author: Alexander, J.

text:
    The People of the State of New York, Appellant, v Jaime Manini, Respondent. The People of the State of New York, Appellant, v Carlos Fuente, Respondent.
    Argued February 14, 1992;
    decided March 31, 1992
    Decided March 31, 1992

      POINTS OF COUNSEL

      Steven Chananie, Ronald Goldstock and Carol Antonacci for appellant in the first above-entitled action.
    I. A defendant who provides cocaine to another on credit so that the other might sell the drugs elsewhere is liable for possession of that cocaine either as an accessory or under the principles of constructive possession; here, the evidence presented to the Grand Jury established defendant’s liability under these principles for possession of cocaine actually possessed by his co-conspirators. (People v Jennings, 69 NY2d 103; People v Pelchat, 62 NY2d 97; People v Valles, 62 NY2d 36; People v Dordal, 55 NY2d 954; People v Barnes, 50 NY2d 375; People v Deegan, 69 NY2d 976; People v Flayhart, 72 NY2d 737; People v Kaplan, 76 NY2d 140; People v Duncan, 46 NY2d 74, 442 US 910; United States v Raper, 676 F2d 841.) II. Defendant also constructively possessed the cocaine he gave to Paige. (United States v Raper, 676 F2d 841; People v Ballard, 133 Misc 2d 584; United States v Aiello, 864 F2d 257; People v Tirado, 47 AD2d 193, 38 NY2d 955; People v West, 56 NY2d 637; People v Robertson, 48 NY2d 993; People v Phiefer, 43 NY2d 719; People v Reisman, 29 NY2d 278, 405 US 1041.)

      James Kousouros and Debra Kay Kousouros for respondent in the first above-entitled action.
    I. Penal Law § 20.10 was intended to be applied to the transaction between a seller and a purchaser and, therefore, precludes prosecution of defendant for Paige’s possession of cocaine on a theory of accessorial liability. (People v Ricci, 59 Misc 2d 259; People v Sparks, 24 AD2d 538; United States v Southard, 700 F2d 1; People v Glover, 57 NY2d 61.) II. Because a seller’s objective is to receive the money owed and not to accomplish or further the inevitable result of the purchaser’s possession, a sale alone, even on credit, does not evince a community of purpose to aid the purchaser in his possession; therefore, the courts below properly found there was insufficient evidence to prove defendant was accessorially liable for Paige’s possession. (People v McGee, 49 NY2d 48; People v Jennings, 69 NY2d 103; People v Dordal, 55 NY2d 954; People v Kaplan, 76 NY2d 140; People v Flayhart, 72 NY2d 737; People v Allah, 71 NY2d 830; People v Cummings, 131 AD2d 865; People v McLean, 107 AD2d 167, 65 NY2d 758; People v Whatley, 69 NY2d 784; People v Ballard, 133 Misc 2d 584.) III. Because the evidence did not establish that defendant either had authority over Paige or that he had any control whatsoever over the cocaine allegedly sold to Paige and which Paige possessed, it was insufficient to establish that Manini, while in California, was in constructive possession of cocaine in Paige’s actual possession in New York. (People v Tirado, 38 NY2d 955; People v Pearson, 75 NY2d 1001; People v Patel, 132 AD2d 498, 70 NY2d 935; People v Perez, 125 AD2d 236; People v Edwards, 147 AD2d 586, 74 NY2d 846; People v Quick, 30 AD2d 561, 26 NY2d 773; People v Rivera, 77 AD2d 538; People v Keitt, 42 NY2d 926; People v Passero, 83 AD2d 769; People v Hodge, 141 AD2d 843, 72 NY2d 1046.)

      Steven Chananie and Ronald Goldstock for appellant in the second above-entitled action.
    Defendant who directs others to possess cocaine may be liable for that possession either as an accessory or under the principles of constructive possession. Here, the evidence presented to the Grand Jury was more than sufficient to establish defendant’s liability for possession of a kilo of cocaine actually possessed by his co-conspirators. (People v Jennings, 69 NY2d 103; People v Pelchat, 62 NY2d 97; People v Valles, 62 NY2d 36; People v Dordal, 55 NY2d 954; People v Barnes, 50 NY2d 375; People v Deegan, 69 NY2d 976; People v Flayhart, 72 NY2d 737; People v Kaplan, 76 NY2d 140; People v Feliciano, 32 NY2d 140.)

      John A. Cirando, Patrick J. Haber and Ivette C. Iza for
    respondent in the second above-entitled action.
    The evidence was insufficient to support the possession charges. (People v

      Deegan, 69 NY2d 976; People v Jennings, 69 NY2d 103; People v Dunleavy, 41 AD2d 717, 33 NY2d 573; People v Sabella, 35 NY2d 158; People v Pelchat, 62 NY2d 97; People v Warner-Lambert Co., 51 NY2d 295, 450 US 1031; People v Feliciano, 32 NY2d 140; People v Torres, 68 NY2d 677; People v Kaplan, 76 NY2d 140; People v Karchefski, 102 AD2d 856.)
   OPINION OF THE COURT

Alexander, J.

In these cases, we consider the extent to which the principles of accessorial liability and constructive possession may support a finding that evidence presented to a Grand Jury is legally sufficient to establish a prima facie case of criminal possession of a controlled substance. In both cases the trial court’s dismissal of counts of the indictments charging criminal possession of a controlled substance were affirmed by the Appellate Division. The People were granted leave to appeal in each case by a Judge of this Court. The legal principles we apply are the same in both cases, but the significantly different factual scenarios require an affirmance in People v Manini and a reversal in People v Fuente.

The indictments in both cases resulted from investigations of the New York State Organized Crime Task Force (OCTF) into the importation of drugs into New York. In Manini, the investigation began in December 1987, and focused on drug trafficking in Onondaga and Cayuga Counties. In the course of its investigation, the OCTF discovered that Manini, an unindicted co-conspirator, Sanford Paige, and codefendant Vincent DeTomaso, along with several other parties, were involved in the importation into and distribution of drugs within New York. Operating out of California, Manini provided Paige and DeTomaso with cocaine on two separate occasions: in April of 1988 he flew to Buffalo from California with one kilogram of cocaine and sold it to Paige; in late June of 1988, Paige obtained nine ounces of cocaine from defendant "on credit” in California. Thereafter, on June 29, 1988, Paige flew from California to Rochester, New York, carrying almost four ounces of cocaine. He was met at the Rochester Airport by DeTomaso. They left the airport together and were both arrested and the cocaine seized. A 38-count indictment re-suited; six of the charges related to Manini, including criminal possession in the second and third degrees for the possession by Paige of the almost four ounces of cocaine on June 29, 1988.

Defendant’s motion to dismiss the indictment on the ground that the evidence presented to the Grand Jury was legally insufficient was granted by the trial court to the extent of dismissing counts 37 and 38, which related to the possession of the cocaine seized from Paige on June 29, 1988 in New York. The Appellate Division affirmed. The courts below held that the evidence presented to the Grand Jury was legally insufficient to establish Manini’s liability for criminal possession of the cocaine physically possessed by Paige in New York on June 29, 1988 under either a theory of accessorial liability or constructive possession.

In People v Fuente, the investigation leading to defendant’s arrest and indictment began in the summer of 1988, and focused on cocaine trafficking by various individuals in the Monroe County area. Between November 12, 1988 and November 19, 1988, utilizing court-authorized electronic surveillance, the police intercepted calls to Puente’s telephone in Rochester. During various intercepted conversations relating to arrangements for the purchase of cocaine between Fuente, his girlfriend and a person who later testified before the Grand Jury, the police learned that Fuente was planning a trip to obtain cocaine for resale to his customers. On November 15, 1988, codefendant Disnardo Carballo was observed arriving at Puente’s apartment complex in a blue Dodge van registered to the mother of Carballo’s girlfriend, codefendant Luz Martinez. About one hour later, Carballo left with another male, presumed to have been Fuente, and the two drove in the van to the home of Martinez’s mother in Rochester. Minutes after the van left the apartment complex, the person who later testified before the Grand Jury called Puente’s apartment and was told by his girlfriend that he had gone to obtain cocaine, and would return later in the week. The witness testified that she understood that Fuente had gone to Florida to obtain cocaine. Over the next few days, surveillance attempts to locate the van were unsuccessful.

Finally, on November 19, 1988 the police observed the same blue van driven by Carballo earlier in the week pulling into the driveway at the home of Martinez’s mother; Carballo was driving and Luz Martinez was in the front passenger seat. About 30 seconds later Fuente, driving his own car, also pulled into the driveway. Both vehicles pulled into a parking area behind the house and remained there for about 10 minutes. The police then observed the vehicles pull out of the driveway and head down the street. When the van turned the corner and pulled into another driveway the police blocked the driveway with two police vehicles, and searched the van pursuant to a search warrant. Approximately one kilogram of cocaine was seized from the van, and Carballo and Martinez were arrested. The cocaine was packaged in four separate packages, each marked with a name. Other items found in the van, including a recent newspaper and a merchandise receipt, indicated that the occupants had been in Florida as recently as November 17, 1988. Fuente was stopped at a different location nearby and also arrested.

On April 14, 1989, Fuente, Carballo and Martinez were indicted for conspiracy in the second degree and criminal possession of a controlled substance in the first and third degrees. Fuente’s motion to dismiss the indictment for legal insufficiency of the evidence before the Grand Jury was granted by the trial court to the extent of dismissing the two possession counts. Although the People argued that the evidence was sufficient under the principles of either accessorial liability or constructive possession, the Appellate Division affirmed, stating only that "[t]he evidence before the Grand Jury was insufficient to establish defendant’s constructive possession of the contraband.” (170 AD2d 986.)

On this appeal the People contend in both cases that the evidence presented to the Grand Jury was legally sufficient to establish, prima facie, each defendant’s liability for possession of drugs found in the actual possession of another under the theories of accessorial liability and/or constructive possession. They argue that each defendant should be liable for criminal possession of a controlled substance even though neither was in actual possession of the drugs upon which the dismissed counts were based. They contend that the fact that narcotics suppliers and middle- and high-level drug dealers use others to actually transport and distribute the narcotics should not shield them from liability for possession of drugs by those others when they themselves caused or directed the possession. In Manini, the People point out that out-of-State suppliers of narcotics who provide drugs for distribution within New York often retain a "continuing possessory interest” in the drugs until they are sold; that if the out-of-State supplier’s possessory interest extends into New York, there is no reason why the supplier should not be held liable by reason of that possessory interest either as an accessory or under the principles of constructive possession. In Fuente, the People contend that sophisticated, higher-level drug dealers often attempt to insulate themselves from potential criminal liability by having others handle drugs being bought and sold. They argue that these dealers should be held criminally liable, as accessories or under the principles of constructive possession, for their direct involvement in the possession of drugs by associates or others employed to assist them in their drug distribution business. Thus, they contend that in each case the evidence submitted to the Grand Jury was legally sufficient to support the indictments and that in each case there should be a reversal.

We begin our discussion by noting that under settled law "legally sufficient evidence” means competent evidence which, if accepted as true, would establish every element of the crime charged and the defendant’s commission of it (CPL 70.10 [1]; People v Haney, 30 NY2d 328, 335-336). The test of legal sufficiency in this context is whether the evidence, viewed in the light most favorable to the People, if unexplained and uncontradicted, would be sufficient to warrant conviction by a trial jury (People v Jennings, 69 NY2d 103, 114-115; People v Pelchat, 62 NY2d 97, 105). With this definition and test in mind, we address each of the People’s liability theories in turn.

A. Accessorial Liability

Under section 20.00 of the Penal Law, a defendant is accessorially liable for a criminal offense committed by another when he "solicits, requests, commands, importunes, or intentionally aids” another to engage in the offense, and when the defendant does so "with the mental culpability required for the commission” of the offense (Penal Law § 20.00; People v Flayhart, 72 NY2d 737, 741). The People argue that, inasmuch as defendant Manini "intentionally aided” Paige to commit the offense of criminal possession of a controlled substance when he sold him the drugs "on credit”, and defendant Fuente "aided and abetted” his codefendants Carballo and Martinez in their possession of a controlled substance because they procured the drugs under his direction and on his behalf, the courts below erred in dismissing the possession counts against these defendants.

Penal Law § 20.10 provides, however, that a person is not criminally liable for an offense committed by another "when his own conduct, though causing or aiding the commission of such offense, is of a kind that is necessarily incidental [to the commission of the offense]” (see, Penal Law § 20.10). If the conduct of the person sought to be held liable as an accomplice constitutes a related but separate offense, that person is liable only for his/her own offense, and not for the offense committed by the principal (see, Penal Law § 20.10). Thus, if a person’s conduct is of a kind that is "necessarily incidental” to the commission of the other person’s offense that person is exempt from accomplice liability, and is criminally liable only for his or her own conduct if it constitutes a related but separate offense.

The People contend, however, that Penal Law § 20.10 does not prohibit assessing accessorial liability against Manini and Fuente for possession of cocaine by others because their conduct was not "necessarily incidental” to that possession within the meaning of the statute. They argue that the plain language of the statute and its legislative history indicate that the prohibition against accomplice liability is only applicable if the definition and nature of the principal’s crime is such that, in all circumstances, not just in those presented in the particular case, the crime could not have been committed without the participation of the accessory (cf., People v Glover, 57 NY2d 61). The People point out that a person may possess drugs without there ever being a seller, i.e., where the drugs were stolen or found, or even grown or manufactured directly by the possessor. Since the offense of criminal possession of a controlled substance does not contemplate or require, in all circumstances, the participation of another, the argument goes, defendants’ conduct in either "intentionally aiding” (Manini) or "aiding or abetting” (Fuente) another to possess drugs is not "of a kind” that is "necessarily incidental” thereto, and thus section 20.10 is not applicable.

We do not believe, however, that the statute should be so narrowly interpreted. We find nothing in the history of Penal Law § 20.10 to support the conclusion that the Legislature intended the exemption to be construed such that one who sells drugs to another thereby becomes an accomplice to the other’s resulting possession. Interpreting the statute in the manner advocated by the People would broaden the reach of accessorial prosecutions such as this to an extent and in a way not clearly intended by the Legislature.

In the interpretation of a statute "[t]he legislative intent is the great and controlling principle” (see, People v Ryan, 274 NY 149, 152; McKinney’s Cons Laws of NY, Book 1, Statutes § 96, at 202). Notwithstanding the People’s contrary argument, it does not clearly appear that the Legislature meant to limit section 20.10 in its application so as to exclude situations such as those presented in these two cases. The underlying purpose of the statute appears to have been to prevent unnecessary prosecutions in cases where "ordinarily each culprit in such a reciprocal situation [would be] prosecuted for his particular offense” such that there would be "no need for torturing [the putative accessory’s] conduct into accessorial guilt of the correlative offense” (Hechtman, Practice Commentaries, McKinney’s Cons Laws of NY, Book 39, Penal Law § 20.10, at 57 [1975]).

Under the former Penal Law, "a fairly logical if strained” argument could be made that a person guilty of bribe giving was also guilty of bribe receiving (see, Hechtman, Practice Commentaries, McKinney’s Cons Laws of NY, Book 39, Penal Law § 20.10, at 57 [1975]; see also, Staff Notes of Temp State Commn on Revision of Penal Law and Criminal Code, reprinted in Proposed NY Penal Law [Study Bill, 1964 Senate Int 3918, Assembly Int 5376], at 315 [1964]). Although a literal reading of section 20.00 might support the same contention, section 20.10 would in fact preclude prosecution of the bribe giver for the crime of bribe receiving (Hechtman, op. cit.; Staff Notes of Temp State Commn, op. cit.).

While, as the People point out, there may be situations in which a person may come into possession of illegal drugs by finding, stealing or manufacturing them, it is far more likely that the purchaser’s possession resulted from a sale. Thus, in the vast majority of cases, a "sale” is "necessarily incidental” to the possession of narcotics. In the typical drug transaction scenario, the seller will continue to be liable for his own actual possession and sale, and in some cases for conspiracy to commit narcotics offenses.

Viewed in this light, it seems unlikely that in enacting section 20.10, the Legislature intended that the typical drug transaction was not to be included as one of the "kinds of reciprocal conduct and offenses” covered by the statute (Hechtman, op. cit., at 57). Indeed, while it is conceivable that a purchaser of narcotics could be convicted of criminal sale of a controlled substance as an accessory under section 20.00, application of section 20.10 limits his culpability to that resulting from his own conduct, i.e., possession (see, e.g., Hechtman, op. cit., at 57; 7 Zett, New York Criminal Practice H 62.1 [6], at 62-48). We do not perceive any reason, nor has any been advanced by the People to demonstrate why, where a purchaser obtains drugs from a seller, section 20.10 should not similarly preclude prosecution of the seller as an accessory to the resulting possession by the purchaser, especially since he remains liable for his own conduct: his possession and sale.

The People’s reliance on our decision in People v Feliciano (32 NY2d 140) is misplaced. Feliciano is distinguishable and inapposite. There, an individual disembarking from a boat carrying cocaine discovered that he was being followed by customs officials. He dropped the bag containing the narcotics and attempted to flee. Feliciano drove toward him to enable him to get into the car so that he could get away with the narcotics. We determined that Feliciano had "aided and abetted” the individual in his possession of the drugs and thus was properly charged with possession of the narcotics as an accessory. Moreover, no issue was raised in that case as to the applicability of section 20.10. By contrast, here, Manini and Paige engaged in a reciprocal transaction which resulted in Paige’s possession of the drugs. The People’s reliance on United States v Smith (832 F2d 1167) is equally misplaced. There the court held that a supplier of controlled substances can be convicted for aiding and abetting the recipient’s subsequent possession (see, 18 USC §2 [a] ["Whoever * * * aids, abets, counsels, commands, induces or procures (an offense against the United States), is punishable as a principal”]; see also, People v Burroughs, 830 F2d 1574, 1581-1582). We find no provision in the United States Code, however, comparable to New York’s Penal Law § 20.10, which specifically provides for an exemption in instances such as those, presented here. Thus, United States v Smith cannot be considered as persuasive precedent.

We therefore conclude that in both Manini and Fuente, the evidence presented to the Grand Jury was legally insufficient, as a matter of law, to the extent that evidence tended to establish accessorial liability since Penal Law § 20.10 precludes prosecution of these defendants for criminal possession of a controlled substance where the possession was solely that of another.

B. Constructive Possession

The People alternatively argue that the evidence presented in both cases was sufficient to support the possession counts of the indictments under the theory of constructive possession. We conclude, however, that the evidence presented in Manini was legally insufficient to support the possession counts on a theory of constructive possession, but that in Fuente the evidence was legally sufficient to support the possession counts of the indictment.

The People acknowledge in Manini that constructive possession is usually established by showing that a defendant exercised dominion and control over the place where contraband was seized or over the person who actually possessed the property. They argue, however, that a defendant’s constructive possession may also be established by showing that he retained a "continuing possessory interest” in the contraband sufficient to give him the requisite dominion and control. They rely principally on United States v Burroughs (830 F2d 1574, supra) where the defendant was charged with possession with intent to distribute, based on the actual possession of narcotics by others. Burroughs sold heroin "on credit” in New York to various individuals who ultimately possessed and sold the drugs in Jacksonville, Florida. Finding that he had a financial stake in the ultimate sale of the heroin in Florida, the court deemed Burroughs to have had constructive possession of the drugs seized from persons in Florida until he received payment, even though he relinquished physical possession of the drugs in New York (cf., United States v Brunty, 701 F2d 1375, 1382 [11th Cir], cert denied 464 US 848). Thus, the court rejected defendant’s challenge to venue in Florida and concluded that venue was proper (see, 18 USC § 3237 [a] [for an offense to have taken place within the trial district, it must have been begun, continued, or completed there]).

We have never adopted such a broad definition of constructive possession in this State, and are not persuaded that we should do so now. In New York, the rule has long been that to support a charge that a defendant was in constructive possession of tangible property, the People must show that the defendant exercised "dominion or control” over the property by a sufficient level of control over the area in which the contraband is found or over the person from whom the contraband is seized (see, Penal Law § 10.00 [8]; People v Francis, 79 NY2d 925; People v Pearson, 75 NY2d 1001 [evidence legally insufficient to establish defendant’s constructive possession of cocaine found in back room of grocery store in absence of evidence that defendant owned, rented or had control over or a possessory interest in store or room]; People v Tirado, 47 AD2d 193, affd on opn below 38 NY2d 955 [proximity of drugs in apartment and defendant’s control of premises support conclusion of constructive possession]; People v Diaz, 112 AD2d 311 [evidence that defendant instructed another to retrieve and sell cocaine to undercover officer sufficient to establish defendant’s constructive possession of cocaine]; People v Rivera, 77 AD2d 538 [defendant who commanded his brother to get a gun and pull trigger had complete dominion and control over gun]; cf., People v Patel, 132 AD2d 498, lv denied 70 NY2d 935 [in absence of any proof that defendant had authority over person in actual possession of gun, there is no constructive possession]).

Applying these principles to the facts in Manini, we conclude that the evidence was insufficient to establish the requisite level of control or authority by Manini over Paige to support a finding that Manini was in constructive possession of the drugs seized from Paige in New York. The record does not reflect that any evidence was presented to the Grand Jury that Manini, in California, exercised any type of authority over Paige while Paige was in New York in possession of the cocaine. To the contrary, the record evidence is that Manini gave Paige the drugs "on credit” and fully expected to receive payment for them. In order to insure payment on the debt, Manini demanded and received "collateral” from Paige as security. Rather than establishing any continuing dominion and control over the cocaine, it is clear that Manini relinquished dominion and control over the drugs by selling them to Paige, albeit "on credit”. There is no indication that Manini was involved in Paige’s subsequent distribution or had any authority over what Paige did with the drugs after receiving them. Thus, the evidence presented was legally insufficient to establish that Manini was in constructive possession of the cocaine.

The evidence presented in Fuente, however, compels a different result. Viewing that evidence, as we must, in the light most favorable to the People (see, People v Jennings, 69 NY2d 103, 114-115; People v Pelchat, 62 NY2d 97, supra), we conclude that it was legally sufficient to establish defendant’s liability, under a theory of constructive possession, for the actual possession of the kilogram of cocaine seized from the van occupied by codefendants Carballo and Martinez.

A defendant may constructively possess property if he has dominion and control over the drugs as a result of his authority over the person who actually possesses them, rather than through his access to or control over the place where the drugs are kept (see, e.g., People v Passero, 83 AD2d 769; People v Diaz, 112 AD2d 311, supra; People v Rivera, 77 AD2d 538, supra). Here, there was evidence from the extensive intercepted telephone conversations that the cocaine seized from the van occupied by Carballo and Martinez had been obtained for resale to defendant’s customers and was being transported on defendant’s behalf and at his direction. Moreover, in contrast to the situation in Manini, Fuente, although not in physical possession of the narcotics, retained a level of control over the drugs sufficient to support a finding of constructive possession. Minutes before the seizure of the cocaine, he was observed following closely behind the van in his own car, and both vehicles stopped together for several minutes in the parking area of the driveway to the house of Martinez’s mother before continuing their progress. Fuente was subsequently apprehended in his own car only a short distance from where the van was stopped. Thus, the evidence in its totality provided a sufficient basis for the Grand Jury to conclude that defendant Fuente was in constructive possession of the kilogram of cocaine seized from the van.

Accordingly, the order of the Appellate Division should be reversed in People v Fuente, and counts two and three of the indictment reinstated. In People v Manini the Appellate Division order should be affirmed.

Chief Judge Wachtler and Judges Kaye, Titone, Hancock, Jr., and Bellacosa concur; Judge Simons taking no part.

In People v Manini: Order affirmed.

In People v Fuente: On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order reversed and counts two and three of the indictment reinstated.

June 9,1992

Motion, treated as a motion for clarification of this Court’s opinion, granted. In that the evidence before the Grand Jury was sufficient to establish defendant Fuente’s constructive possession of the contraband, we did not reach the issue whether, on the facts of that case, a theory of accessorial liability could also support those charges.

      . Of the original nine ounces, there is evidence in the record that Paige sold four ounces in Los Angeles, but had only approximately four when he arrived in New York. The ninth ounce "came up missing.”

      . Manini was also charged with criminal possession of a controlled substance in the first and third degrees (relating to his actual possession in April 1988 of the kilogram of cocaine he sold to Paige), conspiracy in the second degree and criminal sale of a controlled substance in the first degree.

      . Defendant Manini was charged with criminal possession of a controlled substance in the second and third degrees; Fuente was charged with criminal possession of a controlled substance in the first and third degrees.

        Penal Law §220.16 (1) provides, in pertinent part, that "[a] person is guilty of criminal possession of a controlled substance in the third degree when he knowingly and unlawfully possesses * * * a narcotic drug with intent to sell it.”
      Penal Law § 220.18 (1) provides, in pertinent part, that "[a] person is guilty of criminal possession of a controlled substance in the second degree when he knowingly and unlawfully possesses * * * one or more preparations, compounds, mixtures or substances of an aggregate weight of two ounces or more containing a narcotic drug.”
      Penal Law § 220.21 (1) provides, in pertinent part, that "[a] person is guilty of criminal possession of a controlled substance in the first degree when he knowingly and unlawfully possesses * * * one or more preparations, compounds, mixtures or substances of an aggregate weight of four ounces or more containing a narcotic drug.”

      . The Penal Law was substantially revised in 1965 (see, L 1965, ch 1030).

      . The term "sell” is broadly defined in the Penal Law to include any form of transfer of a controlled substance from one person to another, and means "to sell, exchange, give or dispose of to another, or to offer or agree to do the same” (see, Penal Law § 220.00 [1]; Donnino, Practice Commentaries, McKinney’s Cons Laws of NY, Book 39, Penal Law art 220, at 14).

      . We also note the holding in People v Glass (133 AD2d 705) that a defendant who supplied cocaine to another for the other person to sell was liable, as an accessory, for the subsequent sale and possession of the drugs. There is no indication that the court considered the application of Penal Law § 20.10 to the facts of that case. In view of our holding today, to the extent that Glass may be read to the contrary, it is not to be followed.

      . But see, Penal Law § 220.25 which, in specified circumstances, creates a presumption of possession.


source: Caselaw Access Project

author: Hancock, Jr., J.

license: Public Domain

text:
    Unigard Security Insurance Company, Inc., as Successor to Unigard Mutual Insurance Company, Inc., Plaintiff, v North River Insurance Company, Defendant.
    Argued March 31, 1992;
    decided May 5, 1992

      POINTS OF COUNSEL

      Eugene Wollan, Michael H. Goldstein and Robert A. Stern for plaintiff.
    I. Unigard need not prove that it was prejudiced by North River’s untimely notice of loss. (Security Mut. Ins. Co. v Acker-Fitzsimons Corp., 31 NY2d 436; Deso v London & Lancashire Indem. Co., 3 NY2d 127; Rushing v Commercial Cas. Ins. Co., 251 NY 302; Haas Tobacco Co. v American Fid. Co., 226 NY 343; Heydt Contr. Corp. v American Home Assur. Co., 146 AD2d 497, 74 NY2d 651; Ogden Corp. v Travelers Indem. Co., 924 F2d 39; Utica Mut. Ins. Co. v Fireman’s Fund Ins. Cos., 748 F2d 118; Olin Corp. v Insurance Co., 929 F2d 62; Loblaw, Inc. v Employers’ Liab. Assur. Corp., 57 NY2d 872; Travelers Ins. Co. v Buffalo Reinsurance Co., 735 F Supp 492.) II. The District Court’s decision is not supported by the evidence; custom and practice and case law demonstrate that insurers and reinsurers have the same needs for prompt notice of loss. (Bellefonte Reinsurance Co. v Aetna Cas. & Sur. Co., 903 F2d 910; Filner v Shapiro, 633 F2d 139; Morlee Sales Corp. v Manufacturers Trust Co., 9 NY2d 16; Slatt v Slatt, 64 NY2d 966, 65 NY2d 785; Utica Sanitary Milk Co. v Casualty Co., 210 NY 399; Power Auth. v Westinghouse Elec. Corp., 117 AD2d 336; Commercial Union Ins. Co. v International Flavors & Fragrances, 822 F2d 267; Jefferson Ins. Co. v Fortress Re, 616 F Supp 874.)

      Dennis G. Jacobs, Andrew S. Amer and Mary Beth Forshaw for defendant.
    I. Untimely notice, without prejudice, does not discharge a reinsurer’s duty to pay. (O & W Lines v St. John, 20 NY2d 17; Toyomenka Pac. Petroleum v Hess Oil Virgin Is. Corp,, 771 F Supp 63; Restoration Realty Corp. v Robero, 58 NY2d 1089; American Power Indus, v Rebel Realty Corp., 145 AD2d 454; F.H.R. Auto Sales v Scutti, 144 AD2d 956; Manning v Michaels, 149 AD2d 897; Westchester Resco Co. v New England Reinsurance Corp., 818 F2d 2; A & Z Appliances v Electric Burglar Alarm Co., 90 AD2d 802; Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106; Continental Ins. Co. v Albany Hous. Auth., 85 AD2d 782.) II. The rationale underlying the application of New York’s prejudice per se rule in the direct insurance context does not exist in reinsurance. (Allstate Ins. Co. v Furman, 84 AD2d 29, 58 NY2d 613; Tenant

      v Farm Bur. Mut. Auto. Ins. Co., 286 App Div 117; Matter of Marcus [Motor Vehicle Acc. Indemnification Corp.], 29 Misc 2d 573; Power Auth. v Westinghouse Elec. Corp., 117 AD2d 336; Rushing v Commercial Cas. Ins. Co., 251 NY 302; Haas Tobacco Co. v American Fid. Co., 226 NY 343; Matter of Government Employees Ins. Co. v Elman, 40 AD2d 994; Olin Corp. v Insurance Co., 743 F Supp 1044, 929 F2d 62.) III. Prejudice should not be presumed where experience shows that prejudice is rarely suffered. (Matter of Findlay, 253 NY 1; Brown v United States Fid. & Guar. Co., 314 F2d 675; Kivi v Nationwide Mut. Ins. Co., 695 F2d 1285; Liberty Mut. Ins. Co. v Gibbs, 773 F2d 15; Keehn v Excess Ins. Co., 129 F2d 503; Jefferson Ins. Co. v Fortress Re, 616 F Supp 874; Highlands Ins. Co. v Employers’ Surplus Lines Ins. Co., 497 F Supp 169.)

      Marchisello & Doody for Superintendent of Insurance of the State of New York, amicus curiae.

    I. Real world constraints on the liquidation bureau would leave the bureau crippled under a "no prejudice” rule in ways which private insurance companies would not be subject. II. New York law provides protection of reinsurers’ interests in liquidation. (Security Mut. Cas. Co. v Century Cas. Co., 531 F2d 974.)
   OPINION OF THE COURT

Hancock, Jr., J.

Under New York law, the standard provision in a contract of primary liability insurance requiring the insured to give the insurer prompt notice of a potential claim operates as a condition precedent; thus, for failure to give notice, the primary insurer "need not show prejudice before it can assert the defense of noncompliance” (Security Mut. Ins. Co. v Acker-Fitzsimons Corp., 31 NY2d 436, 440). For reasons which follow, we hold that this "no prejudice” rule does not apply to a failure to comply with the prompt notice requirement in a contract of reinsurance.

I.

This appeal, pursuant to section 500.17 of this Court’s Rules of Practice (22 NYCRR), certifies to us the central legal issue in a declaratory judgment action commenced in the United States District Court for the Southern District of New York by Unigard Security Insurance Company, Inc. (Unigard) against North River Insurance Company (North River). The question is whether Unigard must honor its commitment under a facultative reinsurance certificate issued to North River covering a high layer excess insurance policy issued by North River to Owens-Corning Fiberglass Corp. (Owens-Corning) (see, Unigard Sec. Ins. Co. v North Riv. Ins. Co., 762 F Supp 566 [SD NY, Sweet, J.]).

Unigard contends that it is automatically relieved from its obligations under the reinsurance certificate because North River failed to give prompt notice of an "occurrence or accident which appear[ed] likely to involve [the] reinsurance” as required by clause C of the certificate. Any question of prejudice, it argues, is irrelevant. North River has filed a counterclaim seeking damages and a declaration that Unigard is obligated to pay under the certificate. North River maintains that before a reinsurer may avoid its responsibility on account of late notice, it must show that it has suffered prejudice and that, since concededly no prejudice has been shown, Unigard’s defense of late notice must fail.

The North River policy — for which Unigard issued its certificate of reinsurance — provided $30 million in excess liability insurance for two successive policy periods for amounts recovered against Owens-Corning over $76 million of underlying primary and lower level excess policies provided by various insurers. Under its certificate, Unigard agreed "to reinsure” North River in respect to these policies "subject to the terms, conditions, limits of liability, and Certificate provisions set forth”. The terms and provisions include the following:

"C. Prompt notice shall be given by the company to the Underwriting Managers on behalf of the Reinsurers of any occurrence or accident which appears likely to involve this reinsurance and while the Underwriting Managers or the Reinsurers do not undertake to investigate or defend claims or suits, the Underwriting Managers directly, or through its representatives and/or counsel, shall nevertheless have the right and be given the opportunity to associate with the Company and its representatives at the Reinsurers’ expense in the defense and control of any claim, suit or proceeding which may involve this reinsurance with the full cooperation of the Company.”

Unigard, as the agreed payment for its reinsurance commitment, became entitled to receive one sixth of the premium paid to North River, less the standard 25% brokerage commission.

The dispute over the Unigard reinsurance coverage stemmed from the asbestos claim crisis which began in the early 1980’s and resulted in hundreds of claims against various asbestos products manufacturers including Owens-Corning. On April 1, 1987, North River became aware that its excess policies were being penetrated and that there was a likelihood that the Unigard reinsurance would be involved. In August 1987, North River sent a precautionary notice to Unigard advising it of potential asbestos-related losses under its excess policies. Unigard did not receive this notice until September 2, 1987.

The District Court, after a nine-day bench trial, found: (1) that North River’s obligation to send a notice to Unigard arose in April 1987; and (2) that, under an objective standard, the notice sent in August and received on September 2, 1987 was untimely. It rejected Unigard’s late notice defense, however, holding that New York law required a reinsurer to demonstrate prejudice. Because there was no showing of prejudice, the Court rendered judgment in favor of North River (762 F Supp 566, supra).

On appeal to the Second Circuit Court of Appeals, that court determined: (1) that the only New York decision on the issue of whether a reinsurer is required to demonstrate prejudice is an unpublished opinion (General Ins. Co. v Nutmeg Ins. Co., Sup Ct, NY County, July 24, 1987, Shainswit, J.); and (2) that there is a split of authority on the issue within the Southern District of New York (compare, Christiana Gen. Ins. Corp. v Great Am. Ins. Co., 745 F Supp 150 [SD NY 1990] [holding that reinsurer must demonstrate prejudice to prevail on late-notice defense], appeal pending — F2d — [2d Cir, Sept. 23, 1991, No. 91-7912], with Travelers Ins. Co. v Buffalo Reinsurance Co., 735 F Supp 492 [reinsurer need not prove prejudice], vacated in part 739 F Supp 209 [SD NY 1990]).

The Second Circuit noted that the "determination of the legal requirements for the assertion of a late-notice claim in the reinsurance context is important to purchasers and sellers of reinsurance issued in New York and to* the reinsurance industry” (949 F2d 630, 632). Accordingly, it certified to us the following question:

"Must a reinsurer prove prejudice before it can successfully invoke the defense of late notice of loss by the reinsured?” (Id., at 632.)

We answer the question in the affirmative.

II.

It is settled New York law that the notice provision for a primary insurer operates as a condition precedent and that the insurer need not show prejudice to rely on the defense of late notice (see, Security Mut. Ins. Co. v Acker-Fitzsimons Corp., 31 NY2d 436, 440, supra). The question is whether this same rule should be applied in the context of reinsurance. The New York "no prejudice” rule for primary insurers — as remarked by the District Court herein (Unigard Sec. Ins. Co. v North Riv. Ins. Co., supra, at 592) — is a limited exception to two established rules of contract law: (1) that ordinarily one seeking to escape the obligation to perform under a contract must demonstrate a material breach or prejudice (see, Restoration Realty Corp. v Robero, 58 NY2d 1089, 1091; J. N. A. Realty Corp. v Cross Bay Chelsea, 42 NY2d 392, 395; American Power Indus. v Rebel Realty Corp., 145 AD2d 454, 455; Insurance Co. v Associated Intl. Ins. Co., 922 F2d 516, 523 [9th Cir 1991]; Toyomenka Pac. Petroleum v Hess Oil Virgin Is. Corp., 771 F Supp 63, 68 [SD NY]; 11 Williston, Contracts § 1292, at 8 [3d ed]; Restatement [Second] of Contracts § 237 [1979]); and (2) that a contractual duty ordinarily will not be construed as a condition precedent absent clear language showing that the parties intended to make it a condition (see, Manning v Michaels, 149 AD2d 897, 898; F.H.R. Auto Sales v Scutti, 144 AD2d 956; Toyomenka Pac. Petroleum v Hess Oil Virgin Is. Corp., supra, at 68; Insurance Co. v Associated Intl. Ins. Co., supra, at 524; Security Mut. Cas. Co. v Century Cas. Co., 531 F2d 974, 976; 22 NY Jur 2d, Contracts, §§ 234, 237).

Various reasons have been expressed for the New York exception as applied to primary insurers: i.e., that "the insurer [must have] an opportunity to protect itself’ (Security Mut. Ins. Co. v Acker-Fitzsimons Corp., supra, at 440); that without timely notice, "an insurer may be deprived of the opportunity to investigate a claim and is rendered vulnerable to fraud” (Power Auth. v Westinghouse Elec. Corp., 117 AD2d 336, 339); and that late "notification may * * * prevent the insurer from providing a sufficient reserve fund” (id., at 339; and see, Security Mut. Cas. Co. v Century Cas. Co., 531 F2d 974, 978, supra [prompt notice permits the primary insurer to make an early estimate of potential exposure, to investigate the claim while witnesses and facts are available, and to take steps to prevent fraud]; Commercial Union Ins. Co. v International Flavors & Fragrances, 822 F2d 267, 271 [2d Cir 1987] [early notice enables the insurer, inter alia, to exercise early control over the claim and enhances the possibility of settlement]).

The question posed to us by the Circuit Court may be restated thus: do the same reasons for adopting the "no prejudice” exception to the general rules of contract for primary insurers apply to reinsurers? We believe they do not. We address this question, it must be noted, under the specific prompt notice provision contained in clause C of the North River certificate (supra, at 579-580). There is nothing in this provision or elsewhere in the North River certificate indicating that the parties intended that the giving of notice should operate as a condition precedent (compare, Liberty Mut. Ins. Co. v Gibbs, 773 F2d 15, 16-17 [1st Cir 1965] [where the certificate specifically provided that notice "is a condition precedent to any liability under this policy”]). If the ordinary rules of contract were applied, the prompt notice provision in the North River certificate would not be construed as a condition precedent.

III.

There are significant and basic differences between primary insurance and reinsurance. A certificate of reinsurance — unlike a contract of primary insurance — is not a contract under which the company agrees to indemnify the insured from losses up to a stated limit upon the happening of specified contingencies. A certificate of reinsurance is a contract between two insurance companies in which the reinsured company agrees to cede part of its risk to the reinsurer in return for a percentage of the premium. A reinsurance contract operates solely between the reinsurer and the ceding company. It confers no rights on the insured (see, 19 Couch, Insurance 2d § 80:1 [1983]). As we recently stated, a reinsurer’s "only obligation is to indemnify the primary insurer” (Matter of Midland Ins. Co., 79 NY2d 253, 258; see, Security Mut. Cas. Co. v Century Cas. Co., supra, at 977; 13A Appleman, Insurance Law and Practice § 7681 [1976]).

These differences in the contractual undertakings of reinsurers and primary insurers have consequences of critical importance, as courts in other jurisdictions have found (see, e.g., Security Mut. Cas. Co. v Century Cas. Co., supra, at 978; Insurance Co. v Associated Intl. Ins. Co., 922 F2d 516, 523-524, supra). A reinsurer is not responsible for providing a defense, for investigating the claim or for attempting to get control of the claim in order to effect an early settlement. Unlike a primary insurer, it may not be held liable to the insured for a breach of these duties. Settlements, as well as the investigation and defense of claims are the sole responsibility of the primary insurer; and settlements made by the primary insurer are, by express terms of the reinsurance certificate, binding on the reinsurer. Thus, failure to give the required prompt notice is of substantially less significance for a rein-surer than for a primary insurer.

Moreover, the interests of a reinsurer and the ceding primary insurer with respect to a pending claim are generally identical. The "follow the fortunes” clause in most reinsurance agreements leaves reinsurers little room to dispute the reinsured’s conduct of the case. In addition, the interests of both parties are furthered through the primary insurer’s efficient investigation and defense of the claim and through the resolution of the claim on the best terms possible (see, Security Mut. Cas. Co. v Century Cas. Co., supra, at 978 [rejecting rule under Colorado law and noting that a reinsurer had "as much reason” as a primary insurer to see that claims "were properly investigated and defended” and that as between "the two insurers, there was little danger of fraud or imposition”]; Insurance Co. v Associated Intl. Ins. Co., supra, at 523-524). By contrast, the interests of a primary insurer and its insured may often be adverse. There may be disputes over cooperation or coverage or over claimed collusion on the part of the insured. These factors make prompt notice of the claim and expeditious processing and control of it a matter of vital concern to the primary insurer. Such considerations have greatly diminished application to the reinsurer.

Unigard asserts, however, that a reinsurer’s "right to associate” with the ceding insurance company makes it necessary for the reinsurer to have prompt notification of any claim likely to involve the reinsurance. The "right to associate” involves the right to consult with and advise the reinsured in its handling of a claim. Unigard argues that this right gives it an interest similar to that of a primary insurer and that it, therefore, must have early notice so that it may itself investigate the claim and foreclose the possibility of fraud. We agree that there are cases in which the reinsurer’s right to associate may be impaired by late notice from the reinsured. Nonetheless, because of the critical distinctions between a primary insurer’s right to control the investigation and defense of a plaim and a reinsurer’s "right of association” with the ceding companies, we cannot agree with Unigard’s contention that the risk of such impairment is sufficiently grave to warrant applying a presumption of prejudice. Accordingly, there is no sound reason to depart from the general contract law principle that a breach will excuse performance only if it is material or demonstrably prejudicial. Indeed, it has been noted that reinsurers seldom have occasion to exercise their right to associate (see, Christiana Gen. Ins. Corp. v Great Am. Ins. Co., 745 F Supp 150, 159, supra; Travelers Ins. Co. v Buffalo Reinsurance Co., 735 F Supp 492, 499, supra).

This is not to suggest that a reinsurer may never assert late notice as a ground for avoiding its obligations under a reinsurance contract. All we hold here is that the reinsurer must demonstrate how it was prejudicial and may not rely on the presumption of prejudice that applies in the late notice disputes between primary insurers and their insureds.

For the foregoing reasons, we conclude that the question certified should be answered in the affirmative.

Chief Judge Wachtler and Judges Titone, Bellacosa and Yesawich, Jr., concur; Judges Simons and Kaye taking no part.

Following certification of a question by the United States Court of Appeals for the Second Circuit and acceptance of the question by this Court pursuant to section 500.17 of the Rules of Practice of the New York State Court of Appeals (22 NYCRR 500.17), and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified question answered in the affirmative.

      . As we recently noted (see, Matter of Midland Ins. Co., 79 NY2d 253, 258), a facultative reinsurance contract is one issued to cover a particular risk. To be distinguished is treaty reinsurance which is obtained in advance of actual coverage and may cover any risk the primary insurer covers (see, 19 Couch, Insurance 2d § 80:3 [1983]).

      . Clause D of the Facultative Reinsurance Certificate (the so-called "Follow the Fortunes” clause) in pertinent part reads: "All claims covered by this reinsurance when settled by the Company shall be binding on the Reinsurers, who shall be bound to pay their proportion of such settlements” (emphasis added).

      . The "right to associate” in clause C of the Unigard Facultative Reinsurance Certificate is as follows:
      "[W]hile the Underwriting Managers or the Reinsurers do not undertake to investigate or defend claims or suits, the Underwriting Managers directly, or through its representatives and/or counsel, shall nevertheless have the right and be given the opportunity to associate with the Company and its representatives at the Reinsurers’ expense in the defense and control of any claim, suit or proceeding which may involve this reinsurance with the full cooperation of the Company.”

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


author: Bellacosa, J.

text:
    The People of the State of New York ex rel. Dante E. Paganini, Appellant, v Joseph P. Jablonsky, as Sheriff of Nassau County, Respondent.
    Argued April 30, 1992;
    decided June 4, 1992

      POINTS OF COUNSEL

      Elaine Jackson Stack for appellant.
    I. The regulations promulgated by the Commissioner of Motor Vehicles which interpret section 1196 of the Vehicle and Traffic Law and which restrict participation in the rehabilitation program to a class of persons not contemplated by the statute, i.e., those convicted of drug or alcohol-related offenses "in another state,” are unreasonable and should not be controlling. (Matter of Shannon v Introne, 80 AD2d 834; Meltzer v Koenigsberg, 302 NY 523; Matter of Cristo Bros., 97 AD2d 274; United States v Vogel Fertilizer Co., 455 US 16; Matter of Howard v Wyman, 28 NY2d 434; Matter of Rosenbluth v Finkelstein, 300 NY 402; Matter of Lord Mgt. Corp. v Goodwin, 50 AD2d 166.) II. Aggravated unlicensed operation of a motor vehicle in the second degree (Vehicle and Traffic Law § 511 [2] [a] [ii]) is an alcohol-related offense since essential elements of the crime involve alcohol-related conduct, i.e., revocation was caused either by refusal to take a chemical test as required by law or because of a prior conviction for a violation of section 1192 of the Vehicle and Traffic Law. (Matter of State of New York [Abrams] v Ford Motor Co., 74 NY2d 495; Matter of Richmond Constructors v Tishelman, 61 NY2d 1; Curtis v Brookdale Hosp. Center, 62 AD2d 749; McCluskey v Cromwell, 11 NY 593.)

      Denis Dillon, District Attorney (Douglas Noll and Peter A. Weinstein of counsel), for respondent.
    Defendant’s participation in an alcohol rehabilitation program did not satisfy the sentence of imprisonment imposed upon his conviction of aggravated unlicensed operation of a motor vehicle in the second degree, because that offense is not "alcohol-related” within the meaning of Vehicle and Traffic Law § 1196 (4). (Eaton v New York City Conciliation & Appeals Bd., 56 NY2d 340; Matter of Alonzo M. v New York City Dept. of Probation, 72 NY2d 662; Matter of Holtzman v Goldman, 71 NY2d 564; People v Douglass, 60 NY2d 194; Patrolmen’s Benevolent Assn. v City of New York, 41 NY2d 205; People v Lewis, 29 NY2d 923; People v McNamara, 78 NY2d 626; Matter of Allstate Ins. Co. v Shaw, 52 NY2d 818; People v Eulo, 63 NY2d 341.)
   OPINION OF THE COURT

Bellacosa, J.

Petitioner-appellant Paganini was convicted, upon his guilty plea, of aggravated unlicensed operation of a motor vehicle in the second degree under Vehicle and Traffic Law § 511 (2) (a) (ii). He thereafter sought to terminate his jail sentence for that offense based on his completion of an alcohol rehabilitation program (see, Vehicle and Traffic Law § 1196 [4]). We conclude that he is not eligible to reap the benefit of participation in such a program in relation to his Vehicle and Traffic Law § 511 conviction and sentence. Thus, the Appellate Division order which, in dismissing the proceeding, reversed the Supreme Court judgment that sustained the writ of habeas corpus should be affirmed.

In 1986, appellant was arrested and charged with driving while his ability was impaired (Vehicle and Traffic Law former § 1192 [1]). He refused to submit to a chemical test and his driver’s license was revoked after his conviction (Vehicle and Traffic Law former § 1194 [2] [c]). In 1988, Paganini was again arrested and this time he was charged with driving while intoxicated (Vehicle and Traffic Law § 1192 [3]) and aggravated unlicensed operation of a motor vehicle in the first degree (Vehicle and Traffic Law § 511 [3]). He pleaded guilty to the Vehicle and Traffic Law § 1192 (3) charge and to the reduced charge of aggravated unlicensed operation in the second degree under Vehicle and Traffic Law § 511 (2) (a) (ii). He was sentenced to jail for one year for the Vehicle and Traffic Law § 1192 offense and 180 days for the Vehicle and Traffic Law § 511 offense.

During the pendency of his unsuccessful direct appeal to the Appellate Division from the 1988 conviction, Paganini enrolled in and completed a Vehicle and Traffic Law § 1196 certified alcohol rehabilitation program. He subsequently petitioned Supreme Court, Nassau County, for a writ of habeas corpus alleging that, pursuant to Vehicle and. Traffic Law § 1196 (4), both of his jail sentences should terminate upon completion of the program. That court sustained the writ and directed petitioner’s immediate release from custody. The Appellate Division reversed and dismissed the habeas corpus proceeding, concluding that the sentence termination provisions in Vehicle and Traffic Law § 1196 (4), as interpreted and implemented by the regulations of the Commissioner of Motor Vehicles, were not applicable to his sentence for second degree aggravated unlicensed operation of a motor vehicle (176 AD2d 771). That sentence is the only matter before us inasmuch as Paganini’s sentence for his driving while intoxicated conviction was properly terminated under Vehicle and Traffic Law § 1196 (4) upon his successful completion of the rehabilitation program.

Vehicle and Traffic Law § 1196 establishes an alcohol and drug rehabilitation program within the Department of Motor Vehicles. "[Pjersons convicted of alcohol or drug-related traffic offenses” are eligible to participate in the program if they meet the criteria for participation established in Vehicle and Traffic Law § 1196 and the accompanying regulations (Vehicle and Traffic Law § 1196 [4]). The classification, "alcohol or drug-related traffic offenses”, is not defined in the statute. Regulations promulgated by the Commissioner of Motor Vehicles, however, restrict eligibility to persons "convicted * * * of a violation of any subdivision of section 1192 of the Vehicle and Traffic Law, or of an alcohol or drug-related traffic offense in another state”, with certain exceptions not applicable here (15 NYCRR 134.2). Completion of a course in the rehabilitation program results in the termination of any sentence of imprisonment imposed by reason of a conviction for an alcohol or drug-related traffic offense (Vehicle and Traffic Law § 1196 [4]).

Paganini urges, under a first impression and expansive interpretation of this ameliorative statute, that the sentence for his unlicensed driving conviction (Vehicle and Traffic Law § 511 [2] [a] [ii]) should be terminated because that offense is an alcohol-related traffic offense encompassed within Vehicle and Traffic Law § 1196 (4). He would define alcohol-related traffic offenses as any which, in fact, have alcohol-related conduct as an essential element. Appellant reasons that the elements of his unlicensed driving conviction included his prior refusal to submit to a chemical test and his prior driving while ability impaired conviction, both alcohol-related predicates. While we may well agree that Paganini’s Vehicle and Traffic Law § 511 (2) (a) (ii) conviction had a factual and legal genesis in prior alcohol-related conduct, that is not determinative of the availability of the ameliorative sentencing provisions of Vehicle and Traffic Law § 1196 (4).

The goal of Vehicle and Traffic Law § 1196 rehabilitation programs is to induce drivers with alcohol or drug problems to obtain professional help, thus reducing threats to the public safety from persons who disregard the dangers of driving with diminished capacities due to intoxication and impairment (Vehicle and Traffic Law § 520). The statute and the implementing regulation, by targeting and limiting eligibility to participate in the programs, foster that goal. They reflect a rational policy choice not to extend the termination-of-sentence incentive to Vehicle and Traffic Law offenders who knowingly drive without a license — the core element of the Vehicle and Traffic Law § 511 (2) offense at issue in this case— because that would not directly foster the particular goals of Vehicle and Traffic Law § 1196 rehabilitation and education programs. That Paganini’s unlicensed driving conviction may be traced back to a suspension, which was based on his prior refusal to take a chemical test and a prior driving while ability impaired conviction, therefore does not qualify him for the termination-of-sentence remedy.

Paganini also contends that the regulation (15 NYCRR 134.2) limiting participation in the rehabilitation program to persons convicted under Vehicle and Traffic Law § 1192 unreasonably restricts the unambiguous statutory reference to alcohol-related traffic offenses and conflicts with legislative intent. The flaw here, however, is that the legislative history of Vehicle and Traffic Law § 1196 and the structure of Vehicle and Traffic Law article 31 (§ 1192 et seq.) not only do not support his syllogism, but contradict it.

Prior to 1988, the provisions concerning alcohol-related violations of the Vehicle and Traffic Law were scattered in a number of places. Legal practitioners, law enforcement agencies and the judiciary complained that this made coherent implementation of the provisions unnecessarily complex and led to misapplication (Mem of State Executive Dept, 1988 McKinney’s Session Laws of NY, at 1941). The Legislature responded by substantially reorganizing the Vehicle and Traffic Law to “consolidate all of the various alcohol-related provisions of the Vehicle and Traffic Law into a single, comprehensive article” (L 1988, ch 47; Mem of State Executive Dept, 1988 McKinney’s Session Laws of NY, at 1938; see, Governor’s Approval Mem, 1988 McKinney’s Session Laws of NY, at 2252). The new article 31 was entitled “Alcohol and Drug-Related Offenses and Procedures Applicable Thereto”. Section 511 (entitled “Operation while license or privilege is suspended or revoked; aggravated unlicensed operation”) was not among the Vehicle and Traffic Law sections identified as a “current alcohol-related provision^ of the Vehicle and Traffic Law” subject to the recodification (Mem of State Executive Dept, 1988 McKinney’s Session Laws of NY, at 1938), and was not incorporated into the new article 31.

We conclude that the legislative grouping of offenses in article 31, and the use of the term “alcohol or drug-related traffic offenses” in the text of Vehicle and Traffic Law § 1196 mirroring the title of article 31, evidences the legislative intent to particularize and limit the categories of offenders eligible to benefit from the interplay of Vehicle and Traffic Law § 1196 (1) and (4). Only persons convicted of article 31 offenses were included. The regulation of the Commissioner of Motor Vehicles, which restricts eligibility to secure the ameliorative termination-of-sentence benefits of section 1196 to violators of Vehicle and Traffic Law § 1192 offenses, is thus a consistent implementation of the legislative intent and is a rational interpretation of the statute.

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

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

Order affirmed, without costs.


text:
    In the Matter of Gary T. Doyle, Appellant, v Arnold Amster et al., Constituting the Clarkstown Zoning Board of Appeals, Respondents.
    Argued May 6, 1992;
    decided June 4, 1992

      POINTS OF COUNSEL

      Stephen J. Cole-Hatchard for appellant.
    I. The refusal of respondent Zoning Board to grant the requested area variances, as affirmed by the Supreme Court and Appellate Division, Third Department, is contrary to prior holdings and decisions of the Court of Appeals. (Matter of Hoffman v Harris, 17 NY2d 138; Matter of Clune v Walker, 10 Misc 2d 858, 7 AD2d 651; Matter of Fuhst v Foley, 45 NY2d 441; Matter of De Sena v Board of Zoning Appeals, 45 NY2d 105; Matter of Field Delivery Serv. [Roberts], 66 NY2d 516; Matter of Howard Johnson Co. v State Tax Commn., 65 NY2d 726.) II. Pursuant to Second Department case law, as interpreting applicable Court of Appeals decisions, the Third Department’s affirmance of the denial of the requested area variances is an abuse of discretion as a matter of law. (Matter of Stengel v Town of Woodstock Zoning Bd. of Appeals, 155 AD2d 854; Matter of Johansen v Ochsie, 158 AD2d 886; Matter of Clune v Walker, 10 Misc 2d 858, 7 AD2d 651; Matter of Gruen v Simpson, 3 AD2d 841; Van Dusen v Barrack, 376 US 612.) III. A practical difficulty exists as a matter of law pursuant to Appellate Division, Second Department, case law, as interpreting Court of Appeals decisions. (Matter of Clune v Walker, 10 Misc 2d 858, 7 AD2d 651; Matter of Gruen v Simpson, 3 AD2d 841; Matter of Stengel v Town of Woodstock Zoning Bd. of Appeals, 155 AD2d 854; Matter of Johansen v Ochsie, 158 AD2d 886; Matter of Hoffman v Harris, 17 NY2d 138.) IV. The existence of a significant economic injury has been shown as a matter of law, contrary to the decision of the Appellate Division, Third Department. (Matter of Fulling v Palumbo, 21 NY2d 30; Matter of Townwide Props. v Zoning Bd. of Appeals, 143 AD2d 757; Young v Board of Zoning Appeals, 62 Misc 2d 147, 35 AD2d 430, 29 NY2d 685.) V. Strict enforcement of the zoning code herein will not serve any valid public purpose outweighing the severe injury to appellant, and as such, the affirmance of the lower court’s dismissal of the petition was an abuse of discretion and must be reversed. (Matter of De Sena v Board of Zoning Appeals, 45 NY2d 105.)

      Murray N. Jacobson, Town Attorney (Ronald E. De Christoforo of counsel), for respondents.
    The resolution of the Zoning Board of Appeals was supported by substantial evidence and was not arbitrary, capricious or illegal. (Conley v Town of Brookhaven Zoning Bd. of Appeals, 40 NY2d 309; Matter of Cowan v Kern, 41 NY2d 591; McGowan v Cohalan, 41 NY2d 434; Matter of Wilcox v Zoning Bd. of Appeals, 17 NY2d 249; Van Deusen v Jackson, 35 AD2d 58, 28 NY2d 608; Matter of Village of Bronxville v Francis, 1 AD2d 236, 1 NY2d 839; Matter of New York State Elec. & Gas Corp. v McCabe, 32 Misc 2d 898; Matter of Niagara Mohawk Power Corp. v City of Fulton, 8 AD2d 523; Matter of Sofo v Egan, 57 AD2d 841; Matter of Wachsberger v Michalis, 19 Misc 2d 909.)
   OPINION OF THE COURT

Bellacosa, J.

Appellant Doyle challenges the Clarkstown Zoning Board of Appeals’ (Board) denial of his application for area variances to allow subdivision of a 29,370-square-foot parcel of property located in New City, Rockland County, into two building plots. We affirm the order of the Appellate Division, Third Judicial Department, on transfer from the Second Department pursuant to New York Constitution, article VI, § 4 (g), because we agree with both lower courts that there is substantial record evidence supporting the Board’s determination that Doyle did not establish practical difficulties or significant economic injury which would entitle him to the variances. To the extent that Matter of Fulling v Palumbo (21 NY2d 30) suggests otherwise with respect to the measurement of significant economic injury, it should no longer be followed.

The property in issue, which Doyle purchased in 1980 for $64,000, contains two residences — a year-round home and a “summer home”. Doyle resided in the year-round home and rented the latter until 1987, when he moved away and began to rent both residences. At the time the record in this case was made before the Board, Doyle was receiving $1,775 per month in rental income from the dual rentals of the property.

The applicable Clarkstown zoning ordinance requires 22,500-square-foot minimum building lots. In 1989, Doyle applied to the Board for area variances to subdivide his property into two separate building lots: a 14,367-square-foot lot for the year-round home and a 15,003-square-foot lot for the summer place. He alleged in his application and supporting papers that he had been "unable to sell his property as a single parcel” for over three years, having received no purchase offers at his reduced asking price of $225,000 (from $280,000). He concluded that "without [the] variances [he] would suffer great economic injury.”

The Board denied the application after a public hearing, concluding that Doyle had not established a "practical difficulty * * * that would deprive [him] of the reasonable use of the land or building involved”, as required by Clarkstown Code § 106-31 (C) (2). It added that he had not proven that he was unable to sell the property for a profit, noting that he had purchased the property for $64,000 only 10 years ago.

Doyle sued the Board on the grounds that its denial of his application was illegal, arbitrary and capricious. Supreme Court, Rockland County, dismissed the petition and the Appellate Division, Third Department, affirmed. The applicable case law in the Appellate Division, Second Department (where the intermediate appeal originated), and the case law in the Third Department (to which it was transferred) was essentially the same in all relevant respects. If it were different, the view of the originating intermediate appellate court governs until we finally settle the issue (see, Siegel, The Second Department’s Transferred Cases: Whose Law Applies in a Conflict? NYLJ, Apr. 23, 1990, at 1, col 1).

Applicants for area variances are obliged to demonstrate to zoning authorities that strict compliance with an applicable zoning ordinance will result in practical difficulty to the property owner (Matter of Fuhst v Foley, 45 NY2d 441, 445; Conley v Town of Brookhaven Zoning Bd. of Appeals, 40 NY2d 309, 314). "Practical difficulty”, while not subject to precise definition, may be established generally by proof that a property owner cannot utilize the property without violating zoning ordinance restrictions (Matter of Fuhst v Foley, supra, at 445). Judicial review of municipal land use determinations of this kind, i.e., a zoning board’s denial of a variance application based on the property owner’s failure to establish practical difficulty, is subject to the limitation that courts may not interfere with decisions enjoying a rational basis, supported by substantial evidence in the record (id., at 444; Matter of Cowan v Kern, 41 NY2d 591, 599; Conley v Town of Brookhaven Zoning Bd. of Appeals, 40 NY2d 309, 314, supra,).

The Board’s decision in this case that Doyle made an insufficient showing of practical difficulty rests comfortably on a rational basis and substantial evidence. The Board acknowledges that its denial of Doyle’s application for variances does not prohibit him from continuing to reap a significant annual rental income from the two dwellings on his property, which is significantly undersized for a double building use (compare, Matter of Hoffman v Harris, 17 NY2d 138). Alternatively, it is not without significance that Doyle may sell his property, albeit perhaps at a price less than the $225,000 he last sought, and receive a substantial profit on his initial investment.

Doyle counterargues that he is entitled to the requested area variances, in any event, because without them he incurs significant economic injury. "Significant economic injury” in this context may be established by proof that the specific use permitted by the zoning ordinance will not yield a reasonable return if the applicable land use restrictions are enforced (Matter of National Merritt v Weist, 41 NY2d 438, 442). This calculation focuses on the value of the property as presently zoned, not the value the property would have if the variance were granted (Matter of Cowan v Kern, 41 NY2d 591, 597, supra; Matter of Douglaston Civic Assn. v Galvin, 36 NY2d 1, 9). To the extent that Matter of Fulling v Palumbo (21 NY2d 30, supra) holds otherwise in this respect, it should no longer be followed and is overruled. Since Fulling, we have refined the rules to reject the notion that significant economic injury may be established by proof that the property would yield a greater return to the owner with the variance than without it (Matter of Cowan v Kern, supra, at 596-597; 2 Anderson, New York Zoning Law and Practice § 23.39, at 217-218 [3d ed]). Thus, proof that a parcel, if subdivided pursuant to a variance, could be sold to yield a higher profit to the owner does not constitute significant economic injury (see, Matter of Graziano v Scalafani, 143 AD2d 664, 666; 2 Anderson, op. cit., § 23.42, at 224-225).

Although Doyle alleges that the value of his property as zoned, without a variance, is $280,000, he submitted no certified appraisal to that effect, relying solely on real estate brokers’ estimates. While that failure of proof alone might not be determinative in the context of this case, Doyle has also been receiving over $20,000 per year in rental income from the continued nonconforming use of his property, which he purchased for $64,000 in 1980. Moreover, he submitted no proof that he would not realize a reasonable return on his investment if he sold the parcel for an amount somewhat below his last asking price of $225,000. The record establishes that the $64,000 Doyle initially paid for the property would have been worth approximately $151,500 as of January 1, 1990 had he invested it and received an average yield of 9%. Doyle submitted no evidence that he made any substantial improvements to the property. Finally, we note that inasmuch as the applicable zoning restrictions were in effect when Doyle purchased the property, any claimed economic hardship is self-imposed (Matter of Cowan v Kern, supra, at 597; Matter of National Merritt v Weist, supra, at 442; Matter of Graziano v Scalafani, supra, at 665-666).

On this record, we agree with the courts below that it cannot be said as a matter of law that the Board abused its authority in rejecting Doyle’s application for area variances. Accordingly, the order of the Appellate Division should be affirmed, with costs.

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

Order affirmed, with costs.


author: Simons, J.

text:
    In the Matter of Northeast Central School District, Respondent-Appellant, v Thomas Sobol, as Commissioner of Education, et al., Appellants-Respondents.
    Argued April 30, 1992;
    decided June 9, 1992

      POINTS OF COUNSEL

      Richard J. Trautwein and Lizette A. Cantres for Thomas Sobol, appellant-respondent.
    The Commissioner of Education, in his capacity as State-level reviewer of a decision of an impartial hearing officer denying tuition reimbursement to the parents of a child with a handicapping condition, has authority under State and Federal law to order a school district to pay tuition costs commencing with the date the parents unilaterally placed their child in a public or private school for the purpose of receiving a free appropriate public education. (Burlington School Comm. v Massachusetts Dept. of

      Educ., 471 US 359; Antkowiak by Antkowiak v Ambach, 838 F2d 635, cert denied sub nom. Doe v Sobol, 488 US 850; Hendrick Hudson Dist. Bd. of Educ. v Rowley, 458 US 176; Adler by Adler v Education Dept., 760 F2d 454; Norton School Comm. v Massachusetts Dept. of Educ., 768 F Supp 900; Shirk v District of Columbia, 756 F Supp 31; Brown v Wilson County School Bd., 747 F Supp 436; Mrs. C. v Wheaton, 916 F2d 69.)

      Andrew C. Alter for Jeremy Hoffman, appellant-respondent.
    I. In reviewing a decision of the State Commissioner of Education to award parents reimbursement for tuition and transportation expenses incurred on behalf of a disabled child, the court may not modify and restrict the Commissioner’s order on the basis of its interpretation of State law, without ruling on the Commissioner’s authority under Federal law to make the order. (Burlington School Comm. v Massachusetts Dept. of Educ., 471 US 359; Jenkins v State of Florida, 815 F2d 629; Brown v Wilson County School Bd., 747 F Supp 436; Shirk v District of Columbia, 756 F Supp 31; Amelia County School Bd. v Virginia Bd. of Educ., 661 F Supp 889.) II. In a proceeding under the Individuals with Disabilities Education Act, the court may not deny the prevailing party an award of attorneys’ fees without making a finding of "special circumstances” sufficient to support the denial of such a fee. (Abu-Sahyun v Palo Alto Unified School Dist., 843 F2d 1250; Rossi v Gosling, 696 F Supp 1079; Matter of Johnson v Blum, 58 NY2d 454; New York Gaslight Club v Carey, 447 US 54; Independent School Dist. No. 623 v Digre, 893 F2d 987; Moore v District of Columbia, 907 F2d 165; McSomebodies v Burlingame Elementary School Dist., 897 F2d 974; Eggers v Bullitt County School Dist., 854 F2d 892; Angela L. v Pasadena Ind. School Dist., 918 F2d 1188; Texas Teachers Assn. v Garland School Dist., 489 US 782.)

      Raymond G. Kuntz and Wendy F. Klarfeld for respondent-appellant.
    I. The Commissioner of Education exceeded his authority in granting the costs of tuition and transportation because there is no express authority under the law for him to make those determinations. (Burlington School Comm. v Massachusetts Dept. of Educ., 471 US 359.) II. If it is determined that the Commissioner had the authority under Federal and State law to award the costs for tuition and transportation, the determination in this case was arbitrary and capricious because there is no basis in the record for the Commissioner’s finding that the Pine Plains placement was appropriate for Jeremy. (Burlington School Comm. v Massachusetts Dept. of Educ., 471 US 359.) III. The Supreme Court properly exercised its discretion in failing to award attorneys’ fees, and the court below’s determination not to overturn the court’s decision should be upheld. (Angela L. v Pasadena Ind. School Dist., 918 F2d 1188; Abu-Sahyun v Palo Alto Unified School Dist., 834 F2d 1250; Hensley v Eckerhart, 461 US 424.)
   OPINION OF THE COURT

Simons, J.

Jeremy Hoffman, the infant respondent in this proceeding, suffers from a learning disability. Because of this, he is eligible for special education under Federal and State programs and finds himself a party to this dispute between petitioner, Northeast Central School District, and respondent, Commissioner of Education. They disagree about the authority of the Commissioner to approve Jeremy’s unilateral transfer by his parents from Northeast Central School District, his home district, to Pine Plains Central School District. Having transferred their son because they believed Northeast lacked an appropriate program for him, the parents sought to have the Commissioner confirm their decision and order Northeast to pay Jeremy’s tuition and transportation costs to Pine Plains. The Commissioner ruled in favor of the parents and Northeast challenges that ruling in this CPLR article 78 proceeding. Supreme Court dismissed the petition but denied the parents’ application for attorneys’ fees without explanation. The Appellate Division modified the judgment to the extent of authorizing reimbursement to the parents only from the time subsequent to the commencement of the administrative review process.

The questions presented are (1) whether the Commissioner could order reimbursement for tuition and transportation costs to parents after they had unilaterally withdrawn their child from Northeast’s special education program and transferred him to Pine Plains Central School District and (2) whether the Supreme Court properly denied the parents’ request for attorneys’ fees without stating any special circumstances warranting denial. We conclude that the Commissioner’s determination approving the transfer had a rational basis, that he had the power to order reimbursement to the parents and that reimbursement could, in these circumstances, be retroactive to the date of the child’s placement in the alternative special education program at Pine Plains and could include transportation costs. We conclude, also, that the Supreme Court should not have refused the parents’ request for attorneys’ fees unless it found special circumstances warranting denial. Accordingly, we reinstate the Commissioner’s order and remit to the Supreme Court to reconsider the application for attorneys’ fees.

I

Jeremy’s entitlement to benefits rests upon New York State’s participation in the program for educating disabled persons set forth in the Federal Government’s Individuals with Disabilities Education Act (20 USC § 1400 et seq.). The Act delineates a scheme under which a State, in order to receive Federal financial assistance, is required to effectuate a State plan which fulfills the requirements of the Education Act and assures all children with disabilities the right to a "free appropriate public education” (20 USC § 1412 [1]; see, Hendrick Hudson Dist. Bd. of Educ. v Rowley, 458 US 176, 179-181). The term "free appropriate public education” is defined, in part, as one provided in conformity with an Individualized Education Program (IEP) (20 USC § 1401 [a] [18]). An IEP is developed jointly by a school official, the child’s teacher and parents, and, where appropriate, the child. It details the special needs of a disabled child and the services which are to be provided to serve the individual needs of that child (20 USC § 1401 [a] [20]; Burlington School Comm, v Massachusetts Dept, of Educ., 471 US 359, 368).

New York State has adopted legislation intended to complement the Federal program and comply with its requirements (see, Education Law § 4401 et seq.). Under New York’s statutory scheme, each school board is required to establish a Committee on Special Education (CSE) which must review, at least annually, all information relevant to each disabled child and recommend to the school board an appropriate special education program and placement (see, Education Law § 4402 [1] [b]). If the recommendation of the CSE is unacceptable to the parents of a disabled child, it may be reviewed. Under the process available at the time relevant to this case, a parent was entitled to a hearing by an impartial hearing officer who, following the hearing, would make a recommendation to the school board. The school board’s determination could then be appealed to the Commissioner of Education (see, Education Law § 4404 [1] [former (2)]).

II

In this case, Jeremy’s problems apparently became evident in the third grade when he exhibited disruptive classroom behavior and received failing grades. He was referred by his third-grade teacher to the CSE of petitioner Northeast Central School District. In July 1985, the CSE classified Jeremy as "health impaired” and recommended an IEP which included placing Jeremy in a regular fourth grade class, with resource room education four times a week and counseling once a week. Although Jeremy’s parents expressed concern about his continuing academic and behavioral problems during 1985-1986, the CSE recommended no change in the IEP for the 1986-1987 school year, and Jeremy was advanced to the fifth grade. He received failing grades during the fall semester of fifth grade and his behavioral problems intensified. Accordingly, in February 1987 his parents removed him from Northeast’s district and enrolled him as a tuition student in the Pine Plains Central School District.

The Pine Plains CSE classified Jeremy as "learning disabled” and developed a program for him in which he received counseling and instruction in his problem subjects in special education classes grouped with students of similar levels of ability, academic achievement and management needs. He was mainstreamed in the remainder of his subjects. Jeremy showed marked improvement within a few weeks at Pine Plains, and continued to improve throughout the 1986-1987 school year.

In June of 1987, Jeremy’s parents requested that Northeast reimburse them for the tuition expenses they had incurred for sending Jeremy to Pine Plains. Northeast denied the request, contending that it could provide a program similar to that being offered at Pine Plains. After a hearing, the denial was upheld.

On appeal the Commissioner of Education concluded that the Northeast program offered in the 1986-1987 school year was inappropriate for Jeremy’s needs and that the program provided by Pine Plains was appropriate, and continued to be appropriate during the 1987-1988 school year, despite the existence of a somewhat similar program offered by Northeast. He found that equitable considerations supported an award of tuition reimbursement and therefore ordered Northeast to reimburse Jeremy’s parents for tuition paid to Pine Plains from February 1987 through June 1987 and for the 1987-1988 school year. The Commissioner also ordered Northeast to reimburse the parents for transportation expenses incurred during the 1987-1988 school year. Finally, the Commissioner denied the parents’ request for attorneys’ fees because he lacked the authority to award them.

Northeast then instituted this article 78 proceeding to challenge the Commissioner’s decision. Supreme Court deferred to the Commissioner’s determination that Northeast’s recommended placement was inappropriate and that the program at Pine Plains was appropriate and held that he possessed the authority to order both tuition and transportation reimbursement. Accordingly, it dismissed the petition, but did so without ruling on the request for attorneys’ fees.

The Appellate Division modified, concluding that the Commissioner had the authority to order tuition reimbursement, but finding that he had no authority to order reimbursement for tuition paid prior to the commencement of the review process. The court therefore deleted so much of the Commissioner’s determination as ordered reimbursement for tuition paid during the 1986-1987 school year. The court interpreted Supreme Court’s dismissal of the petition, without costs, as a denial of the parents’ request for attorneys’ fees and found no abuse of discretion in that denial. The parties have filed cross appeals from the determination of the Appellate Division.

IH

The record supports the Commissioner’s determinations that (1) the Northeast IEP was inappropriate for Jeremy, (2) the Pine Plains program was appropriate, and (3) the equitable considerations favored granting the parents’ reimbursement request. Inasmuch as the evidence in the record provides a rational basis for the Commissioner’s determination our review powers are at an end unless the Commissioner lacked the authority to order reimbursement (see, Catlin v Sobol, 77 NY2d 552, 561; Matter of Gundrum v Ambach, 55 NY2d 872, 873). We conclude that he had such authority and that his retroactive reimbursement order should be upheld in its entirety.

IV

Petitioner contends that authority for the Commissioner to compel reimbursement is not to be found in State or Federal law.

The relevant State statute, as it then read, provided:

"The commissioner of education shall review and modify, in such cases and to the extent that the commissioner deems necessary, in order to properly effectuate the purposes of this article, any determination of the board of education * * * relating to the * * * selection of an appropriate special educational program or service and the failure to provide such program”. (Education Law § 4404 [former (2)].)

Manifestly, this authorized the Commissioner to modify the school board’s selection of special education programs for its students. Inasmuch as a special education program may necessarily involve contracting with another school district for special services or programs where appropriate services are otherwise unavailable (Education Law § 4401 [2] [b]), the Commissioner clearly had the authority to modify the school board’s selection of a resource room special program and instead require the board to contract with Pine Plains for special services for Jeremy.

The question remains whether this statutory power is sufficiently broad to permit the Commissioner to recognize the contract retroactively, thereby requiring Northeast to reimburse Jeremy’s parents for tuition and transportation expenses previously incurred. We believe it is.

The policy goals underlying both the Federal and State statutes are broadly stated. The expressed congressional intent is to "assure that all children with disabilities have available to them * * * o free appropriate public education * * * to meet their unique needs” (20 USC § 1400 [c]). The State, to implement the Federal program and further its expressed purpose, established an elaborate program, supplemented by regulations of the Commissioner, to identify qualifying students and their needs, to review annually the efficacy of the education provided to each student, and to work toward meeting the physical and educational needs of children with handicapping conditions (see, Education Law §§ 4402, 4403).

These goals and the manner in which they are to be implemented were considered by the Supreme Court in Burlington School Comm. v Massachusetts Dept. of Educ. (471 US 359, supra). It held that parents who unilaterally removed their child from an inappropriate program and placed the child in an appropriate program were entitled to receive retroactive tuition reimbursement. The Court reasoned that to hold otherwise would render the child’s right to a free appropriate education less than complete (Burlington School Comm. v Massachusetts Dept. of Educ., supra, at 370). Moreover, the interference with a free appropriate education could be severe, given the years that might elapse before the issuance of a final judicial decision on the merits of the IEP (Burlington School Comm. v Massachusetts Dept. of Educ., supra, at 370). An order for retroactive reimbursement "merely requires the [district] to belatedly pay expenses that it should have paid all along and would have borne in the first instance had it developed a proper IEP” (Burlington School Comm. v Massachusetts Dept. of Educ., supra, at 370-371).

The Burlington Court also explained that 20 USC § 1415 (e) (3), which provides that a child is to remain in current placement during the pendency of the hearing process, does not require a finding that parents who unilaterally remove their child during the hearing process waive any right to retroactive reimbursement. The provision means only that parents who unilaterally remove their child from an IEP do so at their own financial risk. If, upon review, it is determined that the original placement was appropriate, then the parents are barred from obtaining reimbursement (Burlington School Comm. v Massachusetts Dept. of Educ., supra, at 373-374).

Burlington can be distinguished factually because there (1) the child was unilaterally removed from a public school and placed in a private school, and (2) a court, rather than the Commissioner, ordered tuition reimbursement (471 US 359, supra). Thus, the Burlington Court found explicit statutory authority for retroactive tuition reimbursement in 20 USC § 1415 (e) (2), which provides that a court shall, after hearing the relevant evidence, "grant such relief as the court determines is appropriate.” Nonetheless, the reasoning in the decision controls: where the child’s original placement was inappropriate and the alternative placement appropriate, reimbursement may be ordered if equitable considerations warrant it, even for parents who unilaterally removed their child from a public school’s IEP. As the Court noted, considering the purposes of the Education Act, Congress must have intended the broad power to grant "appropriate” relief "to include retroactive reimbursement to parents as an available remedy in a proper case” (Burlington School Comm. v Massachusetts Dept. of Educ., supra, at 370).

The Commissioner’s power, as stated in Education Law § 4404 (former [2]), is similarly broad. He is to act "to the extent that [he] deems necessary, in order to properly effectuate the purposes of this article.” Given this broad power, and given the fundamental aim of providing disabled children with a free appropriate education, we conclude that the Commissioner was authorized not only to order Northeast to contract with Pine Plains for services for Jeremy, but also to make that order retroactive. Northeast had an obligation to provide Jeremy with a free appropriate public education. One way it could have done so was by contracting with Pine Plains back in February 1987, to provide appropriate services to Jeremy. By ordering reimbursement retroactive to February 1987, the Commissioner did no more than require Northeast to provide, retroactively, the free appropriate education it should have provided in the first place. Without the Commissioner’s action, Jeremy’s right to a free appropriate education could not be fully protected.

The Federal statute provides that a "free appropriate public education” includes special education and related services (20 USC § 1401 [a] [18]) and it specifically states that "related services” includes transportation (20 USC § 1401 [a] [17]). Consequently, the Commissioner’s order properly included the retroactive transportation reimbursement requested by Jeremy’s parents.

We find no merit to petitioner’s contention that the Commissioner’s authority to order reimbursement is limited because found in the provisions of Education Law § 4404 (former [2]) relating to his general powers to review school district determinations. The ability to order retroactive reimbursement is necessary to ensure a child’s right to a free appropriate public education and it should not, therefore, be controlled by filing dates or administrative decisions. In a given situation, it may be necessary to order reimbursement retroactive to a date prior to commencement of the review process in order to fully protect the child’s right to a free public education. This is especially true where the child’s parents are not made aware of their ability to request an impartial hearing until months, or even years, after the child’s placement has been changed. Moreover, there is nothing in the statute to indicate that a limitation of the Commissioner’s authority to order reimbursement is warranted.

Reimbursement rights, it should be remembered, are affected by equitable considerations. The statutes contemplate a joint effort to resolve a child’s placement satisfactorily. If commencement of the review process represents the first time the school board learns of any problems with the IEP it had designed for the child or represents the first opportunity to revise it, then a reviewing board could reasonably exercise its discretion to order reimbursement retroactive only to the commencement of the review process, based upon its assessment of the "equitable considerations * * * relevant in fashioning relief’ (Burlington School Comm. v Massachusetts Dept. of Educ., 471 US 359, 374, supra).

In this case, the Commissioner determined that the equitable considerations favored reimbursement retroactive to the date Jeremy was first enrolled as a tuition student at Pine Plains. He noted that, "[i]n the face of mounting evidence that [Jeremy] was not succeeding academically in the recommended resource room placement and that all efforts to address his behavioral problems in the CSE’s recommended program were ineffectual, [Northeast’s] CSE ignored the parent’s repeated requests to consider alternative placement options.” We find that the Commissioner properly considered equitable factors to determine that Jeremy’s parents should be reimbursed for the entirety of Jeremy’s enrollment at Pine Plains.

V

Finally, the matter must be remitted to Supreme Court to reconsider the parents’ request for attorneys’ fees. The Education Act provides that in any proceeding commenced under the provisions of the Act, "the court, in its discretion, may award reasonable attorneys’ fees as part of the costs to the parents or guardian of a child or youth with a disability who is the prevailing party” (20 USC § 1415 [e] [4] [B]). The legislative history indicates that this provision is to be interpreted in a manner consistent with the interpretation given to the fee provisions under 42 USC § 1988 (see, S Rep No. 99-112, 99th Cong, 2d Sess, reprinted in 1986 US Code Cong & Admin News 1798, 1803-1805; Abu-Sahyun v Palo Alto Unified School Dist., 843 F2d 1250, 1252). Accordingly, attorneys’ fees should be awarded unless special circumstances would render such an award unjust (Matter of Thomasel v Perales, 78 NY2d 561, 567; Matter of Johnson v Blum, 58 NY2d 454, 458). Because neither court articulated any "special circumstances” warranting the denial of attorneys’ fees, the case must be remitted to Supreme Court for a determination of whether any such special circumstances exist. If none do exist, then Jeremy’s parents should be awarded reasonable attorneys’ fees.

VI

Accordingly, the order of the Appellate Division should be modified, with costs to respondent Commissioner and respondents Hoffman, by reinstating the Commissioner’s determination in its entirety and remitting to Supreme Court for further consideration of the parents’ request for attorneys’ fees, and, as so modified, affirmed.

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

Order modified, with costs to respondent Commissioner and respondents Hoffman, by reinstating respondent Commissioner’s determination in its entirety and remitting to Supreme Court, Albany County, for further proceedings in accordance with the opinion herein and, as so modified, affirmed.

      . Prior to October 1990, the Act was known as the Education of the Handicapped Act.

      . Section 4402 (2) was amended in 1990 to permit appeal from a hearing officer’s determination to a State review officer.

      . The Commissioner found respondents failed to request transportation expenses for the period February 1987 to June 1987.

      . Jeremy’s parents requested reimbursement from Northeast in June 1987. The Appellate Division apparently considered this request to have commenced the review process because it upheld the reimbursement order as it applied to the entire 1987-1988 school year, and did not limit the order to tuition paid after December 1987. The court did not change the Commissioner’s order with respect to transportation because transportation reimbursement was only ordered for the 1987-1988 school year.