text:
    Bankers Trust Company, Respondent, v J. V. Dowler & Co., Inc., et al., Appellants, et al., Defendant.
    Argued March 27, 1979;
    decided May 8, 1979

      POINTS OF COUNSEL

      Philip A. Greenberg and Jerome Kamerman for appellants.
    I. Bankers was not entitled to summary judgment against defendants-respondents-appellants. (Phillips v Kantor & Co., 31 NY2d 307; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 895; Falk v Goodman, 7 NY2d 87; Wanger v Zeh, 45 Misc 2d 93; R. M. & B., Inc. v R. G. S. Realty Corp., 28 Misc 2d 679; Richards v Kaskel, 40 AD2d 804, 32 NY2d 524; Cave v Green, 281 App Div 560, 308 NY 754; Lynch v Gibson, 254 App Div 47, 279 NY 634; Allstate Ins. Co. v Altman, 21 Misc 2d 162; Greenberg v Bar Steel Constr. Corp., 22 NY2d 210.) II. Bankers failed to act in a commercially reasonable manner by selling out the Company’s account and ignoring open sales tickets. (Grace v Sterling, Grace & Co., 30 AD2d 61; Matter of

      Kiamie, 309 NY 325; Bowes v National City Bank of N Y., 169 Misc 78.)

      Jack H. Weiner and Charles Leeds for respondent.
    The court below correctly held that Bankers Trust was entitled to summary judgment against the Company, Dowler and the Federal Deposit Insurance Company. (American Bank & Trust Co. v Lichtenstein, 48 AD2d 790, 39 NY2d 857; Indianapolis Morris Plan v Karlen, 28 NY2d 30; Fidelity Bank & Trust Co. of N. J. v Production Metals Corp., 366 F Supp 613; Lincoln Commodity Servs. v Meade, 558 F2d 469; Capos v Mid-America Nat. Bank, 581 F2d 676; Ehrlich v American Moninger Greenhouse Mfg. Corp., 26 NY2d 255; Indig v Finkelstein, 23 NY2d 728; Mallard Constr. Corp. v County Fed. Sav. & Loan Assn., 32 NY2d 285; Woodmere Academy v Steinberg, 41 NY2d 746.)
   OPINION OF THE COURT

Fuchsberg, J.

We are here called upon to construe and apply subdivision (3) of section 9-504 of the Uniform Commercial Code, which provides that a secured party’s sale or other disposition of collateral upon its debtor’s default must be conducted in a "commercially reasonable” manner.

The case comes to us in the context of a dispute over the propriety of plaintiff Bankers Trust Company’s (Bankers) liquidation of municipal bonds held as collateral for loans made to a securities dealer, defendant J. V. Dowler & Company (Company), of which James V. Dowler, Jr. (Dowler), was president and principal stockholder. The basic issues are whether Bankers had adequate cause to "deem itself insecure”, a condition constituting a default under the parties’ security agreement, and whether Bankers’ response to that default was commercially reasonable in light of the standards prevailing in the municipal securities field. A final question is whether the conduct that led to the declaration of default was fraudulent.

As a dealer in municipal securities, the Company would buy and sell bonds for its own account. Its relationship with Bankers essentially was the usual one in which a banking institution makes loans keyed to the value of bonds a dealer puts up as collateral. Specifically, Bankers alleges that its understanding with the Company limited the sums it agreed to advance to 90% of the current market value of the Company’s unsold bonds pledged with it and 100% of the sales price of bonds sold by the Company but held by Bankers, as clearing agent, for delivery to the purchaser. The bank had the right to hold the Company’s bond inventory and the tickets evidencing the Company’s obligation to deliver bonds in exchange for their purchase price on specified settlement dates, all pursuant to a written security agreement which provided, in pertinent part, that the collateral could be sold whenever "the Bank deems itself insecure * * * or if it appears * * * that any representation in any financial or other statement of the [Company] * * * is untrue or omits any material fact”.

Apparently, this debtor-creditor relationship was uneventful until May-June, 1974, when there was a precipitous downslide in the municipal bond market. During this period, Dowler presented Bankers with sales tickets for transactions in which over $2 million worth of municipal bonds were sold to the Franklin National Bank (Franklin) for delivery on July 16 and 18. After postponement of a settlement date caused Bankers to investigate these transactions, Dowler admitted not only that the ticket prices were above true market value, but that, unbeknownst to Bankers, he had simultaneously executed purchase tickets representing repurchases of the same bonds by the Company from Franklin at an identical price plus a small premium. This, Bankers alleges, was a "wash sale” which effected no true change in the beneficial ownership of the stock but misled it into advancing 100% on what it had assumed were tickets for bona fide, arms length sales rather than the 90% of market value which was the outside limit of the credit it would extend on unsold bonds (see Ernst & Ernst v Hochfelder, 425 US 185, 205).

When Dowler failed to meet Bankers’ demand that he put up additional collateral roughly approximating the differential between the Company’s debit balance and the true value of the bonds and an attempt by Dowler to induce the Chase Manhattan Bank to share the risk on the Company’s loans proved futile, Bankers liquidated the Company’s securities. To accomplish the liquidation, after giving the Company notice and an opportunity to redeem, the bank’s municipal bonds department solicited bids, receiving 6 on 2 of the issues "sold” to Franklin, 10 on a third, and one each on the remaining 2. This action to recover a $374,000 deficiency on the sale of collateral approximating $3.5 million followed.

For the purposes of this appeal, we need concern ourselves with but two of the four causes of action spelled out in Bankers’ complaint. One was asserted against the Company alone to recover the deficiency. The second was against both the Company and Dowler individually for fraud in connection with the Franklin transactions. Special Term, expressing the opinion that whether Bankers acted in-a "commercially reasonable manner” presented a question of fact, denied cross motions for summary judgment. However, on cross appeals, the Appellate Division held Bankers’ conduct reasonable as a matter of law, entered an order granting its motion, and directed judgment in its favor on all causes of action (62 AD2d 778). For the reasons which follow, we agree with that disposition.

Initially, we observe that there can be no serious question but that Bankers was entitled to exercise its default remedies. The broad language of the security agreement permitted it to move to protect its interests whenever it deemed itself insecure or was confronted with a passive or active misrepresentation by its debtor. Dowler’s blunt admission that he had engaged in wash sales to postpone the effect of the losses occasioned by the declining market was ample cause for insecurity. The bank was a lender, not an investor or coentrepreneur; it had the right to define and limit the risks it would accept. Each time Dowler submitted one of the Franklin sales tickets to Bankers, it at least impliedly misrepresented that the underlying transaction was fairly described. Instead, viewed most favorably, it was only a half truth; it was silent on the repurchase which in effect canceled out the sale. Such an omission concealed the very kind of danger against which the bank had a right to, and did, protect itself by exacting the terms in its security agreement.

The Uniform Commercial Code contains no definition of default. Nor does it have any provision forbidding the parties from agreeing that circumstances such as those we have described would trigger the bank’s right to liquidate the security. Accordingly, the agreement is controlling for this litigation (see Hogan, The Secured Party and Default Proceedings Under the UCC, 47 Minn L Rev 205, 209; cf. Uniform Commercial Code, § 9-501, subd [3]).

As to Bankers’ postdefault actions, the touchstone of its obligations as a secured party was to dispose of the collateral in a "commercially reasonable” manner (Uniform Commercial Code, §§ 9-207, 9-502, subd [2]). Though commercial reasonableness must inhere in "every aspect of the disposition including the method, manner, time, place and terms” (Uniform Commercial Code, § 9-504, subd [3]), the virtue of its lack of further particularization is that it invites consideration of accepted business practices as a guide to what is most likely to protect both debtor and creditor (Commercial Law, 1978 Ann Survey Am L, 113, 115). Customs and usages that actually govern the members of a business calling day-in and day-out not only provide a creditor with standards that are well recognized, but tend to reflect a practical wisdom born of accumulated experience. This is especially so here where we do not deal with a lay borrower enmeshed in a contract of adhesion but with two sophisticates who vocationally traffic in the milieu of high finance (see Clark, Default, Repossession, Foreclosure, and Deficiency: A Journey into the Underworld and a Proposed Salvation, 51 Ore L Rev 302, 312-315).

These considerations in mind, we focus now on the factors enumerated in section 9-504. In this connection, some authorities suggest that optimizing resale price is the prime objective of the code’s default mechanisms and that the other factors listed are merely designed to ensure that the highest price is achieved (Mercantile Fin. Corp. v Miller, 292 F Supp 797; White & Summers, Uniform Commercial Code, § 26-11, pp 987-989; Gilmore, Article 9 of the Uniform Commercial Code— Part V: Default, 7 Personal Fin LQ Rep 4, 7, 9). Others would have commercial reasonableness turn on the procedures employed (Matter of Zsa Zsa, Ltd., 352 F Supp 665, 671, affd mem 475 F2d 1393; cf. Uniform Commercial Code, § 9-507, subd [2] ["(t)he fact that a better price could have been obtained * * * is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner”]). Examination of the record here reveals that Bankers’ conduct survives either test.

As to the "terms” of the liquidation, though the bonds were sold below both their face value and the amount entered on the Franklin sales tickets, the appellants do not argue that the proceeds were below the actual market value on the date of sale, and they admit that the Franklin "price” was inflated. Though the prices for which the bonds were sold averaged more than 10% lower than those at which they were purchased, this is not surprising in light of the sharp drop in the published bond indexes for July, 1974 (see Standard & Poor’s Statistical Service, Security Price Index Record for 1978, p 235).

As to the "method”, the securities held by Bankers were apparently of a type customarily sold on a recognized market (see Kripke, Practice Commentary, McKinney’s Cons Laws of NY, Book 63i/2, pt 3, UCC 9-504:2, p 611; Hudak & Turnbull, The Standard of Commercial Reasonableness in the Sale of Repossessed Collateral Under the UCC, 4 Western St U L Rev 22; 29-30). Thus, Bankers’ sale of the bonds through regular market channels is immune to attack on the grounds of commercial unreasonableness, irrespective of whether it be deemed public or private (see Hogan, 47 Minn L Rev, 205, 226-227). And, it is by now established that the fact that two of the bond issues drew only one bid does not, without more, render their sale unreasonable (see Matter of Zsa Zsa, Ltd., 352 F Supp 665, supra). When the sale is conducted so as to give a sufficiently broad group of buyers the opportunity to bid, their failure to respond in any particular number may itself be an indication of the market value of the item offered for sale.

But, despite a failure to deny that the method of liquidation pursued by the bank was the customary one, the Company and Dowler take the position that Bankers nevertheless should have presented the bonds to Franklin, which presumably had undertaken an obligation to pay the full price entered on the open sales tickets. In this way, Dowler contends, no deficiency would have arisen despite the depressed state of the market. However, to require Bankers, which had elected to declare the default on or about July 1, to await payment from Franklin would be to compel it to rely on the credit of a third party for approximately two and a half more weeks until July 16 and 18, a long period in terms of the highly unsteady market conditions that prevailed at the time. Moreover, during this interval, the defendants would have Bankers defer pursuing the Company, which, as discovery of the wash sales had revealed, was exposed to financial straits which well might worsen with each passing day. Dowler’s resort to the wash sale device also presented a possibility (later revealed to be a fact) that Franklin never contemplated that it would have to pay for the bonds and was merely expecting a check for its premium in settlement of the matching transactions, a circumstance which could have been anticipated to lead to Bankers’ acquisition of a lawsuit instead of its money.

In short, though Bankers’ indulgence would have accommodated Dowler’s hope that the bond market might recover in time, Bankers had a right to perceive such tolerance as contrary to its legitimate self-interest. Certainly the code was not intended to place a secured party at a borrower’s mercy by permitting it to speculate with pledged collateral at will. Indeed, since a secured party need not fall back upon his debtor’s recommendations in order to satisfy his duty of reasonable care, Bankers certainly need not have done so when the grave threat of further depreciation of the bonds dictated a more prudent course of action (see Old Colony Trust Co. v Penrose Inds. Corp., 280 F Supp 698, 717, affd 398 F2d 310). In addition, by proceeding in normal course, the bank was able to dispose of its holdings before the market dropped even lower and thereby avoid the accusation that delay itself tainted the sale (see Harris v Bower, 266 Md 579). Given these circumstances, it is hard to see how it can be said that Bankers’ refusal to wait to sell the bonds to Franklin rendered its actions commercially unreasonable.

In sum, after eliminating conclusory and irrelevant allegations, the undisputed facts and irrefutable documentary evidence bearing upon each of the elements of commercial reasonableness make it manifest that there could be no realistic expectation that the Company would succeed in obtaining a factual or legal determination in its favor. We therefore affirm the Appellate Division’s order insofar as it granted Bankers summary judgment on this issue (see Rotuba Extruders v Ceppos, 46 NY2d 223, 231).

Finally, the record demonstrates that the conduct which gives conclusive support to Bankers’ declaration of default constitutes fraud as well, and, since the Company acted entirely through Dowler, he is liable on that count along with it. It is undeniable that when he presented the tickets for the sales to Bankers, Dowler permitted their surface expressions to leave the impression that they represented unconditional sales. Though he knew they did not, he concededly failed to disclose that he had already agreed to repurchase the bonds. Entries on the purchase tickets he held reading "Special Instructions — Settle by Difference Check” constitute incontrovertible evidence in writing of a contemporary intention and expectation that the bonds would never have to be accepted by Franklin. The purchase tickets and their entries first came to light when the Federal Deposit Insurance Company, as receiver in bankruptcy for Franklin, made them available upon discovery.

That the implied representations of authenticity were intended to be acted upon by Bankers is obvious, Dowler having testified at his examination before trial that, because he was in a "bind”, he was seeking to "buy time” while gambling that the market would come back. Furthermore, he used the tickets as a basis for circumventing the agreement with Bankers by obtaining 100% of the full, above-market price for which they had been written, thus leaving no doubt either as to the materiality of the representations or as to Bankers’ reliance thereon.

In sum, the facts encompassed the classic elements of false representation, scienter, materiality, expectation of reliance and damage that go to make up fraud (see, generally, Prosser, Torts, ch 18). Consequently, whatever post hoc excuses and rationalizations Dowler was later to offer for his behavior, they did not serve to create an issue of fact sufficient to resist summary judgment on this score either.

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

Chief Judge Cooke and Judges Jasen, Gabrielli, Jones and Wachtler concur with Judge Fuchsberg.

Order affirmed.

      . Although Dowler denies that these were the terms of the oral agreement, he has admitted that Bankers would lend him the face amount of any sales tickets he presented. Different treatment of the two categories of bonds is evidenced by the undisputed fact that at no time did Bankers allow the loans to reach 100% of the value of all bonds held as collateral.

        . This agreement also provided that in the event of default, "(a) all liabilities of the undersigned shall become at once due and payable, without notice, presentment or demand of payment, which are hereby expressly waived, (b) the Bank shall have the right, from time to time, without advertisement or demand upon or notice to the undersigned or right of redemption by the undersigned except as shall be required by applicable statute and cannot be waived, at its option to sell, re-sell, assign, transfer and deliver all or any part of the Collateral, at any brokers’ board or exchange or at public or private sale, for cash or on credit or for future delivery * * * Upon each such sale, the Bank, unless prohibited by provision of any applicable statute which cannot be waived, may purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of the undersigned.”

      . Bankers also sought to recover $16,257.19 representing an overdraft in the Company’s checking account, but defendants do not -dispute their liability for this sum on appeal. Also named as a party defendant was the Federal Deposit Insurance Company, the receiver in bankruptcy of the now defunct Franklin National Bank. The Appellate Division awarded judgment against the FDIC on what it found was Franklin’s complicity in the wash sales, but the FDIC has not appealed.

      . In New York this broadly stated standard of conduct evolved long before our adoption of the Uniform Commercial Code in 1964 (see Matter of Kiamie, 309 NY 325).

      . The Appellate Division order awards judgment against Dowler as an individual for the amount of the deficiency on the bonds involved in the Franklin transactions. The Company was also held liable for this amount as well as for the deficiency attributable to the other items Bankers held as collateral.

      . A transaction is settled by a difference check in lieu of going through the motions of actually delivering and receiving securities on a transaction that originates and ends with the same party.


source: Caselaw Access Project

author: Wachtler, J.

license: Public Domain

text:
    Travelers Indemnity Company, Appellant, v Ryder Truck Rental, Inc., et al., Respondents.
    Argued March 30, 1979;
    decided May 10, 1979.

      POINTS OF COUNSEL

      James A. Magee for appellant.
    The court below erred in not applying the minimum requirements which must be contained in an automobile insurance policy issued in this State to the policy issued by Ryder to Sten. (Motor Vehicle Acc. Ind. Corp.

      v Continental Nat. Amer. Group Co., 35 NY2d 260; Rosado v Eveready Ins. Co., 34 NY2d 43; Auten v Auten, 308 NY 155; New Amsterdam Cas. Co. v Stecker, 3 NY2d 1.)

      Charles S. Hefter and Martin Rosen for respondents.
    I. The court did not err when it unanimously held that subdivision 2 of section 167 of the Insurance Law was not applicable. (McCluskey v Cromwell, 11 NY 593; Neumeier v Kuehner, 31 NY2d 121.) II. Defendants-respondents Ryder cannot defend renter Sten in the underlying action because of a conflict of interest.
   OPINION OF THE COURT

Wachtler, J.

On June 7, 1973, Fjalar Sten, a New York resident, rented a van registered in Massachusetts from Ryder Truck Rental and Ryder System (collectively referred to as Ryder) in New York City. According to the written agreement Sten rented the vehicle for three days, and was to deliver it on June 10 to Ryder in Portland, Maine. The agreement, which provided Sten with liability insurance, excluded coverage for “any injuries of any nature whatsoever to Customer’s agents, employees, guests * * * or other occupants of the Vehicle”. (Rental Contract, par 8, cl [b]). En route to Portland, while in Massachusetts, Sten was joined by a friend, Reino Helin, who was to accompany Sten for the remainder of the trip. On June 10 Sten lost control of the van. The vehicle overturned and Helin was killed instantly.

Helin’s widow commenced an action in Supreme Court, New York County, against Ryder and Sten. Sten was represented by Travelers Indemnity pursuant to an insurance contract issued to Sten on his car. This policy provided liability coverage to Sten for injuries arising from his operation of vehicles other than his own. Ryder disclaimed liability and moved for summary judgment. Special Term granted the motion and severed the action, holding Maine’s guest statute, exempting rental vehicle owners from liability for injuries to passengers, controlling. No appeal was taken from that judgment.

Travelers brought the present action seeking a declaration that the exclusion of guest coverage in the policy issued by Ryder to Sten violates subdivision 2 of section 167 of the Insurance Law and New York public policy. Special Term dismissed the complaint, and the Appellate Division unanimously modified to the extent of declaring the challenged exclusion valid.

The issue is whether the exclusion of guest coverage in the insurance policy issued by Ryder to Sten is void as violative of subdivision 2 of section 167 of the Insurance Law and public policy. We hold on the facts of this case that the challenged exclusion is valid.

It is of vital concern that victims of automobile accidents do not go uncompensated for the injuries inflicted on them (Motor Vehicle Acc. Ind. Corp. v Continental Nat. Amer. Group Co., 35 NY2d 260; Rosado v Eveready Ins. Co., 34 NY2d 43; Vehicle and Traffic Law, § 310). To help implement this public policy the Legislature enacted subdivision 2 of section 167 of the Insurance Law which provides: "No policy or contract of personal injury liability insurance or of property damage liability insurance, covering liability arising from the ownership, maintenance or operation of any motor vehicle * * * shall be issued or delivered in this state to the owner thereof, or shall be issued or delivered by any authorized insurer upon any such vehicle * * * principally garaged or principally used in this state, unless it contains a provision insuring the named insured”. Among the required provisions is coverage for injuries suffered by a passenger in the vehicle (Vehicle and Traffic Law, § 311; 11 NYCRR 60.1).

The Appellate Division held that since the van involved in the accident was not principally garaged or used in this State, subdivision 2 of section 167 did not operate to void the exclusion of guest coverage. Travelers argues that "[t]he Appellate Division placed too great an emphasis on the phrase 'principally garaged or principally used in this state’ ”. According to Travelers "[t]he important factor is that the rental agency does garage and use vehicles in this state”. We disagree.

In enacting subdivision 2 of section 167 the Legislature declared that only policies issued on vehicles principally garaged or used in this State would be subject to the mandatory insurance provisions. To interpret the statute as Travelers urges would be to ignore the statute’s very language and to trespass into the province of the Legislature. As the Appellate Division correctly noted, "The vehicle here involved was registered in Massachusetts. It was only temporarily in New York at the time Sten picked it up.” Indeed the complaint does not even allege that the van was principally garaged or used in New York State. The insurance requirements contained in subdivision 2 of section 167 are therefore inapplicable to the insurance policy in question, and the challenged exclusion of guest coverage may not be said to violate the statute.

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

Chief Judge Cooke and Judges Jasen, Gabrielli, Jones and Fuchsberg concur with Judge Wachtler.

Order affirmed.


author: Gabrielli, J.

text:
    In the Matter of Municipal Consultants & Publishers, Inc., Respondent, v Town of Ramapo et al., Appellants.
    Submitted March 19, 1979;
    decided May 1, 1979

      POINTS OF COUNSEL

      Kenneth H. Resnik and Mitchell P. Schecter for appellants.
    I. No valid and binding contract arose between Municipal Consultants & Publishers, Inc., and the Town of Ramapo, absent the execution of a written agreement by the Supervisor of the Town of Ramapo. (Town of Hempstead v United States Trucking Corp., 31 Misc 2d 419; Pratt v Hudson Riv. R. R. Co., 21 NY 305; Berkeley United School Dist. of Alameda County v Barnes Constr. Co., 112 F Supp 396.) II. The lack of execution and delivery of the alleged contract bars recovery by petitioner-respondent. (Matter of Hendrickson Bros. v County of Suffolk, 58 AD2d 602.) III. An article 78 proceeding is improper and does not lie to enforce obligations of a public contract as there is an adequate remedy at law. (Matter of Corbeau Constr. Corp. v Board of Educ., 32 AD2d 958; Matter of Koegan v Yunich, 51 AD2d 744; People ex rel. Richards v Hylan, 200 App Div 871.) IV. The Court of Appeals is bound by the findings of fact determined in the Supreme Court.

      Harold J. Van Opdorp for respondent.
    I. A contract with a municipal corporation may arise from the submission of a proposal and its acceptance by a resolution. (Village of Lake George v Town of Caldwell, 3 AD2d 550, 5 NY2d 727; Belmar Contr. Co. v State of New York, 233 NY 189; Matter of Town of Hempstead v United States Trucking Corp., 31 Misc 2d 419; Sanders v Pottlitzer Bros. Fruit Co., 144 NY 209; Pratt v Hudson Riv. R. R. Co., 21 NY 305; Rouse Constr. Corp. v Albany Acoustical Corp., 9 AD2d 38; Matter of Hendrickson Bros. v County of Suffolk, 58 AD2d 602.) II. Subdivision 6 of section 64 of the Town Law does not require execution by the supervisor before the contract becomes obligatory. (New York Tel. Co. v Town of North Hempstead, 41 NY2d 691; Soundview Woods v Town of Mamaroneck, 14 Misc 2d 866, 9 AD2d 789; McDonald v Mayor of N. Y., 68 NY 23; Matter of Town of Clay v Helsby, 45 AD2d 292; Knapp v Fasbender, 1 NY2d 212; Village of Lake George v Town of Caldwell, 3 AD2d 550, 5 NY2d 727; Orelli v Ambro, 51 AD2d 85, 41 NY2d 952.) III. Even if it could be interpreted that the provisions of subdivision 6 of section 64 of the Town Law is a legislative fiat that a contract with a town cannot be enforceable until the supervisor executes the contract, the remedy sought is still appropriate. (Belmar Contr. Co. v State of New York, 233 NY 189; People ex rel. Lunney v Campbell, 72 NY 496; People ex rel. Vickerman v Contracting Bd., 46 Barb 254; People ex rel.

      Belden v Contracting Bd., 27 NY 378; Matter of Semper v Duffey, 227 NY 151; Matter of Arcangel v Holling, 258 App Div 180, 1031, 282 NY 808; Bailey v Colonna, 73 Misc 2d 299; Matter of Town of Hempstead v United States Trucking Corp., 31 Misc 2d 419; Moore v Mayor of N. Y., 73 NY 238; Fleishman v Furgueson, 223 NY 235.) IV. Even assuming that mandamus is not the appropriate remedy, the relief to which petitioner-respondent is or may be entitled should be considered by the court. (Matter of Lakeland Water Dist. v Onondaga County Water Auth., 24 NY2d 400; Dun & Bradstreet, Inc. v City of New York, 276 NY 198; Matter of Niagara Falls Urban Renewal Agency v O’Hara, 57 AD2d 471; Matter of Corbeau Constr. Corp. v Board of Educ., 32 AD2d 958; Matter of Rockland Bus Lines v Board of Educ., 43 Misc 2d 1060.) V. The agreement is clearly enforceable within the Statute of Frauds. (Cohon & Co. v Russell, 23 NY2d 569; Argus Co. v Mayor of Albany, 55 NY 495; Village of Lake George v Town of Caldwell, 3 AD2d 550, 5 NY2d 727; Crabtree v Elizabeth Arden Sales Corp., 305 NY 48; Lalonde v Modern Album & Finishing Co., 38 AD2d 960; Tymon v Linoki, 16 NY2d 293; Flax v B. M. Dev. Corp., 35 AD2d 565; Marshall v Ferris, 65 Misc 2d 405; Clifford v Carrols N. Y. Dev. Corp., 50 Misc 2d 741; Sokol v Terry, 43 Misc 2d 168.) VI. The Court of Appeals is not bound by the conclusions of the Supreme Court. (Williams Press v State of New York, 37 NY2d 434.)
   OPINION OF THE COURT

Gabrielli, J.

The issue in this case is whether the Town of Ramapo is contractually obligated to receive and pay for the services offered by the petitioner Municipal Consultants & Publishers, Inc. (Municipal). For the reasons which follow we conclude that there existed an enforceable contract between the parties, and we therefore affirm the order of the Appellate Division.

On June 10, 1976 Municipal, at the request of the town, submitted a written proposal in the form of a contract to the Town of Ramapo offering to codify its ordinances and local laws for a sum specified in the proposal. On July 21 Municipal agreed to certain changes suggested by the town attorney, but no formal action was taken at that time on behalf of the town on the proposal. Finally, on February 9, 1977 the town board formally acted on it, and agreed to engage petitioner’s services.

By resolution No. 77-54 the town (1) authorized the town attorney to accept the proposal; (2) authorized the supervisor to sign the agreement, and (3) provided payment for the work. The resolution adopted by the town board on February 9, 1977, in pertinent part, provided that:

"RESOLVED by the Town Board of the Town of Ramapo that authorization be hereby granted for the Town Attorney to accept the proposal submitted by Municipal Consultants & Publishers, Inc., of 64 Seneca Street, Geneva, New York, to codify Ordinances and Local Laws of the Town of Ramapo, and

"BE IT FURTHER RESOLVED that the Supervisor be hereby authorized to execute the Agreement between the Town of Ramapo and Municipal Consultants & Publishers, Inc., and

"BE IT FURTHER RESOLVED that the sum of $10,000.00 for the first 450 pages or less and $20.00 per page for each additional page in excess of 450 pages, be hereby paid to Municipal Consultants & Publishers, Inc. for services rendered.”

On February 15, 1977, the town attorney notified Municipal that the agreement had been approved, forwarded copies of the agreement for Municipal to execute, and stated he looked forward to a long and pleasant relationship.

Ramapo’s supervisor, however, never signed the contract. It appears that one of Municipal’s competitors, long after the passage of the resolution authorizing the agreement, offered to do the work for a lesser sum. The parties met in an attempt to work out their differences but to no avail. This article 78 proceeding ensued requesting that the court declare the contract valid and enforceable and also to direct the supervisor and town attorney to deliver an executed copy of the agreement.

The primary issue presented is whether the contract is enforceable against the town without the signature of the supervisor.

Generally, where the parties contemplate that a signed writing is required there is no contract until one is delivered (Scheck v Francis, 26 NY2d 466; Schwartz v Greenberg, 304 NY 250). This rule yields, however, when the parties have agreed on all contractual terms and have only to commit them to writing. When this occurs, the contract is effective at the time the oral agreement is made, although the contract is never reduced to writing and signed. Where all the substantial terms of a contract have been agreed on, and there is nothing left for future settlement, the fact, alone, that it was the understanding that the contract should be formally drawn up and put in writing, did not leave the transaction incomplete and without binding force, in the absence of a positive agreement that it should not be binding until so reduced to writing and formally executed (Disken v Herter, 73 App Div 453, affd 175 NY 480; 1 Williston, Contracts, § 28; see, also, Matter of Meister, 39 AD2d 857, affd 32 NY2d 626; Belmar Contr. Co. v State of New York, 233 NY 189, 194). Here, of course, there was no understanding that the agreement would not be binding, short of formal execution by the supervisor; and the facts of the case before us fall within the legal framework of the last above-cited cases. All the terms of the contract had been negotiated and agreed upon. They were, in fact, expressed in Municipal’s written standard contract which had been modified in several slight respects through negotiations. There was no understanding or agreement that the contract would not be binding until both parties had signed it, and therefore it is enforceable although it was never memorialized with a mutually signed writing.

We now further address the question of whether the authorizing resolution No. 77-54 constituted an acceptance of the proposal. The resolution of the town board authorized the town attorney to accept the contract on behalf of the board and authorized, but did not specifically direct, in so many words, the supervisor to sign the agreement on behalf of the town (cf. Village of Lake George v Town of Caldwell, 3 AD2d 550, 552, affd 5 NY2d 727). Because the supervisor never signed the agreement the town maintains that it never fully assented to it. This concept we reject.

Subdivision 6 of section 64 of the Town Law reposes exclusive authority in the town board to award contracts; and it further provides that "the same shall be executed by the supervisor in the name of the town after approval by the town board” (emphasis added). The section does not recognize any discretion on the part of the supervisor to pass on the award of contracts; in fact it is quite the opposite, in effect, by instructing him or directing that he act. The ministerial nature of the supervisor’s function is further emphasized by section 29 of the Town Law which delineates the powers and duties of the supervisor. Despite the breadth of the responsibilities outlined therein, nowhere does there appear any authority or responsibility to agree to or to have any discretionary authority in anywise relating to the execution of contracts authorized or adopted by the board.

Hence, the town board’s resolution which authorized the supervisor to sign the agreement on its behalf was an acceptance of the offer made by Municipal (Orelli v Ambro, 51 AD2d 85, revd on other grounds 41 NY2d 952; Village of Lake George v Town of Caldwell, 3 AD2d 550, affd 5 NY2d 727, supra; Town of Hempstead v United States Trucking Corp., 31 Misc 2d 419). Nothing further was necessary to create an enforceable contract. The supervisor’s refusal to perform the ministerial act of signing the contract was therefore unlawful, and an article 78 proceeding in the nature of mandamus lay to compel his action (see Belmar Contr. Co. v State of New York, 233 NY 189, supra).

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

Chief Judge Cooke and Judges Jasen, Jones, Wachtler and Fuchsberg concur with Judge Gabrielli.

Order affirmed.


author: Chief Judge Cooke.

text:
    The People of the State of New York, Respondent, v David T. Churchill, Appellant.
    Argued March 26, 1979;
    decided May 1, 1979

      POINTS OF COUNSEL

      Arlington R. Gleckner for appellant.
    I. The trial evidence was not legally sufficient to establish the offenses charged in the indictment. (People v Ryan, 41 NY2d 634.) II. The trial court committed reversible error in charging that a sane person in possession of his senses is presumed to intend the natural consequences of an act done by him. III. The verdicts were repugnant. (People v Bullis, 30 AD2d 470.) IV. The jury verdicts were brought about through coercion and the improper conduct of one or more of the jurors during deliberations. V. The sentence was harsh and excessive.

      D. Bruce Crew, III, District Attorney, for respondent.
    I. The trial evidence was legally sufficient to establish that the facts and circumstances of the case were wholly consistent with guilty intent and wholly inconsistent with innocent intent and excluded to a moral certainty every hypothesis except that of defendant’s intention that his promises would not be performed. (People v Ryan, 41 NY2d 634; People v Rolchigo, 33 AD2d 1060, 28 NY2d 644; People v Catruna, 60 AD2d 694; People v Luongo, 58 AD2d 895.) II. The trial court did not commit reversible error in charging that a sane person in possession of his senses is presumed to intend the natural consequences of an act done by him. (People v Consolazio, 40 NY2d 446; People v Russell, 266 NY 147; People v Cerrato, 24 NY2d 1; People v Feld, 305 NY 322.) III. The verdicts were not inconsistent or repugnant. (People v Bullis, 30 AD2d 470; People v Pugh, 36 AD2d 845, 29 NY2d 909, 406 US 921.) IV. The verdict of the jury should not be disturbed. (People v De Lucia, 20 NY2d 275; People v Tobias, 51 AD2d 654.) V. The Court of Appeals lacks jurisdiction to review the sentence. (People v Discala, 45 NY2d 38.)
   OPINION OF THE COURT

Chief Judge Cooke.

Of all the forms of behavior which may subject a person to penal sanctions, one of the more difficult to prove beyond a reasonable doubt is that of larceny by false promise (Penal Law, § 155.05, subd 2, par [d]). In any prosecution grounded upon an alleged violation of this provision of the Penal Law, only rarely is there any direct evidence of the defendant’s intent in engaging in the conduct for which he must stand trial. Of necessity, then, criminal culpability must be inferred from facts and circumstances bearing on the ultimate issue presented to the jury. The sole question presented on this appeal is whether the People have satisfied their statutorily imposed burden of proving the defendant guilty of three counts of larceny in the third degree.

Defendant came to the Elmira area in 1975 in search of employment. Soon after he found a position with a local heating and plumbing concern, he was arrested and jailed on felony charges, for which he was subsequently acquitted. Nevertheless, when ultimately released on bail one month after arrest, defendant’s previous job was no longer available and the pending indictment together with his eighth grade education rendered the prospect of securing future employment dim. Borrowing on over 20 years’ experience in the construction trades, Churchill decided the only viable course left open to him was to secure contracting jobs on his own account. Although he had no experience running a business or, as this prosecution bears out, no conception of the responsibilities such an undertaking entails, defendant placed advertisements in the local newspaper as a home improvement contractor.

The initial response to these advertisements was less than overwhelming. Indeed, in three months Churchill entered into only two minor contracts with homeowners in the area. Those contracts were completed to the satisfaction of all concerned. Defendant’s troubles with law enforcement authorities began when four more substantial contracts came his way in, what was for a person in his station, a brief time.

In early March, 1976, Churchill was contacted by Ward Kahn. After some negotiation, the parties entered into a written contract whereby defendant was to enclose and finish Kahn’s back porch for $1,000. Defendant received a down payment of $775, which he assured Kahn was necessary to purchase building supplies and pay the labor necessary to complete the undertaking. After much prodding and some thinly veiled threats, the work was eventually completed, albeit not to the complete satisfaction of the homeowner.

Three weeks later, defendant contracted with Hazel Hild to construct a concrete walkway and steps for her home in Elmira. Although defendant stated that he needed a $600 down payment to secure the necessary materials for the job, Hild paid him the full contract price, $800. That work was fully performed. Apparently satisfied with defendant’s workmanship, Mrs. Hild asked him to repave her driveway and that of her brother-in-law, who lived next door. Defendant asked for a down payment of $900 to be applied to the $1,200 contract price. Once again, Hild paid the full amount specified in the contract prior to performance. Defendant rented equipment with a portion of the proceeds of the down payment, had the two driveways graded, placed the footings and shored some of the excavation. No other services were rendered, but defendant did inform Mrs. Hild that he was encountering delay due to demands on his time in performing other contracts.

Less than two weeks after agreeing to repave the driveways for Mrs. Hild, defendant was contacted by Robert Van Horn. Van Horn wanted his attic converted into usable space, a new roof put on his house and drainage troughs installed. Defendant agreed to do the work for the sum of $3,400 and received a $2,400 down payment. The next day, defendant ordered approximately $1,300 in supplies for the contract, had them delivered to the job site, and a crew of four men commenced work. However, the work actually effected was sporadic at best and Van Horn’s numerous complaints to Churchill concerning both the amount and quality of the work performed did little to alleviate the problem. Completely, and no doubt justifiably, exasperated by the delays, Van Horn terminated defendant’s services.

Within a week of having arrived at an agreement with Mr. Van Horn, defendant entered into a contract with Doris Vicki in which he agreed to blacktop her driveway, install a sluice and pour a concrete floor in her garage for $2,600. Mrs. Vicki gave defendant a $2,100 down payment upon signing the contract. Once again, execution was something less than substantial: machinery was rented and delivered to the job site, the driveway graded, the garage floor formed and a ditch dug for the sluice pipe, which was delivered but never installed. Alarmed by a visit of the Chemung County Sheriff’s Department investigating Churchill’s activities and dissatisfied with the lack of progress in completing the contracted-for work, Mrs. Vicki instituted an ultimately successful civil suit against defendant.

Spurred by complaints arising out of defendant’s business practices, the District Attorney launched an investigation into his activities. Soon thereafter, a four-count indictment was returned, charging defendant with grand larceny in the third degree in connection with his performance of the Kahn, Hild, Van Horn and Vicki contracts. At trial, the People proceeded on the theory that defendant was engaged in a scheme to defraud these four persons by entering into ostensibly legitimate business transactions which, in truth, he had no intention of completing. A jury found him guilty of larceny by false promise with respect to those counts in the indictment pertaining to the Hild, Van Horn and Vicki contracts. Sentences with a maximum of four years on each of these counts were imposed, to be served consecutively. Viewing as we must the evidence in a light most favorable to the People (People v Montanez, 41 NY2d 53, 57), we find that the proof in the record does not establish to a moral certainty that at the time defendant entered into the three contracts it was his intention not to perform.

At common law and indeed until the enactment of the present version of the Penal Law in 1965, a person could not be criminally prosecuted for obtaining property by means of a misrepresentation of future intention. Owing perhaps to the fact that it was a capital crime, the scope of early common-law larceny was rather circumscribed. It was confined to three limited situations: where the bailee of property broke bulk and misappropriated part of the bailment; situations in which the owner of the property was deemed to be in constructive possession of it and a person in a special relationship to the owner appropriates the property; and, where the owner of the property was induced to part with possession, but not title, due to some trick or artifice by the wrongdoer who subsequently misappropriates the property, i.e., larceny by trick (La Fave & Scott, Criminal Law, pp 618-622).

Larceny by false pretenses — where the wrongdoer induces the owner of property to part with title by means of a false representation of an external fact — was not a crime at common law and was first criminalized by statute in England in 1757 (30 George II, ch 24, § 1). Even after enactment of the larceny by false pretenses statute, however, it was settled that the wrongdoer’s misrepresentation must relate to a past or present fact, not a statement of future intention (Regina v Dent [1955], 2 QB 590). Development of the crime of larceny in New York paralleled that of England. Thus, although the Legislature criminalized larceny by false pretenses in 1813 (see former Penal Law, § 1290 [L 1942, ch 732, § 2, as amd]), the viability of the sanction against certain forms of conduct remained the same. As in England, it was held that a misrepresentation of the wrongdoer’s state of mind or "an expression of intention not meant to be fulfilled” could not serve as the basis for a charge of larceny by false pretenses (People v Karp, 298 NY 213, 216; People v Blanchard, 90 NY 314, 324).

In time, it became evident the statutory definition of larceny accorded a measure of immunity for a form of swindle or fraud that was particularly egregious. No measure of punishment was available in cases where a person obtained property by means of a promise to perform in the future when the promisor had no such intention at the time of the making of such promise. Thus, if one induced another to sell him an article on credit by means of a false representation of his intention to pay for it, the State was without power to punish the promisor. This exculpation was justified primarily on the ground that defaulting debtors could often be subject to criminal prosecutions designed solely to compel payment and that it would be unduly harsh to premise a prosecution upon evidence only that a contract was not performed (see ALI Model Penal Code, TD No. 2, § 206.2, commentary, p 68). The prevailing opinion was that the obligee was aflbrded adequate protection by resort to civil remedies.

Nevertheless, it was patently incongruous that certain forms of larceny were punishable criminally, yet some of the most flagrant frauds perpetrated on the public could only be redressed in the civil forum (see Hechtman, Practice Commentaries, McKinney’s Cons Laws of NY, Book 39, Penal Law, § 155.05, pp 114-115). To remedy this illogical distinction, with the enactment of the new Penal Law, the Legislature chose to criminalize larceny committed by means of false promise, taking steps at the same time to ensure that criminal sanctions not be imposed upon persons who do nothing more than simply breach a contract (see Third Interim Report, Temporary State Commission on Revision of the Penal Law and Criminal Code, Feb. 1, 1964, p 25).

The elements of the crime of larceny by false promise are defined in section 155.05 of the Penal Law:

"1. A person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof.

"2. Larceny includes a wrongful taking, obtaining or withholding of another’s property, with the intent prescribed in subdivision one of this section, committed in any of the following ways:

* * *

"(d) By false promise.

"A person obtains property by false promise when, pursuant to a scheme to defraud, he obtains property of another by means of a representation, express or implied, that he or a third person will in the future engage in particular conduct, and when he does not intend to engage in such conduct, or as the case may be, does not believe that the third person intends to engage in such conduct.

"In any prosecution for larceny based upon a false promise, the defendant’s intention or belief that the promise would not be performed may not be established by or inferred from the fact alone that such promise was not performed. Such a finding may be based only upon evidence establishing that the facts and circumstances of the case are wholly consistent with guilty intent or belief and wholly inconsistent with innocent intent or belief, and excluding to a moral certainty every hypothesis except that of the defendant’s intention or belief that the promise would not be performed”.

Absent direct proof, such as an admission by the accused or inculpatory testimony by an accomplice, in any prosecution grounded on larceny by false promise, the defendant’s intention must be ascertained by looking backward from the failure to perform and finding that at the time the accused made the promise he did not intend to carry out his end of the bargain. However, where the failure to perform is as consonant with ordinary commercial breach of contract as with criminal conduct, the danger of applying this statute becomes readily apparent. There is a very real danger that ordinary business transactions might be inhibited due to the risk of prosecuting one who is guilty of nothing more than a mere failure to pay his debts or an inability to perform contractual obligations. By setting forth "a high standard of proof for establishment of the defendant’s intent” (People v Ryan, 41 NY2d 634, 639), the Legislature has recognized that the criminal justice system is not an alternative to every person who seeks retribution from a defaulting, judgment-proof adversary.

It is because of the danger of confusing larceny by false promise with purely civil wrongs that the Legislature has insisted that the People prove to a moral certainty that at the time of the promise the defendant had no intention that it would be performed. Where the inferences that may be drawn from the defendant’s conduct are ambiguous or are based on mere suspicion, the standard set forth in the statute has not been met (People v Ryan, supra; cf. People v Cleague, 22 NY2d 363, 367-368; Baird v Mayor, 96 NY 566). The inferences the People would have us draw in this case are sufficient only to create the impression that defendant was a bumbling novice in the entrepreneurial community — not that he engaged in a scheme to defraud those with whom he contracted.

The People rely on various factors in the record which they claim prove that defendant never had any intention of abiding by the terms of his compacts. Beyond the fact that three of the jobs were not completed, they note that defendant deposited the proceeds of the down payments in his personal checking account and used a portion of these funds for personal expenses. Yet, they point to no statute or understanding between the parties imposing a duty on defendant to reserve the down payments for certain purposes. Indeed, one would presume that a person with no other source of income would expend a portion of these funds to meet the day-to-day living expenses of himself and his family. Moreover, in spite of the precarious and disordered state of his finances, the record is devoid of any proof that defendant would require additional funds for the completion of the work remaining to be done on the contracts.

Stripped of all unseemly innuendos, the People have shown only that defendant had entered into three contracts for which he received substantial down payments and that he had failed to complete performance. The inferences to be drawn from this record certainly do not exclude to a moral certainty every hypothesis but that at the time he entered into the contracts defendant had no intention of meeting his obligations. Indeed, equally strong is the inference that defendant was simply an inexperienced, uneducated tyro whose talents of salesmanship surpassed his ability to manage a business. In all three instances, supplies and equipment were purchased and delivered to the job sites and at least some work was commenced. Significant, too, is the fact that failure to complete performance was due, at least in part, to the actions of the homeowners themselves. Thus, Van Horn, dissatisfied with the progress of the work, terminated the contract; Vicki commenced a civil suit for breach of contract; and, Hild’s suspicions were aroused after law enforcement officers questioned her about defendant’s activities. On this record, it is impossible to conclude that the proof excludes to a moral certainty every hypothesis except guilty intent.

Accordingly, the order of the Appellate Division should be reversed and the indictment dismissed.

Judges Jasen, Gabrielli, Jones, Wachtler and Fuchsberg concur with Chief Judge Cooke.

Order reversed, etc.


author: Jasen, J.

text:
    In the Matter of John F. Keenan, Deputy Attorney-General, as Special State Prosecutor, Respondent, v Louis R. Gigante, Appellant.
    Argued March 21, 1979;
    decided May 8, 1979

      POINTS OF COUNSEL

      Barry Ivan Slotnick and Jay L. T. Breakstone for appellant.
    I. The First Amendment and CPLR 4505 forbid a court from compelling Grand Jury testimony from a Roman Catholic Priest when said testimony involves confidential communications with a "penitent”. (N. A. A. C. P. v Button, 371 US 415; Wisconsin v Yoder, 406 US 205; Sherbert v Verner, 374 US 398; Wieman v Updegraff, 344 US 183; Kruglikov v Kruglikov, 29 Misc 2d 17, 16 AD2d 735; Kohloff v Bronx Sav. Bank, 37 Misc 2d 27; Smilow v United States, 465 F2d 802, 409 US 944, 472 F2d 1193; Matter of Terkeltoub, 256 F Supp 683; Branzburg v Hayes, 408 US 665; United States v Wells, 446 F2d 2.) II. The court below erred in applying Branzburg v Hayes (408 US 665 [1972]) to the facts of the case at bar; Bransburg v Hayes is inapplicable to this matter. (Thomas v Collins, 323 US 516; People v Tyler, 62 AD2d 136.) III. Appellant did not possess the requisite intent needed for a finding of criminal contempt under section 750 of the Judiciary Law. (People ex rel. Fries v Reilly, 25 Hun 587; Rutherford v Holmes, 5 Hun 317, 66 NY 368; People v Tilotta, 84 Misc 2d 170; Matter of Rotwein [Goodman], 291 NY 116; Matter of Boasberg v Munson, 286 App Div 951; People v Einhorn, 74 Misc 2d 958; People v Renaghan, 40 AD2d 150, 33 NY2d 991; Matter of Parsons v Steingut, 185 Misc 323, revd sub nom. Matter of Steingut v Imrie, 270 App Div 34; People v De Feo, 308 NY 595; People v Saperstein, 2 NY2d 210, 353 US 946.) IV. In view of the reasons for appellant’s actions before the Grand Jury, the term of incarceration should be set aside.

      John F. Keenan, Deputy Attorney-General, as Special State Prosecutor (Thomas A. Duffy, Jr., Mark M. Baker and Michael Shapiro of counsel), for respondent.
    I. Neither the "free exercise” clause of the First Amendment nor CPLR 4505 precluded the court from requiring appellant to answer the five specified questions in the course of a bona fide Grand Jury investigation. In view of his refusal to do so, appellant was properly adjudged in contempt. (People v Woodruff, 26 AD2d 236, 21 NY2d 848; Lathrop v Clapp, 40 NY 328; Smilow v United States, 465 F2d 802; Sherbert v Verner, 374 US 398; La Rocca v Lane, 37 NY2d 575; Matter of Brown v McGinnis, 10 NY2d 531; Reynolds v United States, 98 US 145; Matter of Rabbinical Seminary, 450 F Supp 1078; Matter of Wood, 430 F Supp 41.) II. Appellant willfully disobeyed the lawful mandate of the court. No further showing is required for a finding of criminal contempt pursuant to section 750 of the Judiciary Law. (Matter of People v Knapp, 4 Misc 2d 449, affd sub nom. Matter of Knapp v Schweitzer, 2 AD2d 579, 2 NY2d 913, 975, 357 US 371, 358 US 860; Murphy v Waterfront Comm., 378 US 52; Wass v Stephens, 128 NY 123; People v Broady, 5 NY2d 500; Power Auth. of State of N. Y. v Moeller, 57 AD2d 380.) III. The sentence imposed was legal and appropriate.

      Lawrence X. Cusack, Joseph E. Moukad and Dennis J. Dempsey for Roman Catholic Archdiocese of New York, amicus curiae.

    I. The United States Supreme Court holding in Branzburg v Hayes, relied on by the courts below, was not intended to apply to freedom of religion cases. (Branzburg v Hayes, 408 US 665.) II. The facts before this court are radically different from the Branzburg facts. (Matter of Possible Violations of 18 USC 371, 641, 1503 [Maren], 564 F2d 567.) III. The unanswered questions involved actions taken by appellant in the exercise of his ministry. (People v Shapiro, 308 NY 453.) IV. The actions taken by appellant in the exercise of his ministry are protected by the "religious freedom” clause of the State Constitution and by the "free exercise of religion” clause of the First Amendment. (Murdock v Pennsylvania, 319 US 105; Sherbert v Verner, 374 US 398; Braunfeld v Brown, 366 US 599; Wisconsin v Yoder, 406 US 205; Smilow v United States, 465 F2d 802, 409 US 944, 472 F2d 1193.) V. The record shows not only that the State did not have a compelling interest in obtaining the information sought but also that alternative sources of information were available to the Grand Jury.
   OPINION OF THE COURT

Jasen, J.

We are called upon in this case to balance the weighty considerations of society’s right to expose criminal improprieties within the New York City Department of Correction and a priest’s solemn obligation to assist those who beckon for his guidance and help in the utmost confidence.

These are the pertinent facts. At the direction of the Extraordinary Special and Trial Term Grand Jury of New York County, appellant Reverend Louis Gigante, an ordained priest of the Roman Catholic faith and, at the time, a New York City Councilman, was subpoenaed to appear and testify before the Grand Jury, impaneled to investigate abuses and improprieties within the New York City Department of Correction, with respect to preferential treatment accorded certain members of organized crime incarcerated in New York City correctional facilities. On August 29, 1977, appellant, after receiving immunity (CPL 190.40), was questioned concerning both his relationship with various employees of the Department of Correction and his efforts to secure for one James Napoli, a prisoner incarcerated from October, 1974 to March, 1975 in institutions under the jurisdiction of the New York City Department of Correction, a Christmas furlough and entrance into a work-release program. Although appellant responded to these questions, when asked if he had any conversations with Napoli concerning the conditions of Napoli’s incarceration, appellant refused to answer asserting the priest-penitent privilege. On August 30, 1977, the Presiding Justice ruled that "the privilege was appropriately invoked” with respect to these conversations.

On September 7, appellant reappeared before the Grand Jury and was asked about a conversation he had with an officer of the New York City Department of Correction which was allegedly prompted by an earlier discussion with Napoli. Appellant did not respond, stating: "I really refuse to answer basically, not only as a priest, but that the questions attempt to infringe upon my practicing my ministry, which is protected by the First Amendment of the Constitution.”

Again, on September 9, appellant refused to answer several inquiries upon the ground that the priest-penitent privilege and his First Amendment right to practice his ministry precluded him from replying. A sampling of the questions are as follows:

"Q Do you recall speaking to Mr. Ford [a Correction Department official] about James Napoli, Sr. and concerning the possibility of Mr. Napoli being put in a work-release program?

4*

"Q Do you recall saying in substance to Mr. Ford, 'And if I prove that people have gotten out who are heavy gamblers, who are organized crime what happens then, make a big stink about it? I know a lot of things that have happened that I will not divulge at this time, a lot of things that is bad for the Correction Department. I don’t want to hurt you. I would only use that as a means of helping James Napoli.’

"Do you recall telling that to Mr. Ford?

* * *

"Q During the period of time from October 30, 1974 to March 27, 1975, did you talk to Jesse Harris [a Correction Department official] concerning getting Mr. Napoli in a work-release program?

* * *

"Q During the period of October 30, 1974 to March 27, 1975, did Jesse Harris refer you to Deputy Commissioner Birnbaum concerning the possibility of getting James Napoli into a work-release program?

* * *

"Q Father, did you on behalf of your brother, Ralph Gigante, contact Jesse Harris in an effort to get your brother transferred from Rikers Island to a less strict institution in the Department of Correction?”

The parties sought the assistance of the court to determine whether appellant was justified in refusing to answer. On September 29, the Judge, although observing that nothing in the minutes before the Grand Jury intimated that appellant engaged in any criminal activity, found that the "Grand Jury might reasonably] wish to inquire into the apparent use in part of [appellant’s] position as a public official on behalf of a prisoner * * * and there is at least a possibility in the absence of any answers from the Father that he might have information of some criminality attending Napoli’s treatment.” The court denied appellant’s claim of a First Amendment privilege "except as to his conversations with Mr. Napoli”, and directed appellant to answer questions "relating to either his efforts to secure a furlough or work release program for Mr. Napoli or as to any knowledge that he may have of preferential treatment that Mr. Napoli received in terms of visitors, food, assignments [and], work assignments”.

Thereafter, on both November 2 and 16, 1977, appellant again testified before the Grand Jury. On November 16, appellant refused to reply to many of the inquiries which the court had previously determined to be proper. Appellant reiterated his position that he would not respond because to do so would jeopardize the free exercise of his ministry. Further, appellant asserted that the prosecutor had already obtained the requested responses insofar as appellant had fully answered such inquiries at prior proceedings and the prosecutor had in his possession a transcript of the conversations between appellant and. Mr. Ford, a Correction Department official, which had been recorded by the latter.

On December 16 and 21, 1977, appellant, pursuant to an order to show cause, appeared before the court to explain why he should not be adjudged in criminal contempt (Judiciary Law, § 750) for his refusal to respond to those questions which the court had directed him to answer. Appellant, remaining steadfast in his prior position that he would not respond, was held in contempt and committed to prison for 10 days. On appeal, the Appellate Division affirmed the judgment of contempt. There should be an affirmance.

On this appeal, appellant justifies his recalcitrance before the Grand Jury on two grounds: First, the existence of a priest-penitent privilege which forbids disclosure of the requested information; and, second, the right to practice his ministry unhampered by the "chilling effect” which compelled disclosure might breed. We now conclude that neither asserted justification can serve to shield appellant from his obligation to respond to the Grand Jury’s inquiries.

It has been recognized, without serious disagreement, that there existed no common-law priest-penitent privilege. (See, generally, 8 Wigmore, Evidence [McNaughton rev, 1961], § 2394; Richardson, Evidence [10th ed], § 424.) By statute, however, "a confession or confidence made to [a clergyman] in his professional character as spiritual advisor” shall not be disclosed "[u]nless the person confessing or confiding waives the privilege”. (CPLR 4505.) It is clear that the Legislature by enacting CPLR 4505 and its predecessors responded to the urgent need of people to confide in, without fear of reprisal, those entrusted with the pressing task of offering spiritual guidance so that harmony with one’s self and others can be realized.

The priest-penitent privilege arises not because statements are made to a clergyman. Rather, something more is needed. There must be "reason to believe that the information sought required the disclosure of information under the cloak of the confessional or was in any way confidential” for it is only confidential communications made to a clergyman in his spiritual capacity which the law endeavors to protect. (Matter of Puglisi v Pignato, 26 AD2d 817; CPLR 4505; see People v Gates, 13 Wend 311, 323-324; Kruglikov v Kruglikov, 29 Misc 2d 17, app dsmd 16 AD2d 735; United States v Wells, 446 F2d 2, 4; see, generally, Matters to Which the Privilege Covering Communications to Clergyman or Spiritual Adviser Extends, Ann., 71 ALR3d 794, 808-809.)

Although we recognize that statutes bestowing an evidentiary privilege should be construed in furtherance of their "policy to encourage uninhibited communication between persons standing in a relation of confidence and trust” (People v Shapiro, 308 NY 453, 458), it is all too apparent here that the questions which appellant was directed to answer did not jeopardize the atmosphere of confidence and trust which allegedly enveloped the relationship between appellant and Napoli. Rather, the inquiries were directed to elicit from appellant efforts taken by him, independent of any communications between appellant and Napoli, to secure for the latter entrance into a work-release program. Compelling disclosure as to these matters would not do violence to the social policies underlying the priest-penitent privilege insofar as appellant contacted officials of the Department of Correction, strangers to the confidential relationship, in his attempt to assist Napoli. It is only these contacts with the Department of Correction officials that the court ordered disclosed, and the revelation of such conversations, spoken outside the sphere of confidentiality, cannot be said to fall within the sanctuary of the priest-penitent privilege.

Appellant’s broader contention that he would not respond to the questions posed by the Grand Jury because disclosure would unduly impinge upon the right to practice his ministry as guaranteed by both the State and Federal Constitutions is equally without merit. In our view, the constitutional rights claimed by appellant cannot serve to justify his refusal to answer.

There can be little doubt that the Grand Jury serves a compelling State interest to ensure that peace and order is maintained in our society. It functions to protect the community from disruption by those who elevate and obtain their purely personal desires in ways not sanctioned by society-at-large, while, at the same time, protecting persons from unfounded accusations. (See People v Woodruff, 26 AD2d 236, 238-239, affd 21 NY2d 848; Branzburg v Hayes, 408 US 665, 686-688; Smilow v United States, 465 F2d 802, 804-805, vacated on other grounds 409 US 944.)

In furtherance of its essential function, the Grand Jury, as an arm of society, is entitled to the assistance of all members of the community in uncovering criminal acts. The enduring command that " '[e]very man owes a duty to society to give evidence when called upon to do so’ ” must be honored if the fundamental task of the Grand Jury is to be realized. (People v Woodruff, 26 AD2d 236, 238-239, supra, citing Matter of Manning v Valente, 272 App Div 358, 364, affd 297 NY 681; see Branzburg v Hayes, 408 US 665, 688, supra; cf. Matter of Jacqueline F., 47 NY2d 215.)

On the record before us, appellant raises no colorable First Amendment right. His right to practice his ministry cannot serve to shield him from shedding light upon whether or not any unlawful efforts were undertaken to assist those confined in New York City penal institutions to obtain special privileges and entrance into work-release programs or to obtain a transfer to less secure institutions. In so holding, we observe that the statutory privilege (CPLR 4505) affords appellant any necessary protection against infringement of freedom of religion by Grand Jury investigations, and we reject his contention that the right to practice his ministry bestows more extensive protection beyond the scope of the priest-penitent privilege accorded by statute. (Cf. Branzburg v Hayes, 408 US 665, supra.) Absent a showing that the conversations sought to be disclosed are embraced by the priest-penitent privilege, appellant, even though a clergyman, is, like all citizens, obligated to respond to those questions relevant to the Grand Jury’s investigation.

Nor do we accept appellant’s contention that insofar as the Special Prosecutor already received the necessary responses to his questions or possessed an alternate source from which they could be obtained, further compelled answers would serve only to infringe upon, without reason or justification, appellant’s asserted constitutional rights. Faced with a similar challenge involving a claim by reporters that the State must first demonstrate "that a crime has been committed and that [the reporters] possess relevant information not available from other sources” before they can be required to testify before the Grand Jury, the Supreme Court in Branzburg v Hayes (408 US 665, 701, supra) observed: "The role of the grand jury as an important instrument of effective law enforcement necessarily includes an investigatory function with respect to determining whether a crime has been committed and who committed it. To this end it must call witnesses, in the manner best suited to perform its task. 'When the grand jury is performing its investigatory function into a general problem area * * * society’s interest is best served by a thorough and extensive investigation.’ Wood v. Georgia, 370 U. S. 375, 392 (1962). A grand jury investigation 'is not fully carried out until every available clue has been run down and all witnesses examined in every proper way to find if a crime has been committed.’ United States v. Stone, 429 F. 2d 138, 140 (CA2 1970).” Simply stated, it is for the Grand Jury to determine the most efficacious procedure to carry out its investigation, and even assuming the Grand Jury could have obtained the answers to its stated questions from an alternate source, it was entitled to hear such answers from appellant and probe further into the facts so revealed if it deemed more extensive inquiry necessary to carry out its function.

In sum, we now hold that in the context of this case appellant was not justified, either by virtue of the claimed priest-penitent privilege or by reason of his claimed right to practice freely his ministry, in refusing to respond to the questions which the court directed him to answer. As to appellant’s remaining contentions, we find them to be without merit.

Accordingly, the order of the Appellate Division should be affirmed, without costs.

Chief Judge Cooke and Judges Jones, Wachtler and Fuchsberg concur with Judge Jasen; Judge Gabrielli taking no part.

Order affirmed.

      . By order dated September 7, 1978, the Appellate Division stayed the execution and enforcement of the judgment of Supreme Court pending the determination of this appeal.

      . As our State Constitution commands: "The power of grand juries to inquire into the wilful misconduct in office of public officers, and to find indictments or to direct the filing of informations in connection with such inquiries, shall never be suspended or impaired by law.” (NY Const, art I, § 6.)


text:
    Kathleen George, as Administratrix of the Estate of Katherine David, Deceased, et al., Appellant, v Mt. Sinai Hospital, Respondent.
    Argued March 20, 1979;
    decided May 8, 1979

      POINTS OF COUNSEL

      Martin Gitlin for appellant.
    I. The commencement of an action in the name of a deceased plaintiff was not a nullity, but only an irregularity under CPLR 2001. Defendant, by answering late and not showing prejudice, waived any objection; otherwise plaintiff would be out of court. (Mogavero v Stony Creek Dev. Corp., 53 AD2d 1021; Rosenberg v Caban, 16 NY2d 905; Grippo v Di Vito, 7 AD2d 913; Rima v Rossi Iron Works, 120 NY 433; De Groat v Tompkins Bus Corp., 142 Misc 528; Princeton Textile Print. Corp. v Peck Paper Corp., 195 Misc 955, 275 App Div 1024; Goldberg v Camp Mikan-Recro, 42 NY2d 1029; Livingston v New York El. R. R. Co., 60 Hun 473; de Cordova v Sanville, 177 App Div 592; Covino v Alside Aluminum Supply Co., 42 AD2d 77.) II. There was no voluntary discontinuance of the Civil Court action within the meaning of CPLR 205 (subd [a]). (Matter of Smith, 244 App Div 733; Crouse v McVickar, 207 NY 213; Steverson v News Syndicate Co., 302 NY 81; Davis v Ross, 259 App Div 577; Reilly v Insurance Co. of North Amer., 32 AD2d 918; Henderson v Henderson, 247 NY 428; Harris v Harris, 246 App Div 667; Richard v American Union Bank, 253 NY 166.) III. Defendant is equitably estopped from pleading the Statute of Limitations; at least an issue of fact is raised impelling the denial of defendant’s motion to dismiss. (M. H. Metal Prods. Corp. v April, 251 NY 146; Dupuis v Van Natten, 61 AD2d 293; Hover v Claverack Grange No. 934, 46 Misc 2d 113; Mass v Great Amer. Ins. Co., 28 AD2d 897; Lorentz v Lezette, 28 AD2d 954.)

      Patricia D’Alvia for respondent.
    I. The six-month extension under CPLR 205 (subd [a]) may not apply to revive the 1977 action as the first action, commenced in the name of the decedent as plaintiff in 1973, was not an "action”. (Stutz v Guardian Cab Corp., 273 App Div 4; Winbush v City of Mount Vernon, 306 NY 327; Boffe v Consolidated Tel. & Elec. Subway Co., 171 App Div 392, 226 NY 654; Smith v New York Cent.

      R. R. Co., 183 App Div 478; Eisenthal v Schatzberg, 39 Misc 2d 330; Mogavero v Stony Creek Dev. Corp., 53 AD2d 1021; Goldberg v Camp Mikan-Recro, 42 NY2d 1029.) II. The six-month extension under CPLR 205 (subd [a]) may not revive the 1077 action as the second action, commenced in 1976, was not an action "timely” commenced, or "terminated” pursuant to that section. (Dobkin v Chapman, 21 NY2d 490; Erickson v Macy, 236 NY 412; Friedman v Long Is. R. R. Co., 298 NY 702; Bannister v Michigan Mut. Life Ins. Co., 111 App Div 765.) III. Defendant is not barred from seeking a dismissal by the doctrines of equitable estoppel or waiver. (Callahan v Switchman’s Union of North Amer., 189 App Div 5; Draper v Oswego County Fire Relief Assn., 190 NY 12.)
   OPINION OF THE COURT

Gabrielli, J.

Plaintiff, the administratrix of the estate of Katherine David, seeks to recover damages for personal injuries claimed to have been suffered by the decedent in August of 1972 as a result of defendant’s alleged malpractice. At issue on this appeal is the breadth of CPLR 205 (subd [a]) and the proper application of that statute, if any, to this case. Following the alleged malpractice, decedent retained an attorney for the purpose of instituting an action against defendant. In September of 1973 the summons and complaint in that action were served upon defendant. Katherine David was the named plaintiff in that suit, although, apparently unbeknownst to the attorney, she had died in the interim. The record does not indicate any causal connection between the alleged malpractice and her death, nor has any attempt been made to assert a claim for wrongful death against defendant. What followed could aptly be denominated a comedy of errors were it not for the potentially devastating effect of those events upon what might be a valid claim.

Defendant failed to timely answer, instead sending opposing counsel a series of proposed stipulations to permit late service of an answer. Although none of those proposed stipulations were ever signed by opposing counsel, no attempt was made to enter a default against defendant. When decedent’s counsel belatedly did learn of her death, he sent defendant a proposed stipulation substituting as plaintiff the administratrix, the plaintiff in this action. That proposal was made on June 4, 1975, a date which is of some interest if only because the administratrix could then instead have timely commenced a new action in her representative capacity. As it was, however, the proposed stipulation was not signed by defendant. There followed a period of several months in which it would appear that no relevant action was taken. Finally, in January, 1976 plaintiff sent defendant’s counsel a document labeled an "amended summons” which named the administratrix as plaintiff. Some three months later, defendant served an answer, supposedly to the amended summons, and then moved for summary judgment. Defendant contended that the action commenced by the September, 1973 service was a nullity because the named plaintiff was already dead. As to the amended summons sent to defendant’s counsel in January, 1976, defendant argued that any action was time barred by that date.

Special Term appears to have accepted the gist of defendant’s arguments, but nonetheless denied the motion for summary judgment because defendant had failed to provide proof of the date of decedent’s death. Defendant then renewed the motion with proper proof, but the motion was again denied, this time because of some apparent uncertainty as to the various dates of service. The court set the matter down for a hearing on that seemingly elusive question. Instead of continuing that particular struggle, the parties stipulated to a dismissal "without prejudice to plaintiffs right * * * to commence any action pursuant to the authority of Section 205 of the CPLR”. Within six months of that date, the administratrix commenced this action based on the same claim. Defendant moved to dismiss on the ground that the action was untimely, but Special Term denied that motion. On appeal, the Appellate Division reversed and granted defendant’s motion to dismiss. Plaintiff now appeals to this court as of right (CPLR 5601, subd [a], par [ii]). For the reasons discussed below, we conclude that there should be a reversal.

Preliminarily, we must determine whether a prior action that has been improperly brought in the name of a dead plaintiff may nonetheless be a prior action within the ambit of CPLR 205 (subd [a]). That statute provides as follows: "If an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff, or, if he dies, and the cause of action survives, his executor or administrator, may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination provided that the new action would have been timely commenced at the time of commencement of the prior action”. The effect of the statute is quite simple: if a timely brought action has been terminated for any reason other than one of the three reasons specified in the statute, the plaintiff may commence another action based on the same transactions or occurrences within six months of the dismissal of the first action, even if the second action would otherwise be subject to a Statute of Limitations defense, so long as the second action would have been timely had it been commenced when the first action was brought. In addition to the listed exceptions, the courts have created one apparent additional exception, holding that if the first action was never properly commenced because of a failure to serve the defendant, the statute is inapplicable (e.g., Erickson v Macy, 236 NY 412). Defendant now asks us to create another exception to the statute, and to hold that it is inapplicable if the prior action was dismissed because it was commenced in the name of an improper plaintiff. This we may not do.

Defendant contends that the prior action was a "nullity” rather than an action, and thus there was in fact no prior action. Plaintiff, on the other hand, argues that although the prior action was subject to dismissal becasue it had not been commenced by a living plaintiff, it was yet an action such that a subsequent action commenced by the proper plaintiff would be protected form the application of the Statute of Limitations by operation of CPLR 205 (subd [a]).

The question obviously is not an easy one, and its proper resolution is not aided by frequent use of the term "nullity”. As is often true, overbroad language serves only to becloud the issues. Simplistic analysis founded on catchwords presumed to have some talismanic significance may lead to speedy resolution of disputes; the appropriateness of resolutions so derived, however, is a function of chance, not reason. Stripped of all circumlocution, defendant’s argument is truly circular: defendant would have us hold that since the prior action was properly dismissed, it was a nullity, and thus not an action, and hence no subsequent action may be commenced pursuant to CPLR 205 (subd [a]). Acceptance of this argument would lead inevitably to the conclusion that the statute is effective only in those few cases in which the prior action should not have been dismissed; in all other cases, having been properly dismissed, for whatever reason, it must be deemed a "nullity”. To so read the statute would be to strip it of a major part of its designated role.

Before discussing the nature and breadth of subdivision (a), we note that application of the term "nullity” to an action for personal injuries brought in the name of the decedent rather than in the name of the decedent’s personal representative is based on a misunderstanding of the nature of an action which survives the injured party’s death, as opposed to an action for wrongful death. The cause of action for wrongful death was originally deemed completely a child of statute, as it had no counterpart in the common law. In contrast to an existing action which survives the injured party’s death, a wrongful death action "is not a simple devolution of a cause of action which the deceased would have had * * * but it is an entirely new cause of action” (Whitford v Panama R. R. Co., 23 NY 465, 470). That this is so is indicated by the nature of the damages recoverable and the persons for whose benefit those damages are sought. A wrongful death action is brought not on behalf of the decedent’s estate, but rather on behalf of the decedent’s distributees (EPTL 5-4.1), and the damages recoverable are not in compensation for the injury sustained by the decedent, but rather for the injuries suffered by the distributees as a result of the decedent’s death (EPTL 5-4.3). Because of the unusual nature of the wrongful death action, the statutory requirements for the maintenance of such an action were originally deemed to be substantive in nature and actual conditions precedent to the commencement of the action (see Sharrow v Inland Lines, 214 NY 101, 112-113). In accord with this view of the unique nature of the wrongful death action, it was concluded that "the non-appointment of the administrators before bringing the action is not merely a lack of capacity to sue, for that presupposes an existing cause of action, which the plaintiff is incapacitated to maintain. But the due appointment and qualification of the administrators are necessary elements to the existence of the cause of action” (Boffe v Consolidated Tel. & Elec. Subway Co., 171 App Div 392, 394, affd without opn 226 NY 654).

Whatever the continuing validity of such considerations in light of the subsequent recognition of the existence of an action for wrongful death in certain areas of the common law (compare Moragne v States Mar. Lines, 398 US 375, with Ratka v St. Francis Hosp., 44 NY2d 604) they are of little value with respect to an action which survives the injured party’s death. In the latter case, there must a fortiori exist a valid action in favor of the decedent; rather than statutorily creating a new action founded on the decedent’s death, the statute which allows an action to be brought or continued by the decedent’s personal representative (EPTL 11-3.2) serves merely to remove the bar to such actions which existed under the common law. This is not to say, of course, that such an action may properly be brought or continued by someone other than the personal representative of the decedent. If such an action is brought in the name of the wrong party, dismissal is the appropriate response. Such an action, however, is no more a "nullity” than are actions which were dismissed for lack of jurisdiction or for nonjoinder, and yet the latter are traditionally deemed to be prior actions for purposes of CPLR 205 (subd [a]) (see, e.g., Park & Pollard Co v Industrial Fire Ins. Co., 197 App Div 671; People ex rel. Calderazzo v Stiner, 271 App Div 841).

This is so because the function of the CPLR subdivision is to ameliorate the potentially harsh effect of the Statute of Limitations in certain cases in which at least one of the fundamental purposes of the Statute of Limitations has in fact been served, and the defendant has been given timely notice of the claim being asserted by or on behalf of the injured party. The statute is a remedial one, and, as Judge Cardozo has explained, "[i]ts broad and liberal purpose is not to be frittered away by any narrow construction. The important consideration is that by invoking judicial aid, a litigant gives timely notice to his adversary of a present purpose to maintain his rights before the courts” (Gaines v City of New York, 215 NY 533, 539). Hence, even if the reason for the dismissal of the prior suit was the absence of subject matter jurisdiction, the statute has been found to apply (Gaines v City of New York, supra), although it is difficult to imagine a proceeding which could be considered more of a "nullity” than one in which the court lacked subject matter jurisdiction (see Lacks v Lacks, 41 NY2d 71, 75).

Indeed, there exists only one type of prior "action” which at first glance would appear to be included within the language of the statute, but which we have nonetheless deemed to be outside its purview: that is, those cases in which no prior action was ever actually commenced because of a defect in service (Smalley v Hutcheon, 296 NY 68; Erickson v Macy, 236 NY 412, supra). The rationale enunciated in those cases was that since the service was flawed, no action was ever commenced, and thus there existed no prior action. It has since been suggested that such holdings are more aptly explained by the theory that where the defendant receives no actual notice of the prior action, the purpose of the Statute of Limitations would not have been served as is normally the case in a situation in which subdivision (a) is applied, and thus it would be improper to apply the subdivision. Proponents of this viewpoint thus emphasize the factor of actual notice, suggesting that where the defendant did receive notice but the defect was based on some flaw in the method of service, the section should be applicable (Siegel, New York Practice, § 52, at p 54; see Amato v Svedi, 35 AD2d 672). While we need not now resolve this question, we note that this theory appears inconsistent with our decision in Smalley v Hutcheon (296 NY 68, supra) in which we refused to apply the subdivision where the prior action had been dismissed for lack of personal jurisdiction and yet the defendant had received actual notice by an improper means of service.

At any rate, in the instant case the defect in the prior action did not lie in the means of commencing the action, but rather in the identity of the named plaintiff. While that defect was fatal in the sense that the action was subject to dismissal, it was not the type of defect which precludes application of CPLR 205 (subd [a]). The very function of that subdivision is to provide a second opportunity to the claimant who has failed the first time around because of some error pertaining neither to the claimant’s willingness to prosecute in a timely fashion nor to the merits of the underlying claim. The statute by its very nature is applicable in those instances in which the prior action was properly dismissed because of some fatal flaw; thus, to suggest that it should not be applied simply because there was a deadly defect in the prior action seems nonsensical. Indeed, the statute will normally "involve situations in which a suit has been started but, due to an excusable mistake or a procedural defect or ineptitude of counsel or inability to obtain needed evidence, or some other cause that should not be fatal to the claim, the start has been a false one” (1 Weinstein-Korn-Miller, NY Civ Prac, par 205.03, at p 2-134). This is just such a situation.

In sum, a distinction must be drawn between a failure to commence an action, be it due to a failure of process or some similar reason, and a defect in that action which mandates dismissal. In the former case, CPLR 205 (subd [a]) will be inapplicable, whereas in the latter case the statute will apply. Usually, of course, the fact that one party commenced an action which is subsequently dismissed, will not serve to justify application of the subdivision so as to support a later action by a different claimant. Where, however, as here, the claim is the same, and the subsequent claimant is acting as the representative of the named plaintiff in the prior action, no such difficulty arises (cf. Van der Stegen v Neuss, Hesslein & Co, 270 NY 55).

Defendant suggests that a different result is mandated by our recent decision in Goldberg v Camp Mikan-Recro (42 NY2d 1029). This argument is readily disposed of, for the two cases have nothing in common. In Goldberg, the father of a dead child improperly commenced a wrongful death action in the father’s own name. He was appointed administrator of the child’s estate after the Statute of Limitations had run, and attempted at that point to amend the complaint so as to reflect his appointment, purportedly pursuant to the "relation-back” provisions of CPLR 203 (subd [e]). This we refused to allow, holding that a necessary element of any attempt to utilize the "relation-back” provisions of that statute is the existence of a valid pre-existing action to which the amendment can relate back. Since no valid prior action existed in that case, the relation-back provisions were inapplicable. In the instant case, we are concerned with both a different statute and a different type of action. While the relation-back provisions of CPLR 203 are dependent on the existence of a valid pre-existing action, CPLR 205 (subd [a]) was created to serve in those cases in which the prior action was defective and so had to be dismissed. Moreover, as has already been discussed, there is a fundamental difference between an action for wrongful death and an action which survives the death of the injured party. Hence, we conclude that CPLR 205 (subd [a]) is applicable to cases such as this.

This conclusion, however, does not fully resolve the instant appeal. Subdivision (a) is, by its own terms, made inapplicable if the prior dismissal was for any of three stated reasons. The provision operates only if the prior action was "terminated in any other manner than by a voluntary discontinuance, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits” (CPLR 205, subd [a]). As the dismissal of the prior action in this dispute was pursuant to a voluntary discontinuance, defendant argues that the subdivision is inapplicable. Plaintiff, on the other hand, contends that although the form of termination was a voluntary discontinuance, it was not in fact voluntary because Special Term had accepted defendant’s theory and had indicated that it would grant defendant’s motion upon a proper factual showing. Since there is no serious dispute but that defendant could proffer the required evidence, plaintiff argues that the stipulation was merely a recognition by her of the fact that the action was doomed. In essence, plaintiff urges us to extend our inquiry beyond the fact that the prior action was terminated by means of a voluntary discontinuance, and to consider the reason for that discontinuance. Normally we would refuse to undertake such an exhumation, for the statute is intended to protect only those plaintiffs who have been nonsuited despite their continued opposition to that fate. To undertake in every case the type of investigation suggested by plaintiff would be to encourage the reopening of settled and abandoned suits without furthering the interests served by CPLR 205 (subd [a]). Hence, where the prior action has been terminated by means of a voluntary discontinuance pursuant to a stipulation which contains no express statement of contrary intent, the statute simply does not authorize a subsequent action, regardless of the actual motives of the parties.

Here, however, the situation is somewhat different, for the voluntary discontinuance was specifically stated to be "without prejudice to plaintiff’s right * * * to commence any action pursuant to the authority of Section 205 of the CPLR”. The patent purpose of this disclaimer is to preserve whatever rights plaintiff would have had to commence a new action pursuant to the statute had the prior action been terminated by order of dismissal rather than by voluntary discontinuance. We perceive no reason why this agreement between the parties should not be given its intended effect. Absent some violation of law or conflict with the interests of the public, the parties to an action have considerable freedom to waive strict compliance with procedures which might otherwise delay or preclude judicial resolution of the merits of a dispute in a particular situation. This stipulation runs afoul of no contrary public policy (cf. Kassner & Co. v City of New York, 46 NY2d 544, and thus there exists no bar to its enforcement. Hence, this action was timely commenced.

Accordingly, the order appealed from should be reversed, with costs, and the motion to dismiss the complaint should be denied.

Chief Judge Cooke and Judges Jasen, Jones, Wachtler and Fuchsberg concur with Judge Gabrielli.

Order reversed, etc.

      . Since the alleged malpractice occurred prior to July 1, 1975, it was clearly subject to the three-year Statute of Limitations provided by CPLR 214 (subd 6), and was not governed by the two-year and six months’ Statute of Limitations which now controls medical malpractice actions pursuant to CPLR 214-a (see L 1975, ch 109, § 37). Hence, it matters not whether the particular type of malpractice alleged in the complaint should be classified as medical malpractice.

      . This is the present statutory language. Prior to April 11, 1978, the words "transaction or occurrence or series of transactions or occurrences within six months after the termination provided that the new action would have been timely commenced at the time of commencement of the prior action” were not included in the statute, which instead contained the following language: "cause of action within six months after the termination” (see L 1978, ch 51, § 1). Since the amendment is not relevant to the instant dispute, we refrain from any comment as to its purpose or effect.