, but may have resulted from the use in the last sentence of the then version of Town Law § 281 of the phrase “adjoining land” to describe the open space to be safeguarded. Nothing in the present wording of the section suggests, as petitioners argue, that it was intended to reduce density below that permissible under applicable statute or ordinance. The statement in Kanaley is based solely on Hiscox, is likewise dictum, and fails to note that as presently worded Town Law § 281 (d) leaves no doubt that the open land to be protected is part of the plat for which cluster zoning approval is sought.

      . As the Appellate Division stated in Matter of Kamhi v Planning Bd. (89 AD2d 111, 125, revd on other grounds 59 NY2d 385): “It is entirely optional for the developer to utilize the cluster technique with its concomitant savings in construction costs by accepting the condition of dedication; or, he may refuse the opportunity and conventionally develop the parcel [citation omitted]. Either way, he is limited to the same number of dwellings.”

      . The Appellate Division decision in Matter of Kamhi v Planning Bd. (89 AD2d 111) is not to the contrary. That the landowner there involved was limited to eight residences on his 11-acre parcel (89 AD2d, at p 129) resulted from the Town Board’s specific authorization to the Planning Board to employ clustering for the particular land (89 AD2d, at p 113) or from the Yorktown Drainage Law (id., at p 112), or both. But both are land use controls imposed by legislative act of the Town Board and thus different from the easement purchased by PIPC in the instant case. Matter of County of Suffolk (70 Misc 2d 232, 243) likewise turned upon the fact that under the applicable zoning ordinance underwater land could not be built upon.

      . Whether such a proscription (as distinct from a provision requiring refund of part of the acquisition price) can be made part of a conservation easement which is otherwise not more burdensome than the use permitted for a cluster zoning open area is a question beyond the scope of this case, on which we express no opinion.

      . The record contains a proposed Restated and Amended Conservation Easement Agreement which specifically reserves that right to Marriott, but we are not advised whether in fact it has since been executed (see, however, Matter of Sierra Club v Palisades Interstate Park Commn., 99 AD2d 548).


source: Caselaw Access Project

author: Jasen, J.

license: Public Domain

text:
    In the Matter of American Savings Bank, Formerly Known as Franklin Savings Bank of New York, Respondent, v Philip R. Michael, as Commissioner of Finance of the City of New York, et al., Appellants. In the Matter of Bowery Savings Bank, Respondent, v Philip R. Michael, as Commissioner of Finance of the City of New York, et al., Appellants.
    Argued January 3, 1985;
    decided February 14, 1985

      POINTS OF COUNSEL

      Frederick A. O. Schwartz, Jr., Corporation Counsel (Gale Zareko, Stanley Buchsbaum and Maurice Ravage of counsel), for appellants.
    The tax is imposed on interest or dividends actually credited to depositors during the taxable year or on the interest or dividends which “would have been credited” to them if “each interest or dividend credit” had been computed and credited at the rate of 3.5% per annum, whichever is less. In computing “each interest or dividend credit”, the entire amount on deposit during the quarter (or other period), including interest previously credited, must be used. There is no exclusion for interest earned on any moneys previously credited to the depositor, even though credited as interest. (Woodside Sav. & Loan Assn. v Gallman, 73 Misc 2d 357, 34 NY2d 674; Matter of Herzog v Joy, 74 AD2d 372, 53 NY2d 821; Matter of John P. v Whalen, 54 NY2d 89; People v Newman, 32 NY2d 379; Ostrer v Schenck, 41 NY2d 782; Matter of Fineway Supermarkets v State Liq. Auth., 48 NY2d 464; Matter of Mobil Oil Corp. v Finance Administrator of City of N. Y., 58 NY2d 95; Matter of American Sav. Bank v State Tax Commn., 121 Misc 2d 771; Matter of Steinbeck v Gerosa, 4 NY2d 302.)

      Thomas S. Howard, Douglas J. McClintock and Michael V. Kaprelian for respondent in the first above-entitled proceeding.
    I. The court below properly held that the city’s administrative determination is erroneous as a matter of law. (Howitt v Street & Smith Pub., 276 NY 345; Matter of Crystal v City of Syracuse, 47 AD2d 29, 38 NY2d 883; Matter of Thompson v Mealey, 290 NY 230; Matter of Good Humor Corp. v McGoldrick, 289 NY 452; Matter of Capital Cities Communications v State Tax Commn., 65 AD2d 25; Giventer v Arnow, 37 NY2d 305; Cherokee Nation v United States, 270 US 476; American Timber & Trading Co. v First Natl. Bank, 511 F2d 980,421 US 921; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Matter of Overseas Natl. Airways v State Tax Commn., 91 AD2d 162.) II. If the city’s arguments were accepted they would create an ambiguity that must be resolved in American’s favor. (Matter of Suffolk County Fed. Sav. & Loan Assn. v Bragalini, 5 NY2d 579; American Locker Co. v City of New York, 308 NY 264; People ex rel. Studebaker Corp. v Gilchrist, 244 NY 114; People ex rel. Mutual Trust Co. v Miller, 177 NY 51; Matter of Delmar Box Co. [Aetna Ins. Co.], 309 NY 60.) III. The administrative interpretations of the State’s financial corporation tax statute are not entitled to any weight. (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451.)

      Terence F. Gilheany, Arnold J. Zurcher, Jr., and Rosemary C. Byrne for respondent in the second above-entitled proceeding.
    The order of the court below should be affirmed, since the plain language of the statute, the applicable rules of statutory construction and case authority, the relevant legislative history, and analysis of the results produced by the respective methods of Bowery and the Department, all compel the conclusion that the 3.5% statutory interest rate imposed by section R46-37.53 (b) (2) is a simple, uncompounded, annual rate of interest which excludes from the tax base interest credited to an account during the taxable year. (Matter of Crystal v City of Syracuse, 47 AD2d 29, 38 NY2d 883; Matter of Mobil Oil Corp. v Finance Administrator of City of N. Y., 58 NY2d 95; Matter of Good Humor Corp. v McGoldrick, 289 NY 452; Matter of Pardee v State Tax Commn., 89 AD2d 294; Matter of Grace v New York State Tax Commn., 37 NY2d 193; Matter of American Cyanamid & Chem. Corp. v Joseph, 308 NY 259; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Giventer v Arnow, 37 NY2d 305; Williamsburgh Sav. Bank v Town of Solon, 136 NY 465; Centre Props. Co. v Arnold Constable Corp., 50 AD2d 16.)
   OPINION OF THE COURT

Jasen, J.

On this appeal, we are asked to determine the proper method of calculating the tax base upon which to premise the alternative minimum tax imposed by the City of New York upon savings banks and savings and loan associations.

Petitioner, Bowery Savings Bank (Bowery) is a mutual savings bank organized and existing under the Banking Law of the State of New York. Bowery timely filed New York City financial corporation tax returns for its taxable years 1973 through 1975, and computed its tax thereon on the basis of the alternative minimum tax imposed by the Administrative Code of the City of New York. By notices of deficiency dated May 25,1977, respondents, Philip R. Michael, as Commissioner of Finance of the City of New York, and the Department of Finance of the City of New York (hereinafter collectively referred to as “the Department”), asserted deficiencies in Bowery’s New York City financial corporation tax for the taxable years in issue. On August 22, 1977, Bowery filed petitions for redetermination of the alleged deficiencies in its financial corporation tax, and on May 21, 1981, Bowery filed amended petitions for redetermination of the proposed deficiencies. Formal hearings were conducted, at which the sole issue was the proper method of computing the alternative minimum tax under section R46-37.53 (b) (2). On March 10, 1983, the Department denied Bowery’s petitions and issued a final determination of the tax liability. The final determination was of a deficiency for the years 1973, 1974 and 1975 in the principal amount of $153,289.67, plus interest of $74,676.48, for a total of $227,966.15. On July 8, 1983, Bowery commenced a proceeding pursuant to CPLR article 78 seeking to annul the Department’s final determination, which was subsequently transferred to the Appellate Division, First Department, for disposition pursuant to CPLR 7804 (g).

The circumstances relevant to the petition of the American Savings Bank of New York are virtually identical to those surrounding Bowery’s financial corporation tax dispute. The American Savings Bank (American)* is a mutual savings bank organized and existing under the Banking Law of the State of New York. In the taxable years 1973,1974 and 1975, American paid New York City financial corporation taxes in accordance with the alternative minimum tax. (See, Administrative Code § R46-37.53 [b] [2].) By notices of deficiency dated January 9, 1978, the Department advised American of alleged deficiencies in the amount of its financial corporation tax payments for the taxable years in question.

On March 1, 1978, American petitioned the Department far redetermination of the alleged deficiencies. As with the Bowery financial corporation tax dispute, the sole issue was the proper method of computing the alternative minimum tax under section R46-37.53 (b) (2). By a final determination dated June 30, 1982, the Department denied American’s petition and assessed a deficiency for the years 1973, 1974 and 1975 in the principal amount of $62,121.50, plus interest of $25,619.56, for a total of $87,741.06. American commenced this article 78 proceeding in Supreme Court, New York County, on October 27, 1982, to challenge the Department’s determination, and the matter was subsequently transferred to the Appellate Division. While American’s proceeding was pending, Bowery commenced an article 78 proceeding to annul a similar administrative determination by the Department. American’s proceeding was adjourned so that the two proceedings could be considered jointly in the Appellate Division.

The proceedings of both Bowery and American, having been transferred to the Appellate Division for resolution and involving identical issues of law, were jointly argued and decided at the Appellate Division. The focus of the dispute was, and continues to be, the proper method of calculating the tax base in a statutory scheme which requires the rate of tax to be applied to the interest or dividends credited to depositors or shareholders during the taxable year. It was the contention of petitioners before the Appellate Division that the 3.5% interest rate is a hypothetical rate to be applied to the balance of a depositor’s account exclusive of, and not in addition to, the actual interest credited to that account during the taxable year. It was further argued by petitioners that the statutory rate is an uncompounded interest rate, in which case a particular bank’s actual interest rates exceeding 3.5% per annum, its frequency of compounding or crediting, and the amount of interest actually computed and credited to a given account during the taxable years are not to be considered in computing the alternative minimum tax base. The Department, in contrast, maintained that the 3.5% per annum statutory rate should be applied to the actual interest generated by the bank’s compounding and crediting practices as included in the balance of a depositor’s account.

A sharply divided Appellate Division accepted the method of calculation advanced by petitioners, granted the petitions of Bowery and American, annulled, on the law, the final determinations of the Department of Finance of the City of New York assessing tax deficiencies against petitioners for the years 1973 through 1975 inclusive, and remanded the matters for recomputation. We now modify, for the following reasons.

The imposition by the City of New York of a minimum tax on savings banks and savings and loan associations, as an authorized alternative to taxation upon the taxpayer’s entire .net income, should be based upon each interest or dividend credit applied to the balance of a depositor’s account. The alternative minimum tax under section R46-37.53 (b) (2) of part III of title R, chapter 46 of the New York City Administrative Code provides, in pertinent part: “a savings bank and savings and loan association [shall pay] two and five hundred seventy-four one-thousandths percent of the interest or dividends credited by it to depositors or shareholders during any taxable year, provided that, in determining such amount, each interest or dividend credit to a depositor or shareholder shall be deemed to be the interest or dividend actually credited or the interest or dividend which would have been credited if it had been computed and credited at the rate of three and one-half percent per annum, whichever is less.”

By providing that the alternative minimum tax base should be determined according to the amount of interest “which would have been credited if it had been computed and credited at th e rate of [3.5%] per annum”, in those instances where the 3.5% statutory rate is lower than the amount of interest actually credited to depositor’s accounts, section R46-37.53 (b) (2) dictates that the tax base for the alternative minimum tax include the interest earned by the account as if said interest was computed by resort to the 3.5% per annum statutory rate. For the purposes of the computation of the tax base upon which the New York City alternative minimum tax is premised, the tax base is arrived at by compounding and crediting interest at the hypothetical rate prescribed by statute: 3.5% per annum, notwithstanding the actual or stated rate of interest which had been utilized by the bank during the taxable year. The statute does not provide for a flat tax of 3.5% per annum upon the average daily balance of an account, nor does it authorize application of the 3.5% per annum rate to all funds in the account, including amounts actually credited as compound interest during the taxable year. Rather, the alternative minimum tax contemplates an interpretation which computes each account balance as if each interest credit were made at the statutory rate of 3.5% per annum.

For example, in the case of an account with an average dail;r balance of $100 and the statutory interest rate of 3.5% per annum, which is compounded and credited semiannually, the tax base would equal $3.53. This tax base results because the June 30 interest credit in the amount of $1.75 is included in the account balance from July 1 through December 31, and the 3.5% per annum statutory ceiling is therefore applied to an account balance of $101.75 during the second half of the taxable year. Under the foregoing computation, the tax base would be $3.53, rather than a $3.50 tax base arising from petitioners’ method of computation which excludes all interest credited or due to the account.

This result is concordant with industry practice. Section R46-37.53 (b) (2) directs that the statutory rate be applicable to “each interest or dividend credit to a depositor or shareholder”. Pursuant to the General Regulations of the Banking Board, the terms “interest” and “dividend” are defined as “any amount accruing to or for the account of any depositor(s) in connection with the use of funds deposited in a savings or time deposit account, regardless of whether such earnings have been paid to the account of its holder(s)” (3 NYCRR 13.11 [e] [emphasis added]). It is, therefore, nonindicative that the terms “interest” or “dividend”, as utilized in the ascertainment of the tax base for computation of the New York City alternative minimum tax, do not explicitly incorporate the compounding and crediting practices of banking organizations. The broad concepts of “interest” and “dividend”, as recognized by the General Regulations of the Banking Board and utilized within section R46-37.53 (b) (2), embrace all earnings accruing to or for the account, regardless of whether the earnings constitute the product of the bank’s compounding practices or whether the earnings have been credited to depositors’ accounts. Administrative Code § R46-37.53 (b) (2), however, limits the interest or dividends for purposes of the alternative minimum tax, to the hypothetical interest rate of 3*5% per annum which is independent of the actual rates of interest applicable to depositors’ accounts. It is by means of application of the artificial interest rate ceiling of 3.5% per annum that the taxpayer is relieved of the potentially higher tax liability arising from consideration of all earnings accrued.

Thus, the tax base properly includes the interest produced, through application of the 3.5% per annum statutory rate, by the taxpayers’ compounding and crediting practices.

Accordingly, in each proceeding, the judgment of the Appellate Division should be modified, without costs, and the matter remitted to respondents for recomputation in accordance with this opinion.

Chief Judge Wachtler and Judges Meyer, Simons, Kaye and Alexander concur.

In each case: Judgment modified, without costs, and matter remitted to Supreme Court, New York County, with directions to remand to respondents for recomputation in accordance wifii the opinion herein and, as so modified, affirmed.

      . The alternative minimum tax was imposed under section R46-37.5 (b) (2) for taxable years ending on or before December 31,1973; section R46-37.51 (b) (2) for taxable years beginning on or after January 1,1974 and ending on or before December 31, 1974; and section R46-37.53 (b) (2) for taxable years beginning on or after January 1,1975. These three sections are identical but for the rates of tax imposed thereunder, which are 1.43%, 1.716% and 2.574%, respectively. To simplify the discussion, all references will be to section R4637.53 (b) (2).

      . During the years in question, American Savings Bank was known as Franklin Savings Bank of New York. On April 24,1981, the former American Savings Bank and the former Empire Savings Bank merged into Frankl in Savings Bank of New York. The resulting bank continued operating under the name American Savings Bank and on July 29, 1983 converted to a Federal charter under the name American Savings Bank, FSB.

      . Further by way of example, assume an account balance of $10,000, compounded quarterly, and computed as if each interest credit was made at the statutory rate of 3.5% per annum. The tax base is arrived at in the following manner:
      1/1
      $10,000.00
      3/31
      10,087.50
      6/30
      10,175.77
      9/30
      10,264.80
      12/31
      10,354.62.
      The total interest credited to the depositor’s account is $354.62, which represents an effective annual interest rate of 3.55%.


author: Simons, J. Meyer, J.

text:
    Robert Heller, Appellant, v U. S. Suzuki Motor Corp., Respondent, and Jim Moroney’s Harley-Davidson Sales, Inc., Appellant.
    Argued January 10, 1985;
    decided March 26, 1985

      POINTS OF COUNSEL

      Sheldon Diesenhouse for Robert Heller, appellant.
    The action
    is timely as it was brought within four years from date of the sale to plaintiff. (McCarthy v Bristol Labs., 86 AD2d 279; Fazio v Ford Motor Corp., 69 AD2d 896; Holdridge v Heyer-Schulte Corp., 440 F Supp 1088; Reis v Pfizer, Inc., 61 AD2d 777; Weinstein v General Motors Corp., 51 AD2d 335.)

      James R. McCarl for Jim Moroney’s Harley-Davidson Sales, Inc., appellant.
    The UCC four-year Statute of Limitations does not commence to run until the product is purchased from the dealer by the ultimate purchaser. (Rivera v Berkeley Super Wash, 44 AD2d 316, 45 AD2d 734; Doyle v Happy Tumbler Wash-O-Mat, 90 AD2d 366.)

      Arnold I. Katz and Robert A. Calinoff for respondent.
    The UCC four-year Statute of Limitations bars plaintiff’s action against Suzuki. (Victorson v Bock Laundry Mach. Co., 37 NY2d 395; Martin v Dierck Equip. Co., 43 NY2d 583; Doyle v Happy Tumbler Wash-O-Mat, 90 AD2d 366; Fazio v Ford Motor Co., 69 AD2d 896; Reis v Pfizer, Inc., 61 AD2d 777; Weinstein v General Motors Corp., 51 AD2d 335.)
   OPINION OF THE COURT

Simons, J.

On February 15, 1983 plaintiff instituted this action against defendants U. S. Suzuki Motor Corp. and Jim Moroney’s Harley-Davidson Sales, Inc., seeking to recover damages for injuries he sustained in a motorcycle accident which occurred July 7,1979. U. S. Suzuki Motor Corporation is the Japanese manufacturer’s distributor of the motorcycle in the United States and Jim Moroney’s Harley-Davidson Sales, Inc., is the retailer who sold the motorcycle to plaintiff. The tort causes of action against both defendants were barred by the three-year Statute of Limitations. Accordingly, plaintiff sought to recover on claims that defendants expressly and impliedly warranted the motorcycle safe, merchantable and fit for its intended use. On this appeal he presses only a claim based upon implied warranty pursuant to Uniform Commercial Code § 2-318. The issue before us is the timeliness of plaintiff’s action against defendant U. S. Suzuki Motor Corporation, specifically, whether the cause of action accrued on the date of sale to plaintiff by the retailer or on the date of transfer of the motorcycle by the distributor to its immediate purchaser, one Bakers Recreational Equipment, Inc., who then apparently transferred it to the retailer, defendant Jim Moroney’s Harley-Davidson Sales, Inc.

Uniform Commercial Code § 2-725 provides that a cause of action for breach of a contract of sale must be commenced within four years after it accrues. The action accrues when the breach occurs and, in the absence of a warranty explicitly extending to future performance, a breach occurs when tender of delivery is made. Construing this language, Special Term denied defendant Suzuki’s motion for summary judgment and dismissed its affirmative defense alleging the Statute of Limitations. It held that the cause of action against the distributor accrued when the retailer sold the motorcycle to plaintiff on April 21, 1979. The Appellate Division reversed and dismissed the complaint, holding that plaintiff’s cause of action against the distributor accrued when the distributor tendered delivery to its immediate purchaser, March 30, 1978, and therefore that the action was time-barred because it was commenced more than four years later.

Actions to recover for personal injuries based upon implied warranty originally developed in an effort to impose strict liability on manufacturers and sellers for defects in their products. The action sounded in contract and, accordingly, when contract law was applied, the warranty was considered an incident of the sale and the cause of action for its breach accrued on tender of delivery (see, Mendel v Pittsburgh Plate Glass Co., 25 NY2d 340; Blessington v McCrory Stores Corp., 305 NY 140; 1 NY PJI2d 342, 1984 Cum Supp 155-156). Moreover, because recovery was permitted only by those in privity with the defendant, the cause of action accrued at the time of sale or tender of delivery from the seller to the purchaser in privity with him. Inasmuch as the purchaser usually had no contract with the manufacturer or distributor, he had no right to recover from him in an action on implied warranty (Martin v Dierck Equip. Co., 43 NY2d 583, 589-590). Indeed, following this reasoning, some States refused to recognize an implied warranty cause of action for personal injuries by a purchaser against a remote party under Uniform Commercial Code former § 2-318 (see, e.g., Southgate School Community School Dist. v West Side Constr. Co., 399 Mich 72, 247 NW2d 884). Others, including New York, developed certain narrow exceptions to the general rules governing the statutory and common-law actions to permit warranty actions for personal injuries notwithstanding the traditional requirement of privity (see, e.g., UCC former 2-318, L 1962, ch 553; Greenberg v Lorenz, 9 NY2d 195). As we noted in Martin v Dierck Equip. Co. (supra), however, there is no need to recognize an action on implied warranty for personal injuries, and contend with the serious conceptual problems which arise when it is applied to personal injury actions, if the jurisdiction recognizes a tort action in strict products liability as New York does (see also, generally, 3A Frumer and Friedman, Products Liability § 40.02; Prosser and Keeton, Torts § 97 et seq. [5th ed]). The tort remedy permits the injured plaintiff to seek redress from remote parties in the distributive chain regardless of privity.

Notwithstanding this state of the law, in 1975 the Legislature completely eliminated the requirement of privity for personal injury actions based on implied warranty by adopting a new section 2-318 of the Uniform Commercial Code (L 1975, ch 774). In doing so, it adopted the section recommended by the National Conference of Commissioners on Uniform State Laws in 1966 and described as Alternative B to section 2-318 (see, 1A ULA 53). Its purpose was to make uniform the law in the several jurisdictions desiring to expand the class of beneficiaries entitled to sue in implied warranty but which had not yet adopted the tort theory of strict products liability. Although the Code amendment was proposed to enable consumers to sue remote parties (see, 1975 NY Legis Ann, at 110), it was not entirely necessary in New York because we had decided they could do so in 1973 when we decided Codling v Paglia (32 NY2d 330) and other strict products liability cases following it.

When the Legislature amended section 2-318, it did not amend the limitations period provided in section 2-725 of the Code, however, and notwithstanding the elimination of the requirement of privity, it remains the law that a cause of action against a manufacturer or distributor accrues on the date the party charged tenders delivery of the product, not on the date that some third party sells it to plaintiff (Doyle v Happy Tumbler Wash-O-Mat, 90 AD2d 366; Fazio v Ford Motor Corp., 69 AD2d 896; 1 Weinberger, New York Products Liability § 11.04; cf. Rosenau v City of New Brunswick, 93 NJ Super 49, 224 A2d 689). It may be inferred from the amendment of section 2-318, as the dissent does, that the Legislature, by removing the prior requirement of privity, intended the date of retail sale to be the date of accrual, even for causes of action against others in the distributive chain. The short answer to that argument is that the Legislature did not say so and inasmuch as it did not amend section 2-725 to alter the existing rules on the subject we assume it intended no change (McKinney’s Cons Laws of NY, Book 1, Statutes § 222).

A major purpose of the uniform acts, and for the Statutes of Limitation they contain, is to eliminate jurisdictional variations so that concerns doing business nationwide will not be governed by different periods of limitation. With that in mind, the Commissioners proposed the four-year limitation period stated in section 2-725 as consistent with modern business record keeping procedure (see, 1A ULA 525; Voth v Chrysler Motor Corp., 218 Kan 644, 545 P2d 371; Mysel v Gross, 70 Cal App 3d Supp 10, 138 Cal Rptr 873). This purpose is frustrated, however, and the period of exposure to liability becomes unpredictable if the cause of action accrues at the date of sale to the plaintiff because the product may have left the hands of remote third parties such as the manufacturer or the distributor years earlier. If the product is resold, as it was here, the limitations period for an action on implied warranty may be extended even longer. Thus, our interpretation is consistent with the purpose for the tender of delivery rule set forth in the uniform laws and by the general rule that the function of Statutes of Limitation is repose (see, Schwartz v Heyden Newport Chem. Corp., 12 NY2d 212, 218).

This interpretation does not result in plaintiff’s remedy being foreclosed before his cause of action accrued (see, dissenting opn, at p 415, n 4). Plaintiff was injured 15 months after Suzuki sold the motorcycle to Bakers Recreational Equipment, Inc., but lie waited almost four more years before instituting this suit. His rights have been lost by his own delay, not by any construction we place on the statute. Furthermore, our interpretation does not limit available remedies generally. A consumer who acts within three years of the accident or four years from the date of sale, as the pertinent statutes provide, may now maintain causes of action in New York to recover against both immedia te and remote parties based on express or implied warranty, negligence or strict products liability (see, Voss v Black & Decker Mfg. Co., 59 NY2d 102,106). Thus, there is no need or occasion for us to reinterpret section 2-725 in a manner contrary to its language and past usage. If the limitation period for causes of action based upon warranty is to be extended by fixing a new date of accrual, the Legislature should make that change.

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

Meyer, J.

(dissenting). Prior to 1975 Uniform Commercial Code § 2-318 authorized an action by one injured in person by breach of warranty but limited a seller’s warranty liability to “his buyer,” members of the buyer’s family or household and guests in the buyer’s home. As thus written the provision required both vertical and horizontal privity. Vertically the warranty ran only from the seller to the immediate buyer from him; horizontally it included not only the buyer but his family, household and guests.

The amendment made by chapter 774 of the Laws of 1975 removed the words “who is in the family or household of his buyer or who is a guest in his home”. Its effect was to extend the warranties provided for by the UCC, not only horizontally but vertically, for after amendment the section contained no reference to the buyer and made the seller’s warranty run to “any natural person if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty.” The amended section, therefore, broadened its coverage not only horizontally to encompass bystanders of all types, but also vertically to include a manufacturer whose product is distributed through a dealer to the consumer, for it is reasonable for such a manufacturer to expect that the purchaser from a dealer in his product may use, consume or be affected by the product and be injured in his or her person. That such was the legislative intent is supported, if support be needed, by the memorandum of the Assembly sponsor of the amendatory bill, which stated its purposes as “to extend more intelligently the warranty provided to a purchaser of goods under the UCC” (1975 NY Legis Ann 110).

The majority accepts the premise that despite the absence of privity a manufacturer is liable to a purchaser from a dealer in the manufacturer’s product for a breach of warranty resulting in injury to the purchaser, but nevertheless concludes that the four-year limitations period established by UCC 2-725 begins upon delivery of the product by the manufacturer to the dealer rather than with the dealer’s delivery to the purchaser. For a number of reasons I cannot accept that restrictive reading of the phrase “tender of delivery” used in UCC 2-725 and, therefore, respectfully dissent.

Primary among those reasons is the misconception involved in the majority’s reasoning (majority opn, at p 411) that the 1975 amendment was not necessary because it had been previously held in Codling v Paglia (32 NY2d 330) that a consumer had a cause of action in strict product liability against a manufacturer. The Legislature is presumed to have been áware of the Codling holding (Transit Commn. v Long Is. R. R. Co., 253 NY 345,355) and to have intended in enacting the 1975 amendment to effect some change in existing law and accomplish some useful purpose (Mabie v Fuller, 255 NY 194, 201). With that knowledge and intent and the knowledge that UCC 2-725 imposed a limitation period of four years on an action for breach of warranty measured from “tender of delivery,” it amended UCC 2-318 to provide a cause of action in warranty against a manufacturer running to the consumer. The purpose of the amendment, and the change it accomplished, was the addition to the consumer’s rights against the manufacturer of a new cause of action dependent not upon proof of negligence, as was Codling’s strict liability action, but upon proof of unfitness for intended purpose, or other breach of warranty.

But although amendment of section 2-318 was necessary to broaden consumer rights, amendment of section 2-725 was not. This follows from the facts that there cannot be a warran ty running from manufacturer to consumer until there is a consumer and that in the nature of the transaction there is no consumer until delivery by the dealer-retailer of the product to a particular purchaser. Thus the “tender of delivery” which brings into operation the manufacturer’s warranty to the consumer is from the dealer to the purchaser, not from the manufacturer i;o the dealer.

There is nothing foreign about such a concept. Not only does it underlie the strict liability action recognized in Codling v Paglia (32 NY2d, at p 339, supra), but also in Martin v Dierck Equip. Co. (43 NY2d 583), relied on by the majority, we held that a warranty cause of action arose in Virginia where the injuiy occurred rather than in New York where the product was delivered. The reasoning on which that holding was based was that “if a third party chooses to sue in ‘warranty’ * * * he may not nevertheless by asserting that the cause of action arose at the time of the manufacturer’s tender of delivery contend that his cause of action ‘accrued’ before in fact it had” (id., at p 590 [emphasis supplied]) and that, “No contract of sale, without more, made between plaintiff’s employer and the manufacturer and distributor of the forklift could create any liability to plaintiff [citation omitted]. Plaintiff possessed no cause of action, in tort or in contract, any where in the world until he was injured in Virginia” (id., at p 591). That the plaintiff in Martin was a bystander, whereas the present plaintiff is a purchaser from the dealer, furnishes no basis for distinction, for section 2-318, as amended, replaced the prior requirement of privity, whether horizontal or vertical, with a statutory right of action which could not come into existence until sale by the dealer to the purchaser. To hold otherwise, said the Martin majority, would be to repeat “the all but inconceivable result reached in Mendel v Pittsburgh Plate Glass Co. (25 NY2d 340), overruled in Victor son v Bock Laundry Mach. Co. (37 NY2d 395) * * * a rule that would have barred a plaintiff’s cause of action before it ever came into existence.” (43 NY2d, at pp 590, 591, supra.)

The majority’s citation of Doyle v Happy Tumbler Wash-O-Mat (90 AD2d 366) suggests that the rationale for its holding is its agreement with Doyle’s reasoning that (at p 370) “ ‘tender of delivery’ * * * is more readily applicable to commercial transactions between a seller and buyer.” But Doyle’s restrictive reading of “tender of delivery” not only makes it possible that the newly expanded cause of action could be barred by limitations before it came into existence, a result we should not lightly infer was intended by the Legislature, but also wholly overlooks the fact that the amended section 2-318 is a part of the Uniform Commercial Code, which directs that, “The remedies provided by this Act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed” (§ 1-106 [1]) and that, “This Act shall be liberally construed and applied to promote' its underlying purposes and policies” (§ 1-102 [1]). The fact that “tender of delivery” may connote a buyer-seller relationship does not exclude interpretation of the phrase as it relates to a buyer’s cause of action against the manufacturer to" refer to the tender of delivery made by the seller-distributor as the manufacturer’s conduit to the buyer, nor in light of the liberal administration and liberal construction provisions of the Code should it be so limited.

No greater support for the majority’s conclusion is provided by the suggested relationship (majority opn, at p 412) between limitations, the record keeping procedures of modem business and the unpredictable period of exposure that results if the action accmes on sale to the plaintiff. While that apparently was the origin of the four-year period established by UCC 2-725 (1) when it was adopted in 1964 (see, Comment to the original section), strict products liability was not then generally recognized. With our acceptance in Codling v Paglia (supra), of the strict liability concept, however, and our subsequent holding that the three-year tort limitations period accrued from the date of injury (Victorson v Bock Laundry Mach. Co., supra), the unpredictability of the manufacturer’s exposure became for him a way of life and record keeping procedures were no longer sufficiently significant “to dictate the outcome” as to limitations (Victorson v Bock Laundry Mach. Co., 37 NY2d, at p 404, supra). No more so should those considerations determine when a purchaser’s warranty action against a remote manufacturer accrues with respect to the expanded warranty action authorized by the 1975 amendment to UCC 2-318.

The final basis for my disagreement with the majority is that the cases holding that the UCC’s four-year limitation period begins to run in favor of a manufacturer only from the date of the retail sale are more numerous (and those that state reasons more closely reasoned) than those on which the majority rely. Of the latter Doyle v Happy Tumbler Wash-O-Mat (supra), has been discussed above, and Fazio v Ford Motor Corp. (69 AD2d 896) concerned an action brought more than four years after the consumer’s purchase from the retailer and, therefore, is not in point.* *** And while Rosenau v City of New Brunswick (93 NJ Super 49, 224 A2d 689) held that limitations began to run from the time the manufacturer sold a water meter to the city which the city later installed in plaintiff’s home, the case is readily distinguishable for the court was at pains to point out (93 NJ Super, at pp 55-56, 224 A2d, at pp 692-693, supra) that installation in plaintiff’s home was the result of pure happenstance, that the meter was not intended to be resold by the city nor was it advertised in any way, but rather was intended to be installed by the city as part of its own public system. Moreover, the original sale of the meter was in 1942, long before the UCC was enacted, let alone amended, and the court held both implied warranty and strict liability causes of action barred.

There are, in contrast, a number of cases holding timely an action against a manufacturer brought within four years of the consumer’s purchase (Singer v Federated Dept. Stores, 112 Misc 2d 781; Bort v Sears, Roebuck & Co., 58 Misc 2d 889; Berry v Searle & Co., 56 I11 2d 548, 309 NE2d 550; Ouellette v Sturm, Ruger & Co., 466 A2d 478 [Me]; Waldron v Armstrong Rubber Co., 64 Mich App 626, 236 NW2d 722; Gillespie v American Motors Corp., 51 NC App 535, 277 SE2d 100; Redfield v Mead, Johnson & Co., 266 Ore 273,512 P2d 776; Williams v West Penn Power Co., 502 Pa 557, 467 A2d 811; Commercial Truck & Trailer Sales v McCampbell, 580 SW2d 765 [Tenn]; Rapp Co. v Whitlock Equip. Corp., 222 Va 80,279 SE2d 133; Patterson v Her Majesty Indus., 450 F Supp 425; see, McCarthy v Bristol Labs., 61 AD2d 196, on later appeal 86 AD2d 276; Falker v Chrysler Corp., 119 Misc 2d 375). The holding in many of those cases is equivocal in that the decision does not articulate the basis for its conclusion. But the Singer, Bort, Ouellette and Patterson cases are squarely in point and their reasoning (that UCC 1-102 [1] requires courts to construe its provisions liberally [Singer]; that “otherwise the warranties of all manufacturers would be mere paper words with plaintiffs having to prove negligence in every case” [Bort, 58 Misc 2d, at p 890, supra]; “[o]nly when plaintiff came into possession of the gun * * * did he achieve the status of a foreseeable user which could serve as the predicate for the assertion of warranty liability” [Ouellette, 466 A2d, at p 483 (Me)]; the fact that the Legislature in abolishing vertical and horizontal privity sought to protect the ultimate user requires the conclusion that the cause of action accrues when the user receives the product [Patterson]) is for me persuasive. Likewise persuasive though not so directly in point is the similar reasoning of the Redfield and Commercial Truck cases that the statutory warranty action given the consumer should not be narrowly construed.

For the foregoing reasons I would reverse the order of the Appellate Division and reinstate Special Term’s dismissal of the limitations defense.

Chief Judge Wachtler and Judges Kaye and Alexander concur with Judge Simons; Judge Meyer dissents and votes to reverse in a separate opinion in which Judge Jasen concurs.

Order affirmed, with costs.

      . The 1975 amendment adopted Alternative B, proposed by the Editorial Board of the Uniform Commercial Code in 1966, which was “designed for states * * * that desire to expand the class of beneficiaries” (1A ULA 54, Official Comment 3).

      . Jaffee Assoc. v Bilsco Auto Serv. (58 NY2d 993) is not to the contrary for it involved not personal injury but economic loss (see, 89 AD2d 785).

      . In view of that construction of “tender of delivery” the majority’s reference to “past usage” (majority opn, at p 412) is difficult to understand.

      . Judge Breitel, as he then was, dissenting in Mendel, had called it “all but unthinkable that a person should be time-barred from prosecuting a cause of action before he ever had one” (25 NY2d, at p 346), and Judge Jerome Frank put it even more forcefully in his dissent in Dincher v Marlin Firearms Co. (198 F2d 821, 823): “Except in topsy-turvy land, you can’t die before you are conceived, or be divorced before ever you marry, or harvest a crop never planted, or bum down a house never built, or miss a train running on a nonexistent railroad. For substantially similar reasons, it has always heretofore been accepted, as a sort of legal ‘axiom,’ that a statute of limitations does not begin to run against a cause of action before that cause of action exists, i.e., before a judicial remedy is available to the plaintiff.”

      . Prosser, Law of Torts, at 651 (4th ed): “The middleman is no more than a conduit, a mere mechanical device, through whom the thing sold is to reach the ultimate user”; Kassab v Central Soya (432 Pa 217, 227, 246 A2d 848, 853): “the typical consumer * * * buys from a retail merchant who is usually little more than an economic conduit.”

      . Not in point for like reason, though not cited by the majority, are JR ¿vera v Berkeley Super Wash (44 AD2d 316, 326, affd 37 NY2d 395); Reis v Pfizer, Inc. (61 AD2d 777); Weinstein v General Motors Corp. (51 AD2d 335); Johnson v Hockessin Tractor (420 A2d 154 [Del]); Cumberland Val. Joint School Auth. v Halderman, Inc. (23 Pa D&C3d 616); see, Garcia v Texas Instruments (610 SW2d 456 [Tex]); Garvie v Duo-Fast Corp. (711 F2d 47); Quadrini v Sikorsky Aircraft Div. (425 F Supp 81, 505 F Supp 1049).

      . Accord, 3A Framer and Friedman, Products Liability § 40.02, at 12-34: “It would seem that the courts which apply the time-of-sale rale will hold that the action accrues when plaintiff purchases the product from the retailer. If a warranty is held to extend to a remote purchaser, which is the effect of abrogating privity, it cannot on principle be breached before the product is purchased by him.”

      . It is no answer, as the majority suggests (at p 412), that its interpretation “does not limit available remedies generally” or that this plaintiff waited more than three but less than four years before suing. The issue is not what other remedies might have been available but what the Legislature intended when in 1975 it amended UCC 2-318. That plaintiff may have had other remedies now outlawed furnishes no basis for the majority’s restrictive reading of what the UCC says is to be liberally construed and liberally administered.


author: Kaye, J.

text:
    Servidone Construction Corporation, Respondent, v Security Insurance Company of Hartford, Appellant, et al., Defendant.
    Argued February 6, 1985;
    decided March 26, 1985

      POINTS OF COUNSEL

      Robert L. Horkitz for appellant.
    I. No viable claim against plaintiff came within the coverage of the policy. (Tuffarella v Erie R. R. Co., 33 Misc 2d 1040,17 AD2d 484; Cameron v G & H Steel Serv., 494 F Supp 171.) II. The so-called settlement violated the original order granting summary judgment. (St. Paul Fire & Mar. Ins. Co. v Clarence-Rainess & Co., 70 Misc 2d 1083; Rochester Woodcraft Shop v General Acc. Fire & Life Assur. Corp., 35 AD2d 186.) III. “The duty to defend is broader than the duty to indemnify.” (Rochester Woodcraft Shop v General Acc. Fire & Life Assur. Corp., 35 AD2d 186; Monari v Surfside Boat Club, 469 F2d 9.)

      William J. Roberts for respondent.
    I. An insurer, which has wrongfully refused to defend an action, must indemnify its insured for any reasonable amount paid by the insured to settle the action. (Cardinal v State of New York, 304 NY 400; Leonardi v Standard Acc. Ins. Co., 212 F2d 887.) II. Sound reason and the rules of fair play require an insurer, which has wrongfully refused to defend an action, to indemnify its insured who settles the action. (Mighty Midgets v Centennial Ins. Co., 47 NY2d 12; Brassil v Maryland Cas. Co., 210 NY 235.) III. The Government’s claim settled by plaintiff included a claim for contractual indemnification covered by the policy. (McGroarty v Great Am. Ins. Co., 36 NY2d 358.) IV. The cases cited by defendant-appellant are not pertinent.
   OPINION OF THE COURT

Kaye, J.

Where an insurer breaches a contractual duty to defend its insured in a personal injury action, and the insured thereafter concludes a reasonable settlement with the injured party, is the insurer liable to indemnify the insured even if coverage is disputed? While disagreeing with the court below that the insurer must indemnify the insured irrespective of actual coverage, we hold that the burden is on the insurer to establish that the loss was not covered by the policy.

On March 14, 1972, during construction on a Government flood control project in New Jersey, John Cuttino, an employee of plaintiff, Servidone Construction Corporation (the insured), fell from a tower and as a result was paralyzed from the waist down. In addition to receiving workers’ compensation benefits through Servidone, which functioned as general contractor for the project, in November 1976 Cuttino brought suit under the Federal Tort Claims Act against the United States, owner of the project, in the New Jersey Federal court contending that he had not been provided a safe place to work. The United States, in turn, commenced a third-party action against Servidone, asserting a right of indemnity both under common law (alleging that its negligence was at most passive or secondary) and under the construction contract (which expressly placed responsibility on the contractor for safety precautions to protect the workers).

For defense of the third-party action, Servidone looked to defendant, Security Insurance Company, its compensation and liability insurance carrier (the insurer). Security responded that, pursuant to an exclusion in the policy, a loss based upon any obligation the insured had assumed by contract was outside coverage, but it nonetheless agreed to defend Servidone as to both claims asserted by the Government, reserving its right to disclaim liability for recovery based on contractual indemnification. The litigation proceeded. On February 21, 1978, a pretrial order was entered, which defined the third-party action as one “in contract for indemnity.” Security immediately withdrew, contending that the United States had formally abandoned its claim for common-law indemnification, leaving only its claim under the construction contract, and since the policy excluded losses based on contractual obligations assumed by the insured, the insurer had no further obligation. Servidone engaged new counsel, who prepared for trial and sought a declaratory judgment against Security. When Servidone in 1980 notified Security that it had an opportunity to settle with Cuttino for $50,000, Security made no response. On March 18, 1980, Servidone advised Security that it intended to settle for $50,000, again met by silence.

Before the settlement with Cuttino was concluded, Special Term entered an order in Servidone’s action declaring that the insurer had breached its contractual obligation by failing to provide an unqualified defense and directing that Security pay Servidone any damages flowing from the breach, including the reasonable value of legal services incurred in defense of the third-party action, with damages to be determined at trial; the court, however, declined to pass on the question whether Security had a duty to indemnify, finding it premature. That order is not on appeal. What is challenged is Special Term’s subsequent order, on a motion to reopen made after payment of the settlement, granting the insured summary judgment in the amount of $50,000, which the Appellate Division affirmed, two Justices dissenting.

Neither Security’s breach of its duty to defend nor the reasonableness of the settlement amount is disputed. The difference centers on the effect to be accorded the insurer’s contention that the loss is simply not within the policy coverage. Without finding that the loss was covered, the Appellate Division majority imposed a duty to indemnify on the insurer because, based on the claims asserted, it perceived a possibility of coverage and concluded that the settlement constituted “damages it necessarily suffered by reason of Security’s failure to meet its contractual burden of protecting Servidone from attack.” (102 AD2d 59, 63.) The court noted that one of the alternative causes of action was on the face of the complaint plainly within the policy and the other arguably covered; “where a claim for coverage exists and the insurer breaches its duty to defend, it must indemnify the insured for a reasonably arrived-at settlement because it is impossible to determine on what theory of liability plaintiff might have prevailed.” (Id., at p 63.) The dissent, by contrast, found no evidence that the settlement was necessitated by the insurer’s withdrawal, and concluded that the contract of insurance does not create a duty to indemnify unless it is first established that the insured’s liability is within the coverage. As noted by the dissent, “Servidone freely chose settlement rather than trial * * * [a] choice * * * influenced by a reasonable prediction that, should liability be established on its part, it would not be within the coverage of the policy.” (Id., at p 65.) Finding issues of fact as to coverage, the dissenting Justices would have remitted the case for a plenary trial.

We agree with the dissent that an insurer’s breach of duty to defend does not create coverage and that, even in cases of negotiated settlements, there can be no duty to indemnify unless there is first a covered loss. Since the loss compromised by Servidone was not determined to be within the covered risks, we reverse the order awarding Servidone the full settlement amount and remit the case for further proceedings.

The insured’s right to representation and the insurer’s correlative duty to defend suits, however groundless, false or fraudulent, are in a sense “litigation insurance” expressly provided by the insurance contract (International Paper Co. v Continental Cas. Co., 35 NY2d 322, 325-326). If the claims asserted, though frivolous, are within policy coverage, the insurer must defend irrespective of ultimate liability (see, Goldberg v Lumber Mut. Cas. Ins. Co., 297 NY 148,154). A declaration that an insurer is without obligation to defend a pending action could be made “only if it could be concluded as a matter of law that there is no possible factual or legal basis on which [the insurer] might eventually be held to be obligated to indemnify [the insured] under any provision of the insurance policy” (Spoor-Lasher Co. v Aetna Cas. & Sur. Co., 39 NY2d 875, 876; see also, Seaboard Sur. Co. v Gillette Co., 64 NY2d 304; Lionel Freedman, Inc. v Glens Falls Ins. Co., 27 NY2d 364, 368).

The duty to indemnify is, however, distinctly different. The duty to defend is measured against the allegations of pleadings but the duty to pay is determined by the actual basis for the insured’s liability to a third person (see, Rochester Woodcraft Shop v General Acc. Fire & Life Assur. Corp., 35 AD2d 186,187). While' it is well established that the insurer’s obligation to furnish a defense is “heavy indeed, and, of course, broader than its duty to pay” (International Paper Co. v Continental Cas. Co., 35 NY2d 322, 326, supra), the Appellate Division has in effect applied the same standard for both. By holding the insurer liable to indemnify on the mere “possibility” of coverage perceived from the face of the complaint — the standard applicable to the duty to defend — the court has enlarged the bargained-for coverage as a penalty for breach of the duty to defend, and this it cannot do. (See, 7C Appleman, Insurance Law and Practice § 4690; 14 Couch, Cyclopedia of Insurance Law § 51:59 [2d ed].)

Neither Rosen & Sons v Security Mut. Ins. Co. (31 NY2d 342) nor Cardinal v State of New York (304 NY 400) supports the result reached below. In both cases, the issue was whether the insurer could avoid liability for a settlement made without its consent after it had unjustifiably refused to defend its insured. Since there was no question that the loss was within the policy, simple fairness dictated the result: an insurer cannot by virtue of its own breach escape liability for the reasonable settlement of a covered risk. But here there is no adjudication and no agreement that the loss fell within the ambit of the policy coverage. Quite to the contrary, the insurer urges that the government abandoned its common-law indemnification claim, and the only issue left in the third-party action was expressly excluded by the policy.

In Rosen, moreover, the insurer’s inaction, when it knew of the insured’s strained financial circumstances, raised a triable issue as to whether the insurer had, by economic coercion, waived the policy restriction on unapproved settlements. Here, there is no evidence that the insurer’s unjustified failure to defend Servidone in any way coerced or contributed to its decision to settle with Cuttino, and thus no factual basis for considering the settlement as damages suffered by reason of the insurer’s failure to protect Servidone in the litigation.

While further proceedings are required to determine the basis for Servidone’s liability to Cuttino — not from the pleadings but from the actual facts — the burden of proof will rest with the insurer to demonstrate that the loss compromised by the insured was not within policy coverage. If the insurer does not establish that this loss falls entirely within the policy exclusion as claimed, it will have failed to sustain its burden (Prashker v United States Guar. Co., 1 NY2d 584,592; see also, International Paper Co. v Continental Cas. Co., 35 NY2d 322, 327, supra). The insured urges that it is both impossible to determine how a New Jersey court would have decided the underlying action, and unfair to require a “mock trial” when the insurer’s breach has created the predicament. What the insured refers to as a “mock trial,” or a trial within a trial, is hardly new in the law. In malpractice actions, for example, a client cannot recover against an errant attorney without demonstrating that it would otherwise have succeeded on the merits (see, e.g., Kerson Co. v Shayne, Docks, Weiss, Kolbrenner, Levy, 45 NY2d 730). While Security to be sure breached its obligation to defend, the present uncertainties are the product not of that breach but of Servidone’s voluntary, independent decision to settle, for its own perceived interests, before any determination could be made as to the basis for liability.

The duty to indemnify requires a covered loss, but it should be apparent that a plenary trial of the issue is not always necessary (see, e.g., Butterweich v Goodman & Garson, 12 Misc 2d 706, 708). Here, neither lower court was able to conclude from the summary judgment submissions that coverage had been established as a matter of law; nor can we.

Accordingly, the order insofar as appealed from should be reversed, with costs, and the case remitted to Supreme Court,

Rensselaer County, for further proceedings in accordance with this opinion.

Chief Judge Wachtler and Judges Jasen, Meyer, Simons and Alexander concur.

Order insofar as appealed from reversed, etc.

       Whether an award of additional costs or attorneys’ fees might be appropriate if the insured is ultimately successful is a question we do not reach on this appeal.


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    Susanne O’Toole et al., Appellants, v Benjamin Greenberg et al., Respondents.
    Argued February 4, 1985;
    decided March 26, 1985

      POINTS OF COUNSEL

      John Anthony Bonina for appellants.
    I. A mandatory abortion may never be directed by a court when it opposes a person’s religious freedom. (Roe v Wade, 410 US 113; Matter of Mary P., 111 Misc 2d 532; Ziemba v Sternberg, 45 AD2d 230; Sorkin v Lee, 78 AD2d 180; Griswold v Connecticut, 381 US 479; Meyer v Nebraska, 262 US 390; Rivera v State of New York, 94 Misc 2d 157.) II. The order of the court below was not properly made as the matter at bar should be decided in accordance with common-law tort principles. (Weintraub v Brown, 98 AD2d 339; Sorkin v Lee, 78 AD2d 180; Sala v Tomlinson, 73 AD2d 724, 49 NY2d 701; Ziemba v Sternberg, 45 AD2d 230; Debora S. v Sapega, 56 AD2d 841; Becker v Schwartz, 46 NY2d 401; Mears v Alhadeff, 88 AD2d 827; Rivera v State of New York, 94 Misc 2d 157.)

      Andrea M. Alonso and Patricia D’Alvia for Benjamin Green-berg and another, respondents.
    I. Public policy prevents the mechanical application of legal principles to result in a holding that the birth of a healthy and normal child, as a matter of law, constitutes an injury to the child’s parents. (Albala v City of New York, 54 NY2d 269; Weintraub v Brown, 98 AD2d 339; Becker v Schwartz, 46 NY2d 401; Debora S. v Sapega, 56 AD2d 841; Sala v Tomlinson, 73 AD2d 724; Sorkin v Lee, 78 AD2d 180; Mears v Alhadeff, 88 AD2d 827; Stewart v Long Is. Coll. Hosp., 58 Misc 2d 432, 35 AD2d 531, 30 NY2d 695; McNeal v United States, 689 F2d 1200; White v United States, 510 F Supp 146.) II. The impossibility of calculating damages prevents plaintiffs from recovering the cost of rearing their healthy normal child. (Albala v City of New York, 54 NY2d 269; McNeal v United States, 689 F2d 1200; Sorkin v Lee, 78 AD2d 180; White v United States, 510 F Supp 146.) III. The decision of the court below does not mandate that plaintiff have an abortion. It preserves this private right of personal decision by removing considerations of legal liability from the decision-making process. (Siemba v Sternberg, 45 AD2d 230; Sorkin v Lee, 78 AD2d 180.)

      Howard R. Cohen for the Jamaica Hospital and Family Practice Clinic, respondent.
    I. The order appealed from was based upon sound legal precedent and should be affirmed. (Becker v Schwartz, 46 NY2d 401; Debora S. v Sapega, 56 AD2d 841; Clegg v Chase, 89 Misc 2d 510; Sala v Tomlinson, 73 AD2d 724, 49 NY2d 701; Sorkin v Lee, 78 AD2d 180; Weintraub v Brown, 98 AD2d 339; Jean-Charles v Planned Parenthood Assn., 99 AD2d 542.) II. The order appealed from was based upon sound public policy considerations and represents no infringement of plaintiffs’ religious freedom. (Siemba v Sternberg, 45 AD3d 230; Sorkin v Lee, 78 AD2d 180; Weintraub v Brown, 98 AD2d 339; Clegg v Chase, 89 Misc 2d 510; Albala v City of New York, 54 NY2d 269.)
   OPINION OF THE COURT

Jasen, J.

A medical malpractice action brought by a husband and wife seeking recovery of the ordinary costs of raising a healthy, normal child, bom after an unsuccessful birth control operation, does not state a legally cognizable claim.

According to plaintiffs’ verified complaint, on January 11, 1980, a tubal ligation procedure was negligently performed upon plaintiff Susanne O’Toole while under the care of defendants, Benjamin Greenberg, M.D., Arthur Leber, M.D., and the Jamaica Hospital and Family Practice Clinic. Plaintiff, nonetheless, became pregnant and gave birth to a female child, Kelly, on November 27, 1981. Plaintiffs, Susanne O’Toole and her husband Brian O’Toole, commenced this action prior to the birth of Kelly, alleging four causes of action in their verified complaint. The first cause of action sought damages on behalf of plaintiffs for (1) the expenses incurred for the pregnancy, delivery and postpartum care rendered to plaintiff Susanne and the child, and (2) the expenses involved in caring for and rearing their expected child. It is the second branch of plaintiffs’ first cause of action which is the sole focus of the instant appeal.

By notice of motion dated October 19,1981, defendants Green-berg and Leber moved for an order dismissing plaintiffs’ complaint for failure to state a cause of action. By order dated April 6, 1982, Supreme Court, Queens County, granted the motion to the extent only of dismissing that portion of the first cause of action seeking to recover the anticipated expenses of rearing and caring for the child. Plaintiffs moved for reargument, which was granted; however, Supreme Court adhered to its original determination. Defendant Jamaica Hospital and Family Practice Clinic moved to dismiss plaintiffs’ first cause of action, and by order dated May 13,1982, the court granted the motion to the extent only of dismissing that portion of the first cause of action seeking to recover the anticipated expenses of rearing and caring for the child. The orders of Supreme Court were unanimously affirmed by the Appellate Division, Second Department. The Appellate Division certified to this court the following question: “Was the order of this court dated December 30,1983 properly made?” For the reasons that follow, the certified question should be answered in the affirmative, and the order of the Appellate Division affirmed.

That branch of plaintiffs’ first cause of action whereby the parents seek recovery for the pecuniary expense of rearing a healthy but unplanned child, conceived after an unsuccessful surgical birth control procedure, is properly characterized as a claim for “wrongful conception”. (Becker v Schwartz, 46 NY2d 401, 409.) The concept of wrongful conception, as utilized to seek recovery of the expenses involved in raising a healthy child, has been the subject of much scholarly debate (see, 37 Record of Assn of Bar of City of NY 583-588, Selected Materials on Wrongful Life-Birth), and has been considered by the courts of this State. The question whether parents may recover as damages the ordinary costs of raising a child born by reason of wrongful conception was specifically left undecided in Becker v Schwartz (46 NY2d 401, 410, supra) and is now before us as a matter of first impression.

Resolution of this question requires first a determination as to whether plaintiffs have suffered a legally cognizable harm by the birth of a healthy child. It is a fundamental principle of Anglo-American tort law that an act contrary to law, which does not result in legal harm — injuria absque damnum — is not actionable and does not give rise to any claim or cause. (Deobold v Oppermann, 111 NY 531, 541-542; Speiser, Krause, Gans, The American Law of Torts § 1:11, at 36, n 22, citing, inter alia, Becker v Schwartz, 46 NY2d 401, 411, supra.) Liability for negligent conduct exists only when it proximately causes legal harm to a fully protected interest of another. (Seavey, Principles of Torts, 56 Harv L Rev 72, 89; Pollock on Torts, at 23 [Am ed 1894].) Here, in order to accord plaintiffs a cause of action for the recovery of the ordinary costs of raising a healthy, normal child arising from the alleged wrongful conception, plaintiffs must show “not only injuria, namely, the breach of the defendant’s obligation, but also damnum to themselves v in the sense of damage recognized by law.” (Remorquage Á Hélice [Société Anonyme De] v Bennetts, 1 KB 243, 248 [1911]; see also, Hutch-ins v Hutchins, 7 Hill 104,109.) We believe, as a matter of public policy, that the birth of a healthy child does not constitute a cognizable legal harm for which an action in tort will lie.

This court has recognized the “very nearly uniform high value” which the law and mankind have placed upon human life. (Becker v Schwartz, 46 NY2d 401, 411, supra.) In view of our society’s acknowledgment of the sanctity of life, it cannot be said, as a matter of public policy, that the birth of a healthy child constitutes a harm cognizable at law. (See, Weintraub v Brown, 98 AD2d 339, 348-349; Clegg v Chase, 89 Misc 2d 510, 513; Public Health Trust v Brown, 388 So 2d 1084 [Fla Dist Ct App]; Cockrum v Baumgartner, 95 111 2d 193, 447 NE2d 385, cert denied sub nom. Raja v Michael Reese Hosp. & Med. Center,_ US_, 104 S Ct 149; Coleman v Garrison, 327 A2d 757 [Del Super], affd 349 A2d 8, 13-14.) The moral, social and emotional advantages arising from the birth of a healthy child are to be preferred to the protection of purely economic interests. (See, Cardozo, The Paradoxes of Legal Science, at 57 [1927].) To hold that the birth of a healthy child represents a legal harm would be to engage this court in the jurisprudentially improper task of recasting the immutable, intrinsic value of human life according to the financial burden thus imposed upon the parents. Accordingly, we hold that the birth of a healthy child, as but one consequence of defendant’s tortious conduct, does not constitute a harm cognizable at law.

For the reasons stated, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander and Lynch concur; Judge Meyer taking no part.

Order affirmed, with costs, and question certified answered in the affirmative.

      . For the purpose of our review, which is limited to an evaluation of the facial sufficiency of plaintiffs’ complaint, the allegations set forth therein must be assumed to be true. (Becker v Schwartz, 46 NY2d 401, 408.)

      . The second cause of action, asserted on behalf of plaintiff Susanne O’Toole, was based upon allegations of medical malpractice and sought damages for physical and emotional injuries resulting from labor and delivery and the necessity of a second sterilization procedure. The third cause of action, asserted on behalf of plaintiff Susanne O’Toole, sought damages under a theory of lack of informed consent. The fourth cause of action, asserted on behalf of plaintiff Brian O’Toole, sought damages for loss of services, companionship and consortium. These causes of action, as well as the first branch of plaintiffs’ first cause of action, are not at issue on this appeal. It was noted in the brief for defendants Greenberg and Leber, at page 14, that “[w]e concede that plaintiffs state legally cognizable claims for the physical and emotional injuries suffered by Susanne O’Toole as a result of the unwanted pregnancy, medical expenses associated with the pregnancy, and a pregnancy related loss of services claim brought on behalf of Brian O’Toole.”

      . The courts of New York have generally rejected claims seeking recovery of the costs of raising a healthy child bom as the result of a wrongful conception: Clegg v Chase (89 Misc 2d 510,513 [no recovery for the expenses of rearing and educating healthy child conceived after unsuccessful sterilization, “(i)t is not within the province of the judiciary to decide that the existence of life, and in this case a normal healthy life, is a wrong for which damages can be recovered”]); Sorkin v Lee (78 AD2d 180 [Simons, J.], appeal dismissed 53 NY2d 797 [no recovery for the normal expenses of rearing a healthy but unwanted child inasmuch as damages are speculative and avoidable]); Sala v Tomlinson (73 AD2d 724, 726, Iv dismissed 49 NY2d 701 [“a cause of action seeking future medical expenses for a healthy, normal child and damages for supporting, educating and raising a healthy, normal child * * * is not recognized in this State”]); Weintraub v Brown (98 AD2d 339,348-349 [“As a matter of public policy we are unable to hold that the birth of an unwanted but otherwise healthy and normal child constitutes an injury to the child’s parents and is, therefore, compensable in a medical malpractice action”]); Jean-Charles v Planned Parenthood Assn. (99 AD2d 542); but see, Rivera v State of New York (94 Misc 2d 157 [Ct Cl]).

      . “Injuria” is used here in its original sense of an “act contrary to law”, rather than its modem sense of harm. (See, Salmond on Jurisprudence § 133 [11th ed 1957].) “Injuria” may also be defined as a “tortious act”. (Wright v North-Western Ry. Co., 7 111 App [7 Bradw] 438,446.) “Damnum” means harm, hurt, loss or damage. (King v Lamborn, 186 F 21, 28; see also, 1 Am Jur 2d, Actions, § 69.)

      . See, Millington v Southeastern Elevator Co. (22 NY2d 498, 508, citing Woods v Lancet, 303 NY 349, 355); Albala v City of New York (54 NY2d 269, 274-275).

      . Appellants’ primary contention before this court presents the question whether plaintiff’s failure to have an abortion or to have the child adopted is a failure to mitigate that precluded recovery. The question was answered in the affirmative by Supreme Court, Queens County, below in dismissing that portion of plaintiffs’ complaint which sought to recover the expenses involved in rearing and caring for a healthy but unwanted child. While this view may be incongruous with settled public policy (Robertson, Toward Rational Boundaries of Tort Liability For Injury To The Unborn: Prenatal Injuries, Preconception Injuries and Wrongful Life, 1978 Duke L Rev 1401, 1448-49; Note, Wrongful Conception: Who Pays For Bringing Up Baby?, 47 Ford L Rev 418, 432, n 106), we need not reach the question inasmuch as there was no cognizable harm suffered by plaintiffs upon the birth of a healthy child that need be mitigated.

       Designated pursuant to NY Constitution, article VI, § 2.