author: Kaye, J. Alexander, J.

text:
    Bazak International Corp., Appellant, v Mast Industries, Inc., Respondent.
    Argued January 12, 1989;
    decided February 16, 1989

      POINTS OF COUNSEL

      Allen Jay Bodner, Richard E. Carmen and Ira Kleiman for appellant.
    I. The court below erred in dismissing plaintiffs cause of action for breach of contract. The confirmatory memoranda satisfy UCC 2-201 (2); at the very least they raise issues of fact as to the parties’ intent. (Norminjil Sportswear Corp. v T G & Y Stores Co., 644 F Supp 1; GTP Leisure Prods. v B-W Footwear Co., 55 AD2d 1009; Loudon Mfg. v American & Efird Mills, 46 AD2d 637; Itoh & Co. [America] v Jordan Intl. Co., 552 F2d 1228.) II. The court below erred in dismissing plaintiffs first cause of action because of a defense based on documentary evidence; the memoranda are not sufficient to definitively dispose of plaintiffs claim. (Lake Placid Vil. v Lake Placid Main St. Corp., 90 AD2d 873; Demas v 325 W. End Ave. Corp., 127 AD2d 476.) III. The court below erred in dismissing plaintiffs second cause of action for fraud; plaintiffs cause of action for fraud stands independently of the contract claim. (Ayala v Jamaica Sav. Bank, 121 Misc 2d 564, 109 AD2d 723, 66 NY2d 601; Brown v Lockwood, 76 AD2d 721; Channel Master Corp. v Aluminium Ltd. Sales, 4 NY2d 403; Fort Howard Paper Co. v William D. Witter, Inc., 787 F2d 784; Lehman v Dow Jones & Co., 783 F2d 285; Babdo Sales v Miller-Wohl Co., 440 F2d 962.)

      Joseph C. Markowitz, Paul E. Kazanoff and Blythe M. Bethel for respondent.
    I. The court below correctly dismissed Bazak’s contract cause of action. (Norminjil Sportswear Corp. v T G & Y Stores Co., 644 F Supp 1; Dorman & Co. v Noon Hour Food Prods., 501 F Supp 294; Apex Oil Co. v Vanguard Oil & Serv. Co., 760 F2d 417; East Europe Domestic Intl. Sales Corp. v Island Cr. Coal Sales Co., 572 F Supp 702; Raining v Howell Constr. Co., 106 Misc 2d 967; Rentways, Inc. v O’Neill Milk & Cream Co., 308 NY 342; Bennett & Co. v Economy Mechanical Indus., 606 F2d 182; Breed v Insurance Co., 46 NY2d 351; Rodolitz v Neptune Paper Prods., 22 NY2d 383; Chun Hye Kang-Kim v Feldman, 121 AD2d 590.) II. The court below correctly dismissed Bazak’s fraud cause of action. (Metropolitan Transp. Auth. v Triump Adv. Prods., 116 AD2d 526; Tesoro Petroleum Corp. v Holborn Oil Co., 108 AD2d 607;
      Rogoff v San Juan Racing Assn., 77 AD2d 831, 54 NY2d 883; Minichiello v Royal Business Funds Corp., 18 NY2d 521, 389 US 820; Alanthus Corp. v Travelers Ins. Co., 92 AD2d 830; Eidelberg v Newman, 27 Misc 2d 652; Lebowitz v Mingus, 100 AD2d 816; Wills v Wills, 28 NY2d 645; Soper v Simmons Intl., 632 F Supp 244.)
   OPINION OF THE COURT

Kaye, J.

This dispute between textile merchants concerning an alleged oral agreement to sell fabric centers on the "merchant’s exception” to the Statute of Frauds (UCC 2-201 [2]). We conclude that annotated purchase order forms signed by the buyer, sent to the seller and retained without objection, fall within the merchant’s exception, satisfying the statutory requirement of a writing even without the seller’s signature. It was therefore error to dismiss the buyer’s breach of contract action on Statute of Frauds grounds, and deny it any opportunity to prove that the alleged agreement had indeed been made.

For purposes of this dismissal motion, we accept the facts as stated by plaintiff buyer (Bazak International). On April 22, 1987 Karen Fedorko, marketing director of defendant seller (Mast Industries), met with Tuvia Feldman, plaintiff’s president, at Feldman’s office. Fedorko offered to sell Feldman certain textiles that Mast was closing out, and the two negotiated all the terms of an oral agreement except price. At a meeting the following day, Fedorko and Feldman agreed on a price of $103,330. Fedorko told Feldman that Bazak would receive written invoices for the goods the next day and that the textiles would be delivered shortly. When no invoices arrived, Feldman contacted Fedorko, who assured him that everything was in order and that the invoices were on the way. However, on April 30, 1987, Fedorko had Feldman come to the New York City offices of Mast’s parent company where, following Fedorko’s instructions, Feldman sent five purchase orders by telecopier to Mast’s Massachusetts office. That same day Feldman received written confirmation of Mast’s receipt of the orders. Mast made no objection to the terms set forth in the telecopied purchase orders, but never delivered the textiles despite Bazak’s demands.

Bazak then filed a complaint alleging breach of contract and fraud, which Mast moved to dismiss for failure to state a cause of action, based upon the lack of documentary evidence (CPLR 3211 [a] [7]). Mast contended that the only writings alleged in the complaint — the purchase orders sent by Bazak to Mast, and Mast’s confirmation of receipt of the purchase orders — were insufficient under UCC 2-201 to satisfy the Statute of Frauds. In addition, Mast argued that the complaint did not make out a cause of action for fraud, but merely duplicated the contract allegations.

Supreme Court denied the motion to dismiss, but the Appellate Division reversed, holding that the breach of contract claim was barred by the Statute of Frauds, and that the fraud claim merely disguised a flawed breach of contract claim. The focal issue before us on Bazak’s appeal from that order is whether the disputed documents qualified as confirmatory writings within the "merchant’s exception” to the Statute of Frauds (UCC 2-201 [2]). We conclude that they did, and therefore reverse the Appellate Division order.

At the heart of the dispute are two issues involving the telecopied purchase orders. First, the parties disagree as to the standard for determining whether the purchase orders are confirmatory documents: Mast asserts that there is a presumption against application of UCC 2-201 (2) — if the memorandum on its face is such that a reasonable merchant could reasonably conclude that it was not a confirmation, then the claim is barred as a matter of law by the Statute of Frauds. Bazak, on the other hand, argues for a less restrictive standard — that is, a requirement only that the writings afford a belief that the alleged oral contract rests on a real transaction, a requirement Bazak contends that it has met. Second, the parties disagree as to the application of the governing standard to this complaint. Bazak contends that the purchase orders were sent in confirmation of the agreement already reached, and that there is sufficient support for that interpretation in the documents themselves; Mast argues that on their face, the purchase orders are no more than offers to enter into an agreement, and thus inadequate to satisfy the Statute of Frauds.

As to both issues, we are essentially in agreement with Bazak, and therefore reverse the order dismissing its complaint.

Before turning to the two substantive questions, there is a preliminary matter of what evidence should be considered in answering them. Although a court ordinarily might take plaintiffs affidavits into account on a dismissal motion (see, e.g., Rovello v Orofino Realty Co., 40 NY2d 633, 635-636), different considerations apply where the basis for the dismissal motion is a Statute of Frauds defense. Parol evidence, even in affidavit form, is immaterial to the threshold issue whether the documents are sufficient on their face to satisfy the Statute of Frauds. Consideration of parol evidence in assessing the adequacy of a writing for Statute of Frauds purposes would otherwise undermine the very reason for a Statute of Frauds in the first instance. That issue must be determined from the documents themselves, as a matter of law (see, Scheck v Francis, 26 NY2d 466, 472). Accordingly, the trial court erred in ruling that the Statute of Frauds issue should be determined as a matter of fact at trial, and to the extent that plaintiff’s arguments are based on parol evidence set forth in Bazak’s affidavits, we disregard them.

As a further threshold matter, it bears note that this dismissal motion does not resolve the parties’ underlying dispute. Assuming that the writings are sufficient on their face to surmount the Statute of Frauds defense, plaintiff still has the burden of proving the alleged agreement for the sale of the textiles (2 Hawkland, Uniform Commercial Code Series § 2-201:05, at 26; 1 White & Summers, Uniform Commercial Code § 2-3, at 78 [3d ed-Practitioner’s]). The present motion settles only the question whether the action can go forward at all; if successful now, plaintiff has yet to establish the allegations of its complaint in order for there to be any recovery against defendant.

Description of the Writings

A total of five printed purchase order forms, all of them on Bazak’s letterhead, were telecopied by Feldman to Mast from the offices of Mast’s parent company. The first four are individual orders for various quantities of different types of fabric, while the fifth summarizes the orders and states the total price. All are dated April 23, 1987 — the date of the alleged oral contract. On each form, are the handwritten words "As prisented [sic] by Karen Fedorko.” At the bottom of each form are several lines of small type reading: "All claims must be made within 5 days after receipt of goods. No allowances or returns after goods are cut. This is only an offer and not a contract unless accepted in writing by the seller, and subject to prior sale.” Each form concludes with two signature lines, one for "bazak international corp.” and one for "customers acceptance.” Each form is signed by Bazak, but the space for "customers acceptance” remains blank.

An interoffice memorandum confirms that the purchase orders were telecopied to Mast’s Massachusetts office from the premises of Mast’s parent company on April 30, 1987.

The Writings as Confirmations of a Contract

The Statute of Frauds remains a vital part of the law of this State. A contract for the sale of goods for the price of $500 or more is not enforceable "unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.” (UCC 2-201 [1].) That section further provides that the only indispensable term in such a writing is quantity.

Undisputedly, the alleged oral contract in this case was for the sale of more than $500 worth of goods, and the only writings were not signed by Mast, against whom enforcement is sought. Bazak claims, however, that the orders fall under the merchant’s exception to the signature requirement contained in UCC 2-201 (2): "Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.” Bazak contends that the purchase orders are writings in confirmation of the oral agreement reached between Fedorko and Feldman, and that having failed to object to their contents Mast cannot now assert the Statute of Frauds defense.

At the outset, we are called upon to define the standard to be applied in determining whether a document can be construed as a confirmatory writing under UCC 2-201 (2): are explicit words of confirmation necessary? Should there be a presumption against application of the section? Relying on a New Jersey case, Trilco Term. v Prebilt Corp. (167 NJ Super 449, 400 A2d 1237, affd without opn 174 NJ Super 24, 415 A2d 356), and a subsequent Federal case applying Trilco, Norminjil Sportswear Corp. v T G & Y Stores Co. (644 F Supp 1 [SD NY]), Mast argues that confirmatory language is necessary, and that an exacting standard should be imposed.

The cases cited by Mast do stand for the proposition that a writing offered as confirmatory in satisfaction of UCC 2-201 (2) is insufficient unless it explicitly alerts the recipient to the fact that it is intended to confirm a previous agreement. In Trilco (supra), the lower court stated its belief that as a policy matter, a more stringent test was appropriate under UCC 2-201 (2) than that applied under UCC 2-201 (1) to determine if a writing was "sufficient to indicate that a contract for sale has been made”, because under the merchant’s exception, a party could be bound by a writing it had not signed. The Federal District Court in Norminjil (supra) found this reasoning persuasive in what it perceived to be the absence of any New York case law on the point.

We disagree. Cases dealing with the sufficiency of a confirmatory writing between merchants are hardly legion, but this is not the first time any New York court has interpreted the confirmatory writing requirement. In B & R Textile Corp. v Domino Textiles (77 AD2d 539), the Appellate Division found that an invoice specifying the parties to the sale, the goods, prices and quantities involved, and the terms of payment constituted a writing in confirmation of an oral contract. Moreover, although the Appellate Division did not articulate the standard it had applied in reaching that result, there was no mention of any express language of confirmation in the invoice, suggesting that a more liberal test was employed.

But even writing on a clean slate, we reject the exacting standard proposed by Trilco and Norminjil as inconsistent with the letter and spirit of the relevant UCC sales provisions.

UCC 2-201 (1) requires that the writing be "sufficient to indicate” a contract, while UCC 2-201 (2) calls for a writing "in confirmation of the contract.” We see no reason for importing a more stringent requirement of explicitness to the latter section, and holding merchants engaged in business dealings to a higher standard of precision in their word choices. The official comment describes UCC 2-201 (1) as simply requiring "that the writing afford a basis for believing that the offered oral evidence rests on a real transaction.” As Karl Llewellyn, a principal drafter of UCC 2-201, explained to the New York Law Revision Commission: "What the section does * * * is to require some objective guaranty, other than word of mouth, that there really has been some deal.” (1954 Report of NY Law Rev Commn, at 119.) We hold that the same standard applies under UCC 2-201 (1) and 2-201 (2), noting that this conclusion accords with the majority of courts and commentators that have considered the issue (see, e.g., Rubin & Sons v Consolidated Pipe Co., 396 Pa 506, 153 A2d 472, 476; Azevedo v Minister, 86 Nev 576, 471 P2d 661, 666; M. K. Metals v Container Recovery Corp., 645 F2d 583, 591 [8th Cir]; Dura-Wood Treating Co. v Century Forest Indus., 675 F2d 745, 749 [5th Cir]; Perdue Farms v Motts, Inc., 459 F Supp 7, 15-16 [ND Miss]; 2 Anderson, Uniform Commercial Code § 2-201:133, at 79 [3d ed]; 6C Bender’s UCC Service, Willier & Hart, UCC Reporter-Digest § 2-201, at 2-182; 1 White & Summers, op. cit., § 2-5, at 87-88).

Special merchant rules are sprinkled throughout article 2 of the Uniform Commercial Code, distinguishing the obligations of business people from others (see, UCC 2-103 [1] [b]; 2-205, 2-207 [2]; 2-209 [2]; 2-312 [3]; 2-314 [1]; 2-327 [1] [c]; 2-402 [2]; 2-403 [2]; 2-509 [3]; 2-603 [1]; 2-605 [1] [b]; and 2-609 [2]). Among the suggested motivations was to state clear, sensible rules better adjusted to the reality of what commercial transactions were (or should be), thereby promoting predictable, dependable, decent business practices (see, Hillinger, The Article 2 Merchant Rules: Karl Llewellyn’s Attempt to Achieve The Good, The True, The Beautiful in Commercial Law, 73 Geo LJ 1141 [1985]). Section 2-201 (2) recognized the common practice among merchants, particularly small businesses, to enter into oral sales agreements later confirmed in writing by one of the parties. Absent such a provision, only the party receiving the confirmatory writing could invoke the Statute of Frauds, giving that party the option of enforcing the contract or not, depending on how advantageous the transaction proved to be. UCC 2-201 (2) was intended to address that inequity; it encourages the sending of confirmatory writings by removing the unfairness to the sender. (See, 1954 Report of NY Law Rev Commn, at 115.)

In imposing a requirement that the writing explicitly state that it is sent in confirmation, the understandable concern of the New Jersey court in Trilco was that the effect of UCC 2-201 (2) was "to bind a merchant to a writing that he did not sign” (167 NJ Super, at 455, 400 A2d, at 1240, supra), and thus to create a new potential unfairness: a merchant might unilaterally create a binding contract simply by dispatching unsolicited purchase orders, thus unfairly disadvantaging the recipient. Consequently, the court perceived it was necessary to require that the writing contain explicit language of confirmation or reference to the prior agreement, so the recipient could know that the sender was asserting the existence of a contract, and hence had a "meaningful opportunity” to exercise the right of objection found in UCC 2-201 (2) (id., at 454, 400 A2d, at 1240). This argument is not without merit. However, in our view it overlooks other protections provided by UCC 2-201.

A confirmatory writing does not satisfy the requirements of UCC 2-201 (2) unless it is "sufficient against the sender.” This alone provides some protection against abuse, for the sending merchant itself runs the risk of being held to a contract. Moreover, while we hold that explicit words of confirmation are not required, the writing still must satisfy the test articulated in UCC 2-201 (1) that it be "sufficient to indicate that a contract for sale has been made”. A purchase order, standing alone, is unlikely to meet this test. On the other hand, if the writing contains additional evidence that it is based upon a prior agreement, then as a policy matter it is not unfair to require the recipient to make written objection where there is an intent to disavow it. True, a rule requiring explicit confirmatory language or an express reference to the prior agreement could be applied mechanically and would afford the broadest possible protection to recipients of unsolicited orders. But that rigidity and breadth also could work unnecessary injustice and be unresponsive to the realities of business practice, which was a likely motivation for the merchant’s exception in the first instance. Indeed, such a rule would reintroduce the very unfairness addressed by the reform, for the sending merchant still would be bound by the writing while the recipient could ignore it or enforce it at will (see, Comment, The Merchant’s Exception to the Uniform Commercial Code’s Statute of Frauds, 32 Villanova L Rev 133, 165-173 [1987]).

Finally, as additional protection against abuse and inequity, we note that the consequence of a failure to give timely written notice of objection to a confirmatory writing is only to remove the bar of the Statute of Frauds. The burden of proving that a contract was indeed made remains with the plaintiff, as does the burden of proving the terms of the contract. By the same token, the defendant remains free to urge that no contract was made, or that it differed from the one claimed by plaintiff (UCC 2-201, official comment 3). Thus, UCC 2-201 (2) neither binds the receiving merchant to an agreement it has not made nor delivers an undeserved triumph to the sending merchant. It does no more than permit the sender to proceed with an attempt to prove its allegations.

We therefore conclude that, in determining whether writings are confirmatory documents within UCC 2-201 (2), neither explicit words of confirmation nor express references to the prior agreement are required, and the writings are sufficient so long as they afford a basis for believing that they reflect a real transaction between the parties.

It remains for us to apply this standard to the facts and determine whether the documents in issue satisfy the requirements of UCC 2-201 (2).

Of the various requirements of UCC 2-201 (2), four are not in controversy. There is no dispute that both parties are merchants, that the writing was sent within a reasonable time after the alleged agreement, that it was received by someone with reason to know of its contents, and that no written objection was made. If the writings can be construed as confirming the alleged oral agreement, they are sufficient under UCC 2-201 (1) against Bazak — the sender — since Bazak signed them. Thus, the open question is whether, applying the governing standard, the documents here were sufficient to indicate the existence of a prior agreement.

Cases considering whether writings containing the words "order” or "purchase order” could satisfy the "confirmatory” requirement of UCC 2-201 (2) fall into two categories. In some, the writings on their face contemplated only a future agreement, and they were held insufficient to overcome the Statute of Frauds defense (see, e.g., Arcuri v Weiss, 198 Pa Super 506, 184 A2d 24); in others, there was language clearly indicating that a contract had already been made, and the writings were deemed sufficient (see, e.g., Dura-Wood Treating Co. v Century Forest Indus., 675 F2d 745, supra; Perdue Farms v Motts, Inc., 459 F Supp 7, supra). The writings here do not fit neatly into either group. However, taken as a whole, there is sufficient evidence that the writings rest on a real transaction, and therefore satisfy the Statute of Frauds.

We first address Mast’s contention — apparently decisive in the Appellate Division — that the small print at the foot of the forms to the effect that they are "only an offer and not A CONTRACT UNLESS ACCEPTED IN WRITING BY THE SELLER” must be given literal effect and precludes the possibility that the writings were confirmatory of an agreement. While an express disclaimer generally would suffice to disqualify a memorandum as confirmatory of an oral agreement (see, 1 White & Summers, op. cit., §2-4, at 85), it is plain from the face of these documents that the printed matter was entirely irrelevant to the dealings between these parties. The forms themselves bespeak their purpose: to record a sale by Bazak as seller, not a purchase by Bazak as buyer. The language regarding claims, allowances and returns are clearly all referable to a transaction in which Bazak was the seller, as is the signature line for Bazak. Read literally, these forms would not even have allowed for Mast’s signature; the line for "customers acceptance” is obviously inapplicable — Bazak, not Mast, was the customer. In short, though Mast is free to argue at trial that different inferences should be drawn, the forms indicate that Bazak simply used its seller’s documents to record its confirmation of the alleged contract, and that the small print at the bottom of the page was no part of that communication.

The handwritten notations on the purchase order forms provide a basis for believing that the documents were in furtherance of a previous agreement. The terms set forth are highly specific; precise quantities, descriptions, prices per unit and payment terms are stated. The documents refer to an earlier presentation by defendant’s agent Karen Fedorko. The date April 23, 1987 is written on the forms and the date April 30 on the transmission, indicating reference to a transaction that took place a week before they were sent. Finally, Mast itself relayed Bazak’s forms. The telecopier transmittal sheet shows that the forms were sent to Mast by defendant’s own parent company in New York, using its facilities — obviously suggesting that the forms were not merely unsolicited purchase orders from Bazak, but that their content reflected an agreement that had been reached between the parties.

While no one of these factors would be sufficient under UCC 2-201 (2), considered together they adequately indicate confirmation of a preexisting agreement so as to permit Bazak to go forward and prove its allegations.

Finally on this issue, addressing the dissent, it is apparent that a philosophical difference divides the court. The plain implication of the dissent is that express confirmatory language is needed because "ambiguous” confirmatory writings unfairly burden receiving merchants. The majority, by contrast, perceives that the Code intended to place such a burden on the receiving merchant because there is less unfairness in requiring it to disavow than in denying the sending merchant who has failed to use any magic words an opportunity to prove the existence of a contract. A merchant bent on fraud, of course, can easily send documents containing express confirmation of a nonexistent oral contract, so it is difficult to see how our reading of the statute "weakens” its protection against fraud (dissenting opn, at 131). The protection consists of requiring a writing that provides a basis for belief that it rests on a real transaction — no more, no less. If the writing is sufficient to indicate the existence of a contract, it is also sufficient at the pleading stage to support an inference that the receiving merchant knew full well what it was.

Plaintiffs Fraud Cause of Action

Having thus resolved the motion to dismiss the breach of contract claim, little need be added regarding plaintiffs fraud claim. Assuming every fact alleged by plaintiff to be true, and liberally construing the pleading in plaintiffs favor, we conclude both that there was sufficient specificity to satisfy CPLR 3016 and that the fraud alleged is not simply a duplication of the breach of contract claim, as defendant urges. Viewed from the perspective of a dismissal motion, the fraud count may be read to assert that defendant’s persistent promises to send invoices induced plaintiff to undertake an obligation to a third person for which it now stands responsible. In a fraud case, where it has long been recognized that " 'the circumstances constituting a fraud * * * are peculiarly within the knowledge of the party against whom the (fraud) is being asserted’ ” (CPC Intl. v McKesson Corp., 70 NY2d 268, 285, citing Jered Constr. Corp. v New York City Tr. Auth., 22 NY2d 187, 194), that is plainly sufficient to survive a motion to dismiss.

Accordingly, the order of the Appellate Division should be reversed, with costs, and defendant’s motion to dismiss the complaint denied.

Alexander, J.

(dissenting). In my view, the purchase orders at issue here, which describe themselves as offers and do not otherwise indicate the existence of a completed agreement are not "sufficient against the sender” (UCC 2-201 [2]) because they fail to "indicate that a contract for sale has been made between the parties” (UCC 2-201 [1]). Consequently they are not confirmatory memoranda sufficient to satisfy the Statute of Frauds and plaintiffs contract cause of action was properly dismissed. Furthermore, plaintiff has failed to plead facts sufficiently independent of its contract claim to sustain its second cause of action for fraud. Thus, contrary to the view taken by the majority, I would affirm the order of the Appellate Division dismissing the complaint. Accordingly, I dissent.

I

As alleged by Bazak International Corp. (Bazak), on April 22 and 23, 1987, Ms. Karen Fedorko, marketing director of defendant Mast Industries, Inc. (Mast), met with Bazak’s corporate officer, Tuvia Feldman, and allegedly negotiated all the terms of an oral agreement, pursuant to which Bazak was to purchase certain knitted textiles from Mast at a price of $103,330.

Approximately one week later, on or about April 30, 1987, Bazak sent Mast five purchase orders prepared by Bazak and bearing Bazak’s signature. These orders recite the description, quantity and price terms of the goods and four of the orders are also inscribed "As prisented [sic] by Karen Fedorko”, presumably a reference to the meetings of April 22 and 23. None of the orders, however, refer to any "agreement”, "contract”, "sale”, "purchase” or anything else to indicate that an agreement had been reached by the parties on that date or thereafter. Indeed, near the bottom of each order, a disclaimer states: "this in [sic] only an offer and not a contract UNLESS ACCEPTED IN WRITING BY THE SELLER”. Further, the orders include two signature lines, one signed by Bazak, and the other, which is blank, labeled "customers acceptance”. It is undisputed that Mast received the orders but did not sign them or object to them within 10 days.

When Mast did not deliver the subject goods, Bazak commenced this action alleging breach of contract and fraud. Mast’s motion to dismiss the complaint (CPLR 3211 [a] [1], [7]), which asserted the Statute of Frauds defense (UCC 2-201), was denied by Supreme Court. The Appellate Division reversed, holding that the purchase orders, which were not signed by Mast, did not constitute confirmatory documents sufficient to take this alleged agreement between merchants out of the Statute of Frauds (see, UCC 2-201 [2]) since the orders, by their terms, were merely offers (140 AD2d 211, 212). The majority of this court now reverses and denies Mast’s motion to dismiss.

II

The majority concludes that the merchant’s exception of UCC 2-201 (2) does not require that writings contain express confirmatory language (compare, Trilco Term, v Prebilt Corp., 167 NJ Super 449, 400 A2d 1237, 1239-1241, affd without opn 174 NJ Super 24, 415 A2d 356; Norminjil Sportswear Corp. v T G & Y Stores Co., 644 F Supp 1, 3-4 [SD NY]; see generally, 1 White & Summers, Uniform Commercial Code § 2-5, at 87-88 [3d ed-Practitioner’s]; Comment, The Merchant’s Exception to the Uniform Commercial Code’s Statute of Frauds, 32 Villa-nova L Rev 133, 173-180) and that writings satisfy both UCC 2-201 (1) and (2) when they are "sufficient to indicate that a contract for sale has been made between the parties” (UCC 2-201 [1]) and are therefore "sufficient against the sender” (UCC 2-201 [2]). In my view, however, it is unnecessary to reach the question of whether UCC 2-201 (2) requires that writings "in confirmation of the contract” contain express confirmatory language because Bazak’s purchase orders do not satisfy UCC 2-201 (1). As the only proper inference to be drawn from the plain language of the purchase orders is that they are offers, the majority’s determination that they evidence a completed contract is nothing more than speculation. These purchase orders expressly state that they are offers, and even if this plain language can be disregarded, the remaining language of the orders is ambiguous at best. By holding that the requirements of UCC 2-201 are satisfied by these writings, the majority undermines the very protections the statute was intended to afford.

UCC 2-201 (1) bars actions to enforce alleged oral agreements for the sale of goods worth $500 or more unless the agreement is evidenced by a writing signed by the person against whom enforcement is sought. While UCC 2-201 was intended to eliminate some of the rigidity of the former Statute of Frauds, subdivision (l)’s requirement that the writing be "sufficient to indicate that a contract for sale has been made between the parties” is the statute’s primary safeguard against fraudulent commercial practices (Howard Constr. Co. v Jeff-Cole Quarries, 669 SW2d 221 [Mo]). The merchant’s exception of UCC 2-201 (2) does not in any way diminish this safeguard, rather, it permits a writing to satisfy the statute even though it is not signed by the merchant against whom it is to be enforced.

The official comment explains that a writing sufficiently "indicate[s] that a contract for sale has been made” (UCC 2-201 [1]) when it "afford[s] a basis for believing that the offered oral evidence rests on a real transaction” (UCC 2-201, official comment 1). While the majority correctly articulates this standard, it misapplies this standard by holding that these writings, which are at best ambiguous, satisfy the statute.

Even a most liberal construction of UCC 2-201 (1) requires at least that the writing indicate that the existence of a contract is more probable than not (see, 1 White & Summers, op. cit., § 2-4, at 84-85; see also, Comment, The Merchant’s Exception to the Uniform Commercial Code’s Statute of Frauds, 32 Villanova L Rev 133, 173). This construction serves the statute’s purpose of preventing fraud without unduly burdening commercial transactions (Comment, The Merchant’s Exception to the Uniform Commercial Code’s Statute of Frauds, op. cit., at 137-138; Dorman & Co. v Noon Hour Food Prods., 501 F Supp 294, 296; Norminjil Sportswear Corp. v T G & Y Stores Co., 644 F Supp 1, 3, supra; see also, Cohon & Co. v Russell, 23 NY2d 569, 574) and comports with the operation of the merchant’s exception of UCC 2-201 (2). That subsection denies the Statute of Frauds defense to only those merchants who "unreasonably [fail] to reply to a letter of confirmation” (Hawkland, Sales and Bulk Sales Under the Uniform Commercial Code, at 28-29). Significantly, UCC 2-201 (2) binds the receiving merchant only when it "has reason to know of [the] contents” of the writing, indicating that the contents of the writing must at least put the receiving merchant on notice that the sender believes that a contract was made. Thus, to satisfy UCC 2-201 (1) and therefore be "sufficient against the sender” (UCC 2-201 [2]), the writing must at least allow for the reasonable inference that a contract was made and therefore that the writing rests on a real transaction (see, Howard Constr. Co. v Jeff-Cole Quarries, 669 SW2d 221, 227 [Mo], supra; Rubin & Sons v Consolidated Pipe Co., 396 Pa 506, 153 A2d 472, 475-476).

Writings containing express language indicating a contract obviously satisfy UCC 2-201 (1) (see, e.g., Azevedo v Minister, 86 Nev 576, 471 P2d 661, 665 [" 'your purchase’ ”]; Apex Oil Co. v Vanguard Oil & Serv. Co., 760 F2d 417, 419 [both documents expressly " 'confirm(ed) our telephonic agreement of 12/29/81’ ” under which " '(seller) will sell’ ” and " '(buyer) will purchase’ ”]; Dura-Wood Treating Co. v Century Forest Indus., 675 F2d 745, 749 ["confirmation of conversation” regarding terms of purchase]; Perdue Farms v Motts, Inc., 459 F Supp 7 [documents titled "Confirmation of Purchase”]). It is well established, however, that writings which evidence only preliminary negotiations do not sufficiently indicate that a contract for sale has been made (Bennett & Co. v Economy Mechanical Indus., 606 F2d 182, 186; Oakley v Little, 49 NC App 650, 272 SE2d 370, 373; Arcuri v Weiss, 198 Pa Super 506, 184 A2d 24, 26; Howard Constr. Co. v Jeff-Cole Quarries, 669 SW2d, at 227-228, supra; see also, Azevedo v Minister, 471 P2d, at 665, supra; see generally, 1 White & Summers, op. cit., § 2-4, at 85). Thus a writing is insufficient if it contains express language indicating only an intention to enter a contract (see, e.g., Bennett & Co. v Economy Mechanical Indus., 606 F2d, at 185, supra [" 'we also offer for your consideration’ ”]; Arcuri v Weiss, 184 A2d, at 25, supra [" 'tentative deposit on tentative purchase’ ”]; Wickersham Eng’g & Constr. v Arbutus Steel Co., 1 UCC Reporting Serv 49, 50 [" '(i)t is our intention to award you a contract’ ”]). Such express language plainly negates any inference that a contract was made.

Moreover, ambiguous writings do not satisfy the statute. In Howard Constr. Co. v Jeff-Cole Quarries (669 SW2d, at 227-228, supra), for example, the court found insufficient a signed proposal which listed only specific quantities and prices because the proposal did not reasonably allow for the inference that a contract for sale had been made. By contrast, in M. K. Metals v Container Recovery Corp. (645 F2d 583, 591), a purchaser’s purchase order listing quantities and prices without any express language of agreement was sufficient to indicate that a contract had been made. The court in that case reasoned that because the writing also specifically listed terms "geared toward the satisfaction of the seller” the writing "reflected] prior dealings” (id.). Thus the terms of the writing itself supported the reasonable inference that a contract had been made.

Here, the majority’s conclusion that there is sufficient evidence that Bazak’s purchase orders evidence a completed contract is refuted by the writings themselves. As indicated earlier, the writings are at best ambiguous, allowing for equally probable inferences that the parties either engaged only in negotiations or entered a contract. They do not demonstrate that the existence of a contract is more probable than not (1 White & Summers, op. cit, § 2-4, at 84-85) and therefore cannot satisfy the statute. Indeed, in view of this manifest ambiguity, a finding that these purchase orders "indicate that a contract for sale has been made” would require resort to the extraneous evidence of the practices and intentions of the parties offered by Bazak. Consideration of such evidence outside the terms of the documents themselves, however, is clearly precluded by the Statute of Frauds (UCC 2-201).

The purchase orders, by their own terms, are only offers. Each form states "this in [sic] only an offer and not a CONTRACT UNLESS ACCEPTED IN WRITING BY THE SELLER”. The plain import of this language, in this action where defendant was a seller, was that defendant would not be bound unless it signed the form. The majority attempts to avoid the import of this plain language, urging that it should be disregarded because this printed statement is on a form plaintiff usually used when acting as a seller and thus is meaningless in this alleged transaction where plaintiff was acting as a buyer (majority opn, at 123-124). Significantly, plaintiff, who prepared the documents, never indicated on any of the forms that this disclaimer should be disregarded and, fully aware of the existence of the disclaimer, signed each form on the line provided beneath it. Moreover, the fact that plaintiff usually used these forms in its capacity as a seller is not properly considered in evaluating the sufficiency of the documents on their face (Scheck v Francis, 26 NY2d 466, 472).

Even if the "offer” language properly could be disregarded, the purchase orders nevertheless are ambiguous and therefore insufficient to "indicate that a contract for sale has been made” (UCC 2-201 [1]). Four of the purchase orders merely list quantities of goods and prices, with the additional notation "as prisented [sic] by Karen Fedorko”. This reference to a presentation by defendant’s employee is simply that — there is no indication that an agreement was reached at that presentation. Additionally, the list of goods and prices, as well as the totals contained in the fifth purchase order similarly provide no basis for inferring that a contract was made before the orders were drafted. They do not list delivery terms or other special requirements of the seller which might indicate that an agreement had been reached (cf., M. K. Metals v Container Recovery Corp., 645 F2d 583, supra). The fact that the purchase orders were transmitted from defendant’s home office, while possibly unusual, sheds no light on whether the parties had reached an agreement. Thus, nothing in the purchase orders reasonably leads to the conclusion that the existence of a completed contract is more probable than not.

Finally, the majority’s holding that these purchase orders satisfy UCC 2-201 (1) and (2) substantially weakens the statute’s protection against fraud. To assert the Statute of Frauds defense, merchants will be required to promptly respond to writings which provide no notice that the sender believes that they have a contract and which may in fact indicate to the contrary: that the sender has submitted an offer. Such a rule unfairly burdens the receiving merchants and effectively negates the very purpose and intent of UCC 2-201 (2): to put both the sending merchant and the receiving merchant on equal footing.

Ill

Plaintiff also contends that it has sufficiently pleaded a cause of action for fraud. The majority agrees, reasoning that plaintiff suffered damages because defendant’s promises to send invoices induced it to undertake an obligation to a third party (majority opn, at 125). Although damages resulting from a defendant’s conduct are indeed elements of fraud, plaintiff has failed to sufficiently plead the requisite scienter (see, Channel Master Corp. v Aluminium Ltd. Sales, 4 NY2d 403, 406-407). The complaint baldly asserts that defendant deliberately or recklessly gave false assurances that it would send invoices reflecting their alleged agreement but contains absolutely no facts indicating that defendant’s employee, Ms. Fedorko, knew or should have known that the assurances she gave were false. Thus, even viewed in the most liberal light, the pleading is not sufficiently specific to assert a fraud claim (CPLR 3016). Rather, as the Appellate Division concluded, this second count simply recasts plaintiffs contract claim and should also be dismissed (Wills v Wills, 28 NY2d 645, 647).

Therefore, I would affirm the order of the Appellate Division in all respects.

Chief Judge Wachtler and Judges Titone and Bellacosa concur with Judge Kaye; Judge Alexander dissents and votes to affirm in a separate opinion in which Judges Simons and Hancock, Jr., concur.

Order reversed, etc.

      . UCC 2-201 (1) and (2) provide:
      "(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
      "(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know of its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten days after it is received.”

      . Although one court has held that a mere price list satisfies UCC 2-201 (1) (Southwest Eng’g Co. v Martin Tractor Co., 205 Kan 684, 473 P2d 18), that decision has been criticized as substantially weakening the protections of the Statute of Frauds by determining that the statute is satisfied by evidence of mere negotiations (see, Recent Cases, Uniform Commercial Code, 84 Harv L Rev 1737,1738-1739; Howard Constr. Co. v Jeff-Cole Quarries, 669 SW2d 221, 228 [Mo]).


source: Caselaw Access Project

author: Simons, J.

license: Public Domain

text:
    Thomas Sablosky, Respondent, v Edward S. Gordon Company, Inc., Appellant.
    Argued January 12, 1989;
    decided February 21, 1989

      POINTS OF COUNSEL

      Edward L. Sadowsky and Owen D. Kurtin for appellant.
    The requirement of mutuality of obligation has been rejected in the more modern view of contract formation. (Weiner v McGraw-Hill, Inc., 57 NY2d 458; Matter of Nationwide Gen. Ins. Co. v Investors Ins. Co., 37 NY2d 91; Aegis Prop. Serv. Corp. v Mihalski, 91 AD2d 577; Matter of Waldron [Goddess], 93 AD2d 706, 61 NY2d 181; Becker Autoradio U.S.A. v Becker Autoradiowerk GmbH, 585 F2d 39.)
    A. Richard Golub and Gary S. Graifman for respondent.
    I. The arbitration clause is void as lacking mutuality of obligation. (Hull Dye & Print Works v Riegel Textile Corp., 37 AD2d 946; Matter of Kaye Knitting Mills [Prime Yarn Co.], 37 AD2d 951; Cored Panels v Meinhard Commercial Corp., 72 AD2d 544; Matter of Weinrott [Carp], 32 NY2d 190; Lehigh Val. Indus. v Griebel, 49 AD2d 827; Hull v Norcom, Inc., 750 F2d 1547.) II. The employment agreement is devoid of fairness and constitutes an unconscionable contract of adhesion. (Ditmars-31' St. Dev. Corp. v Punia, 17 AD2d 357; Matter of Kaye Knitting Mills [Prime Yarn Co.], 37 AD2d 951; Cored Panels v Meinhard Commercial Corp., 72 AD2d 544; Lovisa Constr. Co. v County of Suffolk, 108 AD2d 791; Matter of Cross & Brown Co. [Nelson] 4 AD2d 501; Naclerio Contr. Co. v City of New York, 116 AD2d 463, 69 NY2d 794.)
   OPINION OF THE COURT

Simons, J.

Plaintiff, Thomas Sablosky, was formerly employed as a commission salesman for defendant, Edward S. Gordon Company, Inc., a New York City real estate brokerage firm. In this action, he alleges that he helped defendant sell the Exxon Building in Midtown Manhattan at a price of $610 million, and claims that he is entitled under his employment agreement to a commission of $3.6 million. Defendant has moved to stay the action and to compel arbitration, and plaintiff has made a cross motion to stay arbitration permanently. Plaintiff contends that the arbitration clause is invalid for lack of mutuality of remedy, and that it should not be given effect as a matter of public policy because the employment agreement constitutes a contract of adhesion and is unconscionable. Supreme Court granted defendant’s motion and directed the parties to proceed to arbitration. The Appellate Division reversed and granted plaintiff’s cross motion, holding that the arbitration agreement was unenforceable for lack of mutuality of obligation. We granted defendant leave to appeal and now reverse and reinstate the judgment of Supreme Court.

The principal issue submitted is whether an employment contract, which is supported by consideration on both sides and which contains an arbitration clause compelling one party to submit all disputes to arbitration but allows the other party the choice of pursuing arbitration or litigation, is invalid for lack of mutuality of remedy or obligation.

There is no dearth of authority on the subject. The Appellate Division, First Department, held almost 20 years ago that an arbitration provision granting one party the unilateral right to elect arbitration was invalid, notwithstanding that there was consideration to support the entire agreement (Hull Dye & Print Works v Riegel Textile Corp., 37 AD2d 946; Matter of Kaye Knitting Mills [Prime Yarn Co.], 37 AD2d 951). It has followed that rule ever since, with some notable exceptions, and its decisions have generally been approved and followed by the other departments (see, e.g., Cored Panels v Meinhard Commercial Corp., 72 AD2d 544 [2d Dept]; Arcata Graphics Corp. v Silin, 59 AD2d 1007 [4th Dept]).

The exceptions are to be found in Matter of Riccardi (Modem Silver Linen Supply Co.) (45 AD2d 191, affd 36 NY2d 945) and Kessner & Rabinowitz v Winchester Textiles (46 AD2d 239; see also, Aegis Prop Servs. Corp. v Mihalski, 91 AD2d 577 [affg for reasons stated by Meyers, J., at Special Term], as reported in Matter of Waldron [Goddess], 93 AD2d 706, 707, revd 61 NY2d 181). In Riccardi the employment contract provided that both parties were obligated to arbitrate all disputes arising out of the agreement except disputes involving whether the employee violated a restrictive covenant contained in the agreement. Disputes concerning the restrictive covenant could be arbitrated or litigated at the option of the employer. The Appellate Division enforced the arbitration clauses, despite their lack of complete mutuality. At the outset, it recognized that the enforceability of arbitration agreements is governed by the rules applicable to contracts generally and that contract law has abandoned the idea that to render an agreement enforceable there must be mutual promises creating identical rights and obligations in each party (45 AD2d 191, 193-194, supra). Rather than following these principles to their logical conclusion, however, and overruling Hull Dye & Print Works v Riegel Textile Corp. (supra) and Matter of Kaye Knitting Mills (Prime Yarn Co.) (supra), the court decided the case on narrower grounds, emphasizing that the parties exchanged binding promises to submit all disputes to arbitration except those relating to breach of the restrictive covenant provision, and held that it was permissible for the parties to carve out an area of potential controversy from an otherwise mutually binding arbitration agreement and give one party the unilateral right to select the dispute resolution forum in that area.

Riccardi is the only case in which we have considered the mutuality issue in an arbitration context. We affirmed the Appellate Division, but it should not be inferred from our affirmance or our citation of the Hull Dye and Kaye Knitting decisions that we implicitly adopted a general rule requiring mutuality. Rather, we cited Hull Dye and Kaye Knitting to distinguish those cases, urged upon us for reversal, and proceeded, as did the Appellate Division, to decide no more than necessary to resolve the particular case before us (see also, Kessner & Rabinowitz v Winchester Textiles, 46 AD2d 239, supra [using a similar analysis]).

Mutuality of remedy is not required in arbitration contracts. If there is consideration for the entire agreement that is sufficient; the consideration supports the arbitration option, as it does every other obligation in the agreement. Our holding is consistent with decisions which have repudiated the necessity for mutuality of remedy in contracts (see, Walter v Hoffman, 267 NY 365, 368; Epstein v Gluckin, 233 NY 490, 493-494) and with similar views of leading commentators (Restatement [Second] of Contracts § 363, comment c, at 183 ["the law does not require that the parties have similar remedies in case of breach”]; Farnsworth, Contracts § 12.4, at 822 [speaking of the "now discredited 'mutuality of remedy’ rule”]; 5A Corbin, Contracts §§ 1178-1204; 11 Williston, Contracts § 1433, at 884 [3d ed Jaeger]). Since it is settled that the validity of an arbitration agreement is to be determined by the law applicable to contracts generally (Matter of Zimmerman [Cohen], 236 NY 15, 19), there is no reason for a different mutuality rule in arbitration cases. Moreover, recognition that mutuality of remedy is not required in arbitration is logically consistent with our recent statement in Weiner v McGrawHill, Inc. (57 NY2d 458) that "while coextensive promises may constitute consideration for each other, 'mutuality’, in the sense of requiring such reciprocity, is not necessary when a promisor receives other valid consideration” (id., at 464).

It is also noteworthy that an increasing number of jurisdictions enforce commercial arbitration clauses notwithstanding the lack of mutuality of remedies (see, LaBonte Precision v LPI Indus. Corp., 507 So 2d 1202 [Fla Dist Ct App]; Kalman Floor Co. v Jos. L. Muscarelle, Inc., 196 NJ Super 16, 481 A2d 553, affd for reasons stated below 98 NJ 266, 486 A2d 334; Willis Flooring v Lease Constr. Co. & Assocs., 656 P2d 1184 [Alaska]; Becker Autoradio U.S.A. v Becker Autoradiowerk GmbH, 585 F2d 39, 47 [applying Federal law]; contra, Roberts Constr. Co. v St. John’s Riv. Water Mgt. Dist. 423 So 2d 630 [Fla Dist Ct App]).

Nor should the court refuse to enforce the clause on policy grounds. Over the last 20 years arbitration has emerged as a preferred method for the settlement of many controversies (Mobil Oil Indonesia v Asamera Oil [Indonesia], 43 NY2d 276, 281-282; Matter of Prime [Jonas], 38 NY2d 570, 574). Arbitrators customarily have an expertise over a particular subject matter and are able to offer parties a relatively expeditious and inexpensive forum to resolve their disputes. Although a party gives up an important right when it agrees to submit a dispute to arbitration, such proceedings are not less effective in discovering the truth than are judicial proceedings and it is not, as a matter of public policy, per se unfair to give one party the right to select them.

Plaintiff also relates his argument on mutuality to underlying principles of unconscionability and fairness. Indeed, some courts have invalidated unilateral arbitration clauses for want of mutuality although their decisions might as well rest on the doctrine of unconscionability or public policy (see, e.g., Deutsch v Long Is. Carpet Cleaning Co., 5 Misc 2d 684 [App Term], affd no opn 3 AD2d 1002; Dwyer v Biddle, 274 App Div 903; and see, Miner v Walden, 101 Misc 2d 814 [expressly finding clause unconscionable and against public policy]).

The doctrine of unconscionability contains both substantive and procedural aspects, and whether a contract or clause is unconscionable is to be decided by the court against the background of the contract’s commercial setting, purpose and effect (see, Wilson Trading Corp. v David Ferguson, Ltd., 23 NY2d 398, 403). Substantively, courts consider whether one or more key terms are unreasonably favorable to one party (People v Two Wheel Corp., 71 NY2d 693, 699). There is no general test for measuring the reasonableness of a transaction but we have recently provided this guidance: "[a]n unconscionable contract [is] one which 'is so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforcible according to its literal terms.’ ” (Gillman v Chase Manhattan Bank, 73 NY2d 1, 10, quoting Mandel v Liebman, 303 NY 88, 94.) Measured against this standard, the arbitration clause in plaintiffs contract is not unreasonable as a matter of law. The real estate brokerage business, by nature, is bound to generate a substantial number of disputes. An employer, who may hire hundreds of employees, should be able to protect itself from the delays and costs of extensive litigation by including as a condition of employment an agreement by the employee to arbitrate claims rather than litigate them.

Nor do we accept plaintiffs claim that the contract is one of adhesion or that it results from procedural unconscionability in the contract formation process. Such claims are judged by whether the party seeking to enforce the contract has used high pressure tactics or deceptive language in the contract and whether there is inequality of bargaining power between the parties (Gillman v Chase Manhattan Bank, 73 NY2d 1, supra; Matter of State of New York v Avco Fin. Serv., 50 NY2d 383, 390; State of New York v Wolowitz, 96 AD2d 47, 67). Plaintiffs claim here relates almost exclusively to the fact that the employment agreement was prepared by the employer or the employer’s attorney. As noted by Supreme Court, however, almost all employment contracts are prepared by the employer; that circumstance cannot render the arbitration clause contained in the contract unconscionable.

Plaintiffs remaining claim, alleging that the arbitration panel may be biased, is premature (see, CPLR 7511, 7506).

Accordingly, the order of the Appellate Division should be reversed, with costs, and the judgment of Supreme Court, New York County, reinstated.

Chief Judge Wachtler and Judges Kaye, Alexander, Ti-tone, Hancock, Jr., and Bellacosa concur.

Order reversed, etc.

       The arbitration clause in plaintiffs employment contract provides in pertinent part: "11. ARBITRATION Employee agrees that, any dispute of any kind, nature or description, between the parties hereto with respect to, relating to or arising out of the provisions of this Agreement, shall at the Company’s election, which election may be made at any time prior to the commencement of a judicial proceeding by the Company, or in the event instituted by the Employee at any time prior to the last day to answer and/ or respond to a summons and/or complaint made by the Employee, be submitted to arbitration before the American Arbitration Association or the Real Estate Board of New York, Inc. (at the Company’s election) in accordance with the rules then pertaining of the American Arbitration Association or the Real Estate Board of New York”.


author: Titone, J.

text:
    The People of the State of New York, Respondent, v Morris Leisner, Appellant. The People of the State of New York, Respondent, v Max Marx, Appellant.
    Argued January 12, 1989;
    decided February 21, 1989

      POINTS OF COUNSEL

      Richard A. Greenberg and Robert Hill Schwartz for Morris Leisner, appellant.
    I. The court’s failure to charge on the Statute of Limitations as applied to the conspiracy count, pursuant to Leisner’s written request, was reversible error, which was not waived by the failure to renew the request thereafter. (United States v Greichunos, 572 F Supp 220; United States v Head, 641 F2d 174; United States v Ruggiero,
      726 F2d 913; People v Le Mieux, 51 NY2d 981; People v Hoke, 62 NY2d 1022; People v Whalen, 59 NY2d 273; People v Lipton, 54 NY2d 340; People v Cobos, 57 NY2d 798; People v Cona, 49 NY2d 26; People v Teeter, 47 NY2d 1002.) II. The court’s error in permitting the jury to return a guilty verdict on the basis of defective overt acts, despite a timely motion to strike them, was reversible and preserved. (People v Bongarzone, 69 NY2d 892; People v Menache, 98 AD2d 335; People v Musso, 57 AD2d 578; People v Blase, 112 AD2d 943; United States v Lieberman, 637 F2d 95.) III. Leisner was prejudiced by proof of a conspiracy of which he was not a member, requiring reversal of his conviction. (United States v Alessi, 638 F2d 466; United States v Cambindo Valencia, 609 F2d 603; United States v Varelli, 407 F2d 735; Kotteakos v United States, 328 US 750; Blumenthal v United States, 332 US 539; United States v Bernstein, 533 F2d 775, 429 US 998; United States v Bertolotti, 529 F2d 149; United States v Miley, 513 F2d 1191.) IV. The evidence was insufficient to make out Leisner’s guilt of conspiracy to commit extortion by instilling a fear of "physical injury”. V. Leisner adopts any argument raised by his coappellant Marx which is favorable to him and consistent with his position on this appeal.

      Herald Price Fahringer and Diarmuid White for Max Marx, appellant.
    I. Max Marx was denied due process, under both the New York State and Federal Constitutions, because the prosecutor failed to prove the single conspiracy charged in the indictment, and Justice Leif refused to charge the jury that if they found that several conspiracies existed, they must acquit defendants. (People v McGee, 49 NY2d 48; United States v Borelli, 336 F2d 376; United States v Cambindo Valencia, 609 F2d 603; United States v Bertolotti, 529 F2d 149; United States v Fuel, 583 F2d 978; United States v Miley, 513 F2d 1191; United States v Varelli, 407 F2d 735; Kotteakos v United States, 328 US 750; People v Pelchat, 62 NY2d 97; People v Glen, 173 NY 395.) II. The court’s failure to instruct the jury on the Statute of Limitations as it related to the conspiracy charge was reversible error, and counsel did not withdraw a request for that instruction. (People v Hoke, 62 NY2d 1022; People v Le Mieux, 51 NY2d 981; People v Whalen, 59 NY2d 273.) III. It was reversible error for the court, as part of its charge, to read selected portions of the New York City Rent and Rehabilitation Law. (People v Leonard, 77 AD2d 605; People v Bell, 38 NY2d 116; People v Johnson, 6 AD2d 181;
      Bollenbach v United States, 326 US 607; People v Bacaloeostantis, 111 AD2d 991.) IV. There was insufficient independent evidence to sustain the conviction of Max Marx for conspiracy. (People v Moses, 63 NY2d 299; People v Hudson, 51 NY2d 233; People v Ohlstein, 54 AD2d 109, 44 NY2d 896; People v Kress, 284 NY 452.) V. Max Marx’s sentence should be vacated because he was denied due process at sentencing. (Gardner v Florida, 430 US 349; United States v Pugliese, 805 F2d 1117; People v Andujar, 110 AD2d 606; People v McGee, 49 NY2d 48.) VI. Max Marx adopts the claims and arguments of coappellant Morris Leisner where they are not inconsistent with those raised in this brief.

      Robert M. Morgenthau, District Attorney (Lisa Feiner and Mark Dwyer of counsel), for respondent.
    I. Defendants’ guilt of the single conspiracy charged in the indictment was proved beyond a reasonable doubt. (People v Keindl, 68 NY2d 410; United States v Borelli, 336 F2d 376, cert denied sub nom. Mogavero v United States, 379 US 960; People v Engel, 200 Misc 60; Braverman v United States, 317 US 49; People v Trammell, 50 Misc 2d 179; United States v Perez, 489 F2d 51; United States v Tramunti, 513 F2d 1087; United States v Panebianco, 543 F2d 447; United States v Taylor, 562 F2d 1345, cert denied sub nom. Salley v United States, 432 US 909.) II. The court was not required to charge the jury to acquit defendants if the People proved several conspiracies rather than the one conspiracy alleged in the indictment. (United States v Alessi, 638 F2d 466; United States v Murray, 618 F2d 892; United States v Martino, 664 F2d 860, cert denied sub nom. Miller v United States, 458 US 1110; United States v Ocampo, 650 F2d 421; People v Watts, 57 NY2d 299; United States v Tramunti, 513 F2d 1087; United States v Cambindo Valencia, 609 F2d 603; United States v Eubanks, 591 F2d 513; United States v Griffin, 464 F2d 1352; United States v Mack, 837 F2d 254.) III. Defendants abandoned their request for a Statute of Limitations charge on the conspiracy count and have therefore not preserved their complaint about the court’s failure to give it. In any event, no such charge was called for. (People v Hoke, 62 NY2d 1022; People v Lipton, 54 NY2d 340; People v Le Mieux, 51 NY2d 981; People v Lam Lek Chong, 45 NY2d 64; People v Watts, 57 NY2d 299.) IV. None of the overt acts submitted to the jury was defective as a matter of law. The jury was, therefore, entitled to consider all of them in determining whether the People had proven the commission of an overt act by one of the conspirators. (People v Sheldon, 139 NY 251; Yates v United States, 354 US 298; People v De Cabia, 10 Misc 2d 923; United States v Marable, 574 F2d 224; United States v Villarreal, 546 F2d 1145; United States v Ammar, 714 F2d 238; United States v Gibbs, 739 F2d 838; United States v Paone, 782 F2d 386; United States v Gomez, 810 F2d 947; People v Menache, 98 AD2d 335.) V. The trial court did not abuse its discretion in refusing to grant Marx’s motion for a severance. (People v Bornholdt, 33 NY2d 75, cert denied sub nom. Victory v New York, 416 US 905; United States v Bari, 750 F2d 1169, cert denied sub nom. Benfield v United States, 472 US 1019.) VI. The court properly read from a portion of the New York City Rent and Rehabilitation Law while defining property under the larceny statute. (People v Garland, 69 NY2d 144.) VII. The court was not required to recuse itself from sentencing, and imposed sentence with a presentence report that was fair. (People v Moreno, 70 NY2d 403; People v Perry, 36 NY2d 114.)
   OPINION OF THE COURT

Titone, J.

Appellants Morris Leisner and Max Marx were indicted on December 14, 1984, and charged with one count of conspiracy and numerous substantive counts of attempted extortion and coercion based upon their alleged involvement in a plot to force tenants from their rent-controlled apartments. Appellants, who owned several buildings in Manhattan both individually and jointly, allegedly sought to rid the buildings of tenants by instilling fear of personal injury and property damage, thereby increasing the buildings’ resale value. Ultimately, appellants were convicted solely of conspiracy in the fourth degree (Penal Law § 105.10 [1]), and sentenced to indeterminate terms of imprisonment of from 1 to 4 years.

At trial, the prosecution attempted to show that Leisner and Marx hired Morris Lender and Hardman P. Lambert to "relocate” tenants from the subject buildings. As the proof at trial demonstrated, the relocation techniques used by Lender and Lambert were highly unsavory. From December 1978 to July 1980, Lender and Lambert installed drug addicts, pimps, prostitutes and assorted thugs in appellants’ buildings in order to coerce the tenants into abandoning their apartments. When threats, intimidation and abuse did not immediately produce the desired results, apartments were broken into and property was stolen or vandalized. According to the prosecution, appellants were aware of and condoned these actions.

With respect to the conspiracy count in the indictment, the prosecution endeavored to show that all of the aforementioned activities were part of one single integrated conspiracy. Although a majority of the buildings in question were individually owned, the prosecution theorized that the movements of the Lender-Lambert "group” were coordinated with the purchase and subsequent sale of buildings by Marx and Leisner, and that these activities constituted a unitary conspiracy to commit extortion. Eighty-six overt acts were alleged in the indictment, a significant majority of which occurred before December 14, 1979.

In defense to the substantive counts, both Leisner and Marx argued that they neither knew about nor authorized the use of any unlawful means to empty their buildings. In response to the conspiracy count, appellants argued that, if a conspiracy existed at all, the facts revealed three separate and discrete agreements concerning the relocation of tenants from different buildings: (1) the Marx buildings (W. 23rd St. and E. 30th St.); (2) the Leisner buildings (W. 22nd St., W. 80th St., Eighth Ave.); and (3) the jointly owned buildings (W. 53rd St.; W. 46th St., Ninth Ave. and 48th St.).

Based upon this argument, defendants submitted the following written request to charge: "[I]n order to convict either defendant of the conspiracy alleged in Count One, you must find that the single overall conspiracy alleged in that Count existed, and that each defendant joined that conspiracy. If you find that more than one conspiracy existed, you cannot convict either defendant of conspiracy unless you find that at least one of those conspiracies is the conspiracy alleged in Count One and the defendants were members of that conspiracy.” In addition, appellants submitted a written charge directing that before the jury could convict either defendant of conspiracy, it must find that at least one overt act was committed within the past five years as required by the Statute of Limitations (CPL 30.10 [2] [b]). Neither of these charges nor their equivalents were given to the jury.

After a six-week trial and five days of deliberation, the jury acquitted Leisner and Marx of one count of attempted grand larceny and one count of attempted coercion, both involving the same tenant, Ion Burta. Both defendants were convicted of conspiracy to commit grand larceny in the first degree by extortion. The jury was unable to reach a verdict on the remaining substantive counts.

On appeal, appellants challenged, inter alia, the trial court’s failure to give the two above-mentioned charges. The Appellate Division rejected their arguments and affirmed the convictions. We now reverse.

WAIVER OF STATUTE OF LIMITATIONS CHARGE

Appellants argue that the trial court committed reversible error by refusing to charge, as requested in writing by appellants, that before the jury could convict either defendant of conspiracy, it must find that at least one overt act was committed after December 14, 1979. We agree.

The establishment by the prosecution of a timely overt act by one of the conspirators in furtherance of the conspiracy was clearly necessary to satisfy both the applicable Statute of Limitations (CPL 30.10 [2] [b]), and the elements of the crime (Penal Law § 105.20; see also, 1 Sand, Siffert, Loughlin & Reiss, Modern Federal Jury Instructions — Criminal, Aug. 1986 Supp, at 52-53 [Matthew Bender 1986]). Such an instruction was critical here because an overwhelming majority of the overt acts on which the People relied were outside the Statute of Limitations. Because it is impossible to determine at this point whether the conviction was supported by a timely overt act, it plainly cannot be said that the error was harmless (see, Yates v United States, 354 US 298; United States v Head, 641 F2d 174, on remand 697 F2d 1200, cert denied 462 US 1132; United States v Greichunos, 572 F Supp 220, 225-227).

Although it did not disagree that a Statute of Limitations charge would have been appropriate, the Appellate Division concluded that reversal was not required because, in its view, appellants had withdrawn their requested charge on the issue, thereby waiving their objection to the court’s failure to so charge (138 AD2d 273, 276). We disagree. In People v Le Mieux (51 NY2d 981), this court noted that, under the clear language of CPL 470.05 (2), an objection is deemed preserved when the court fails to grant a written charge request, regardless of the absence of a specific postcharge exception. Further, even though the defendant in Le Mieux had made specific reference to other omitted charges while making only a blanket renewal of all his prior requests (including the request disputed on appeal), the issue was not forfeited because defendant had not "demonstrated a clear intent to waive a position already preserved” (id., at 983). In People v Whalen (59 NY2d 273), in contrast, the trial court stated that it was granting defendant’s submitted charge, but then delivered a different version than was requested by defendant. In that situation we held that "[w]hen a Judge grants a request to charge and then fails to deliver the charge as requested, the requesting party has an obligation to draw the error to the Judge’s attention” (People v Whalen, 59 NY2d 273, 280, supra). Finally, in People v Hoke (62 NY2d 1022), we concluded that when a Trial Judge denies a requested charge and, in its place, gives a different instruction on the same subject without a defense exception, the propriety of the court’s refusal to charge is preserved, but any issue as to the instruction as given is not.

Here, defense counsel made a written request to charge on the Statute of Limitations, but the trial court did not promptly rule on that request. Thus, appellants were entitled to assume their request had been denied (CPL 300.10 [5]). Additionally, since the trial court did not give a variation on the requested charge, appellants were under no further duty to preserve their claim (People v Whalen, supra). Therefore, this case is most similar to Le Mieux and the only question is whether appellants "demonstrated a clear intent” to abandon their request on the Statute of Limitations. We believe they did not.

During the precharge conference, the Statute of Limitations was mentioned in two contexts. First, the subject was broached in regard to two substantive counts involving Ion Burta, a tenant in the West 53rd Street building. Second, appellant Marx’s counsel raised the limitations issue in connection with the multiple conspiracy theory he had advanced. Neither of these discussions evinced a "clear intent” by defendants to waive their right to a Statute of Limitations charge on the entirely separate issue of the overt act element of the conspiracy count. Nor can such an intent be inferred from the fact that appellants’ counsel took 21 specific exceptions to the court’s charge, without mentioning the Statute of Limitations issue (see, People v Le Mieux, supra).

MULTIPLE CONSPIRACIES

Since there must be a retrial, we deem it appropriate to comment on an additional error in the trial court’s charge so that its repetition may be avoided. Appellants argue that the trial court committed reversible error by refusing to charge the jury on the possibility of multiple conspiracies. Additionally, they argue that, at best, the proof at trial established a number of discrete conspiracies, not the single conspiracy alleged in the indictment. Appellants contend that the trial court’s refusal to charge as requested, and the prejudicial spillover effect resulting from combining separate conspiracies into a single count constitute reversible error. Although we reject appellants’ contention regarding the sufficiency of the evidence to establish the single conspiracy charged in the indictment, we agree that the trial court committed error in refusing to charge the jury on multiple conspiracies.

The crime of conspiracy has been described as the "darling of the modern prosecutor’s nursery” (Harrison v United States, 7 F2d 259, 263 [Hand, J.]), perhaps because it exemplifies the " 'tendency of a principle to expand itself to the limit of its logic’ ” (Krulewitch v United States, 336 US 440, 445 [Jackson, J., concurring], citing Cardozo, The Nature of the Judicial Process, at 51) and furnishes the prosecution with potent evidentiary weapons. For instance, the overt acts of any conspirator may be attributed to other conspirators to establish the offense of conspiracy (People v McGee, 49 NY2d 48, 57). Similarly, the acts and declarations of any conspirator may be used against the others once a prima facie conspiracy case has been established (People v Salko, 47 NY2d 230, 237-238; People v Rastelli, 37 NY2d 240). In addition, a conspirator may be prosecuted in the county in which he entered into the conspiracy or in any county in which an overt act in furtherance of the conspiracy was committed (Penal Law § 105.25 [1]).

While such rules give the prosecution helpful tools in proving these often elusive crimes, they also create some risk of prejudice to the defense. This risk is greatest when the prosecution combines a number of seemingly related criminal agreements into a single integrated conspiracy count (see, Note, The Conspiracy Dilemma: Prosecution of Group Crime or Protection of Individual Defendants, 62 Harv L Rev 276 [1948]; Note, Developments in the Law — Criminal Conspiracy, 72 Harv L Rev 920, 983-985 [1959]; Note, Federal Treatment of Multiple Conspiracies, 57 Colum L Rev 387, 397-398 [1957]). In such circumstances, the "all too real” danger that a jury will find guilt by association is well recognized (see, Berger v United States, 295 US 78; Kotteakos v United States, 328 US 750, 772-773; Krulewitch v United States, 336 US 440, 445 [Jackson, J., concurring], supra). Moreover, jury confusion may arise when the prosecution’s proof establishes several discrete conspiracies, but not the single integrated conspiracy charged in the indictment. Indeed, it has been noted that "[t]his danger of sacrificing individual justice arises most often * * * wherein questions are raised as to. whether there was one single conspiracy or several minor conspiracies” (United States v Eubanks, 591 F2d 513, 522 [Ely, J., concurring] [9th Cir]; see also, United States v Sperling, 506 F2d 1323, 1340-1341, cert denied 420 US 962 [cautioning that use of single conspiracy indictments may lead to unnecessary exposure to reversal]).

Although this court has never addressed the problems created when the prosecution attempts to combine a series of agreements into a single integrated conspiracy, the Federal courts have been struggling with the dilemma for some 40 years (see, Berger v United States, 295 US 78, supra; Kotteakos v United States, 328 US 750, supra; see generally, Note, Federal Treatment of Multiple Conspiracies, op. cit.). The Federal Circuit Courts appear to be in agreement that the determination as to whether a single conspiracy was demonstrated by the evidence is a classic question of fact (see, United States v Alessi, 638 F2d 466 [2d Cir]; United States v Brito, 721 F2d 743 [11th Cir]; United States v Michel, 588 F2d 986 [5th Cir], cert denied 444 US 825; United States v Perry, 550 F2d 524 [9th Cir], cert denied sub nom. Ware v United States, 431 US 918). Thus, the jury must be instructed on the single-multiple conspiracy issue when the facts are such that a jury might reasonably find either a single conspiracy or multiple conspiracies (see, United States v Cambindo Valencia, 609 F2d 603, 625 [2d Cir]; United States v Eubanks, 591 F2d 513, 518 [9th Cir], supra ["(i)f it is possible under the evidence for the jury to find that multiple conspiracies existed, then the court should instruct the jury on the issue”]; but see, e.g., United States v Martino, 664 F2d 860; United States v Ocampo, 650 F2d 421).

Like the Federal courts, we believe that because the clarity of the charge is so crucial in these complex conspiracy trials, a charge must be given explicitly recognizing the possibility of multiple conspiracies and directing an acquittal in the event that the jury concludes that something other than a single integrated conspiracy was proven. Such a charge is required whenever the possibility of more than one conspiracy is supported by a reasonable view of the evidence (see, CPL 300.10 [2]; see also, People v Butts, 72 NY2d 746; People v Farnsworth, 65 NY2d 734; People v Padgett, 60 NY2d 142; People v Johnson, 45 NY2d 546; People v Torre, 42 NY2d 1036; People v Steele, 26 NY2d 526; People v Asan, 22 NY2d 526; People v Moran, 246 NY 100).

In this case, although the prosecution’s "single conspiracy” approach was certainly viable, there was also a reasonable view of the evidence to support appellants’ contention that any conspiracy or conspiracies proven were narrower in scope than the single overarching one charged in the indictment. Appellants point out that Morris Lender, the prosecution’s chief witness, testified that Max Marx had nothing to do with the Leisner buildings (22nd St., Eighth Ave., 80th St.), and did not participate in the vacating of those buildings. Lender further testified that there was no agreement between Marx and Leisner concerning the relocation of tenants from those buildings. Additionally, Max Marx testified that he had no interest in the Leisner buildings, that he had nothing to do with vacating the Leisner buildings, and that Leisner had no interest in his buildings. This testimony supported appellants’ contention that whatever Leisner did at his buildings in no way "depended” on whether Marx succeeded or failed at vacating his own buildings, and vice versa, and that, consequently, there was no single overarching conspiracy. Accordingly, the trial court’s failure to charge the jury on the possibility of multiple conspiracies was error.

We note, however, that even though a reasonable view of the evidence supports the multiple conspiracy charge, appellants are not entitled to a dismissal of the conspiracy count. Viewing the evidence in the light most favorable to the prosecution, a rational trier of fact could have found that the single integrated conspiracy alleged in the indictment had been proven beyond a reasonable doubt (Jackson v Virginia, 443 US 307, 319; People v Contes, 60 NY2d 620, 621; Matter of Anthony M., 63 NY2d 270, 280; People v Lewis, 69 NY2d 321, 324).

In support of their single conspiracy theory, the prosecution relied upon what has become known as a "wheel conspiracy” approach, with the Lender-Lambert group as the hub and appellants both individually and jointly serving as the spokes. However, a single conspiracy cannot be found unless there is a "rim of the wheel to enclose the spokes” (Kotteakos v United States, 328 US 750, 755, supra). No matter the geometric shape taken by a conspiracy, "the gist of the offense remains the agreement, and it is therefore essential to determine what kind of agreement or understanding existed as to each defendant” (United States v Borelli, 336 F2d 376, 384 [2d Cir] [Friendly, J.], citing Note, Developments in the Law — Criminal Conspiracy, op. cit., at 923-933; see also, United States v Falcone, 109 F2d 579, affd 311 US 205 [Judge Learned Hand’s formulation of the stake in the venture test]; Note, Resolution of the Multiple Conspiracies Issue Via a "Nature of the Enterprise” Analysis: The Resurrection of Agreement, 42 Brooklyn L Rev 243 [1975]; Wechsler, Jones, Korn, The Treatment of Inchoate Crimes in the Model Penal Code of the American Law Institute: Attempt, Solicitation, and Conspiracy, 61 Colum L Rev 957, 979-990 [1961]).

In order to prove the existence of such a "rim”, i.e., a single controlling agreement, the prosecution relied on the timing of appellants’ purchasing, vacating and selling of the subject buildings, and the coordinated movements of the Lender-Lambert group (see, Note, Federal Treatment of Multiple Conspiracies, op. cit., at 388-389, n 12; United States v Tramunti, 513 F2d 1087, 1106, as well as the existence of a "joint economic benefit” which, the prosecution argues, was demonstrated by the evidence that there was, in fact, disguised joint ownership of some of the buildings (see, People v Ruiz, 130 Misc 2d 191, 193; United States v Tilton, 610 F2d 302, 307 [5th Cir]; United States v Bernstein, 533 F2d 775, 791 [2d Cir], cert denied 429 US 998). We agree that a rational trier of fact could have inferred a single integrated conspiracy from this evidence. Accordingly, reversal and a retrial, rather than dismissal, is the proper remedy.

For the foregoing reasons, the orders of the Appellate Division should be reversed and a new trial ordered.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander, Hancock, Jr., and Bellacosa concur.

In each case: Order reversed, etc.

      . Appellants were indicted for conspiracy in the fourth degree (Penal Law § 105.10), 10 counts of attempted grand larceny in the first degree (Penal Law §§ 110.00, 155.40 [now § 155.42]), two counts of grand larceny in the first degree (Penal Law § 155.40 [now § 155.42]), 10 counts of attempted coercion in the first degree (Penal Law §§ 110.00, 135.65), two counts of coercion in the first degree (Penal Law § 135.65) and two counts of burglary in the third degree (Penal Law § 140.20). Appellant Leisner was also indicted for an additional six counts of attempted grand larceny in the first degree and six counts of attempted coercion in the first degree.

      . The nine buildings involved in the conspiracy count of the indictment are: 345-347 West 22nd Street; 204 Eighth Avenue; 140 West 80th Street (Leisner’s buildings); 351-353 West 53rd Street; 410-412 West 46th Street; 704-708 Ninth Avenue; and 367-369 West 48th Street (buildings owned jointly by Leisner and Marx); 171 West 23rd Street and 155-157 East 30th Street (Marx’s buildings).

      . After reviewing appellants’ written charge requests, the Trial Judge endorsed on some of them either "covered by charge” or "refused”, and made his annotated copy a court exhibit. The Judge did not, however, explicitly rule on the Statute of Limitations request. Instead, he simply underlined the relevant date constituting the limitation deadline. Relying on this, the majority below concluded that the Trial Judge had not yet rejected appellants’ request, but was apparently relying on the oral charge conferences to clarify appellants’ position on the issue (138 AD2d 273, 276). This position is untenable. As pointed out by the dissent below, there is no indication that appellants’ counsel ever saw the Judge’s annotated copy. While appellants’ requests were marked during the precharge conference, the court made reference to them for the first time during the postcharge conference. At this time, the court merely invited counsel to look at the annotations, but did not instruct them to do so. Thus, appellants’ counsel were aware only that they had submitted a written charge, and that it had not been given in any form whatsoever. The Appellate Division’s belief as to what the Trial Judge must have thought is sheer speculation.

      . The fact that two of appellants’ exceptions concerned written charges which had been submitted and not given by the trial court, other than the Statute of Limitations charge, is of no legal consequence, since appellants were under no duty to bring such charges to the Judge’s attention (People v Hoke, 62 NY2d 1022; People v Le Mieux, 51 NY2d 981).

      . Since we are reversing on another ground, we need not address whether the Appellate Division’s application of the "substantial prejudice” test, the harmless error rule applied by the Federal courts, was proper (see, Berger v United States, 295 US 78; Kotteakos v United States, 328 US 750; Note, Federal Treatment of Multiple Conspiracies, 57 Colum L Rev 387).

      . At trial, Marx testified that he had no ownership interest in 140 West 80th Street, but the evidence at trial showed that this building had been purchased by 650 Tenth Avenue Corporation, a company in which he conceded he was a principal and a signatory on a joint bank account with Leisner.