author: Wachtler, J.

text:
    In the Matter of Wendy V. Lehman, Individually and as Executrix of Manuela H. McLean, Deceased, Appellant, v Irving Trust Company, as Trustee, Respondent.
    Submitted January 7, 1982;
    decided February 16, 1982

      POINTS OF COUNSEL

      Albert Heit and Monroe E. Stein for appellant.
    I. The provisions of article Ninth of the trust agreement are binding on all interested parties and the provisions thereof may not be amended or enlarged. (Matter of Schinasi, 3 NY2d 22; Matter of Hayden, 172 Misc 669; Matter of Bostwick, 189 Misc 331.) II. A fair reading of article Ninth of the trust agreement shows conclusively that the bank agreed to accept certain fees in full payment of its services as trustees; the annual principal commissions were not included in said fees, and that the subsequent legislative act granting trustees the right to annual principal commissions was not operative on this trust. (Matter of Andrus, 4 Misc 2d 831; Matter of Schinasi, 3 NY2d 22; Smith v Lansing, 24 Misc 2d 566; Matter of Langley, 39 Misc 2d 419.)

      Patricia A. Setterberg and Julius P. Fouts for respondent.
    I. The court below applied the appropriate standard in construing article Ninth of the McLean trust. (Matter of Barker, 230 NY 364; Robertson v de Brulatour, 188 NY 301; Matter of Larney, 148 Misc 871; Matter of Cohen, 128 Misc 906; Smith v Lansing, 24 Misc 566; Matter of Langley, 39 Misc 2d 419; Matter of Andrus, 4 Misc 2d 831.) II. Application of that standard requires allowance of annual principal commissions to the trustee. (Matter of Andrus, 4 Misc 2d 831; Matter of Schinasi, 2 AD2d 105, 3 NY2d 22; Smith v Lansing, 24 Misc 566.) III. Subsequent case law supports the decisi on of the court below and substantiates the correctness of that court’s reasoning.
   OPINION OF THE COURT

Wachtler, J.

The question presented on this appeal is whether an inter vivos trust which provides that the trustee shall receive certain commissions on the receipt and disbursement of income amd principal as compensation for its services precludes the trustee from receiving annual principal commissions piermitted by a statute enacted after the execution of the trust agreement. The Appellate Division held that the trustee is entitled to receive the statutory commissions in addition to those provided for in the trust. We reverse.

The controversy was submitted to the Appellate Division as a court of first instance on an agreed statement of facts pursuant to CPLR 3222. In 1941 Alfred G. Vanderbilt established an irrevocable trust for the benefit of his then wife, Manuela Hudson Vanderbilt. Under the terms of the trust agreement, to which the defendant trustee (Irving Trust Company) was a party, the trustee was directed to pay the net income and up to $100,000 from the trust corpus to Manuela during her lifetime. Upon heir death the accumulated and accrued net income was to be paid to the executors of her estate with the remainder of the trust corpus to be paid over to the plaintiff Wendy Vanderbilt (now Wendy Vanderbilt Lehman), daughter of the grantor and Manuela, provided she was then alive and had attained the age of majority.

The life tenant, Manuela, died on April 14, 1978 survived by plaintiff, who had by then attained majority and was therefore entitled to receive the corpus free of the trust. Manuela’s will was admitted to probate in Florida and letters testamentary were issued to plaintiff as personal representative of the estate. The trustee has prepared its final account of proceedings from Ju ne 30,1942 to September 12, 1978 in which it seeks annual principal commissions for that period in the sum of $22,871.05, computed at the statutory rates applicable to annual principal commissions.

When the trust agreement was executed in 1941, the laws of this State did not provide for the payment of annual principal commissions. At that time section 285 of the Surrogate’s Court Act (L 1934, ch 892) governed the payment of trustee commissions and provided only for commissions on receiving and paying principal as well as an annual income commission based on income received and paid. In 1943 the first New York statute providing for the payment of annual principal commissions was enacted (L 1943, ch 694), the substance of which is now contained in SCPA 2308 (subd 2).

The sole provision of the trust agreement relating to the payment of trustee commissions is article Ninth which provides: “As compensation for its services in the administration of the trust the Trustee shall be entitled to receive commissions on the principal received upon the creation of the trust at the rate of one percent (1%) on the par value of the securities then constituting the principal of the trust. Said commissions shall be paid by the Settlor on the creation of the trust. The Trustee shall be entitled to receive commissions on income at the time income is received and paid out and upon principal at the time principal is paid out, at the rates allowed to a sole testamentary trustee under the laws of the State of New York at the date hereof.” A commission of $10,000 was paid to the trustee upon receipt of the principal. Since the inception of the trust the trustee has taken annual income commissions computed at the rates allowed to a sole testamentary trustee under the laws of the State of New York as of the creation of the trust in 1941.

In opposing the trustee’s request for annual principal commissions, plaintiff claims that the trustee is entitled to only those commissions enumerated in the trust agreement and that the subsequent enactment providing for the payment of annual principal commissions cannot expand the rights of a party who has contractually limited its right to commissions. Defendant argues that the trust agreement merely fixes the time and rates at which it may compute its commission on receiving and paying principal and income, but that it does not limit the type of commissions payable to only those types recited in the trust agreement.

The Appellate Division held that the trustee is not only entitled to the various commissions established in the trust agreement but also to the annual principal commissions permitted by statute as of 1943. Because we find article Ninth of the trust agreement to be controlling and exclusive on the issue of remuneration, we reverse.

Where the settlor of a trust provides a “specific compensation” for the trustee’s services, a trustee is not entitled to any additional allowance (CPLR 8005; SCPA 2308, subd 11). We hold that article Ninth of the trust agreement provides for a “specific compensation” for the defendant’s services within the meaning of these statutes. In the context of the brief yet precise three-sentence provision relating to compensation, the introductory phrase “As compensation for its services in the administration of the trust” can only be interpreted to mean that the parties intended article Ninth to constitute the exclusive authorization of the type and amount of commissions to which the trustee would be entitled as compensation.

In construing the provisions of article Ninth as nonexclusive on the issue of compensation, the Appellate Division read the introductory phrase as modifying only the sentence in which it is contained, which refers only to a commission on the receipt of principal. We believe this interpretation to be incorrect, for it could lead to the conclusion that the only compensation the trustee was entitled to receive “for its services in the administration of the trust” was the commission on the receipt of principal. The remainder of the article would thereby be rendered meaningless surplusage, a result obviously not intended.

The introductory phrase must therefore have been intended to modify the entire three-sentence article. The types and amount of commissions enumerated there were thus meant to constitute the exclusive compensation for the trustee’s services in the administration of the trust. We conclude that these various commissions constitute a “specific compensation” for the trustee’s services sufficient to preclude its receipt of any additional allowance for those services (CPLR 8005; SCPA 2308, subd 11).

Although the compensation provision of the trust agreement in this case does not expressly preclude payment of the annual principal commissions subsequently authorized by statute, a factor deemed determinative by the Appellate Division, this court’s decision in Matter of Schinasi (3 NY2d 22) makes it clear that an express preclusion is unnecessary in order to render the trust provision exclusive. There the respondent agreed by letter to act as executor and trustee under the testator’s will and was to receive in return (p 28) “for [it’s] services *** as Trustee *** 1 xh% per annum on the distribution of income.” At the time, former section 285 of the Surrogate’s Court Act provided that “[w]here a trustee or executor is, by the terms of the instrument, required to collect the rents and manage real property, he shall be allowed and may retain, five percentum of the rents collected therefrom, in addition to the commissions herein provided”. The trustee claimed the 5% commission for collecting rents on real property which became part of the trust established by the testator’s will.

This court held that the trustee was entitled only to a l1/2% commission on the rents collected. Since rents on realty in the trust were income of the trust and since collection of those rents were “services” performed “as trustee” pursuant to the letter of agreement, we found that the trustee’s express agreement to accept a lVfe% commission “on the distribution of income” implicitly included an agreement to accept no more than that commission on the collection of any income, including rents. We then concluded that the letter of agreement controlled to the exclusion of the specific 5% statutory provision regarding the collection of rents. No express statement precluding the trustee from receiving the 5% commission was required.

That the Legislature thought it appropriate in 1943 to provide trustees with a statutory right to annual principal commissions in no way justifies the abrogation of portions of trust agreements, executed prior to that time, in which the parties have agreed to a specific compensation scheme. The purpose of the legislation is to assure that fiduciaries are fairly compensated for their services. Certainly this admirable purpose is fulfilled when the parties to a trust agreement have already established the trustee’s remuneration.

Accordingly, the order of the Appellate Division should be reversed, with costs, and judgment granted in favor of appellant.

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

Order reversed, etc.


source: Caselaw Access Project

author: Jasen, J.

license: Public Domain

text:
    In the Matter of Steven G. Legum, Appellant, v Harrison J. Goldin, as Comptroller of the City of New York, et al., Respondents.
    Argued January 12, 1982;
    decided February 16, 1982

      POINTS OF COUNSEL

      Steven G. Legum, appellant pro se.

    I. Appellant, a nonresident city employee, has standing to challenge section 822 of the New York City Charter. (Boryszewski v Brydges, 37 NY2d 361; Society of Plastics Ind. v City of New York, 68 Misc 2d 366; Lee v Nyquist, 318 F Supp 710; Mandelkern v City of Buffalo, 92 Misc 2d 425; United States v Herrera, 584 F2d 1137; Matter of Donohue v Cornelius, 17 NY2d 390; Schieffelin v Komfort, 212 NY 520; Matter of New York Times Co. [Newspaper Guild of N. Y. Local 3, C.I.O.], 2 AD2d 31; Wein v Carey, 41 NY2d 498.) II. Since section 822 of the New York City Charter is in conflict with and in violation of the laws and Constitution of the State of New York, it is illegal and unconstitutional and should be declared void. (Franklin Soc. for Home Bldg. & Sav. v Bennett, 282 NY 79, 309 US 640; United States v Butler, 297 US 1; Jewish Reconstructionist Synagogue of North Shore v Incorporated Vil. of Roslyn Harbor, 40 NY2d 158; Matter of Hanson v Griffiths, 204 Misc 736, 283 App Div 662; Matter of Joslin v Regan, 63 AD2d 466, 48 NY2d 746; Mobil Oil Corp. v Town of Huntington, 85 Misc 2d 800; People v Brooklyn Garden Apts., 283 NY 373; Genet v City of Brooklyn, 99 NY 296; Gautier v Ditmar, 204 NY 20; County Securities v Seacord, 278 NY 34.)

      Allen G. Schwartz, Corporation Counsel (June A. Witterschein, Leonard Koerner and Ira L. Blankstein of counsel), for respondents.
    I. Section 822 constitutes a valid and reasonable exercise by the city of its power to regulate the compensation of its employees. It does not impose a tax, but rather requires a voluntary agreement to pay the required amount as a condition precedent to employment. (Matter of Rhinelander, 290 NY 31; Mandelkern v City of Buffalo, 64 AD2d 279; Matter of Maye v Lindsay, 69 Misc 2d 276, 41 AD2d 127, 33 NY2d 552, 414 US 1069; Matter of Long Is. R. R. Co. v Hylan, 240 NY 199; 8200 Realty Corp. v Lindsay, 60 Misc 2d 248, 34 AD2d 79, 27 NY2d 124; Lane County v Oregon, 7 Wall [74 US] 71; City of New York v McLean, 170 NY 374; Wise v Wedlake, 217 App Div 210; Carson v Brockton Sewerage Comm., 182 US 398; Central Sav. Bank v City of New York, 279 NY 266, 280 NY 9, 306 US 661.) II. Section 822 does not violate State law requirements for collective bargaining. (Board of Educ. v Associated Teachers of Huntington, 30 NY2d 122; Matter of Niagara Wheatfield Administrators Assn. [Niagara Wheatfield Cent. School Dist.], 44 NY2d 68; Matter of New York City School Bds. Assn. v Board of Educ., 39 NY2d 111; Board of Educ. v Areman, 41 NY2d 527.)
   OPINION OF THE COURT

Jasen, J.

The issue raised by this appeal is whether section 822 of the New York City Charter imposes an income tax on nonresident employees of the city.

That section requires that “every person seeking employment with the city of New York or any of its agencies * * * sign an agreement as a condition precedent to such employment to the effect that if he is or becomes a nonresident *** he will pay to the city an amount by which a city personal income tax on residents computed and determined as if he were a resident individual * * * exceeds the amount of any city earnings tax and city personal income tax imposed on him for the same taxable period.”

By this article 78 proceeding, petitioner seeks to challenge the validity of that section of the New York City Charter and the validity of the contract provision by which he agreed to make such payments. Steven Legum, the petitioner, was employed by the Law Department of the City of New York from February 2,1976 until his resignation became effective August 1, 1980. He concedes that throughout this period he was a nonresident of the City of New York as that term is defined by section T46-6.0 of the Administrative Code of the City of New York. It is similarly conceded by the petitioner that he was advised of the contractual provision required by section 822 of the City Charter and that by signing his contract of employment he agreed to its provisions. Petitioner was notified by memorandum in December, 1978 that his department intended to enforce this contractual provision and that failure to comply with the applicable regulations would lead to disciplinary action including dismissal. In response, petitioner brought this action challenging the validity of both the contractual provision and section 822 of the New York City Charter.

It is the contention of the petitioner that payments made under the contract provision required by section 822, although denominated “condition of employment payments”, are essentially payments of a tax imposed by the city. Since the city has no authority to impose such a tax on nonresidents, petitioner argues, both the contractual provision and section 822 of the City Charter are invalid.

Petitioner’s argument confuses the fundamental distinction between a tax imposed by the sovereign and a contractual provision agreed to by two parties. We have said that “[t]axes, unlike debts, are not contractual, but are enforced contributions levied by the authority of the state for the support of its government and other public needs. *** The citizen owes to the government the duty to pay taxes, so that the latter may be enabled to perform its functions, and he thus receives his proper compensation in the protection which the government affords to his life, liberty and property.” (City of New York v McLean, 170 NY 374, 387.) The Supreme Court of the United States has similarly interpreted a tax as “‘an impost levied by authority of government upon its citizens, or subjects, for the support of the State. It is not founded on contract or agreement. It operates in invitum (Lane County v Oregon, 74 US 71, 80.) This court has also recognized the involuntary nature of a tax stating that a tax “operates in invitum and is in no way dependent upon the will or contract, express or implied, of the persons taxed.” (Central Sav. Bank v City of New York, 279 NY 266, 280.)

The facts of this case do not present a situation in which the city has exercised its sovereign authority to impose a tax on petitioner without his consent, but instead presents a situation in which petitioner agreed by contract to pay a certain amount to his employer, the City of New York. Petitioner makes no allegation that his agreement to this contractual provision was a result of either fraud or duress. Having freely agreed to this contract of employment, petitioner incurred liability pursuant to the contractual provision in question and enjoyed the benefits of the other provisions of the contract. The mere fact that the debt incurred pursuant to the contract of employment is owed to the City of New York does not transform it into a tax. (Central Sav. Bank v City of New York, 279 NY 266, 280, supra; Carson v Brockton Sewerage Comm., 182 US 398, 403.) The test is not to whom the funds are paid, but whether the payment is imposed in invitum by the sovereign or is owed pursuant to a contractual agreement voluntarily entered into. It is clear beyond cavil that the payments due to the City of New York are owed as a result of the contract entered into by the petitioner with the city and not as a result of an exercise by the city of its taxing authority.

We have considered petitioner’s other arguments and find them without merit.

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

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

Order affirmed.


author: Fuchsberg, J.

text:
    In the Matter of the Estate of John Gagliardi, Deceased. Giovani Gagliardi et al., as Executors of John Gagliardi, Deceased, Respondents; Gigino Gagliardi et al., Appellants.
    Argued January 8, 1982;
    decided February 16, 1982

      POINTS OF COUNSEL

      Harry D. Graham for appellants.
    I. A disposition to one person for the use of another, where the trustee has no active duties to perform, is a passive trust and the legal title vests in the beneficiary by operation of law. (Matter of Reed v Browne, 295 NY 184; Rawson v Lampman, 5 NY 456; Matter of Holzwasser, 177 Misc 868; Pratt v Prentice, 166 App Div 906, 221 NY 707; Matter of Baker, 36 Misc 2d 426; Matter of Lang, 23 Misc 2d 328; Matter of Brown, 252 NY 366.) II. The agreement between the decedent and the designated trust beneficiaries, providing for the payment of interest decedent would otherwise have earned during his lifetime, does not enure to the benefit of his testamentary estate. (Martin Delicatessen v Schumacher, 52 NY2d 105.) III. The evidence is insufficient, as a matter of law, to support the findings and conclusions of the courts below.

      David M. Barnovitz and Harold A. Kleinfeld for respondents. I.
    No trust was created in favor of appellants. (Pfeiffer v Rheinfrank, 2 App Div 574; Kanenbley v Volkenberg, 70 App Div 97.) II. The lease negates any finding of trust or gift. (Matter of Szabo, 10 NY2d 94; Matter of Bolin, 136 NY 177; Frick v Cone, 160 Misc 450, 251 App Div 781; Matter of Abramowitz, 38 AD2d 387, 32 NY2d 654.) III. Appellants, as tenants, are estopped from questioning their landlord’s title or claiming another or different right of possession. (Metropolitan Fuel Distrs. v Coogan, 277 App Div 138; Pratt v Prentice, 166 App Div 906, 221 NY 707.)
   OPINION OF THE COURT

Fuchsberg, J.

Essentially, the issue on this appeal boils down to whether a trust provision in a conveyance of realty, in view of its passive nature, in legal and equitable contemplation vested all interests in the property in the settlor-trustee or in the cestuis que trust.

The trust with which we treat originated on October 1, 1974, when, pursuant to the instructions of John Gagliardi, who had. agreed to purchase a parcel of residential property on Pine Grove Avenue in Kingston, New York, the deed was made to run from the seller to “John Gagliardi *** in trust for Gigino and Maria Louijia Gagliardi, as tenants by the entirety.”

Contemporaneously, as part of the closing, all three Gagliardis, John, Gigino and Maria, entered into a separate “lease agreement”. After expressly reciting that John, as Gigino’s uncle, was “interested in helping Gigino, his wife and children, secure proper and adequate living accomodations [sic]”, that John’s purchase of the premises for $30,000 was “in furtherance thereof” and that, but for the purchase, “the interest he otherwise would have earned” on his $30,000 was $187.50 per month, the agreement went on to provide that Gigino and Maria would occupy the property as tenants and, in return, would pay John $187.50 per month and assume all utility, tax, fuel oil and maintenance charges. Gigino and Maria thereafter took possession and fulfilled the terms of the agreement until John’s death some five years later.

The litigation which now brings the case to us began with an application to Surrogate’s Court by John’s executors for leave to sell the property in aid of their liquidation of his estate. Gigino countered with a motion, under SCPA 209 (subd 4), for an order construing the deed to be one which by operation of law vested title solely in his wife and him. On the estate’s motion for summary judgment, the court, deeming the “in trust for” verbiage “surplusage”, denied both motions and entered a decree which, as pertinent here, declared that, by the conveyance, John had acquired a half interest in the Pine Grove Avenue property as a tenant in common with Gigino and Maria, who, he added, at the same time had thereby come to hold the other half as tenants by the entirety.

For its part, the Appellate Division, on cross appeals, modified the decree by granting the estate’s motion and declaring that the deed had made John, and therefore ndw his estate, the sole owner of the property; it thus relegated Gigino and Maria to the role of tenants. This disposition was posited on a miscellany of theories. Most crucially, the court reasoned that the absence of “terms or conditions” for the governance of the trust meant that the fee had to pass to the grantee-trustee personally. Detouring on that basis from the trust issue altogether, and emphasizing that decedent had retained possession of the deed, it also decided that no transfer of indicia of ownership would support the creation of an enforceable gift. Moreover, choosing nevertheless to hypothesize that, even “if a trust could be considered to have been created”, John’s retention of “control over the res” constituted the trust, one which “was at all times revocable”.

On this further appeal by Gigino and Maria, while we, in turn, now uphold the result arrived at by the Appellate Division, we do so by way of a different analytical path.

Before entering it, however, we observe, preliminarily, that, since neither party raised any objection to the introduction of the lease agreement, we have no occasion to consider or to decide any evidentiary issue regarding the effect of the law relating to integrated transactions or of the parol evidence rule as these otherwise would bear on the admissibility of the agreement (compare Restatement, Trusts 2d, §38, with Matter of Glaser, 14 NY2d 895, affg 19 AD2d 354, and Van Cott v Prentice, 104 NY 45, 55, and Rawson v Lampman, 5 NY 456). Accordingly, we here construe two documents, each of which we first examine separately.

The salient language of the deed, of course, is “John Gagliardi *** in trust for Gigino and Maria Louijia Gagliardi, as tenants by the entirety”. No other phrases, or even words, relate to the trust, neither by direct reference to “terms or conditions”, as the Appellate Division put it, nor by articulating duties delegated to the trustee, nor, for that matter, by reference to any other document which delineates either. It is well and long established that, in these circumstances, because the instrument allocates no functions to the trustee, a passive or naked trust is created. As distinguished from cases in which, for instance, a trust has failed for uncertainty as to the nature of duties actually assigned to a trustee (see Bogert, Trusts and Trustees [2d ed], § 206, p 35), so long as identity of the beneficiary is clear, a passive trust automatically is executed by vesting the entire interest in the res in the cestui que trust.

This but recognizes the latter as both the legal and equitable owner of the trust estate. The original policy-laden English Statute of Uses, the model for most American and statutory law on the subject, for all practical purposes did the same. In this spirit, EPTL 7-1.2 explicitly states that “[e]very disposition of property shall be made directly to the person in whom the right to possession and income is intended to be vested and not to another in trust for such person, and if made to any person in trust for another, no estate, legal or equitable, vests in the trustee” (see Bogert, Trusts and Trustees [2d ed], § 206, pp 34-36; §207, p 44).

Hence, on its face the deed in the present case, in isolation, conveyed neither the legal nor the equitable interests in the property to John Gagliardi, but, instead, vested both in Gigino and Maria as tenants by the entirety (EPTL 7-1.1, 7-1.2; see Matter of Fischer, 307 NY 149; Rawson v Lampman, supra; Restatement, Trusts 2d, §§ 67-69).

It follows that, contrary to the contentions of the executors and the conclusions of both courts below, the deed on its own did not vest the fee in John as an individual. The opposite assertions simply misread cases which say no more than that, where the name of a person is followed simply by a bald reference to his title or office, these are but descriptio personae rather than indication of intent to focus on the individual’s representative capacity. Not to be confused is the case in which, as in the one before us now, the descriptive title, here “trustee”, is further defined by specifying the names of the beneficiaries for whom John was to act (see Werner v Wheeler, 142 App Div 358; Pfeiffer v Rheinfrank, 2 App Div 574; cf. Rawson v Lampman, supra; Ann., 137 ALR 460).

All this said, however, the fact is that the conveyance here does not stand alone. Though the deed, in its legal characteristics, portrays a classical picture of nonretention by the settlor-trustee of any beneficial interest in the property, the situation EPTL 7-1.1 and 7-1.2 were designed to reach, the “lease agreement” tells a different tale. Though John indubitably was motivated by generosity and familial ties, these apparently had their limits. For example, the lease unreservedly treats John as owner and lessor and refers to Gigino and Maria as “tenants”. And, most important, an obligation is undertaken to pay rent to John. This presents more than a conflict between the legal relationships spelled out in the two documents. It preserves a beneficial interest in John and, as such, takes the transaction out of the class of those in which “the right to possession and income” is merged (EPTL 7-1.2; King v Townshend, 141 NY 358, 363-364).

True, as urged upon us by the estate, John may have thought the two instruments were creating a “Totten trust” of real property — a trust which he could revoke if untoward contingencies became realities, but which otherwise, at his death, would indefeasibly vest in Gigino and Maria. Indeed, perhaps that is what the Appellate Division had in mind when it spoke of “control over the res”. The leasehold rent then would simply have been John’s method of earning the “interest he otherwise would have earned” on the purchase price. But all this is simply hypothesis. The creation of a trust requires that there be a clear intent (Matter of Gilbert, 39 NY2d 663, 666; Restatement, Trusts 2d, §§ 23-24). Here, instead, reading the two documents as one, at best there is ambiguity and equivocation. It, therefore, cannot be said that a trust was intended.

Moreover, were it clear that John did intend to create a “Totten trust” in the property, we could not give it effect because it then would have to be treated as a testamentary transfer which failed to comply with the formal requisites of the so-called “Statute of Wills” (see EPTL 3-2.1; Butler v Sherwood, 233 NY 655, affg 196 App Div 603). In addition, a “Totten trust”, “A deposit by one person of his own money, in his own name as trustee for another [which], standing alone, does not establish an irrevocable trust during the lifetime of the depositor” (Matter of Totten, 179 NY 112, 125-126), is, as this definition indicates, generally understood to cover only bank deposits of funds (see EPTL 7-5.2; see, generally, 10 Am Jur 2d, Banks, §§392-394).

In fine, no trust relationship of any sort having been created by the deed and lease when read in combination, Gigino and Maria’s rights to the property are governed by the lease agreement and by no more.

For all these reasons, the order of the Appellate Division should be affirmed, with costs to all parties payable out of the estate.

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

Order affirmed, with costs to all parties appearing separately and filing separate briefs payable out of the estate.

       Since, concededly, the seller of the property had no other interest except to follow the purchaser’s instructions as to the delivery of title, we assume, without otherwise deciding, that, in the context of this case, John Gagliardi was both settlor and trustee.


author: Gabrielli, J.

text:
    In the Matter of Benjamin S., Respondent. Edward J. Kuriansky, as Deputy Attorney-General, Appellant.
    Argued January 4, 1982;
    decided February 18, 1982

      POINTS OF COUNSEL

      Edward J. Kuriansky, Deputy Attorney-General (Arthur G. Weinstein and Richard D. Carruthers of counsel), for appellant.
    I. There is no evidence in the record to support the de novo finding of the court below that the prosecutor knowingly agreed to limit Benjamin S.’ future Grand Jury testimony. (People v Lazore, 59 AD2d 635; Matter of Blumberg v Lennon, 44 AD2d 769; Matter of Gold v Booth, 79 AD2d 691; Matter of Gribetz v Edelstein, 66 AD2d 788; Schubtex, Inc. v Allen Snyder, Inc., 49 NY2d 1; People v Pomerantz, 46 NY2d 240; People v Pena, 50 NY2d 400; People v Santos, 38 NY2d 173; Snyder v Massachusetts, 291 US 97.) II. An off-the-record promise may not be recognized. (People v Selikoff, 35 NY2d 227, 419 US 1122; People v Frederick, 45 NY2d 520; People v McConnell, 49 NY2d 340; People v Da Forno, 53 NY2d 1006; People v Campbell, 35 NY2d 227; People v McCloud, 64 AD2d 972.) III. A prosecutor has no power to bargain away the Grand Jury’s right to evidence. (Branzburg v Hayes, 408 US 665; Matter of Hynes v Moskowitz, 44 NY2d 383; Matter of Keenan v Gigante, 47 NY2d 160, cert den sub nom. Gigante v Lankler, 444 US 887; People v Di Falco, 44 NY2d 482; United States v Nixon, 418 US 683; Matter of Heller v Hynes, 51 AD2d 515; Matter of Chaipis v State Liq. Auth., 44 NY2d 57; People v Thomas, 53 NY2d 338; People v Ali, 35 AD2d 435.)

      David G. Richenthal and George P. Birnbaum for respondent.
    I. The lower courts’ finding of a broken plea agreement must be affirmed. (People v Wharton, 46 NY2d 924; People v Cardona, 41 NY2d 333; People v Yarter, 41 NY2d 830, 433 US 910; Matter of Kaplan [Greenman], 294 NY 584; People v Cerullo, 18 NY2d 839; Matter of Seagram & Sons v Tax Comm. of City of N. Y., 14 NY2d 314; People v Eisenberg, 22 NY2d 99; People v Lobel, 298 NY 243; People v Monaco, 14 NY2d 43; People v Gruttola, 43 NY2d 116.) II. The lower courts properly enforced an off-the-record plea agreement consistent with the record. (People v Selikoff, 35 NY2d 227, 419 US 1122; People v Frederick, 45 NY2d 520; People v McConnell, 49 NY2d 340; People v Seminara, 58 AD2d 841; People v Griffith, 43 AD2d 20.) III. The plea agreement was lawful. (People v Di Falco, 44 NY2d 482; Matter of Additional Jan. 1979 Grand Jury of Albany Supreme Ct. v Doe, 50 NY2d 14; United States v Lieber, 473 F Supp 884; Matter of Heller v Hynes, 51 AD2d 515; Santobello v New York, 404 US 257.)
   OPINION OF THE COURT

Gabrielli, J.

Petitioner moved to quash or modify a Grand Jury subpoena issued by a Queens County Grand Jury, on the basis of a promise allegedly made to him by a Special Assistant Attorney-General as part of a plea bargaining agreement. Supreme Court and the Appellate Division both held that the plea bargaining promise should be enforced, each basing the result on differing reasoning. Because the alleged promise was not made a part of the record in the prior criminal proceeding, we reverse.

In March of 1979, petitioner was subpoenaed to appear before a New York County Grand Jury and was questioned about thé existence of kickbacks and other illegal rebates in the health-care industry. Petitioner’s responses to this questioning led to his indictment for three counts of perjury in the first degree. During plea negotiations, petitioner’s desire to avoid being required to give further information regarding the events covered by his Grand Jury testimony was expressed several times by his two attorneys. Whatever understanding may have been reached between petitioner’s attorneys and the prosecutor in this regard, however, it clearly was not made a part of the record. Neither is the existence of such an agreement flatly contradicted on the record, either by virtue of an inconsistent agreement or by a statement elicited from petitioner that no other promises had been made to induce his plea.

Approximately six months after his guilty plea, petitioner was served with a grand jury subpoena commanding his appearance before a Queens County Grand Jury, which was investigating corruption in the hospital industry. This subpoena, the subject of the present appeal, was issued in connection with an investigation being prosecuted by another bureau of the special prosecutor’s office which had previously subpoenaed petitioner in March of 1979. After unsuccessful attempts to have the claimed plea bargaining agreement honored, petitioner made a motion to quash or modify the subpoena. Supreme Court, Criminal Term, found that the prosecutor, by his equivocal responses whenever the subject was brought up, had led petitioner to believe that he had no reason to worry about future Grand Jury appearances. Notwithstanding the court’s belief that no definite promise had been made regarding future Grand Jury testimony, it enforced petitioner’s expectation by modifying tlje subpoena to the extent of precluding questioning of petitioner about matters which had been discussed during his prior appearance before the New York County Grand Jury.

The Appellate Division affirmed, but on a different analysis. That court noted that a prosecutor may not be held to an aspect of a plea bargain to which he did not consent simply because he made imprecise or equivocal statements during plea negotiations. The Appellate Division found, however, that by indicating his assent that petitioner would not be required to give further information about matters covered in his Grand Jury testimony, the prosecutor knowingly consented to an agreement that petitioner would not be called before a Grand Jury by his office to discuss those matters.

We find it unnecessary to attempt to discern the scope and meaning of the statements made during the plea negotiations relative to petitioner’s desire to avoid further involvement with the Grand Jury. Inasmuch as a record had been made of the terms of the plea agreement in the prior criminal proceeding, and the promise petitioner now claims was made is nowhere mentioned in that record, the claimed off-the-record promise is unenforceable. Thus, the order of the Appellate Division should be reversed.

It is a settled rule of law in this State that off-the-record promises made in the plea bargaining process will not be recognized where they are flatly contradicted by the record, either by the existence of some on-the-record promise whose terms are inconsistent with those later urged or by the placement on the record of a statement by the pleading defendant that no other promises have been made to induce his guilty plea (People v Frederick, 45 NY2d 520; People v Selikoff, 35 NY2d 227, cert den 419 US 1122; People v Da Forno, 53 NY2d 1006). We have repeatedly emphasized the necessity of placing all promises on the record, in order to assure the continued validity and usefulness of the plea bargaining process in our criminal, justice system (People v Frederick, 45 NY2d 520, 526, supra; People v Selikoff, 35 NY2d 227, 244, supra; see, also, People v McConnell, 49 NY2d 340, 346).

The distinguishing factor in the present case, and one which the Appellate Division found to be dispositive on this issue, is that the promise now urged by petitioner is not expressly contradicted by the record. We disagree that this factor mandates a departure from our policy of requiring that all terms of the plea agreement be placed on the record. Notwithstanding the emphasis that has previously been placed upon the existence of record contradiction of the promise later being claimed, we believe that the purposes of the plea bargaining process would best be furthered in the usual case by refusing judicial recognition of any off-the-record promise once a record has been made of the terms of the plea agreement. The mere fact that the court failed to ask or the defendant failed to inform the court of the existence of other promises or inducements should not entitle that defendant to attempt to prove that other inducements led him to plead guilty, particularly where, as here, the defendant is represented in the plea bargaining process by experienced counsel.

Thus, once the terms of a plea bargaining agreement are placed on the record, judicial recognition of additional promises or terms of the agreement will not be forthcoming except in a rare case. Any other rule would serve only to undermine the goal of eliminating the secretiveness that has at times tended to surround the plea bargaining process. The court should, in every case, ascertain on the record that no other promises have been made on which the defendant might be relying. If the court fails to make this determination, however, it is nevertheless the defendant’s burden, on pain of losing the claimed promise, to inform the Judge accepting the plea of all promises that were made to induce his plea that are not otherwise revealed.

As the promise sought to be enforced by petitioner does not appear on the record of the prior criminal proceeding, it was unnecessary to hold a hearing to determine whether such á promise existed. In view of our disposition of this case, we need not reach the question of whether the prosecutor has the power to negotiate with a criminal defendant regarding potential future appearances before a Grand Jury.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the motion to quash or modify the subpoena should be denied.

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

Order reversed, etc.


author:
      Per Curiam.

      Meyer, J.

text:
    In the Matter of New York Roadrunners Club et al., Respondents, v State Division of Human Rights, Appellant.
    Argued January 6, 1982;
    decided February 18, 1982

      POINTS OF COUNSEL

      Ann Thacher Anderson for appellant.
    I. The court below overlooked evidence in the record and related legal principles justifying the orders on review. (Williams v Gallatin, 229 NY 248; People v Wise, 54 Misc 2d 87; 795 Fifth Ave. Corp. v City of New York, 40 Misc 2d 183, 20 AD2d 850, 15 NY2d 221; Matter of Theatre Festival v Moses, 16 Misc 2d 258; Scala v City of New York, 200 Misc 475; New York State Div. of Human Rights v New York-Pennsylvania Professional Baseball League, 36 AD2d 364, 29 NY2d 921; Proctor v Mount Vernon Arena, 292 NY 168; Johnson v Auburn & Syracuse Elec. R. R. Co., 222 NY 443; Norman v City Is. Beach Co., 126 Misc 335; Delany v Central Val. Golf Club, 263 App Div 710, 289 NY 577.) II. The orders of the division and the appeal board are not made arbitrary, capricious or unreasonable by evidence as to safety. (300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; Clark v City of Buffalo, 288 NY 62.)

      Bennett L. Gershman for respondents.
    I. It was entirely reasonable for the organizer of the New York City Marathon to establish as a condition of competition that athletes must use their feet, unassisted by any wheels or other devices, to aid locomotion. (300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; Matter of New York Athletic Club of City of N. Y. v City Comm. on Human Rights, 56 Misc 2d 565; Matter of Westinghouse Elec. Corp. v State Div. of Human Rights, 49 NY2d 234; Southeastern Community Coll. v Davis, 442 US 397; Kampmeier v Nyquist, 553 F2d 296.) II. Legitimate concern for the safety of runners, borne out at the administrative hearing by compelling and convincing evidence, entitled the organizer of the New York City Marathon footrace to disqualify from competition athletes using wheeled devices for locomotion. (Kampmeier v Nyquist, 553 F2d 296; Davis v Southeastern Community Coll., 424 F Supp 1341, affd sub nom. Southeastern Community Coll. v Davis, 442 US 397.) III. The State Division of Human Rights exceeded its jurisdiction in this matter. (La Rocca v Lane, 37 NY2d 575.)

      Richard C. Raymond for International Wheelchair Road Racers Club, amicus curiae.

    I. Excluding wheelchair athletes from a road race discriminates against such athletes on the basis of their disability. (Korematsu v United States, 323 US 214; Weber v Aetna Cas. & Sur. Co., 406 US 164; Trimble v Gordon, 430 US 762; Weinberger v Wiesenfeld, 420 US 636; Schlesinger v Ballard, 419 US 498; New York State Div. of Human Rights v New York-Pennsylvania Professional Baseball League, 36 AD2d 364, 29 NY2d 921.) II. Section 296 (subd 2, par [a]) of the Executive Law prohibits the organizers of a road race from excluding wheelchair athletes who meet the publicly announced criteria for entry. (Gilmore v City of Montgomery, 417 US 556; Norwood v Harrison, 413 US 455.) III. The court below erred in setting aside the well-supported determination of the Commissioner of Human Rights that participation in road races by wheelchair athletes does not pose a significant threat to the safety of other competitors. (300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; Matter of CBS, Inc. v State Human Rights Appeal Bd., 76 AD2d 813; Galante & Son v State Div. of Human Rights, 76 AD2d 1023, 52 NY2d 962; State Off. of Drug Abuse Servs. v State Human Rights Appeal Bd., 48 NY2d 276.)

      James J. Weisman for Eastern Paralyzed Veterans Association, amicus curiae.

    I. The Human Rights Commissioner’s factual finding that wheelchair athletes do not present any proven safety hazards and his order enjoining the Roadrunners from unlawful discriminatory practices against such athletes may not be reversed as they were both supported by sufficient evidence on the record. (300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; State Div. of Human Rights v Syracuse City Teachers Assn., 66 AD2d 56; State Div. of Human Rights v County of Onondaga, 50 AD2d 716; State Div. of Human Rights v City of Syracuse, 57 AD2d 452; Matter of Stork Rest. v Boland, 282 NY 256.) II. The Roadrunner’s exclusion of qualified wheelchair athletes from the New York City Marathon constitutes discrimination based on disability and thereby violates section 296 (subd 2, par [a]) of the Executive Law. III. The Roadrunner’s discriminatory practices are not justified by the affirmative defense that wheelchair participants would create safety hazards in the New York City Marathon. (Dothard v Rawlinson, 433 US 321; Home Lines v State Div. of Human Rights, 60 AD2d 1004; New York State Div. of Human Rights v New York-Pennsylvania Professional Baseball League, 36 AD2d 364, 29 NY2d 921; Matter of Guardian Capital Corp. v New York State Div. of Human Rights, 46 AD2d 832; Murphy v Steeplechase Amusement Co., 250 NY 479; Curcio v City of New York, 275 NY 20; Arnold v Schmeiser, 34 AD2d 568; Kozera v Town of Hamburg, 40 AD2d 934; McEvoy v City of New York, 266 App Div 445, 292 NY 654; Stevens v Central School Dist. No. 1 of Town of Ramapo, 25 AD2d 871.) IV. The Roadrunners are not exempt from compliance with the Human Rights Law in order to preserve the traditions of the ancient Greek Marathon. (People v Bernquist, 167 Misc 293; Baker v Drake, 66 NY 518; Garramone v Simmons, 177 Misc 330; Hopper v Sage, 112 NY 530; Matter of City of New York v Maltbie, 269 App Div 662, 294 NY 931; B.M. Heede, Inc. v Roberts, 303 NY 385; International Harvester Co. v Town of Ellery, 28 AD2d 1081.)
   OPINION OF THE COURT

Per Curiam.

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

The record reveals no proof to support the Human Rights Division’s finding that the respondents, New York Roadrunners Club and its president, Fred Lebow, discriminated against the disabled in violation of section 296 (subd 2, par [a]) of the Executive Law (Human Rights Law) when, in organizing and promoting the 1978 New York City Marathon, it required participants to use only their feet, and not wheelchairs, skateboards, bicycles or other extraneous aids. Indeed, as the Appellate Division pointed out, so long as entrants met this qualification, as well as some others the propriety of which are unchallenged, any disabilities unrelated to the capacity to move on foot would rule out no prospective contestant.

What the respondents had decided to conduct was not just any kind of marathon race, but a marathon footrace, a traditionally and, in any case, because of its label as a marathon, an historically rooted athletic event. No doubt it might have been possible for the club to have laid down guidelines which would have opened the race to individuals who used any means of locomotion, or one which would have allowed only those who used means other, than their feet to participate. But the club, a private, though not-for-profit, organization, without more was under no legal compulsion to follow any of these alternatives. Standing alone, its election to adhere to the method of locomotion most intrinsic and conventional to what, at all odds, is planned as a foot racing event cannot be catalogued as blameworthy in a Human Rights Law discriminatory sense. In setting the standards for the race, in this perspective it also was a valid consideration for the club to take into account the fact that a uniform requirement that the race be run on foot would tend to equalize competition. Equally valid was its concern that, without a uniform rule, it would make it difficult, if not impossible, to objectively evaluate the relative performances of the competitors.

In making these observations, we, of course, are not insensitive to the role athletic activity may play in the rehabilitation and in the lives of the handicapped. Nor do we depart from our appreciation of the special concerns committed to the expertise of the Human Rights Division to combat discrimination in the first instance (State Off. of Drug Servs. v State Human Rights Appeal Bd., 48 NY2d 276, 283-284). Rather, we simply hold that, under the circumstances, the acts on which the complaint here was posited did not constitute an unlawful discriminatory practice.

Finally, because of the ground on which we affirm, we note that we have had no occasion to reach or decide either the issue of safety or the question as to whether the marathon course was a “‘place of public accommodation’” (see Executive Law, §292, subd 9) or the legal significance, if any, of the failure of the city to have withdrawn its permit once the respondents had rejected its request that wheels be allowed.

Meyer, J.

(dissenting). Without reaching the “place of accommodation” issue or the city’s relationship to the marathon, the majority concludes that there is no evidence of discrimination and that the Roadrunners Club, as a private organization, can conduct a marathon footrace if it chooses. It thus ignores both the interpretation of the statute and the findings of fact made by the Commissioner of the State Division of Human Rights and affirmed by the State Human Rights Appeal Board, notwithstanding the deference given to the interpretation of a statute by the agency responsible for its administration and the command of section 298 of the Executive Law that the findings of fact on which a division order is based “shall be conclusive if supported by sufficient evidence on the record considered as a whole.” I respectfully dissent.

The record contains a letter from Fred Lebow addressed to Robert J. Hall, rejecting his entry into the 1978 New York City Marathon and stating that “we must turn down your entry and those of any other athletes in wheelchairs.” The majority’s holding that there is no discrimination, if it is based on an absence of substantial evidence, is, therefore, a usurpation of the function of the commissioner.

In failing to consider the city’s relationship and the place of public accommodation question, the majority ignores affirmed findings that the New York City Marathon, which respondents organize and sponsor, is “an annual athletic competition open to the public at large, and using public facilities” and that the 1978 New York City Marathon (which is the subject of this proceeding) “took place in or about October, 1978, again using park roads, streets and other public facilities and sponsored by New York City departments and agencies.” The statutory definition (Executive Law, § 292, subd 9) of “ ‘place of public accommodation’ ” excludes “any institution, club or place of accommodation which is in its nature distinctly private”, but includes “all places included in the meaning of such terms as *** race course.” The commissioner concluded that, because the public was invited to respondent’s race course, which was made available to it by the city, respondents “were the managers and superintendents of a place of public accommodation, the course over which the New York Marathon was run”, and both the appeal board and the Appellate Division agreed. Notwithstanding that respondents did not have exclusive use of the highways over which the race was run, they did superintend and manage so much of those highways as the course was run over, making changes such as the placing of asbestos mats over expansion joints of bridges to prevent injury to the runners. The conclusion that respondents manage a “place of public accommodation” was neither irrational nor unreasonable and was not contrary to the wording of the statute. It should, therefore, be upheld (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Matter of Howard v Wyman, 28 NY2d 434). Nor may any significance be given to the failure of the city to have withdrawn respondents’ permit, for there was no reason to do so in 1978 (wheelchair entrants were permitted to enter after the Mayor intervened) and there is nothing in the record as to later years.

In final analysis, the majority’s reasoning appears to turn on its conception that “a marathon foot race” is as a matter of law “a traditionally and *** an historically-rooted athletic event”, essentially the reasoning adopted by the Appellate Division. Neither the dictionary definition, nor judicial decision, nor the evidence concerning marathons run in other cities sustains that conception, however. The Columbia Encyclopedia (3d ed) defines a “marathon race” as a “long-distance endurance race deriving its name from Marathon Greece” (p 1305; emphasis supplied). Webster’s Third New International Dictionary (p 1380) defines “marathon” as “a long distance race: (1): a footrace run on an open course of now usu. 26 miles 385 yards (2): a race other than a footrace (as for swimmers, skaters) marked by esp. great length”. A Texas Court of Civil Appeals in Sportatorium, Inc. v State (104 SW2d 912, 916 [Tex]) concluded as to “marathon” that “its modern meaning is any race or physical endurance contest” (see, also, Weaver v Stone, 11 F Supp 559, 560), and the evidence presented before the hearing examiner established that wheelchair participants have been accepted in marathons run in Miami, Florida, Tampa, Florida, Jacksonville, Florida, Atlanta, Georgia, Scottsdale, Arizona, Toledo, Ohio, Wheeling, West Virginia, Charleston, West Virginia and Boston, Massachusetts, among others. Clearly, therefore, there was an evidentiary basis for the commissioner to conclude that, notwithstanding that Pheidippides carried the news of victory over the Persians from Marathon to Athens in 490 B.C. on foot, a marathon race is no longer limited to foot racers only, especially in view of the city’s requirement that if respondents were to be permitted to use city streets as their race course, wheelchair entrants must be permitted.

Even if a marathon is limited to a footrace, the law requires that persons disabled from using their feet be permitted to enter if the race is held in a place of public accommodation. To hold otherwise is to ignore the statutory definition of “disability.” Subdivision 21 of section 292 of the Executive Law defines that term to mean “a physical, mental or medical impairment resulting from anatomical, physiological or neurological conditions which prevents the exercise of a normal bodily function” provided it does not prevent “performing in a reasonable manner the activities involved in the job or occupation sought.” Inability to use one’s feet is an impairment of a normal bodily function, but, as the evidence concerning wheelchair participants in New York and other cities showed, does not prevent such a participant from performing in the marathon in a reasonable manner. To hold that only people with feet they can use normally may participate because the event is a footrace is wholly to ignore the meaning of disability. In short, the commissioner’s finding that wheelchair athletes “utilize their chairs as a substitute for their feet to overcome their disability” is both a reasonable interpretation of the statute and supported by substantial evidence.

As concerns the safety issue, not reached by the majority, it is only necessary to note that the commissioner’s conclusion that “[djespite the fact that wheelchairs have been utilized by competitors in many road races, no provable danger to the health and safety of the participants has occurred” is supported by evidence well within the standard defined in 300 Gramatan Ave. Assoc. v State Div. of Human Rights (45 NY2d 176, 180-181).

In sum, the division’s holding, affirmed by the appeal board, was not an arbitrary or capricious interpretation of the governing statute and was sustained by substantial evidence in all of its factual aspects. Any complaint that the requirement thus imposed will adversely affect the sport may be addressed to the Legislature, or remedied by holding the race off the public thoroughfare (as, for example, fox hunts are) in which event as a private organization the Roadrunners Club can fix any entry criteria its membership will agree to. The Appellate Division should, therefore, have confirmed rather than annulled and we should reverse their order.

Chief Judge Cooke and Judges Jasen, Gabrielli, Wachtler and Fuchsberg concur in Per Curiam opinion; Judge Meyer dissents and votes to reverse in an opinion; Judge Jones taking no part.

Order affirmed.

      . The argument that Hall has use of his feet may, if that use is found to constitute “normal bodily function,” require that he race on foot rather than in a wheelchair, but has no bearing on the question whether all wheelchair racers may be excluded.

      . Nor is it relevant that other disabled persons such as runners without sight or without a limb (included one-legged persons) are admitted, for the issue is whether there has been discrimination against persons whose disability affects both feet, not whether all disabled persons have been excluded. Likewise irrelevant is it that persons using skateboards, bicycles and roller skates are excluded, for those persons have, but do not use, normal function in their feet.


author: Meyer, J. Gabrielli, J.

text:
    Michael Zappone et al., Appellants, v Home Insurance Company, Respondent, and Ivan Belyna, an Infant, et al., Appellants.
    Argued January 5, 1982;
    decided February 18, 1982

      POINTS OF COUNSEL

      William J. Werner for Michael Zappone and others, appellants.
    I. The threshold consideration is compliance with subdivision 8 of section 167 of the Insurance Law and the attempted denial of coverage by Home Insurance Company is invalid as a matter of law. (Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 47 NY2d 951; Allstate Ins. Co. v Gross, 27 NY2d 263; Gordon v Motor Vehicle Acc. Ind. Corp., 72 AD2d 594; Fatigate v Lion Ins. Co., 70 AD2d 874; Regional Tr. Serv. Ins. v Kemper Ins. Cos., 73 AD2d 1036.) II. Reasonably prompt notice is mandated by subdivision 8 of section 167 of the Insurance Law by insurance carriers. (Preisch v Continental Cas. Co., 55 AD2d 117, 41 NY2d 802; Home Ind. Ins. Co. v State Farm Mut. Auto. Ins. Co., 64 AD2d 212; Western World Ins. Co. v Jean & Benny’s Rest., 69 AD2d 260.) III. Subdivision 8 of section 167 of the Insurance Law requires reasonably prompt notice in cases of denial of coverage as well as disclaimers of liability without violation of constitutional principles. (Allstate Ins. Co. v Gross, 27 NY2d 263; Hartford Ins. Co. v County of Nassau, 46 NY2d 1028; Gordon v Motor Vehicle Acc. Ind. Corp., 72 AD2d 594; Fatigate v Lion Ins. Co., 70 AD2d 874; Home Ind. Ins. Co. v State Farm Mut. Auto. Ins. Co., 64 AD2d 212; Regional Tr. Serv. v Kemper Ins. Cos., 73 AD2d 1036; Ashland Window & Housecleaning Co. v Metropolitan Cas. Ins. Co. of N. Y., 269 App Div 31; Security Ins. Group v Priestly, 61 AD2d 795; Foremost Ins. Co. v Sotiriou, 66 AD2d 812; Newman v Ketani, 54 AD2d 926.)

      Harry D. Snyder for Ivan Belyna and others, appellants.
    I. The trial court was correct in holding that the attempted denial of coverage by Home Insurance Company was invalid as a matter of law. (Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 47 NY2d 951; Allstate Ins. Co. v Gross, 27 NY2d 263; Gordon v Motor Vehicle Acc. Ind. Corp., 72 AD2d 594; Matter of Hartford Acc. & Ind. Co. v Csakan, 74 AD2d 924; Regional Tr. Serv. v Kemper Ins. Cos., 73 AD2d 1036; Foremost Ins. Co. v Sotiriou, 66 AD2d 812; Security Ins. Group v Priestly, 61 AD2d 795; Schiff Assoc. v Flack, 51 NY2d 692.) II. The court below erred in holding that subdivision 8 of section 167 of the Insurance Law does not require reasonably prompt notice in cases where the insurer denies that the policy covers the subject incident. III. Section 167 of the Insurance Law has historically required prompt notice by insurers of disclaimers of liability and denials of coverage. (Preisch v Continental Cas. Co., 55 AD2d 117, 41 NY2d 802.)

      Myron Komar for respondent.
    I. The decision of the court below should be affirmed. (Hartford Ins. Co. v County of Nassau, 46 NY2d 1028; Allstate Ins. Co. v Gross, 27 NY2d 263; Preisch v Continental Cas. Co., 55 AD2d 117, 41 NY2d 802; Home Ind. Ins. Co. v State Farm Mut. Auto. Ins. Co., 64 AD2d 212; McMahon v Boston Old Colony Ins. Co., 67 AD2d 757; Olenick v Government Employees Ins. Co., 68 Misc 2d 764; Rushing v Commercial Cas. Ins. Co., 251 NY 302; Fidelity Gen. Ins. Co. v Aetna Ins., 27 AD2d 932.) II. Appellants’ briefs contain various misstatements and also legally incorrect arguments. (Allstate Ins. Co. v Gross, 27 NY2d 263; Prashker v United States Guar. Co., 1 NY2d 584; Goldberg v Lumber Mut. Cas. Ins. Co. of N. Y., 297 NY 148.)
   OPINION OF THE COURT

Meyer, J.

The principle, declared in Schiff Assoc. v Flack (51 NY2d 692), that the failure to disclaim coverage does not create coverage which the policy was not written to provide, applies to liability policies as well as professional indemnity insurance, notwithstanding the provisions of subdivision 8 of section 167 of the Insurance Law. The words “deny coverage” in that subdivision refer to denial of liability predicated upon an exclusion set forth in a policy which, without the exclusion, would provide coverage ’ for the liability in question. It does not encompass denial that the policy as written could not have covered the liability in question under any circumstances. The order of the Appellate Division should, therefore, be affirmed, with costs.

Judith Zappone, her brother, Michael, and her father, Dominick, reside in the same household. Home Insurance Company issued an automobile liability policy to Judith covering a 1970 MG. Judith also owned a 1966 Mercedes Benz which was, however, insured not by Home but by Aetna Insurance Company. Home also insured a 1963 Chevrolet owned by Dominick. On July 20, 1975, Michael was involved in a collision while driving Judith’s Mercedes Benz with Judith’s permission. Aetna undertook the defense as to the claim arising out of the collision and has offered to pay up to the limits of its policy in settlement. In November, 1975, two of the persons injured in the collision sued Michael and Judith. Notice of the action and the accident was given to Home by the Zappones on January 6, 1976. Home, by letters dated January 20, 1976 predicated essentially on late notice, advised that it would investigate the matter but was reserving its rights. Not until April 14, 1977 did it advise the Zappones that, because the Mercedes Benz was neither an owned nor a nonowned automobile under either Judith’s or Dominick’s policy, it would not provide coverage excess to the Aetna policy.

The Zappones and Aetna then brought this action for judgment declaring that the Zappones were entitled to excess coverage under the two Home policies and that Home’s disclaimer was invalid by reason of subdivision 8 of section 167 of the Insurance Law. Trial Term granted the judgment requested, but on appeal to. the Appellate Division that court, two Judges dissenting, reversed on the law and directed entry of judgment declaring that neither policy provided coverage for the incident of July 20, 1975 and that Home was not required by subdivision 8 of section 167 to give notice of denial of coverage. We affirm.

Subdivision 8 provides that: “If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.” It is settled law that the subdivision applies whether the policy is primary or excess (Preisch v Continental Cas. Co., 55 AD2d 117, mot for lv to app den 41 NY2d 802), that if the subdivision applies it is the carrier’s burden to explain its delay in notifying of its disclaimer or denial (Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029), that a reservation of rights letter does not constitute compliance with the requirements of the subdivision (id.; Allstate Ins. Co. v Gross, 27 NY2d 263, 269), and that an unexplained delay of 15 months is unreasonable as a matter of law (Hartford Ins. Co. v County of Nassau, supra; Regional Tr. Serv. v Kemper Ins. Cos., 73 AD2d 1036). If the subdivision was intended to cover the situation of the instant case, therefore, Trial Term’s decision was correct.

We conclude, however, that the Legislature did not intend by its use of the words “deny coverage” to bring within the policy a liability incurred neither by the person insured nor in the vehicle insured, for to do so would be to impose liability upon the carrier for which no premium had ever been received by it and to give no significance whatsoever to the fact that automobile insurance is a contract with a named person as to a specified vehicle.

The parties have presented no legislative report or memorandum to explain the sense in which the words were used in the statute and our research has revealed none. Essentially then the arguments advanced are in terms of the plain meaning of the words on the one hand and on the other the unreasonableness of the result which would provide insurance coverage to a person and with respect to a vehicle for which no premium had ever been received by the carrier.

A carrier may deny liability because, for example, its insured has breached the terms of his policy by failing to co-operate in the defense of the lawsuit brought by the injured person or by failing to give notice of an accident or of the beginning of an action against the insured. It may deny liability because although the person and the vehicle are covered by the policy the circumstances of the accident bring a policy exclusion into play, for example, that the person injured is an employee of the insured whose injury arose out of and in the course of his employment or was injured while an automobile insured as a pleasure vehicle was being used as a public conveyance. It may deny liability because it made no contract of insurance with the person and for the vehicle involved in the accident in question or because, though there was such a policy at one time, it had, prior to the accident, been canceled by the insurer or terminated by act of the insured.

In the first instance, the policy covers the driver, the vehicle and the accident and the carrier will be liable unless it disclaims liability because of the insured’s breach. In the second, the policy covers the driver and the vehicle and the accident would be covered except for the specific policy exclusion and the carrier must deny coverage on the basis of the exclusion if it is not to mislead the insured and the injured person to their detriment. In the third, though the carrier may have some other relationship with the owner or driver of the vehicle, it has no contract with that person with respect to the vehicle involved and, there being no contractual relationship with respect to the vehicle, is not required to deny coverage or otherwise respond to a claim arising from an accident involving that vehicle except as statute mandates or courtesy suggests. Though the second and third situations may both be denominated a denial of coverage, there is a basic distinction between them; as the Trial Judge put it, in the second there is no coverage “by reason of exclusion,” in the third, by reason of “lack of inclusion.” We disagree, however, with his conclusion that because both situations fit within the meaning of the words “denial of coverage” both were intended to be covered by subdivision 8 of section 167.

In the interpretation of statutes the “[a]bsence of facial ambiguity is *** rarely, if ever, conclusive” (New York State Bankers Assn. v Albright, 38 NY2d 430, 436). Literal interpretation of the words used will not be accorded when to do so will occasion great inconvenience, or produce inequality, injustice or absurdity (Matter of Hogan v Culkin, 18 NY2d 330, 335; Matter of Petterson v Daystrom Corp., 17 NY2d 32, 38; Matter of Meyer, 209 NY 386, 389; McKinney’s Cons Laws of NY, Book 1, Statutes, § 111, pp 233-234). It is, moreover, always presumed that no unjust or unreasonable result was intended and the statute must be construed consonant with that presumption (Matter of Breen v New York Fire Dept. Pension Fund, 299 NY 8, 19; McKinney’s, Statutes, § 143), the court looking to the purpose of the legislation as a whole rather than its literal words (New York State Bankers Assn. v Albright, 38 NY2d 430, 437, supra).

The purpose for which subdivision 8 of section 167 was enacted was to avoid prejudice to the insured, the injured claimant and the Motor Vehicle Accident Indemnity Corporation, each of whom could be harmed by delay in learning of the carrier’s position (Allstate Ins. Co. v Gross, 27 NY2d 263, 267, supra). It was not, however, to provide an added source of indemnification which had never been contracted for and for which no premium had ever been paid. Here, as in State Farm Mut. Auto. Ins. Co. v Westlake (35 NY2d 587, 592), to hold Home for Michael’s accident in the Mercedes Benz on either of the policies written by Home on Judith’s MG or Dominick’s Chevrolet would be to rewrite the policy to expose Home to a risk (an accident in the Mercedes Benz when driven by someone other than Judith in the one case or Dominick in the other) never contemplated by the parties and for which Home had never been compensated, though the Insurance Law requires that a rate commensurate with the risk assumed be charged without deviation or discrimination (see §§180, 183-186). Home argues that if the subdivision be construed to impose such bootstrap coverage as the penalty for failure to give notice of noncoverage it would violate a number of constitutional provisions. We do not reach that issue for we conclude that the Legislature in using the words “denial of coverage” did not intend to require notice when there never was any insurance in effect, and intended by that phrase to cover only situations in which a policy of insurance that would otherwise cover the particular accident is claimed not to cover it because of an exclusion in the policy. A contrary rule would impose an intolerable burden on carriers, subject as they are to penalty for a misrepresentation concerning coverage (Insurance Law, § 40-d), if they must, upon penalty of having to cover a claim for which no premium has been paid, respond within the relatively short period of time that subdivision 8 of section 167 has been construed to require. The more particularly is this so when it is recalled that the subdivision covers not only motor vehicle accidents but any other type of accident and requires notice not only to an insured but also to the injured person or any other claimant, bearing in mind the crisscrossing of liability policies, often with widely different liability limits, that would result.

The case law construing the subdivision is not contrary to the conclusion we now reach. Indeed, as is conceded by appellants and the dissenting Judges below, in Perez v Hartford Acc. & Ind. Co. (31 AD2d 895, 896) the Appellate Division, First Department, held that “subdivision 8 of section 167 of the Insurance Law does not refer to a situation as in the case at bar where coverage had terminated due to a cancellation of the policy long before the happening of the accident”, and this court affirmed (26 NY2d 625). If the subdivision does not require notice with respect to a policy which has been terminated, it is difficult to understand why it should require notice with respect to a policy which does not insure a car owned by another person when that car is not driven by the person to whom the policy was issued. In either case there simply is no insurance at all and, therefore, no obligation to disclaim or deny. That the subdivision does not require disclaimer with respect to a vehicle owned by a person other than the insured was the conclusion in State Farm Mut. Auto. Ins. Co. v Elgot (48 AD2d 362) and Matter of United States Fid. & Guar. Co. (Assenza) (52 AD2d 772), and on the basis of the State Farm decision it was held by the Appellate Division, First Department (51 AD2d 525), and affirmed by us on the memorandum below (41 NY2d 872), in Matter of Allcity Ins. Co. (Sioukas), that since an excess carrier “did not have a policy affording coverage to the respondent until the primary coverage had been exhausted, it had no duty to serve a notice of disclaimer”. Thus, it cannot be argued that “denial of coverage” means a denial for whatever reasons.

The fallacy of the dissent’s contrary argument is revealed by its footnote 1 and its penultimate paragraph. A policy which covers neither the person nor the vehicle involved in an automobile accident does not create an insurer-insured relationship as to automobile liability by reason of that policy. The fact that there may be another policy on another vehicle does not create the relationship with which the statute deals any more than would a homeowner’s liability policy on a house or a premises liability policy on a store. Whether the relationship no longer exists because a policy otherwise covering person and vehicle has been terminated or never came into existence because there was no insurance for either vehicle or driver is simply irrelevant. The result is the same.

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

Gabrielli, J.

(dissenting). I dissent because I see no reason to fail to give effect to the plain language of subdivision 8 of section 167 of the Insurance Law.

The statute provides that an insurer seeking to disclaim liability or deny coverage for death or bodily injuries arising out of an accident occurring within this State, under a liability policy delivered or issued for delivery in this State, must give written notice of such disclaimer or denial as soon as is reasonably possible. If the insurer fails to meet this requirement, an attempted disclaimer of liability or denial of coverage will not be given effect (see, e.g., Allstate Ins. Co. v Gross, 27 NY2d 263 [where seven-month delay occurred in notifying insured of disclaimer of liability, insurer was required to defend and indemnify its insured]; see, also, Hartford Ins. Co. v County of Nassau, 46 NY2d 1028).

As the majority notes, an insurer may seek to deny coverage (as opposed to disclaiming liability) in two situations; (1) where a person or vehicle involved in an accident is covered by the policy, but an exclusion in the policy negates coverage or (2) where the person or vehicle involved is simply not covered by the policy. In interpreting the statutory language, the majority concludes that the former situation involves a “denial of coverage” within the meaning of the statute, but the latter does not. I believe this interpretation is erroneous, as it conflicts directly with the plain language of the statute. The latter situation no less involves a denial of coverage than the former, and the majority provides no rationale for distinguishing the two.

The goal of the courts in interpreting statutes is to give effect to the legislative intent (Rankin v Shanker, 23 NY2d 111, 114; Matter of New York Post Corp. v Leibowitz, 2 NY2d 677, 685), and this intent is first to be sought from a literal reading of the statute itself (Department of Welfare of City of N. Y. v Siebel, 6 NY2d 536, 543, app dsmd 361 US 535; Meltzer v Koenigsberg, 302 NY 523). “A statute must be read and given effect as it is written by the Legislature, not as the court may think it should or would have been written if the Legislature had envisaged all the problems and complications which might arise in the course of its administration” (Lawrence Constr. Corp. v State of New York, 293 NY 634, 639, quoted in Allen v Minskoff, 38 NY2d 506, 511). In the present case, the majority departs from the literal wording of the statute and construes the statute in accordance with the presumption that no unjust or unreasonable result was intended. I disagree that the result of giving effect to the statute as written is unjust or unreasonable. It is reasonable and entirely plausible that the Legislature has determined that once an insurer issues a liability policy, it will bear the responsibility of notifying the insured under that policy, in a reasonably prompt manner, whether a particular accident is covered. That the insurer is in the best position to interpret these sometimes complex documents is clear, and it seems entirely rational to require it to do so. Surely, it may properly be presumed that when the Legislature used the words “deny coverage”, it contemplated that in some instances it would be requiring an insurer to deny coverage where none existed because the event simply was not covered by the contract. To more narrowly interpret the statute frustrates this wholly legitimate legislative purpose.

Moreover, the “unreasonable result” of giving effect to the statute as written, and as perceived by the majority — bringing within the policy a liability for which no premium had been received by the insurer and for which the insurer never contracted — is not eliminated by the narrow interpretation of the requirement of reasonably prompt notice of a denial of coverage. That result is simply limited to fewer situations, i.e., those in which the denial of coverage arises from an exclusion in the policy. Thus, the majority explains that where the policy covers the person and vehicle involved in the accident, but a policy exclusion comes into play to negate coverage, for example, because the person injured is an employee of the insured whose injury arose in the course of his employment, the insurer is required to comply with the terms of the statute. In this situation, of course, the effect of a failure to give prompt notice of a denial of coverage is to impose a liability on the insurer for which it received no premium and as to which it made no contract. I fail to perceive why the result is less unreasonable under these circumstances. Moreover, as to the insurer’s argument that a decision adverse to it will result in an expansion of the coverage it believed it was providing when it calculated its premium, it should also be noted that the experience factor is an integral part of the long-range rate-fixing process to which insurance companies are subject (see Country-Wide Ins. Co. v Wagoner, 45 NY2d 581, 587-588 [automobile accident indemnification indorsement]; Becker v Huss Co., 43 NY2d 527, 541-542 [workers’ compensation]).

Finally, comment is in order on the cases relied upon by the majority. First, I note that the present case does not involve a mere extension of Schiff Assoc. v Flack (51 NY2d 692), as the majority appears to believe. Schiff deals with the question of a disclaimer of liability under a set of facts and a contract of insurance as to which subdivision 8 of section 167 of the Insurance Law is patently inapplicable. The notice requirement of subdivision 8 of section 167 applies only if the insurer is seeking to disclaim liability or deny coverage for “death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state”. In Schiff, on the other hand, the litigation as to which the insured sought defense and indemnification involved willful and malicious usurpation of a trade secret. Secondly, other cases referred to by the majority as not undermining its conclusions do not necessarily support them either. Subdivision 8 of section 167 requires notice of a denial of coverage only when the insured-insurer relationship exists. When a policy has been terminated or canceled, there is no predicate for application of the statute (e.g., Perez v Hartford Acc. & Ind. Co., 31 AD2d 895, affd 26 NY2d 625 [policy canceled long before happening of the event]; State Farm Mut. Auto. Ins. Co. v Elgot, 48 AD2d 362 [liability policy “terminated” upon sale of insured vehicle]; Matter of Allcity Ins. Co. [Sioukas], 51 AD2d 525, affd 41 NY2d 872 [the insurer “did not have a policy affording coverage to the (insured) until the primary coverage had been exhausted”]).

Accordingly, I dissent and vote to reverse the order of the Appellate Division.

Judges Jasen, Jones and Wachtler concur with Judge Meyer; Judge Gabrielli dissents and votes to reverse in a separate opinion in which Chief Judge Cooke and Judge Fuchsberg concur.

Order affirmed.

      . Preisch v Continental Cas. Co. (55 AD2d 117, mot for lv to app den 41 NY2d 802, supra), holding that a duty arises to give notice once the primary carrier has fulfilled its obligation, is not to the contrary.

      . The cases relied upon by appellants and the dissenting Judges below do not undermine the conclusion now reached. Though Foremost Ins. Co. v Sotiriou (66 AD2d 812) and Security Ins. Group v Priestly (61 AD2d 795) appear to hold to the contrary with respect to the statutory exclusion from coverage of interspousal liability, review of the briefs in both cases shows that the distinction between types of noncoverage on which this decision rests was not argued in either case and that the reference to subdivision 8 of section 167 in the Foremost decision concerned the extension of that section to include accidents other than motor vehicle, not whether the policy covered at all. Moreover, Regional Tr. Serv. v Kemper Ins. Cos. (73 AD2d 1036, supra); State of New York v Fidelity & Cas. Co. (70 AD2d 687); and Newman v Ketani (54 AD2d 926) each concerned, as the report or the record in the case establishes, an exclusion from the policy rather than the absence of any coverage at all.

      . As to the other situation noted by the majority, i.e., where the policy has been canceled or terminated, I note that the statute apparently would not be applicable in such a case, since the insured-insurer relationship no longer exists.

      . The result of the application of subdivision 8 of section 167 of the Insurance Law is certainly no more unreasonable than the result of an insurer’s failure to effectively terminate an automobile liability policy pursuant to subdivision 1 of section 313 of the Vehicle and Traffic Law. We have held, for example, that where the notice of cancellation fails to strictly comply with the statute, it is ineffective to cancel the policy (see Matter of Liberty Mut. Ins. Co. [Stollerman], 70 AD2d 643, affd on mem below 50 NY2d 895). If the attempted notice of cancellation were for failure to pay a premium, a liability is created where it no longer exists under the contract and for which no premium has been received. I find the two situations to be logically indistinguishable.