text:
    The People of the State of New York, Respondent, v Saul Kagan, Jean Wolf and Torleaf Benestad, Appellants.
    Argued April 1, 1982;
    decided May 18, 1982

      POINTS OF COUNSEL

      Peter H. Morrison, Kevin T. Rover and Gerald G. Paul for Saul Kagan, appellant.
    I. The conduct for which Saul Kagan was convicted is not covered by the felony statute under which he was prosecuted. (People v Stoll, 242 NY 453; People v Vetri, 309 NY 401; People v Caswell-Massey Co., 6 NY2d 497; People v Knapp, 206 NY 373; United States v Britton, 107 US 655; People v Marcus, 261 NY 268.) II. Section 673 does not give fair notice of the conduct it covers. (United States v Harriss, 347 US 612; United States v Britton, 107 US 655; People v Berck, 32 NY2d 567; Papachristou v City of Jacksonville, 405 US 156; Lanzetta v New Jersey, 306 US 451; People v Firth, 3 NY2d 472; People v Marcus, 261 NY 268; United States v Christo, 614 F2d 486.) III. The element of acting for purposes other than those of American Bank & Trust Company was neither pleaded nor proved. (United States v Britton, 107 US 655; People v Marcus, 261 NY 268; People v Kresel, 243 App Div 137.) IV. The trial court erred in its rulings on three pivotal issues. V. The trial court impermissibly directed a partial verdict of conviction. (People v Walker, 198 NY 329; People v Cuvilje, 66 AD2d 761; People v Amoroso, 38 AD2d 563; Roe v United States, 287 F2d 435, 368 US 824.) VI. The burden of proof on the issue of knowledge was impermissibly shifted to defendants. (Notaro v United States, 363 F2d 169; United States v Booz, 451 F2d 719; United States v Wolffs, 594 F2d 77; United States v Read, 658 F2d 1225; Bihn v United States, 328 US 633; United States v Corrigan, 548 F2d 879; People v Elmore, 277 NY 397; People v Barbato, 254 NY 170; People v O’Neill, 79 AD2d 429; People v Jones, 74 AD2d 515.) VII. The evidence was not sufficient to permit submission to the jury and Kagan’s guilt was not established beyond a reasonable doubt. (People v Cleague, 22 NY2d 363; United Pilots Assn. v Halecki, 358 US 613; Strobe v Netherland Co., 245 App Div 573.) VIII. The prosecutor’s misconduct requires reversal. (United States v Christo, 614 F2d 486; People v Stanard, 32 NY2d 143; People v Lopez, 67 AD2d 624, 444 US 827; People v Pryor, 70 AD2d 805.)

      Herald Price Fahringer, Paul J. Cambria, Jr., and Barbara Davies Eberl for Jean Wolf, appellant.
    I. The evidence against Jean Wolf is insufficient for the crimes of conspiracy and bank fraud. (People v Piazza, 48 NY2d 151; People v Santos, 38 NY2d 173; People v Cleague, 22 NY2d 363; United States v Crosby, 294 F2d 928; People v Ryan, 41 NY2d 634; People v Lewis, 275 NY 33; People v Matthew, 47 AD2d 749; People v Yonkers Contr. Co., 17 NY2d 322; People v McGee, 49 NY2d 48; People v Salko, 47 NY2d 230.) II. Sections 103 and 106 of the Banking Law have been unconstitutionally applied in the prosecution of Jean Wolf because those provisions do not place a violator on notice that he will be subjected to felony punishment. (Rabe v Washington, 405 US 313; United States v Harriss, 347 US 612; Winters v New York, 333 US 507; Lanzetta v New Jersey, 306 US 451; People v Phyfe, 136 NY 554; People v Caswell-Massey Co., 6 NY2d 497; People v Colozzo, 54 Misc 2d 687; People v Zambino, 75 Misc 2d 608; United States v Christo, 614 F2d 486; United States v Britton, 107 US 655.) III. The prosecutor’s systematic exclusion of Jews from the trial jury through the misuse of peremptory challenges deprived appellants of their constitutionally guaranteed right to a fair trial before an impartial jury. (People v Thompson, 79 AD2d 87; Swain v Alabama, 380 US 202; Taylor v Louisiana, 419 US 522; Duren v Missouri, 439 US 357; Castaneda v Partida, 430 US 482; Peters v Kiff, 407 US 493; Ballard v United States, 329 US 187; Cooper v Morin,
      49 NY2d 69; Brady v Maryland, 373 US 83.) IV. Reversible error was committed when the court misadvised the jury on crucial aspects of the case. (People v Walker, 198 NY 329; United States v Singleton, 532 F2d 199; United States v Natale, 526 F2d 1160,425 US 950; United States v Bright, 517 F2d 584; United States v Cangiano, 491 F2d 906, 419 US 904; United States v Houle, 490 F2d 167, 417 US 970; United States v Painter, 314 F2d 939; United States v Phillips, 217 F2d 435; People v Rodriguez, 75 AD2d 829.) V. The court committed reversible error in amending the conspiracy count of the indictment. (Russell v United States, 369 US 749; People v Miles, 289 NY 360; People v Boyd, 59 AD2d 558; People v Brown, 59 AD2d 1006; People v Taylor, 43 AD2d 519; Stirone v United States, 361 US 212; Ex parte Bain, 121 US 1; Watson v Jago, 558 F2d 330; United States v Somers, 496 F2d 723.) VI. Jean Wolf was the victim of prosecutorial vindictiveness in that he was lulled into co-operating with the District Attorney in the belief he would not be charged with any crime but was thereafter prosecuted. (Blackledge v Perry, 417 US 21; North Carolina v Pearce, 395 US 711; United States v Ruesga-Martinez, 534 F2d 1367; United States v Johnson, 537 F2d 1170; United States v De Marco, 550 F2d 1224; United States v Jamison, 505 F2d 407; Brady v United States, 397 US 742; Santobello v New York, 404 US 257; People v Argentine, 71 AD2d 869; United States v Rodman, 519 F2d 1058.) VII. The charging of two substantive offenses arising out of the same transaction is unconstitutional and requires that the judgment be reversed. (United States v Gaddis, 424 US 544; Castle v United States, 368 US 13; Ladner v United States, 358 US 169; Prince v United States, 352 US 322; Bell v United States, 349 US 81; United States v Corral, 578 F2d 570; United States v Squires, 581 F2d 408; United States v Woods, 568 F2d 509; United States v Chrane, 529 F2d 1236; United States v Deaton, 468 F2d 541.)

      Andrew J. Maloney for Torleaf Benestad, appellant.
    A larcenous intent to defraud the bank is or should be a necessary element of a charge of misappropriation of bank funds under section 673 of the Banking Law where the party is not on both sides of a loan transaction. (People v

      Marcus, 261 NY 268; People v Kresel, 243 App Div 137; Morissette v United States, 342 US 246; United States v Northway, 120 US 327; United States v Britton, 107 US 655; United States v Docherty, 468 F2d 989; United States v Mullins, 355 F2d 883, 384 US 942; United States v Fortunato, 402 F2d 79, 394 US 933; United States v Giordano, 489 F2d 327; Ex parte Collett, 337 US 55.)

      Robert M. Morgenthau, District Attorney (Vivian Berger, Robert M. Pitler and Jerrold L. Neugarten of counsel), for respondent.
    I. Defendants were proved guilty beyond a reasonable doubt of the substantive crimes and the conspiracy of which they were convicted at trial. (United States v Crosby, 294 F2d 928; United States v Dubrin, 93 F2d 499, 303 US 646; People v Knapp, 206 NY 373; United Bank v Cambridge Sporting Goods Corp., 41 NY2d 254; First Empire Bank-New York v Federal Deposit Ins. Corp., 572 F2d 1361, 439 US 919; Travelers Ind. Co. v Flushing Nat. Bank, 90 Misc 2d 964; United States v Franklin, 608 F2d 241; People v McGee, 49 NY2d 48; Direct Sales Co. v United States, 319 US 703; Kelley v People, 55 NY2d 565.) II. The trial court correctly charged the jurors that, in order to convict a defendant under section 673 of the Banking Law, they had to find that he knew he was putting the money or credit of the bank to a use prohibited by law. (United States v Docherty, 468 F2d 989; Morissette v United States, 342 US 246; People v Chesler, 50 NY2d 203; United States v Arthur, 602 F2d 660, 444 US 992; United States v Beran, 546 F2d 1316, 430 US 916; United States v Schmidt, 471 F2d 385; United States v Duncan, 598 F2d 839, 444 US 871; United States v Franklin, 608 F2d 241; United States v Larson, 581 F2d 664.) III. By knowingly making loans and deposits in excess of legal limits set out in various civil provisions of the Banking Law, defendants wilfully misapplied the bank’s funds within the meaning of section 673 of the Banking Law, a criminal provision which gave defendants fair notice that their actions were felonious. (State of New York v Rutkowski, 44 NY2d 989; United States v National Dairy Corp., 372 US 29; United States v Harriss, 347 US 612; People v Cruz, 48 NY2d 419; People v Berardini, 150 Misc 311; People v Marcus, 261 NY 268; Screws v United States, 325 US 91; United States v

      Boyce Motor Lines, 188 F2d 889, affd sub nom. Boyce Motor Lines v United States, 342 US 337.) IV. Since defendants themselves caused the indictment to be multiplicitous, over the prosecution’s objection, defendant Wolf is not entitled to relief on this ground; in any event, Wolf suffered no prejudice from the splitting of the challenged counts since he received single, not multiple, punishment. (United States v Goldstein, 479 F2d 1061, 414 US 873; People v Tutt, 38 NY2d 1011; United States v Chrane, 529 F2d 1236; United States v Rizzo, 418 F2d 71, cert den sub nom. Tonabene v United States, 397 US 967; People v Perrin, 56 AD2d 957; People v Mulligan, 29 NY2d 20; People v Elfe, 37 AD2d 208; United States v Gaddis, 424 US 544.) V. The trial court did not impermissibly amend the conspiracy count of the indictment when it struck the portion of that count relating to Federal funds transactions. (People v Mendez, 63 AD2d 69; People v Hochberg, 62 AD2d 239; Salinger v United States, 272 US 542; United States v Colasurdo, 453 F2d 585; Overstreet v United States, 321 F2d 459, 376 US 919; People v Miles, 289 NY 360; People v Boyd, 59 AD2d 558; People v Brown, 59 AD2d 1006.) VI. The court below withdrew from the jurors’ consideration only those issues that it properly decided as a matter of law. (People v Ianniello, 36 NY2d 137, 423 US 831; People v Cuvilje, 66 AD2d 761; People v Neff, 191 NY 210.) VII. No prosecutorial vindictiveness marred defendant Wolf’s prosecution, nor was any immunity agreement with Wolf violated. (Blackledge v Perry, 417 US 21; North Carolina v Pearce, 395 US 711; Bordenkircher v Hayes, 434 US 357; Hayes v Cowan, 547 F2d 42; United States v Kurzer, 534 F2d 511; People v Caruso, 100 Misc 2d 601; Stevens v Marks, 383 US 234; People v Masiello, 28 NY2d 287; United States v Dornau, 491 F2d 473, 419 US 872; People v Tutt, 38 NY2d 1011.) VIII. The cease and desist order issued by the Banking Department in September, 1975 was correctly admitted in evidence against defendant Kagan and properly used by the People thereafter; furthermore, nothing in the cross-examination of character witnesses for Kagan warrants reversal on appeal. (Berger v United States, 295 US 78; People v Schwartzman, 24 NY2d 241, 396 US 846; People v Marino, 271 NY 317; People v

      Marcus, 261 NY 268; United States v Pry, 625 F2d 689; Counihan v Werbelovsky’s Sons, 5 AD2d 80; People v Helms, 243 App Div 818; Radosh v Shipstad, 20 NY2d 504.) IX. Defendants’ miscellaneous complaints about the trial court’s charge to the jury do not provide any grounds for reversal. (People v Thomas, 51 NY2d 466; People v Leyva, 38 NY2d 160; Cupp v Naughten, 414 US 141; People v Getch, 50 NY2d 456; Sandstrom v Montana, 442 US 510; People v Newton, 46 NY2d 877) People v lanniello, 36 NY2d 137; People v Ferola, 215 NY 285.) X. Under both the well-established rule of Swain v Alabama and the more recent minority rule of People v Wheeler, these defendants were not entitled to a hearing on their accusation that the People systematically excluded all Jews from the trial jury through the exercise of peremptory challenges. (People v Kagan, 101 Misc 2d 274; People v McCray, 104 Misc 2d 782; United States v Danzey, 476 F Supp 1065, 620 F2d 286; Swain v Alabama, 380 US 202; United States v Newman, 549 F2d 240; People v Thompson, 79 AD2d 87, 53 NY2d 713; People v Goodrich, 80 AD2d 562.)
   OPINION OF THE COURT

Chief Judge Cooke.

A bank officer or employee who, without more, extends to an individual credit in amounts exceeding civil limits is not guilty of feloniously misapplying bank funds. “Wilful misapplication”, as that term is used in section 673 of the Banking Law, requires that the offender have a personal pecuniary interest in the transactions before criminal liability will attach.

Subdivision 1 of section 103 of the Banking Law generally prohibits a bank from lending to any single customer “an amount which will exceed ten percentum of the [bank’s] capital stock, surplus fund and undivided profits”. To the extent that the loans are secured by collateral having an ascertainable market value, the amount the bank may lend to a customer may rise to 25% of its capital stock, surplus fund, and undivided profits (Banking Law, § 103, subd 1, par [d], cl [2]). Section 103 is a civil regulation only; it does not prescribe penal sanctions for its violation.

Subdivision 1 of section 106 of the Banking Law imposes various limitations on the amount of funds one bank may deposit with another. Defined in terms of percentages of the depositor bank’s capital stock surplus fund, and undivided profits, the limits range from 10% to 200%. The specific limitation depends on whether the depository bank has been so designated by a majority of the depositor bank’s directors and whether it is located in this State and authorized by the Superintendent of Banking to act as a -depository for purposes of section 106. As with section 103, section 106 does not prescribe penal sanctions for its violation.

Section 673 of the Banking Law, the particular statute that is at the center of controversy here, provides in full: “Any officer, director, trustee, employee or agent of any corporation to which the banking law is applicable, or any employee or agent of any private banker, who abstracts or wilfully misapplies any of the money, funds or property of such corporation or private banker, or wilfully misapplies its or his credit, is guilty of a felony. Nothing in this section shall be deemed or construed to repeal, amend or impair any existing provision of law prescribing a punishment for any such offense.”

With this statutory backdrop, the general events underlying the instant case may be examined. The facts are complex as the prosecution arose from a review of daily bank transactions occurring during the period from December 31, 1975 to June 28, 1976. Only a general recitation of these events is necessary, however, to resolve the issues on appeal.

The transactions at issue were carried on between American Bank & Trust Company (ABT) and a correspondent bank in Belgium, Banque Pour L’Amerique du Sud (BAS), and between ABT and an affiliate, Bankers International (BI). Defendants were connected to ABT in varying capacities. Saul Kagan was chairman of the board of ABT’s holding company, as well as an executive officer and director of ABT itself. He chaired ABT’s executive committee and was particularly involved in developing ABT’s international business. Jean Wolf headed ABT’s international division; although a senior manager, he had limited lending authority. Torleaf Benestad was a director of both ABT and its holding company until his resignation on March 25, 1976. In addition, he was an executive officer of ABT until his retirement on April 15, 1976.

In spring, 1975, a contract to purchase ABT was made by the Graivers, a prominent Argentinian business family. Among the Graivers’ existing holdings were interests in BAS and BI. These companies began doing business with ABT almost simultaneously with the Graivers’ execution of the contract to purchase ABT. In addition, David Graiver received an office at ABT, became a director of ABT’s holding company in June, 1975, and attended ABT’s board and executive committee meetings as a guest until his election to the board in March, 1976.

In early August, 1975, David Graiver solicited from ABT loans for $2,000,000 each to BI and to Juan Graiver, David’s father. At the time the loans were made, Juan Graiver executed a pledge and security agreement covering both loans and extending to all indebtedness then or thereafter incurred. Stock valued at $8,000,000 was delivered to ABT. Both loans were eventually repaid and a second loan for $2,200,000, also secured by the same stock, was made to Juan Graiver. In March, 1976, Juan Graiver also undertook to guarantee all extensions of credit to BAS, again pledging the stock already in ABT’s possession. Thus, at all times pertinent here, ABT had $8,000,000 worth of stock to cover any extension of credit it made to BI and, after March 4, 1976, to BAS.

The specific transactions that gave rise to the indictments and convictions fall into two categories — deposits and extensions of credit. The former were three overnight deposits in BAS that ABT made at the end of December, 1975 and January and February, 1976, respectively. In each case, these were repaid on the following day. The amounts deposited, however, exceeded the 10% limit imposed by section 106 of the Banking Law.

The extensions of credit took three forms. First, BAS was permitted to overdraw its account on several occasions. This may have violated section 103 of the Banking Law when the amount of the overdraft was added to credit extended in other check transactions. In one instance, the overdraft itself exceeded the 10% limit of subdivision 1 of section 103. Second, ABT “purchased” a number of checks drawn on BAS and payable to BI. A “purchase” consisted of ABT’s granting immediate credit to the payee’s account rather than waiting for collection. The third alleged form of extending credit was based on a letter dated March 30, 1976, in which ABT offered to purchase certain loans from BAS. The prosecutor likened this to a letter of credit.

Defendants’ roles in the transactions varied. For the most part, their activity consisted of authorizing or approving the transactions. Two critical facts must be noted especially: ABT suffered no losses on any of these transactions, even receiving interest when the overdrafts were paid; and none of the defendants made any profit or otherwise had any personal pecuniary interest in the transactions.

Nonetheless, these indictments followed. In essence, defendants were charged with felonies under section 673 for wilfully misapplying bank funds and credit. The indictment was predicated on the theory that defendants knowingly violated sections 103 and 106, and that those acts constituted “wilful misapplication” for purposes of section 673. Before trial, defendants moved to dismiss the indictments on the ground that section 673 requires more than merely violating civil regulations, but instead requires a larcenous intent or an intent to injure or defraud the bank.

Numerous counts were dismissed before the case was submitted to the jury, which eventually acquitted defendants of many more counts. Kagan was convicted on 33 counts and Wolf was convicted on 9 counts. Benestad eventually pleaded guilty to three counts, but sought to reserve a right to appeal the question whether section 673 requires a larcenous intent.

The Appellate Division affirmed the convictions, with one Justice dissenting. The majority, relying on People v Marcus (261 NY 268), approved the theory that any knowing violation of the Banking Law may provide a basis for prosecution under section 673. The dissent disagreed and would have reversed on the ground that, under the circumstances, defendants were denied due process because they had not received fair notice that violations of sections 103 and 106 would also subject them to criminal sanctions under section 673. This court now reverses the orders of the Appellate Division.

The primary question to be decided is the meaning of “wilful misapplication” — i.e., what is the nature of the mens rea, if any, that must be alleged and proven in order to sustain a prosecution for violating section 673. The People urge that knowing violation of the Banking Law’s civil regulations suffices to establish a wilful misapplication. On the other hand, defendants argue that an actual intent to injure or defraud a bank is necessary. While it is concluded that the People too broadly interpret section 673, the defendants’ construction similarly is found to be overly narrow.

The predecessor to section 673 was first enacted in 1913 (L 1913, ch 102). The legislation was introduced at the behest of the then Superintendent of Banks so that the State Banking Law would more closely harmonize with the Federal National Banking Act (Superintendent of Banks Ann Rep, p 21 [1912]).

The correlative Federal statute at the time was section 5209 of the Revised Statutes of the United States (since amended and now codified at US Code, tit 18, § 656). That section made it an offense for a bank officer to wilfully misapply funds with the intent to injure or defraud the bank. In United States v Britton (107 US 655), the Supreme Court determined that “wilful misapplication” meant “a misapplication for the use, benefit, or gain of the party charged, or of some company or person other than the [bank]” (id., at p 666). After concluding that an actual conversion must occur, the court went on to distinguish criminal misapplication from mere maladministration of a bank’s affairs. By way of example, the opinion referred to another law limiting extensions of credit, similar to our subdivision 1 of section 103, and remarked that the directors’ civil liability for such a violation was the proper sanction for what would be nothing more than maladministration (id., at pp 667-668).

This same question was confronted in People v Marcus (261 NY 268, supra). After noting that the New York statute had omitted the “intent to injure or defraud” language of the Federal law, the court concluded that the New York Legislature had taken “a broader view and made it illegal for a director knowingly to use the assets of his corporation for other than corporate purposes or proper and legitimate investment, even though [the director] had no intention of cheating or defrauding anybody.” (Id., at p 278.) Wilful misapplication occurs when the defendant has misused assets “not for the benefit of the company, but for the use and benefit of other enterprises in which [he or she is] interested.” (Id.)

In Marcus, the defendants were moving funds among several corporations of which they were the principal shareholders. Their attorney, Kresel, who advised them but did not hold any position with the bank, was held guiltless in a separate trial because of the absence of any “malevolent and criminal intent” (People v Kresel, 243 App Div 137, 141-142). Similarly, the son of one of the Marcus defendants was a young lawyer working for Kresel and participated in the scheme to the extent of handling paperwork and taking care of details; he, too, was exonerated for lack of criminal intent (People v Marcus, 261 NY, supra, at pp 294-295).

The clear implication is that “wilful misapplication” requires some form of self-dealing, some benefit to the accused’s commercial and material interests. In short, for an individual to be convicted under section 673, there must be alleged and proven some personal pecuniary interest in the transactions. Moreover, this interest must be in more than the simple benefits flowing from the gratitude of a well-served client or owner of the bank. Such an incidental bounty is not the sort of “personal benefit” contemplated by the decision in Marcus.

In the present case, there was no evidence that defendants had any personal investments in BAS or BI. To the contrary, defendants acted solely in their, positions as officers and directors of ABT without any suggestion of personal profit. Consequently, there was no basis for the charges that they wilfully misapplied ABT’s funds and credit.

Accordingly, as to defendants Kagan and Wolf, who proceeded to trial, the orders of the Appellate Division should be reversed and the indictments dismissed. As to defendant Benestad, who pleaded guilty, the order of the Appellate Division should be reversed, his plea vacated, and the case remitted for further proceedings on the indictment (see People v Thomas, 53 NY2d 338).

Judges Gabrielli, Jones, Wachtler, Fuchsberg and Meyer concur with Chief Judge Cooke; Judge Jasen dissents and votes to affirm for reasons stated in the memorandum of the Appellate Division (83 AD2d 517).

In People v Kagan and Wolf: Orders reversed and indictments dismissed.

In People v Benestad: Order reversed, plea vacated and case remitted to Supreme Court, New York County, for further proceedings on the indictment.


source: Caselaw Access Project

author: Jasen, J.

license: Public Domain

text:
    Doris Feinberg, Appellant, et al., Plaintiff, v Saks & Co. et al., Respondents, et al., Defendant.
    Argued April 1, 1982;
    decided May 20, 1982

      POINTS OF COUNSEL

      Leon J. Greenspan and Joseph D. De Salvo for appellant.
    I. The verdict of the jury is consistent and should not be set aside. (Martin v City of Albany, 42 NY2d 13; Somersall v New York Tel. Co., 74 AD2d 302, 52 NY2d 157; Daly v Casey, 38 NY2d 808; Mintz v Festa, 29 AD2d 689, 23 NY2d 750; Munoz v City of New York, 18 NY2d 6; Mullen v Sibley, Lindsay & Curr, 51 NY2d 924; Guion v Associated Dry Goods Corp. [Lord & Taylor Div.], 43 NY2d 876; Oakley v City of Rochester, 71 AD2d 15, 51 NY2d 908; People v Singletary, 37 NY2d 310; People v Scott D., 34 NY2d 483.) II. A reasonable suspicion requires much less proof than probable cause and is sufficient to authorize certain warrantless intrusions as constitutionally permissible. (People v Rivera, 14 NY2d 441; People v Castro, 53 NY2d 1046; People v Peters, 18 NY2d 238; People v Arthurs, 24 NY2d 688; People v Rosemond, 26 NY2d 101; People v Mack, 26 NY2d 311; People v Johnson, 30 NY2d 929; People v Moore, 32 NY2d 67; People v Scott D., 34 NY2d 483; People v Green, 35 NY2d 193.) III. Not every governmental intrusion in the form of detention short of a formal arrest requires proof of probable cause. (Terry v Ohio, 392 US 1; Dunaway v New York, 442 US 200; People v De Bour, 40 NY2d 210; People v Rivera, 14 NY2d 441; People v Peters, 18 NY2d 238; United States v BrignoniPonce, 422 US 873; Delaware v Proust, 440 US 648; United States v Mendenhall, 446 US 544; Reid v Georgia, 448 US 438; People v Perel, 34 NY2d 462.) IV. The jury correctly found a cause of action for malicious prosecution. (Broughton v State of New York, 37 NY2d 451; Martin v City of Albany, 42 NY2d 13; Munoz v City of New York, 18 NY2d 6; Burt v Smith, 181 NY 1; Nardelli v Stamberg, 44 NY2d 500; Di Maggio v O’Brien, 497 F Supp 870; Daughtry v Arlington County, Va., 490 F Supp 307; Dean v Kochendorfer, 237 NY 384; Halsey v New York Soc. for Suppression of Vice, 234 NY 1.) V. Plaintiff was entitled to compensatory and punitive damages for the malicious prosecution. (Watson v City of New York, 57 Misc 2d 542; White v Madison, 26 NY 117; Hynes v Patterson, 95 NY 1; Cooper v Weissblatt, 154 Misc 522; Madison County Constr. Co. v State of New York, 177 Misc 777; Delahanty v Walzer, 271 App Div 886, 298 NY 820; Schindler v Lamb, 25 Misc 2d 810, 10 AD2d 826; Conway v Samet, 59 Misc 2d 666; Loeb v Teitelbaum, 77 AD2d 92; Giagheddu v Town of Colonie, 75 AD2d 198.)
    A. Paul Goldblum for Saks & Company, respondent.
    I. The “reasonable grounds to believe” of section 218 of the General Business Law and the “probable cause” of malicious prosecution are coextensive. (People v De Bour, 40 NY2d 210; Burdeau v McDowell, 256 US 465; Sackler v Sackler, 15 NY2d 40; Emmer v Emmer, 69 AD2d 850; Jacques v Sears, Roebuck & Co., 30 NY2d 466; Maxie v Gimbel Bros., 102 Misc 2d 296; Heyne v Blair, 62 NY 19; Burt v Smith, 181 NY 1; Tota v Alexander’s, 63 Misc 2d 908, 38 AD2d 892; Oakley v City of Rochester, 71 AD2d 15, 51 NY2d 908.) II. The “reasonable grounds to believe”, also known as “probable cause”, were conclusively established in the action for false detention. (Standard Oil Co. v Amazonias. Co., 79 NY 506; Matter of Burk, 298 NY 450; Gray v Brooklyn Hgts. R. R. Co., 175 NY 448.) III. The “probable cause” did not disappear after the initial “stop” of plaintiff and plaintiff is estopped from so asserting. (Magagnos v Brooklyn Hgts. R. R. Co., 128 App Div 182; Loeb v Teitelbaum, 77 AD2d 92; Hopkinson v Lehigh Val. R. R. Co., 249 NY 296; Lewis v Counts, 81 AD2d 857.) IV. Vicarious liability for punitive damages is not an issue before this court. (Craven v Bloomingdale, 171 NY 439; Nardelli v Stamberg, 44 NY2d 500; Lake Shore Ry. Co. v Prentice, 147 US 101; Rose v Imperial Engine Co., 127 App Div 885; Spathis v King Kullen Grocery Co., lb AD2d 598.)

      Francis J. Henderson for Norma Sanderson, respondent.
    I. The jury verdict for plaintiff on the second cause of action for malicious prosecution is inconsistent with the jury verdict for defendants on the first cause of action for false arrest. (Broughton v State of New York, 37 NY2d 451; Martin v City of Albany, 42 NY2d 13; Mulder v U. S. Slicing Mach. Co., 228 NY 88; Loeb v Teitelbaum, 11 AD2d 92; Burt v Smith, 181 NY 1, 203 US 129; Carl v Ayers, 53 NY 14; Hyman v New York Cent. R. R. Co., 240 NY 137; Rawson v Leggett, 184 NY 504; Simpson v Coastwide Lbr. & Supply Co., 239 NY 492; Day v Levine, 181 App Div 261, 228 NY 588.) II. The verdict for defendants on the first cause of action for false arrest is final. (Gray v Brooklyn Hgts. R. R. Co., 175 NY 448.)
   OPINION OF THE COURT

Jasen, J.

Plaintiff, Doris Feinberg, brought this action for false arrest and malicious prosecution after having been acquitted of a charge of petit larceny. That criminal charge had been filed against her by security personnel of defendant Saks & Company. At trial, a general verdict was returned in Mrs. Feinberg’s favor on the cause of action for malicious prosecution, and in favor of defendants on the false arrest cause of action.

Although the defendants had not requested a charge that the jury’s finding on the false arrest cause of action should in any way affect their determination on the other cause of action for malicious prosecution, defendants moved to set aside the malicious prosecution verdict for Mrs. Feinberg on the ground that it was inconsistent with the verdict for defendants on the false arrest cause of action. This objection to the verdicts was raised for the first time after the jury had been discharged.

The trial court ruled that the two verdicts were not inconsistent and specifically noted that the defense had failed to raise a timely objection. (Cf. Barry v Manglass, 55 NY2d 803, 806.) On appeal, the Appellate Division nonetheless reached the unpreserved issue, reversed the trial court, and dismissed plaintiff’s cause of action for malicious prosecution (83 AD2d 952). The court held that the defendants, who had probable cause to subject plaintiff to reasonable detention (General Business Law, § 218), had a complete defense to a cause of action for false arrest or imprisonment, and existence of such probable cause will also serve to bar an action for malicious prosecution unless some intervening fact exonerating plaintiff has become known to defendants between the time of detention and the time of prosecution. The Appellate Division concluded that the verdict for defendants on the cause of action for “false detention” and verdict for plaintiff on the cause of action for malicious prosecution were inconsistent since there were no intervening circumstances in this case which would have vitiated defendants’ probable cause to detain plaintiff.

Although the order of the Appellate Division states that the reversal was on the law, it is clear that, in reaching the unpreserved legal issue as to whether the verdicts were inconsistent, the Appellate Division exercised its broad discretionary powers of review. The subsequent reversal by the Appellate Division makes the order of that court appealable to this court. (CPLR 5601, subd [a], par [ii].) The legal issue presented, however, is not subject to our review as defendants during trial failed to make a timely objection to preserve it for our review. (CPLR 5501; Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 5501:2, p 23; Siegel, New York Practice, § 529, p 731.) This court has no power to review either the unpreserved error or the Appellate Division’s exercise of discretion in reaching that issue. (E.g., 7 Weinstein-Korn-Miller, NY Civ Prac, par 5501.11.)

We do have the power, however, to review the corrective action taken by the Appellate Division in dismissing plaintiff’s cause of action for malicious prosecution after determining that the verdicts of the jury were inconsistent. (Maguire v Barrett, 223 NY 49.) The Appellate Division could reverse on the law and dismiss the complaint only if there was no evidence at trial that the defendant, between the time of detention and the time of instituting the criminal proceeding against the plaintiff, had knowledge of some intervening fact exonerating plaintiff. Put another way, the Appellate Division’s dismissal of the complaint would be proper only if there was no evidence upon which the jury could have found an intervening circumstance necessary to support an inference of malice. (Martin v City of Albany, 42 NY2d 13.) In resolving this question, appellate courts “should consider the facts adduced at trial in a light most favorable to the plaintiff and the plaintiff is entitled to the benefit of every favorable inference that can reasonably be drawn from the facts.” (Martin v City of Albany, supra, at p 18.)

We believe that there is some evidence in the record before this court which, if credited by the jury, could establish an intervening circumstance supporting an inference of malice and, therefore, the Appellate Division should not have dismissed plaintiff’s complaint but, rather, should have ordered a new trial. (Martin v City of Albany, supra, at p 16; NY Const, art I, § 2.) Thus, the proper disposition of this case would have been to order a new trial so that a properly charged jury could determine whether, on the facts presented, plaintiff should recover from defendants on the cause of action for malicious prosecution.

No appeal having been taken from so much of the judgment as found in favor of defendants on the cause of action for false arrest, that issue is not before the court.

For the reasons stated, the order of the Appellate Division should be modified by deleting so much of that order as dismisses the cause of action for malicious prosecution, and the case remitted to Supreme Court, Westchester County, for a new trial on the cause of action for malicious prosecution, with costs to abide the event, and, as so modified, the order should be affirmed.

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

Order modified and case remitted to Supreme Court, Westchester County, for a new trial in accordance with the opinion herein, with costs to abide the event, and, as so modified, affirmed.


author: Jones, J.

text:
    In the Matter of New York Telephone Company, Appellant, v Public Service Commission of the State of New York, Respondent. Robert Abrams, as Attorney-General of the State of New York, et al., IntervenorsRespondents.
    Argued March 29, 1982;
    decided May 20, 1982

      POINTS OF COUNSEL

      Guy Miller Struve, James L. Kerr, Harold S. Levy and Gerald M. Oscar for appellant.
    I. Subdivision 1 of section 16 of the Public Service Law does not deprive the Commission of the power to grant protective treatment to confidential commercial information which has been received in evidence in a major rate proceeding. (Kewanee Oil Co. v Bicron Corp., 416 US 470; Du Pont Powder Co. v Masland, 244 US 100; Board of Trade v Christie Grain & Stock Co., 198 US 236; New Era Elec. Range Co. v Serrell, 252 NY 107; Tabor v Hoffman, 118 NY 30; Eastman Kodak Co. v Reichenbach, 79 Hun 183; Champlin v Stoddart, 30 Hun 300; Tymko v K-Mart Discount Stores, 75 AD2d 987, 51 NY2d 879; Snyder v Parke, Davis & Co., 56 AD2d 536.) II. If subdivision 1 of section 16 of the Public Service Law deprives the Commission of the power to protect trade secrets received in evidence in major rate proceedings, it denies the company due process of law. (Drake v Herrman, 261 NY 414; New Era Elec. Range Co. v Serrell, 252 NY 107; Tabor v Hoffman, 118 NY 30; Spiselman v Rabinowitz, 270 App Div 548; St. Michael’s Convalescent Hosp. v State of California, 643 F2d 1369; Union Carbide Agric. Prods. Co. v Costle, 632 F2d 1014; Wearly v Federal Trade Comm., 462 F Supp 589, 616 F2d 662; Zotos lnt. v Kennedy, 460 F Supp 268; People v Scott, 26 NY2d 286; Matter of Original R. Tyson v Tyler, 24 NY2d 671.)

      Charles R. Gibson and David E. Blabey for respondent.
    I. Subdivision 1 of section 16 of the Public Service Law requires that the testimony and exhibits in a rate case be public records. (Matter of Connell v Public Serv. Comm, of State of N. Y., 152 Misc 242; Matter of Zuppa v Maltbie, 190 Misc 778; Matter of Stenstrom v Harnett, 131 Misc 75, affd sub nom. People ex rel. Stenstrom v Harnett, 224 App Div 127, 249 NY 606; People ex rel. German-American Loan & Trust Co. v Richards, 99 NY 620; American Dist. Tel. Co. v Woodbury, 127 App Div 455; Matter of Zuckerman v New York State Bd. of Parole, 53 AD2d 405.) II. Subdivision 1 of section 16 of the Public Service Law does not deny the company due process of law. (Du Pont Powder Co. v Masland, 244 US 100; Board of Regents v Roth, 408 US 564; Kewanee Oil Co. v Bicron Corp., 416 US 470; Eastman Kodak Co. v Reichenbach, 79 Hun 183; Matter of New York City Housing Auth. v Public Serv. Comm, of State of N. Y., 17 NY2d 246; Citizens Water Supply Co. v Public Serv. Comm. of State of N. Y., 53 AD2d 166, 40 NY2d 917, 42 NY2d 804; Powhatten Min. Co. v Ickes, 118 F2d 105; Wirtz v Balder Elec. Co., 337 F2d 518.) III. The Commission acted reasonably and lawfully in declining to issue a protective order in the proceeding under review. (FCC v Schreiber, 381 US 279; Pennzoil Co. v Federal Power Comm., 534 F2d 627.)

      Robert Abrams, Attorney-General (John F. Duane, Shirley Adelson Siegel, Melvyn R. Leventhal and Paulann M. Caplovitz of counsel), for Robert Abrams, intervenor-respondent.
    I. The court below correctly decided that subdivision 1 of section 16 of the Public Service Law requires the inclusion in the public record of any document relevant and material to a rate determination. (Matter of City of Rochester v Public Serv. Comm. of State of N. Y., 192 Misc 33, 275 App Div 172, 972, 301 NY 801; Matter of Zuppa v Maltbie, 190 Misc 778; Matter of Connell v Public Serv. Comm. of State of N. Y., 152 Misc 242; Matter of Friedman v Burritt, 195 Misc 376; Matter of Stenstrom v Harnett, 131 Misc 75, affd sub nom. People ex rel. Stenstrom v Harnett, 224 App Div 127, 249 NY 606; People ex rel. German-American Loan & Trust Co. v Richards, 99 NY 620; St. Joseph’s Hosp. Health Center v Blue Cross of Cent. N. Y., 489 F Supp 1052, 614 F2d 1290, 445 US 962; Humana of Va. v Blue Cross of Va., 622 F2d 76; St. Joseph’s Hosp. Health Center v Axelrod, 74 AD2d 698, 49 NY2d 706; People v Jelke, 308 NY 56.) II. Subdivision 1 of section 16 of the Public Service Law is constitutional because in passing subdivision 1 of section 16 the State Legislature acted rationally in balancing the public interest in an open record against a monopoly’s interest in confidentiality. (Matter of Sanford v Rockefeller, 35 NY2d 547; Collins v Carey, 421 US 973; Matter of Van Berkel v Power, 16 NY2d 37; Matter of Cromwell v Ferrier, 19 NY2d 263, 862, 863; Williamson v Lee Opt. Co., 348 US 483, 349 US 925; Montgomery v Daniels, 38 NY2d 41; Day-Brite Light v Missouri, 342 US 421; Turner Nurses Agency v State of New York, 17 Misc 2d 273; New York State Elec. & Gas Corp. v Maltbie, 169 Misc 144, 255 App Div 820; County of Orange v Public Serv. Comm, of State of N. Y., 39 AD2d 311, 31 NY2d 843.) III. The Public Service Commission acted properly in ordering the inclusion of the migration strategy in the public record of this case. (Kaumagraph Co. v Stampagraph Co., 235 NY 1; Monroe Coverall Serv. v Bosner, 283 App Div 451, 998; Matter of Attorney-General of State of N. Y. v Lundy, 34 AD2d 698, 27 NY2d 485; Hyman v Revlon Prods. Corp., 277 App Div 1118; Fibron Prods. v Hooker Chem. Corp., 26 Misc 2d 779; People ex rel.

      Delaware & Hudson Co. v Stevens, 197 NY 1; New York State Elec. & Gas Corp. v Maltbie, 169 Misc 144, 255 App Div 820.)
   OPINION OF THE COURT

Jones, J.

The Public Service Commission (Commission) has authority to issue orders protecting the confidentiality of trade secrets received in evidence in rate-fixing proceedings notwithstanding the statutory prescription that all proceedings and records of the Commission shall be public.

In the course of hearings being conducted by the Public Service Commission on tariff revisions filed by petitioner New York Telephone Company, certain user parties (intervenors in the present proceeding) proposed to introduce in evidence material gained from a “Migration Study” which had been prepared by the telephone company and had been made available by it to the user parties under a protective agreement. The “Migration Study” contained detailed, year-by-year projections of transfer of the company’s customers from older to newer, more sophisticated types of telephone systems, as well as specifics of the company’s future price plans, schedules of new product introduction, and particular sales tactics, representing confidential commercial information which would be valuable to the utility’s competitors and which petitioner characterizes as trade secrets. When the telephone company requested that a protective order be granted precluding disclosure of the “Migration Study” data to the public (as contrasted with disclosure to the Commission, its hearing officers and the parties to the proceeding), the Administrative Law Judges before whom the hearing was being held denied receipt in evidence of the confidential information pending determination by the Public Service Commission whether it would grant such protective relief. The Commission on August 14,1980 denied the protection sought and directed that the proof, insofar as the hearing officers determined it to be relevant and material, be placed in evidence without measures to preserve confidentiality. When the Administrative Law Judges thereafter concluded that much of the alleged confidential information was relevant and material, petitioner again sought a protective order from the Commission which, on August 27, 1980, declined to alter its prior denial of such relief. The Commission did however grant an order, effective only through September 30,1980, limiting disclosure of the described material to the Commission, its Administrative Law Judges, the parties to the proceeding, and such additional persons as the Commission might specify, to afford the utility an opportunity to obtain judicial review of the Commission’s refusal to grant a permanent protective order.

On September 5, 1980 the telephone company commenced the present proceeding under CPLR article 78 to annul the determinations of the Commission on August 14 and August 27 to the extent that the Commission directed that the relevant portions of the “Migration Study” should be admitted into evidence without any protective measures to preserve their confidentiality. Special Term dismissed the proceeding, concluding that the Public Service Commission had neither “abused its discretion [n]or acted in an arbitrary or capricious manner in refusing to seal the record” to protect the “Migration Study” material. The Appellate Division unanimously affirmed, but on a different ground, holding that by virtue of subdivision 1 of section 16 of the Public Service Law the Commission is without authority to issue an order protecting trade secrets against public disclosure once the information has been admitted into evidence during the course of a rate-making proceeding.

Although acknowledging in its August 14 order that there might be “circumstances where we would need to protect those rare items of proprietary material whose disclosure would cause injury more significant than secrecy’s effects on the openness of our decisional process”, but noting too that “it would be extraordinary if information in a regulated company’s possession were relevant and material to a Commission proceeding yet also deserving of secrecy”, the Public Service Commission now joins the intervenor Attorney-General in arguing in support of the holding of the Appellate Division, asserting that it does not have power to issue any protective order because subdivision 1 of section 16 of the Public Service Law requires that the testimony and records in a rate-fixing case be public records.

We hold a different view and give no such limiting effect to the statutory provision, failing to find in it any proscription against protection from general public disclosure by appropriate order of the Commission of information put in evidence at hearings held by it which falls within the category of trade secrets. The importance of trade secret protection and the resultant public benefit are well recognized (e.g., Kewanee Oil Co. v Bicron Corp., 416 US 470, 481-482). Numerous decisions in this and other jurisdictions demonstrate the variety of protective means that have been fashioned to maintain the confidentiality of trade secret information that is the subject of litigation (Du Pont Powder Co. v Masland, 244 US 100; Tymko v K-Mart Discount Stores, 75 AD2d 987, mot for lv to app dsmd 51 NY2d 879; Snyder v Parke, Davis & Co., 56 AD2d 536; National Starch Prods, v Polymer Inds., 273 App Div 732). This court has itself on at least two occasions noted the propriety of restricting attendance of the public during portions of a trial at which trade secret proof is to be introduced (Sybron Corp. v Wetzel, 46 NY2d 197, 207; People v Jelke, 308 NY 56, 63, n 2), despite the fundamental precept that trials and judicial proceedings generally shall be open to public view and the mandate of section 4 of the Judiciary Law that “the sittings of every court within this state shall be public” (with exceptions which do not include trade secrets).

For the same reason that section 4 of the Judiciary Law (providing that court sessions shall be public) does not preclude a court’s exclusion of the public when such exclusion is necessary or appropriate to the protection of confidential trade information, subdivision 1 of section 16 of the Public Service Law (providing that proceedings of the Public Service Commission shall be public records) does not foreclose restriction by the Commission of access to its proceedings when such restriction is necessary or appropriate for protection of similar confidential material. Indeed, absent an express statutory prohibition (of which there is none and as to the validity of which we have no occasion to comment), no rationale is suggested why the Commission should not extend the same evidentiary privileges and protection to trade secrets that a court would in a judicial proceeding (cf. Matter of City Council of City of N. Y. v Goldwater, 284 NY 296, 302; see FCC v Schreiber, 381 US 279, 296). The Commission was therefore not free in the present case to decline to provide any protection for confidentiality to the information taken from petitioner’s “Migration Study” and to be put in evidence at the rate-fixing hearing if in fact such material constituted trade secrets. It not only was not without power but it had an affirmative responsibility to make provision, appropriate to the exercise of its regulatory authority, for the protection of the interest of the utility in any trade secrets which the telephone company had made available to participants in the proceeding. To fail to do so would be arbitrary and capricious and erroneous as a matter of law, subject to being set aside in an article 78 proceeding.

Whether or not a permanent protective order in some form should be granted in the present case cannot now be resolved because there has as yet been no determination whether in fact the “Migration Study” data received in evidence subject to the temporary protective order of August 27, 1980 constitutes trade secrets. The case must therefore be remitted to Supreme Court with directions to remand to the Commission for such determination and, if trade secrets be found to be involved, for formulation by it of an appropriate permanent protective order, the terms of which, if unsatisfactory, would of course be subject to judicial review in another article 78 proceeding.

Pending such action by the Commission on the utility’s application, the temporary protective order (which petitioner’s counsel advised on oral argument is satisfactory and which the Commission has not indicated is other than a considered order on its part) should be continued in effect.

For the reasons stated, the order of the Appellate Division should be reversed, without costs, the petition granted to the extent of vacating the Commission’s denials of a permanent protective order on August 14, 1980 and August 27, 1980, and the matter remitted to Supreme Court with direction to remand to the Public Service Commission for further proceedings by it in accordance with this opinion, pending which the temporary protective order of August 27, 1980 should be continued in effect.

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

Order reversed, without costs, petition granted to the extent of vacating the Commission’s denials of a permanent protective order on August 14, 1980 and August 27, 1980, and matter remitted to Supreme Court, Albany County, with directions to remand to the Public Service Commission for further proceedings in accordance with the opinion herein.

      . The temporary protective order issued by the Commission on August 27,1980 has been continued through this litigation by orders of Supreme Court and of the Appellate Division.

      . Public Service Law (§ 16, subd 1), provides: “All proceedings of the commission and all documents and records in its possession shall be public records.”

      . A useful and widely adopted definition of a trade secret is that which was set out in Restatement of Torts (§757, Comment b): “A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.”


author: Meyer, J.

text:
    James Copeland et al., Appellants, v Abraham Salomon, Respondent. (Action No. 1.) (And Another Action.)
    Argued April 2, 1982;
    decided May 20, 1982

      POINTS OF COUNSEL

      James L. Fischer, Selwyn Karp, Stephen N. Silver and John Diaconis for appellants.
    I. Special Term was not incompetent to grant leave to sue Salomon, the receiver, nunc pro tunc. Prior leave of court is not subject matter jurisdictional in an action against a court-appointed receiver. (Hackley v Draper, 4 Thomp & C 614, 60 NY 88; Pruyn v McCreary, 105 App Div 302, 182 NY 568; Johnson v Smith, 297 NY 165, 335 US 824; Le Fevre v Matthews, 39 App Div 232; Chautauque County Bank v Risley, 19 NY 369; Hubbell & Curran v Dana, 9 How Prac 424; Thrasher v United States Liab. Ins. Co., 19 NY2d 159; Nuernberger v State of New York, 41 NY2d 111; Salesian Soc. v Village of Ellenville, 41 NY2d 521; Matter of Steinway, 159 NY 250.) II. Special Term did not abuse its discretion in granting Copeland leave to sue the receiver, nunc pro tunc. In the circumstances before this court, Salomon was properly estopped to oppose such equitable relief. (Bender v New York City Health & Hosps. Corp., 38 NY2d 662; Kilarjian v Kilarjian, 32 AD2d 542; Augustine v Szwed, 77 AD2d 298; Seligson v Weiss, 222 App Div 634.)

      Jay Edmond Russ for respondent.
    I. The court below correctly ruled that the receiver could not be sued without the express permission of the court that appointed him, that failure to comply was jurisdictional, and could not be cured by an order of the appointing court, nunc pro tunc. (Lilienthal v Betz, 185 NY 153; Kilarjian v Kilarjian, 32 AD2d 542; Wildermuth v Pious, 21 AD2d 912; Dulberg v Ebenhart, 68 AD2d 323; Bonwit Teller v Vanderbilt, 9 Misc 2d 176; 149 Clinton Ave. North v Grassi, 51 AD2d 502.) II. Special Term had erroneously balanced the equities and had improperly considered the presence of the liability insurance carrier. (Denkman v Denkman, 255 App Div 496; Marony v Applegate, 266 App Div 412; Seider v Roth, 17 NY2d 111; O’Connor v Lee-Hy Paving Corp., 437 F Supp 994, 579 F2d 194; Alford v McGaw, 61 AD2d 504.) III. The error from which plaintiffs-appellants seek relief constitutes “law office failure”. (Barasch v Micucci, 49 NY2d 594.)
   OPINION OF THE COURT

Meyer, J.

Neither the failure to obtain permission from the court which appointed a receiver in mortgage foreclosure to begin an action against him for personal injury incurred by plaintiff during his receivership, nor the fact that prior to service of the summons and complaint the receiver had been permitted to resign subject to an accounting and application for discharge being made by him and a substitute receiver appointed, constitutes a jurisdictional defect barring maintenance of the action. The order of the Appellate Division should, therefore, be reversed, with costs, and the orders of Special Term should be reinstated.

By order dated June 19, 1975, made in an action to foreclose a first mortgage on the premises known as 1502 Mott Avenue, Far Rockaway, New York, defendant Salomon was appointed receiver of rents and profits. The order authorized the receiver to keep the property in repair, no repair costing more than $500 to be made except by order of court made on notice. On November 29, 1975, plaintiff James Copeland, a tenant in the building, was injured while using the common stairway of the building. By summons and complaint dated May 3, 1976, Copeland and his wife began an action against Salomon to recover for the injury and for loss of consortium. The complaint alleged that defendant was acting in his official capacity as receiver on November 29, 1975, and that plaintiff had been injured by reason of defendant’s negligence.

Although defendant was the receiver on November 29, 1975, he sought permission to resign by motion dated January 30, 1976. By order dated February 17, 1976, defendant was permitted to resign, directed to file and obtain confirmation of his accounts and to “apply * * * for his discharge as such Receiver” and a successor receiver was appointed. What the status of the receivership presently is does not appear from the record, but by order entered October 6, 1976, defendant Salomon’s accounts were approved and he and his surety were “discharged and relieved from all liability to any person, partnership, association and corporation as to all matters embraced in the * * * Receiver’s account.” No answer was served on behalf of defendant until February 18, 1977, when a pro forma answer was served, which admitted by failing to deny Salomon’s status as receiver at the time of James Copeland’s injury and control of the stairway on which he was injured, and asserted but one affirmative defense (of culpable conduct on plaintiff’s part). After the matter had been assigned to a Trial Part and a jury selected, however, defendant’s attorney moved before the Trial Judge to dismiss for want of jurisdiction.

The case was then returned to Special Term for consideration of the jurisdictional question. Special Term by order of May 20, 1980, stayed the action but denied defendant’s motion to dismiss without prejudice to renewal should plaintiffs fail to move within 30 days in the receivership proceeding for appropriate relief. Plaintiffs then moved in the latter proceeding for leave to sue Salomon as receiver and to vacate the order discharging him. The moving affidavit stated and defendant, though disputing its relevance, has not denied that the summons and complaint were forwarded to the insurance carrier whose liability policy covered both the owner and the receiver. By order dated July 22, 1980, the motion was granted to the extent of vacating the order discharging Salomon as receiver with respect to plaintiffs’ action, granting plaintiffs leave to sue, amending the title to show that Salomon was being sued “as receiver,” and vacating the stay.

The Appellate Division held that plaintiffs’ failure to comply with the condition precedent that leave be obtained prior to suit was jurisdictional and not curable by an order nunc pro tunc. It, therefore, reversed, on the law, the orders appealed from, granted the motion to dismiss the personal injury action and denied the foreclosure action application for leave to institute the personal injury action. We conclude that (1) plaintiffs’ failure to obtain leave of the foreclosure court prior to institution of this personal injury action was not jurisdictional; (2) Salomon was sued and was liable in his official capacity, was obliged as an officer of the court to set forth plaintiffs’ claim as a contingent liability in his accounting to the foreclosure court and to give plaintiffs notice of that accounting and moreover, under the limited language of the order of October 6,1976, has never been discharged as to that claim; and (3) in any event, Special Term had the authority to make the order of July 22, 1980 in the receivership proceeding vacating Salomon’s discharge as to plaintiffs’ claim and granting them leave to sue, and under the circumstances of this case it would have been an error of law not to do so. We, therefore, reverse and reinstate the Special Term orders appealed from.

I

We have previously noted the confusion that arises because the word “jurisdiction”, which with respect to subject matter means the power of a court to adjudicate concerning a category of cases, is also inexactly used to refer to the situation in which the absence of a condition precedent requires dismissal of a particular case notwithstanding that the court has jurisdiction of the subject matter (Nuernberger v State of New York, 41 NY2d 111, 117; Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 166). Generally, though not necessarily, the condition is statutory in origin (Salesian Soc. v Village of Ellenuille, 41 NY2d 521, 526 [notice of claim]; Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 166, supra [notice of entry of judgment against insured]). The omission of such a condition does not necessarily bar the claim entirely. If no time limit for compliance with the condition is established, or the established time limit is still open, or CPLR 205 operates because of the defectively commenced action to extend the time limit, the omission can be supplied and the action or a new action replacing it will be decided on the merits (e.g., Garrick v Central Gen. Hosp., 51 NY2d 242; George v Mt. Sinai Hosp., 47 NY2d 170).

The power to appoint a receiver in foreclosure proceedings, though now touched upon by RPAPL 1325 (see, also, CPLR art 64), stems not from statute but from the inherent powers of the Court of Chancery (Hollenbeck v Donnell, 94 NY 342, 346). The rule that leave of the appointing court be obtained before suing such a receiver was devised in order to protect the receiver and the estate against the harassment and expense of possibly unnecessary litigation and to preserve the estate in the hands of the receiver for the benefit of all creditors equally (Metropolitan Sav. Bank v Residual Realties, 102 Misc 2d 1105; James v James Cement Co., 8 NY St Rep 490; Hubbell & Curran v Dana, 9 How Prac 424). It arose also from the fact that, because the property is held by the receiver as an officer of the court, of as it is sometimes said, as the hand of the court, interference with the property by the bringing of an action without leave may constitute contempt (Matter of Directors of Christian Jensen Co., 128 NY 550, 553; People ex rel. Attorney Gen. v Security Life Ins. & Annuity Co., 79 NY 267, 270; Foster v Toumshend, 68 NY 203, 206; Chautauque County Bank v Risley, 19 NY 369, 377; Pruyn v McCreary, 105 App Div 302, 304, affd 182 NY 568; see Anns., 39 ALR 6; 48 ALR 241).

Nothing in the reasons upon which the rule is based mandates a holding that failure to obtain leave is a fatal and incurable error, nor although we recognize that there is a division in the lower courts on the question (see 7A Weinstein-Korn-Miller, NY Civ Prac [1981 Supp], par 6401.19, p 75; compare McLaughlin, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, C6401.4, p 408), do we believe that the rule applied by the Appellate Division is the correct view. Thus, in Johnson v Smith (297 NY 165, remittitur amd 297 NY 954, cert den 335 US 824), we held that property in the hands of a receiver could be sold by the county treasurer for taxes without obtaining leave of court, and as part of the analysis noted in dictum “that, while propriety may suggest an application to the court before selling property possessed by a receiver, the failure to obtain leave neither defeats the action brought * * * nor invalidates the sale effected” (297 NY, at p 172). More closely in point because it is a flat holding rather than obiter and concerns commencement of an action against a receiver rather than sale of property in his possession is Pruyn v McCreary (105 App Div 302, supra), in which we affirmed, without opinion, but answered in the affirmative two certified questions asking whether the Supreme Court had jurisdiction of the person of the receiver and whether it had jurisdiction of the subject matter of the action (182 NY 568). The import of the affirmative answers given becomes clear when the Appellate Division opinion is read, for the rule it states is diametrically opposed to that applied by the Appellate Division in this case, as the following passage shows (at p 304): “The commencement of an action against a receiver without leave does not affect the jurisdiction of the court. (Hirshfeld v. Kalischer, 81 Hun, 606.) The rule requiring leave to sue a receiver is not statutory and is not elementary to the action. Suing without leave is purely a question of contempt of court. (Chautauque County Bank v. Risley, 19 N. Y. 369.) The court, on motion, may set aside or stay the proceeding commenced without its sanction, but until the court interferes the action is regular. (Hackley v. Draper, 4 T. & C. 614; affd., 60 N. Y. 88.)” The Hackley case, affirmed by us, held that, until the appointing court holds otherwise, an action brought without permission against a receiver is regular, and in Chautauque, which involved a sale, we not only said (19 NY, at p 377) with respect to the creditor’s failure to obtain leave that “the question is merely whether the court will consider him in contempt and punish him accordingly. The sale itself is but the assertion of a legal right, and it cannot be illegal and void on the ground that the leave of an equitable tribunal is not first asked and obtained”, but also refused to follow a contrary decision of the United States Supreme Court.

The cases cited in Kilarjian u Kilarjian (32 AD2d 542), upon which the Appellate Division relied, other than its own prior decision in Wildermuth v Pious (21 AD2d 912), do not support the conclusion reached in this case, for Thompson v Brunswick-Balke-Collender Co. (288 NY 550) and Foster v Townshend (68 NY 203) both involved actions brought by a receiver without permission. Moreover, the defect not being jurisdictional, the court in which the action had been begun was free to consider it regular and permit it to continue subject to the later order of the appointing court (Pruyn v McCreary, 105 App Div 302, affd 182 NY 568, supra; Hackley v Draper, 4 Thomp & C 614, 631, affd 60 NY 88, supra; Di Chiara v Sutherland, 62 Misc 555) or, as was done by Special Term, to stay the action pending an application to the appointing court for leave nunc pro tunc (Town of Greenburgh v Shalleck, 247 App Div 813; M. P. Moller, Inc. v Farley, 219 App Div 750, affd 246 NY 562; Le Fevre v Matthews, 39 App Div 232; Hirshfeld v Kalischer, 81 Hun 606, supra; James v James Cement Co., 8 NY St Rep 490, 492, supra), or to dismiss the action without prejudice to recommencement after such leave had been obtained (Matter of New York Municipal Ry. Corp. v Holliday, 189 App Div 814, 820, affd 228 NY 561), as appropriate in the particular case (see, generally, Ann., 29 ALR 1460). Moreover, the appointing court, upon application to it, could, in its discretion, either grant leave nunc pro tunc with or without a contempt penalty (Chautauque County Bank v Risley, 19 NY 369, supra; Le Fevre v Matthews, supra; James v James Cement Co., supra), or condition leave or deny it outright as it found necessary and appropriate for the protection of creditors in and parties to the receivership proceeding (Matter of Directors of Christian Jensen Co., 128 NY 550, supra; Matter of Commercial Bank, 35 App Div 224).

It was, therefore, error for the Appellate Division to reverse on the law and order the complaint dismissed.

II

Prior to September 1,1946, the law as to the liability of a receiver in foreclosure was in some confusion. Although other receivers were held liable officially for torts committed by the receiver or his employees in the administration of the receivership and damages awarded in such an action were a receivership expense (Leal v Westchester Trust Co., 279 NY 25, 31), a receiver in foreclosure not guilty of affirmative negligence and permitted but not required by the order appointing him to keep the property in repair was liable neither officially nor personally (Woman’s Hosp. of State of N. Y. v Loubern Realty Corp., 266 NY 123; Reynolds v Graham, 250 App Div 787, affd 276 NY 555; see Cardot v Barney, 63 NY 281).

In a comprehensive study of the problem, the Law Revision Commission in 1936 noted that the effect of the casé law was to encourage mortgagees, while allowing the property to fall into disrepair, to continue receiverships so as to avoid liability for disrepair, and that that was an injustice to tenants of the property and had resulted in a proposal that receivers be required to maintain liability insurance, which as a matter of common practice many of them obtained in any event (1936 Report of NY Law Rev Comm [Legis Doc, 1936, No. 65], pp 627, 646-648, 652-653). The commission, therefore, recommended passage at the 1936 session of legislation that would make a receiver in foreclosure liable to the same extent as the owner (id., p 621).

Not until 1946, after a further report from the Law Revision Commission which noted that it was anomalous not to impose liability upon a receiver for passive negligence in view of the fact that the State had accepted liability for its own passive as well as active negligence, and that “It is not uncommon for a receiver to take out liability insurance in terms broad enough to cover passive negligence. In such a case, under the rule which exempts the receiver from liability for passive negligence, there is a resulting windfall to the insurer” (1946 Report of NY Law Rev Comm [Legis Doc, 1946, No. 65], p 26), was legislation, now known as section 9-101 of the General Obligations Law, enacted. That section provides that: “A receiver of rents and profits appointed in an action to foreclose a mortgage upon real property shall be liable, in his official capacity, for injury to person or property sustained by reason of conditions on the premises, in a case where an owner would have been liable. Nothing herein contained shall be construed to enlarge the liablity of the receiver in his personal capacity.”

There can be no question, therefore, that Salomon as receiver at the time James Copeland was injured was subject in his official capacity to liability to plaintiffs, whether the negligence in maintenance of the stairway was active or passive. Moreover, by appearing in the action without objecting to jurisdiction, the receiver subjected himself to the jurisdiction of the court over his person as receiver in an action over which there was no impediment to its subject matter jurisdiction (Pruyn v McCreary, 105 App Div 302, 305; supra; People v Square Deal Poultry Corp., 218 App Div 746; Hubbell & Curran v Dana, 9 How Prac 424, supra). Nor did the transfer of his interest as receiver in the property to the substitute receiver require that the latter be substituted in the action for Salomon; if the action Was properly begun against Salomon it could be continued against him notwithstanding the transfer (CPLR 1018; 2 Weinstein-Korn-Miller, NY Civ Prac, par 1019.03). Furthermore, the complaint having expressly alleged that Salomon was acting at the time of plaintiff’s injury in “his official capacity as a receiver,” the omission from the title of the words “as receiver” is no more than an irregularity to be disregarded pursuant to CPLR 2001 and 3026.

A receiver, as already noted, acts as the hand of the court. Damages for injuries to persons or property during the receivership caused by the negligence of the receiver or his agents or employees are part of the expenses of administration payable out of receivership funds or out of the property held by the receiver and as such entitled to priority over creditors whose claims precede the receivership (Kain v Smith, 80 NY 458, 470; Robinson v New York & Staten Is. Elec. Co., 99 App Div 509, 512). Though generally a receiver stands indifferent as between creditors, he is bound to see to it that each has an opportunity to enforce his claim and to give them reasonable aid in doing so (People ex rel. Attorney Gen. v Security Life Ins. & Annuity Co., 79 NY 267, 271, supra) and if with knowledge of a claim he nonetheless pays out all of the receivership funds he may incur personal responsibility for the payment of such a claim (Robinson v New York & Staten Is. Elec. Co., supra; see Alexander v Valumet Chocolate Co., 240 App Div 769).

These obligations as to general creditors apply, a fortiori, to priority administration expense creditors, fixed or contingent. Moreover, “creditors, though not parties to the suit, have a right to be heard” concerning distribution and apportionment of receivership funds (Kilarjian v Kilarjian, 32 AD2d 542, supra; see Klasko Fin. Corp. v Belleaire Hotel Corp., 257 NY 1, 4). As to the Copelands, therefore, the discharge of Salomon as receiver, had it been worded broadly enough to discharge their claim, would nevertheless have been void for want of notice (Miller v Everest, 212 NW2d 522 [Iowa]). In the Miller case a tenant of a building in receivership died of injuries sustained in a fall on ice in the building parking lot. The receiver in foreclosure was, however, discharged before the executor brought suit and the trial court dismissed the action on the ground that as receiver the defendant could not be sued after he had ceased to be such and that individually he was not liable for passive negligence. The Supreme Court of Iowa affirmed as to individual liability but reversed as to the receiver in his official capacity and held the discharge order void as to the executor for want of notice. To hold the tort claimant barred, it said, would:

“work injustice and cannot withstand close scrutiny.

“The present case affords a good example. Here a tort was committed (we are assuming) during the course of the receivership. Before the personal representative of the deceased person started her action against the receiver, the receiver, without notice to the personal representative, obtained his own discharge — and thereby, we are told, terminated his liability.

“We cannot believe such a rule would be good law. Meritorious claims ought not come to an end before the statute of limitations has barred them by a receiver’s simply securing his own discharge without notice to the claimants” (212 NW2d, at p 524).

The facts that the substitute receiver may have paid out the funds collected and that the property involved may be back in the hands of the mortgagor or have been sold in foreclosure is no greater bar to the action. In the first place, “[Liability is not synonymous with ability to pay” and it, therefore, is not a condition of suit that the receiver be in funds to pay it (Gabriele v Kent Realty Co., 150 Misc 415, 417). More importantly, however, should there be liability insurance covering the receiver, as the moving papers indicate, the Copelands, if they recover judgment against Salomon, will be entitled to proceed against the carrier directly under the provisions of section 167 (subd 7) of the Insurance Law, and if, perchance, there is no such coverage, the receiver or his successor may, as above noted, have incurred personal responsibility for disbursing receivership assets without notice to the Copelands.

Clearly, therefore, the action should be permitted to proceed.

Ill

Thus, the receivership remained open as to plaintiffs and that part of the order of July 22, 1980 which vacated the prior order discharging Salomon was not technically necessary. There is, however, abundant authority for making such an order under circumstances such as are present in this case (Matter of New York & Western Union Tel. Co. v Jewett, 115 NY 166,170; Matter of Gant v Levine, 52 AD2d 925; 149 Clinton Ave. North v Grassi, 51 AD2d 502, 506; Moskowitz v Rothman, 274 App Div 999; Matter of Frankle, 241 App Div 767; see Ferguson v Toledo, Ann Arbor & North Mich. R. R. Co., 85 App Div 352, 354, affd 183 NY 557). Lilienthal v Betz (185 NY 153), upon which defendant relies, is not to the contrary, for it held only that the discharged receiver was not a necessary party to an action to set aside the transfer of assets brought about by the same fraud that induced discharge of the receiver, and did not deal with whether an order discharging a receiver can be vacated under the circumstances of this case. Because the discharge order was void as to plaintiffs, vacatur of it was unnecessary but not improper. But because the discharge order had it covered plaintiffs’ claim would have been void, the Appellate Division order reversing Special Term’s July 22, 1980 order and denying leave to sue was erroneous as a matter of law.

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

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

Order reversed, with costs, and the orders of Supreme Court, Queens County, reinstated.

      . Support for the contrary view may be thought to exist in Walling v Miller (108 NY 173, 178). It held “wholly illegal and void” the sale, without leave of the appointing court, of real property held by a receiver under an execution on a judgment against the debtor for whose property the receiver was appointed. But there is a clear distinction between a sale of property which is part of the receivership and making a claim against the receiver by instituting suit against him. Moreover, the status of Walling as authority is far from clear (see Johnson u Smith, 297 NY 165, 173, infra; Beardslee v Ingraham, 183 NY 411, 422; Moore v Potter, 155 NY 481, 489-490).

      . Failure to substitute would not be jurisdictional (Baer u McCullough, 176 NY 97, 101; Dougherty v King, 41 App Div 1, 4, revd on other grounds 165 NY 657; 2 Weinstein-Korn-Miller, op. cit., par 1018.02).

      . In fact Salomon was not discharged from liability to plaintiffs even by the order of October 6,1976, for that order only relieved him from liability as to matters embraced in his account, which so far as the record shows made no mention of plaintiffs’ claim.


author: Chief Judge Cooke.

text:
    The People of the State of New York, Respondent, v Kenneth Williams, Appellant.
    Argued February 19, 1982;
    decided May 20, 1982

      POINTS OF COUNSEL

      Thomas R. Legenhausen and William E. Hellerstein for appellant.
    The majority below erroneously based its finding of harmless error upon an impermissible factor when it speculated that appellant would not have testified, even if the trial court had correctly decided his Sandoval application. (People v Shields, 58 AD2d 94, 46 NY2d 764; People v Davis, 44 NY2d 269; People v Daniels, 77 AD2d 745; Brooks v Tennessee, 406 US 605; People v Crimmins, 36 NY2d 230; People v Kennedy, 47 NY2d 196.)

      Mario Merola, District Attorney (Jay Shapiro and Steven R. Kartagener of counsel), for respondent.
    I. Appellant’s guilt was proven beyond a reasonable doubt by overwhelming evidence. II. Appellant was not deprived of a fair trial by the Sandoval ruling. (People v Sandoval, 34 NY2d 371; People v Shields, 58 AD2d 94, 46 NY2d 764; People v Woods, 41 NY2d 279; People v Cook, 42 NY2d 204.)
   OPINION OF THE COURT

Chief Judge Cooke.

The extent to which the prosecution should be allowed to use prior convictions to impeach the credibility of a defendant who testifies is a matter that is generally left to the discretion of the trial court. The trial court may not, however, abdicate its responsibility by failing to exercise this discretion. Here, the Appellate Division was correct in its determination that no such discretion was exercised. This court cannot agree, however, that the error was harmless. The order of the Appellate Division therefore should be reversed.

Defendant Kenneth Williams was convicted after a jury trial of robbery in the second degree. Prior to trial, defendant moved, pursuant to the procedures outlined in People v Sandoval (34 NY2d 371), for a ruling on which of defendant’s prior convictions might be used to impeach his credibility if he chose to testify in his own behalf. The court reviewed 23 of defendant’s prior convictions that the prosecution stated it planned to use. The prosecutor later withdrew his request to use one of the convictions. Of the remaining 22, the court ruled that defendant could be cross-examined on 20 of the convictions and on the underlying facts of the remaining 2. Defendant chose not to testify.

At trial, the complainant testified that defendant and another man accosted her on a Bronx street and defendant told her he had a gun. She testified that the men took her money and rings and forced her to buy a television set for them with her credit card. They then fled. She stated that four months later, she saw defendant walking on the street and called police. Two police officers testified that after his arrest defendant told them he took the rings, money, and television set from complainant but that he had done so by tricking her and had not used a weapon. The defense offered no testimony. In summation, defense counsel argued that defendant had perpetrated a confidence game upon the complainant but had not robbed her.

The Appellate Division, by a divided court, affirmed defendant’s convictions (82 AD2d 734). All of the members of that court agreed that the trial court had either abused its discretion or exercised none at all in its Sandoval ruling. A majority held, however, that this error was harmless.

In Sandoval, this court sanctioned a procedure whereby a defendant, before deciding whether to testify, could obtain “an advance ruling as to the use by the prosecutor of prior convictions or proof of the prior commission of specific criminal, vicious or immoral acts for the purpose of impeaching a defendant’s credibility” (34 NY2d 371, 374, supra). It emphasized that, in weighing whether cross-examination about a prior conviction or immoral act should be allowed, the court should balance the probative worth of the evidence on the issue of defendant’s credibility against “the risk of unfair prejudice to the defendant, measured both by the impact of such evidence if it is admitted after his testimony and by the effect its probable introduction may have in discouraging him from taking the stand in his own behalf” (34 NY2d 371, 375, supra).

Although the list is by no means exhaustive, among the factors that may bear upon the court’s decision whether to permit use of a prior conviction are the period of time since the conviction, the degree to which it bears on a defendant’s veracity and credibility, and the extent to which any similarity between the prior conviction and the crime charged may “be taken as some proof of the commission of the crime charged rather than be reserved solely to the issue of credibility” (People v Sandoval, 34 NY2d 371, 377, supra; see People v Mackey, 49 NY2d 274; People v Davis, 44 NY2d 269; People v Carmack, 44 NY2d 706).

The balancing of these factors in the course of passing on a Sandoval motion is a discretionary determination for the trial courts, and review beyond the intermediate appellate level is generally not warranted (People v Brown, 48 NY2d 921). Where the court has abused its discretion or exercised none at all, however, a legal issue reviewable by this court exists. On this record we have no occasion to disturb the determination of the Appellate Division that there was error.

In this case, the District Attorney indicated he would use 23 of defendant’s prior convictions for impeachment if defendant testified. With the exception of one felony, armed robbery, these involved a laundry list of misdemeanors, including larceny by trick, fraud, petit larceny and sexual abuse, among others. The prosecutor withdrew his request to use one of the convictions. Of the remaining 22 convictions, the court permitted cross-examination on 20. It also allowed the use of the underlying facts of the other two crimes, for one of which defendant was adjudicated a youthful offender.

The record of the Sandoval hearing gives no indication that the court engaged in any exercise of its discretionary power to weigh the various relevant factors. Indeed, the only factor it appeared to consider was whether the prior convictions indicated defendant’s willingness to place his own interests above those of society. This, it is true, was one of the factors mentioned in Sandoval as bearing on a defendant’s veracity (34 NY2d 371,377, supra; see People v Duffy, 36 NY2d 258, 262, cert den 423 US 861). As Sandoval made clear, however, neither this nor any other factor was intended to be definitive. Nearly every crime, to a greater or lesser degree, indicates such a willingness.

To the extent a past crime may indicate this willingness, it bears upon whether a defendant will place self-interest foremost again and lie on the witness stand. But the indication, no matter how strong, of the existence of such a tendency through past convictions does not obviate the need for the court to exercise its discretion and weigh other relevant factors such as the danger that the defendant may be convicted for his past criminal record rather than for the crime for which he is charged (People v Davis, 44 NY2d 269, 274-276, supra).

This is not to say that any particular conviction in this case should have been excluded or that cross-examination should have been limited to only a certain number of past convictions. As Sandoval stated and subsequent decisions have reiterated, this is an exercise of discretion that should be left to the trial court. But it is also an exercise of discretion that should be performed by the trial court.

Although the Appellate Division unanimously determined that there was an abuse or nonexercise of discretion by the trial court, the majority nonetheless held the error to be harmless. The majority concluded (82 AD2d 734, 735, supra) that because at least some of defendant’s prior convictions would have formed a proper basis for cross-examination, “it does not appear to us that defendant would have taken the stand under any circumstances”. The determination of harmlessness was incorrect.

Harmless error analysis does not involve speculation as to whether a defendant would have testified if the legal error had not occurred (People v Shields, 46 NY2d 764,765; cf. People v Grant, 45 NY2d 366, 378-380). Speculation about what the defendant might have done had the circumstances been different can never be more than just that — speculation. Laying aside such conjecture and examining the evidence presented by the prosecution, it cannot be said that the error here was harmless. On the crucial issue of whether defendant robbed the complainant or merely “conned” her, the only evidence was the testimony of complainant that defendant told her he had a gun. There was no testimony by her or anyone else that a gun was actually seen. In addition, defendant’s alleged accomplice was never apprehended. The proof of defendant’s guilt of the robbery charge was far from overwhelming. And, inasmuch as the pretrial ruling might have affected defendant’s decision whether to testify and provide critical information, the trial court’s abdication of its responsibility to exercise its discretion in ruling on defendant’s Sandoval motion cannot be considered harmless.

Accordingly, the order of the Appellate Division should be reversed and the case remitted for a new trial.

Judges Jasen, Gabrielli, Jones, Wachtler and Fuchs-berg concur; Judge. Meyer taking no part.

Order reversed and case remitted to Supreme Court, Bronx County, for a new trial.